CASE STUDY - 5 Background Mahesh Gupta (MG) is an expert in rural development and was part of an NGO working in this field. Saurabh Gupta (SG) is the younger brother of MG and is an engineer by profession who went to the United States around 15 years back. The Gupta's family has its roots in Rajasthan, where Kamal Gupta (KG), father of MG and SG was a school teacher. Around 10 years back, MU got his posting as an advisor in the PM office and was given a furnished accommodation from the office itself. Only two months were remaining for his retirement. Post retirement, MG proposed to settle at Noida, (Uttar Pradesh) as both of his sons were working at Noida. In view of his proposal, MG booked an apartment in 'Spring Valley Homes' (SVH) in Greater Noida for his entire family to live in after his retirement. Spring Valley Homes' (SVH) Project SVH project is fashionably developed based on western style of architecture with lush green gardens and a landscape capable of enthralling and amusing anyone, irrespective of any age. There were nearly 30 amenities made available to resident allottees for a perfect community living. The project was started on time and the construction also took place as per the time schedule mentioned in the building plans as furnished to the RERA Authorities. Ultimate Construction Limited (UCL) Ultimate Construction Limited (UCL), the developer of the SVH project, is known for quality construction and timely delivery. After completion of construction activities and provisioning of all civic infrastructure such as water, drainage, sanitization, electricity, roads etc., UCL obtained an occupancy certificate on August 31, 2022 from the competent authorities on behalf of SVH permitting the ultimate occupation of the building. The same was informed to all the allottees (MG being one of the allottees) immediately on the same day for taking the physical possession of the property by means of a formal letter followed with an e-mail & SMS. Extension of MGs Retirement MG attained the superannuation age on August 14, 2022 and he was supposed to retire on the last working day of August, 2022. But on August 10, 2022, his tenure was extended by another six months because some of the projects for which he was an advisor, were on the verge of completion. As his service period got extended, MG decided to take physical possession of the apartment on November 30, 2022. Completion Certificate UCL got the Completion Certificate on November 16, 2022 for SVH. An association of allottees was formed in the month of July, 2022 which was registered on September 5, 2022 as a resident society. Documents including the building plans, possession of common areas including park and landscapes, were handed over to such resident society on December 15, 2022. Local laws are silent on the provisions relating to handing over the possession of documents and common areas. Goyal Family MG was married to Shreya Goyal (SG), a qualified Chartered Accountant. Goyal family is a joint family with persons of four generations and is presently staying at Gurugram, but has its roots in Jammu. The father of SG, Ajay Goyal (AG) was also a Chartered Accountant who later turned into a statesman. He migrated to Gurugram in the early 80s. Goyal family inherited the undivided estate from their lineal ascendants which in their testaments was transferred in the favour of the undivided family. Uncle of AG is acting as the Karta of the undivided family but substantial financial control were in the hands of AG. Farm House AG bought a farmhouse in Jammu during the winters of 2022 in his personal name, where he proposed to establish his party office. The entire family continued to stay in their house situated in Gurugram and have never visited the farmhouse since its purchase. The fair market value of the property as of the date of registration was ₹ 3 crore. The large portion of the purchase consideration to acquire this property was paid out of the funds realized from such impartial estate of the undivided family. Since, AG is a public figure, holding immovable property of such a huge value might create unnecessary issues, so he transferred the farmhouse property to the pool of the impartial estate of the undivided family. Vijay Auto Ancillary Limited (VAAL) Sister of MG, Bhavya is married to Swapnil. Swapnil is a promoter of Vijay Auto Ancillary Limited (VAAL) which is engaged in the business of manufacturing automobile parts and is art exclusive supplier to the country's largest four wheeler manufacturer. The demand for four wheelers declined sharply in the last 5 years. The last couple of years were the worst for the industry, which affected the business of many auto part suppliers and VAAL is one amongst thein. Initiation of Corporate Insolvency Resolution Process In the later part of 2021, on account of failure to serve the debt, a Corporate Insolvency Resolution Process (CIRP) was initiated against VAAL by the Adjudicating Authority on an application from the concerned financial creditors. Swapnil is keen to revive the business and is eagerly waiting for a resolution plan from the resolution professional but in the first meeting of the Committee. of Creditors (CoC), the Interim Resolution Professional (IRP) was appointed as the Resolution Professional who intimated the Adjudicating Authority of the decision of the CoC to liquidate VAAL with 66% of voting share of the financial creditors. Swapnil challenged such a decision of the financial creditors by writing a letter to the Adjudicating Authority. Star Shipping Limited (SSL) Bhavya is a management consultant in Star Shipping Limited (SSL) which is an associate company of Multi Syndicate Limited (MSL) which holds 25% of the voting rights in SSL (25% stake was acquired on April 10, 2020) and so it is having a right to appoint 4 out of total 10 directors on the Board of SSL. The management and daily affairs of the SSL are purely independent. SSL is contributing a major portion to the group profits. SSL is willing to enter the domain of operation of airports alongside the sea port business because the market of domestic travel has been multifold in a previous couple of years and is yielding significant profits to the airport operators. Hence, in the first week of September, it acquired the airport of the prominent city of the country. Status of the Ancestral Property Presently, no one stays at the ancestral house of the Gupta family, which is situated in Rajasthan. SG is staying in New York along with his wife and children. His family has got citizenship in United States. The needs of the family are growing as children are getting older hence, SG decided to buy a more spacious house for his family, for which he required money so he requested his elder brother MG to help him. Considering the needs of his younger broth er and his own decision to settle in Noida, MG decided to sell the house despite being sentimentally attached to the ancestral house very much. This is the only immovable property in India in which SG holds interest. As per the will of their father, the property of KG was divided into four equal parts (one part for MG, one for SG, another one for Bhavya, and the last for the trust of school, where he was a teacher). After the sale of the property, the sale proceeds were shared accordingly. The house was sold to a local person, who converted the building into a resort and leased the same to a travel and tourism company of Nepal for a period of 7 years without the permission from RBI. Since SG was not aware of the Indian laws in force, he decided to take consultancy services from Shyam, a Chartered Accountant in India who advised him that the transfer and remittance of his share in the ancestral immovable property sold can be done only with the approval of Central Government. In the light of the above inputs, answer the following questions in Part A and Part B: PART - A
Sub-questions (8)
MG decided to take physical possession of the apartment at SVH on November 30, 2022. Examine and state whether he can legally do so?
