Bombay High Court
Helbon Engineers Pvt Ltd vs Jayantilal A.Shah And 2 Ors on 10 June, 2024
Author: Abhay Ahuja
Bench: Abhay Ahuja
2024:BHC-OS:8509
IA 1454-24 in CP 924-03
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION NO. 1454 OF 2024
IN
COMPANY PETITION NO. 924 OF 2003
Helbon Engineers Pvt. Ltd.
A Company duly incorporated
under the Companies Act, 1956
and having its registered office at:
Plot No. 2 & 5 near Veer Rubber Company,
MIDC, Chikloli, Near Forest Naka,
Ambernath (W), Thane - 421 502 ...Applicant
In the matter between
Jayantilal A. Shah, C. A. of Devyani J. Shah
Sole Proprietress of M/s Jayant Trading
Corporation, carrying on business at
22/30, Princess Street, 4/12, Mulchand Mansion,
Mumbai 400 002 ...Petitioner
V/s.
1. Ferral Anant Machinery Manufacturers Pvt. Ltd.
A Company in Liquidation, having its registered
office at Flat No. 5, Moon Stone Apartment,
65-E Linking Road, Santacruz West, Mumbai-400054
2. The Official Liquidator
Bombay High Court, Bank of India Building,
5th Floor, Mahatma Gandhi Road,
Fort, Mumbai-400 023, as liquidator of
Ferral Anant Machinery Manufactures Pvt. Ltd.
Having its office at : 22 Gulabbai Desai Road,
Mumbai-400 026. ...Respondents
Mr. Sarosh Bharucha with Mr. Hrushi Narvekar and Mr.K.V Ramdasan
i/b E. A. Sasi & Mr. Arnav Rane, Advocate for the Applicant.
Mr. Ranjeev Carvalho, Advocate for Official Liquidator.
Mr. Chetan Shelake, Assistant Official Liquidator.
Nikita Gadgil 1/31
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IA 1454-24 in CP 924-03
CORAM : ABHAY AHUJA, J.
RESERVED ON : 2nd MAY, 2024
PRONOUNCED ON: 10th JUNE, 2024
JUDGMENT :
1. This Interim Application has been filed on behalf of the Applicant
seeking various reliefs inter alia for a declaration that the sale
agreement dated 5th September, 2007 is not affected by Section 536 (2)
of the Companies Act, 1956 and to ratify the said sale.
2. The background facts are that in and around 1981, the
Maharashtra Industrial Development Corporation ("MIDC"), who as
owner of the land being two pieces and parcels of land known as : (i)
Technician Shed No.2 admeasuring 1870 sq. meters and built up shed
admeasuring 786 sq. meters or thereabout and (ii) Technician Shed No.
5 admeasuring 1755 sq. meters and built up shed admeasuring 1314
sq. meters or thereabout, both situated at Ambernath Industrial Area,
within the village limits of Ambernath and sub-District of Ulhasnagar,
District and registration District : Thane (the "said Property"), leased
the said property in favour of one Ferral Anant Machinery
Manufacturers Pvt. Ltd. (the "said company) against which a winding
up order has been passed and arrayed as the Respondent No.1.
IA 1454-24 in CP 924-03
3. On 25th August 2003, one Mr.Jayantilal A. Shah, Constituted
Attorney of Devyani J. Shah, Sole Proprietress of M/s Jayant Trading
Corporation, the Petitioner, filed the petition for winding up against the
said company.
4. It is the case of the Applicant that the said company did not
inform the Applicant of the filing of the winding up petition nor of any
order of admission or of winding up and the Applicant came to know of
the same only in the year 2011.
5. On 4th February 2005 an ex-parte order was passed by this Court
admitting the winding up petition.
6. In or around 2006-07, the Applicant learnt about the intention of
the said company to transfer its leasehold rights and sell the structures
standing on the said land. That, accordingly negotiations ensued
between the Applicant and the said company for transfer of the said
property. That, at the time of negotiations, the directors of the said
company represented to the Applicant that the said property was free
of all and any encumbrances and subject to the approval of MIDC and
the same could be transferred to the Applicant for valuable
IA 1454-24 in CP 924-03
consideration. That, at the relevant time, the said company informed
the Applicant that it had only one creditor i.e. Bank of Baroda,
however, its dues were being cleared by the said company. On 16 th
February, 2007, the Applicant issued a public notice inviting objections
to the transfer of the said property, however no objections were
received. On 29th June, 2007, the Respondent No.1-company applied to
MIDC for transfer of the said property in favour of the Applicant. On
4th July, 2007 and 27th July, 2007, the Bank of Baroda issued its letter
confirming that the Respondent No.1-company has paid all its dues and
that the bank has released all documents kept with it as security.
7. On 14th August, 2007, the MIDC granted its approval for transfer
of the said property in favour of the Applicant subject to payment of
differential premium of Rs. 5,40,900/-, which was paid by the
Applicant.
8. That on 5th September, 2007, the Applicant and the said company
entered into a sale agreement for transfer of the said property in favour
of the Applicant for a consideration of Rs.1,25,00,000/- payable by the
Applicant to the Respondent No.1-company. It has been submitted that
the sale agreement has been duly registered before the Sub-Registrar of
IA 1454-24 in CP 924-03
Assurances and the entire consideration of Rs. 1,25,00,000/- has also
been paid by the Applicant to the said company.
