Jun 25, 2024 05:37 UTC
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Jun 25, 2024 at 05:37 UTC
Case Study: Subhra Mukherjee & Anr. v. Bharat Coking Coal Ltd. & Ors.
Citation: (2000) 3 SCC 312
Court: Supreme Court of India
Date of Judgement: 8th March, 2000
Bench: S.Rajendra Babu (J), S.S.M.Quadri (J)
Facts
● Dispute is regarding a bungalow and a piece of land owned by M/s.Nichitpur Coal Company Private Limited (hereinafter referred to as the Company), which is registered under the Indian Companies Act.
● On 21st September, 1970, by a resolution of the board of directors of the Company, it was resolved to sell the suit property to the appellants for a consideration of Rs.5,000/-. However, the appellants paid Rs.7,000/- to one of the directors under receipt dated December 30, 1970. An agreement to sell the suit property to the appellants for Rs.7000/- (Rs.5000/- as consideration of the Bungalow and Rs.2000/- as price of the land) was executed by the Company on January 3, 1971. On 20th March, 1972, the Company executed the sale deed in the favour of appellants.
● The Coal Mines (Nationalization) Act, 1973 came into force on May 1, 1973 and from that date the right, title, and interest of the owners in relation to the coal mines vested in the central government through a Government Company named M/s. Bharat Coking Coal Ltd (BCCL
● The appellants did not hand over the possession of the suit property to BCCL. So on 15th October, 1976, it initiated proceedings under the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 for their eviction from the suit property. The appellants filed the present suit against BCCL for declaration of their rights in, title to and interest over the suit property.
Decision of the Trial court
Court observed that the appellants are wives of the directors of the Company, who are real brothers. The alleged sale transaction in favour of appellants was seems to be sham, collusive, without any consideration and was brought into existence to avoid the effect of vesting of the suit property under the Coal Mines (Nationalisation) Act of 1973. Hence, the court dismissed the suit.
Decision of the District judge, Dhanbad
The District Judge allowed the appeal and set aside the judgment and decree of the trial court.
Decision of High Court of Judicature at Patna (Ranchi Bench)
The High Court restored the judgment of the trial Court holding that the transaction of sale between the appellants and the Company was sham and bogus and was entered into to avoid the vesting of the suit property in Central Government under Section 3(1) of the Act of 1973 and thus allowed the appeal filed by the BCCL.
Judgment
Court observed that appellants did not exercise their rights as purchasers over the suit property till the date of the filing of the suit; the water and electricity connections were obtained during the pendency of the suit by them; further till the date of vesting of the suit property under the Act of 1973, it was maintained by the Company for the use of the directors. Court held that sale in favor of the appellants, is neither bona fide nor genuine and confers no right on them. So, the suit property remained the property of the Company and, therefore, it vested in the Central Government under Section 3(1) of the Act of 1973.
Key legal issues discussed
● Whether the resolution dated September 21, 1970 was an antedated document?
Yes
Court accepted the appellants’ contention that the government authorities were in possession of all the records of the Company, but it has been observed that appellants themselves took no steps to summon the record from the custody of the concerned authority. Moreover, there was no mention of the resolution dated September 21, 1970 either in the receipt signed by one of the directors or in the agreement for sale of January 3, 1971 or in the sale deed dated March 20, 1972. So, the resolution was an antedated document.
● Whether the veil of incorporation could be pierced to ascertain the true nature of the transaction?
Yes
Appellants referred to Salomon’s case in which it was decided by the House of Lords that the company is at law a different person altogether from the subscribers who have limited liability. But the court observed that lifting the veil of incorporation under statutes and decisions of the courts is an equally settled position of law which is more readily done under American law. To look at the realities of the situation and to know the real state of affairs behind the facade of the principle of corporate personality, the courts can pierce the veil of incorporation. Where a transaction of sale of its immovable property by a Company in favour of the wives of the directors is alleged to be sham and collusive, it would be justified in piercing the veil of incorporation to ascertain the true nature of the transaction as to who were the real parties to the sale and whether it was genuine and bona fide or whether it was between the husbands and the wives behind the facade of separate entity of the Company.
Nishant Singh Rawat
Contributing Editor @LegalWires A Research Scholar at the University of Delhi also graduated from the University of Delhi and Himachal Pradesh National Law University with specialization in criminal law. He is an egalitarian and strong supporter of human rights. He is a keen traveller and mountaineer. Whatever challenges the societal structure and norms, attracts his attention.