(A) Yes, he can take possession at any time as per his convenience, but he needs to inform the same to UCL in writing.
(B) No, he can take possession at any time but before November 16, 2022.
(C) No, he can take possession at any time but before September 30, 2022.
(D) No, he can take possession at any time but before by October 31, 2022.
Whether the transaction of acquiring the property in the form of a farm house, by AG in his own name, out of the funds utilized from the impartible estate of the undivided family, amount to a 'benami transaction'?
(A) No, because the Prohibition of Benami Property Transactions Act, 1988 does not apply to Jammu and Kashmir. As the property lies in Jammu, it is out of the purview of the Act.
(B) Yes, because if the property is purchased out of the funds of the undivided family, it shall be for the benefit of all the members of the undivided family.
(C) Yes, because if the property is purchased out of the funds of the undivided family, it shall be registered in the name of the Karta.
(D) No, because the purchase of property by a member of HUF from the known sources of the HUF for his own benefit does not amount to a benami transaction.
Whether UCL has validly handed over the relevant documents and the possession of the common area to the resident society of SVH within the required time frame?
(A) Yes, because in the absence of any local law, the promoter shall handover the necessary documents and plans, including common areas, to the association of the allottees within 4 months from the date of occupancy certificate i.e. December 30, 2022.
(B) No, because in the absence of any local law, the promoter shall handover the necessary documents and plans, including common areas, to the association of the allottees within 21 days from the date of completion certificate i.e. by December 6, 2022, whereas the builder handed it over only on December 15, 2022.
(C) Yes, because in the absence of any local law, the promoter shall handover the necessary documents and plans, including common areas, to the association of the allottees within 30 days from the date of completion certificate.
(D) No, because in the absence of any local law, the promoter shall handover the necessary documents and plans, including common areas, to the association of the allottees within 15 days from the date of completion certificate i.e. by November 30, 2022, whereas, the builder handed it over only on December 15, 2022.
Whether the decision taken by the Committee of Creditors (CoC) of liquidation of VAAL is legally valid?
(A) Legally invalid, because the decision of liquidation of VAAL can only be taken by NCLT.
(B) Legally invalid, because the decision of liquidation of VAAL is to be taken by a CoC only after the resolution plan presented by the resolution professional is rejected.
(C) Legally valid, because the decision of liquidation of VAAL is taken by the CoC with a voting share of 66%.
(D) Legally invalid, because the decision of liquidation of VAAL is to be taken by the CoC with a voting share of exceeding 66%.
Whether the act of leasing out the resort for a period of 7 years without permission from RBI to the Nepal based travel and tourism company is invalid?
(A) Legally valid.
(B) Yes, because no person of Nepal is allowed to acquire an interest in immovable property in India in the form of lease for a period exceeding five years.
(C) Yes, because no person resident outside India, is allowed to acquire an interest in immovable property in India, whether for lease or otherwise.
(D) Yes, because no person resident outside India, is allowed to acquire an interest in immovable property in India, in any form, in any manner, without the prior permission of RBI, whether for lease or otherwise.
Shyam, a Chartered Accountant advised SG that the transfer and remittance of his share in the ancestral immovable property sold can be done only with the approval of the Central Government. Critically examine the advice in the light of the provisions of the Foreign Exchange Management Act, 1999.
As per Section 5 of the Competition Act 2002, if any enterprise or group merge or acquire an interest in another enterprise, which create a resulting entity, with assets or turnover over the threshold limit, it is considered as the formation of a 'combination', which may adversely affect the competition in the relevant market sphere. Examine whether SSL and MSL is a 'group' as per the Competition Act, 2002 for purpose of making an application under the said Section.
In the light of the provisions of the Prohibition of Benami Property Transactions Act, 1988 analyze the following: Whether the property acquired by AG in his own name, by utilizing the funds realized from the undivided estate of the undivided family, and then transferring it to the pool of the impartible estate of the undivided family, can be considered a "benami transaction" if suspicion arises with respect to the purpose and nature of the transaction? Highlight the commonly applicable circumstances which guide, whether a transaction is benami or not. Is there any litmus test to determine whether the transaction is benami or not?