9. That, thereafter, the Applicant has invested substantial sums of
monies in the said property for installation of plant, machineries,
equipment, raw material/stock-in-trade, etc, so as to use the said
property for its business of manufacturing of electrical transformer
tanks, other engineering and fabrication works. The Applicant
employed around 100 workers whose livelihood is dependent on the
Applicant. Further, that in the year 2010, the Applicant mortgaged the
said property to the South Indian Bank Limited for raising finance to
the extent of Rs.4,24,00,000/- for establishing the business.
10. On 26th July 2010, order was passed by this Court winding up the
company. It is not in dispute that none appeared for the company and
as recorded earlier, the Applicant came to know of the winding up
related proceedings only in the year 2011, when on 25 th June 2011, a
representative from the office of the Official Liquidator visited the said
property and informed the Applicant that the Official Liquidator would
be taking over possession of the said property in the light of the
winding up order. It is submitted that it was after this date that the
IA 1454-24 in CP 924-03
Applicant conducted necessary searches and came to know of the
winding up petition and the orders passed therein.
11. Thereafter, in the year 2011, the Applicant filed Company
Application No.325 of 2011 in the winding up petition inter alia for a
declaration that the sale agreement dated 5 th September 2007 was
valid, subsisting and binding.
12. On 6th August 2011, a Memorandum of Understanding (MOU)
was entered into between the Applicant and the Petitioner whereby the
dues of the Petitioner were settled by the Applicant.
13. On 13th October 2011, keeping all contentions open, an order
was passed by this Court permitting the Applicant to withdraw the said
Company Application No.325 of 2011 with liberty to adopt appropriate
proceedings against the company in liquidation and particularly in
relation to the sale agreement dated 5 th September 2007. The
Applicant was protected from dispossession for a period of two months
and status-quo was directed to be maintained at the site accordingly,
which order was extended for some more time. Also, the following
order was passed on the Official Liquidator's Report No.269 of 2011 :
IA 1454-24 in CP 924-03
" In the light of the withdrawal of the company application
and the order made therein, presently Mr.Sawant appearing
for Liquidator states that the Liquidator is not seeking any
reliefs in terms of prayer clause (a) of this report. The request
of Liquidator to pass orders in terms of prayer clause (a) is
deferred for a period of eight weeks from today.
2) As far as prayer (b) is concerned, Mr.Sawant states that
Bank of Baroda was one of the secured creditor of the
company in liquidation. The representative of Bank of Baroda
informs the Liquidator in a meeting dated 28th February 2011
that the company in liquidation has already settled the dues
of the said bank under One Time Settlement scheme. The
bank submitted a letter dated 16th May 2011 along with
statement of account and NOC indicating that it has received
a sum of Rs.3,38,32,000/- plus interest of Rs.14.85 lakhs for
the period as per the compromise proposal sanctioned and the
company in liquidation has a credit balance of Rs.4,382/-. It is
stated in the report that date of payment to Bank of Baroda is
not informed.
3) Learned Counsel places reliance upon a letter dated 24 th
May 2011 of the Bank of Baroda addressed to the Deputy
Official Liquidator confirming this fact and relies upon the
annexures thereto.
4) In the submission of Mr.Sawant, notice of this report was
served on Bank of Baroda. It has failed to respond to the said
notice. It has received notice and yet has not filed any
response nor is any representative of the said bank present in
Court.
5) Mr.Sawant submits that the company in liquidation was
wound up on 26th July 2010. However, the record would
indicate that the company petition for winding up was
admitted on 4th February 2005. The order of winding up was
passed on 26th July 2010. Inviting my attention to the
provisions enabling the Court to pass an order of winding up,
it is contended that such an order enures for the benefit of all
creditors as if it had been made on their joint petition.
Therefore, upon an order of winding up being passed, the
IA 1454-24 in CP 924-03
same relates back to the date of presentation of the winding
up petition. Admittedly, the bank of Baroda has informed that
the payment has been made some time by the company in
liquidation, post the winding up order. In any event, it is
made during the pendency of the proceedings. That the
application of doctrine of relation back is, therefore, not in
dispute. The documents that have been placed on record
would indicate that on 4th July 2007, the bank issued a no
dues certificate in favour of the company in liquidation.
Therefore, at least until that date the claim was not settled. If
at all the monies were received, they were received during the
course of proceedings. Upon the order of winding up being
passed, it was the duty, therefore, of Bank of Baroda to inform
the Liquidator and if required by the Liquidator to bring back
the monies and deposit them with him. The secured creditors
have to be treated equally and particularly in the light of
section 529 and 529A of the Companies Act, would rank pari
pasu and, therefore, their claim is on par as stated in the
statutory provisions.
6) Today claims of workmen and others have to be invited.
They have to be adjudicated. Therefore, the Bank of Baroda
cannot retain any sums as that would mean that one of the
creditors and that too claiming to be a secured one gets
preference over others.
7) Mr.Sawant, therefore, submits that the report be made
absolute in terms of prayer clause (b). Having heard
Mr.Sawant at some length and with his assistance perusing
the report and annexures, including the letter dated 4th July
2007, leaves me in no manner of doubt that the bank appears
to have agreed to one time settlement with the company in
liquidation, post admission of this company petition. Atleast
the company in liquidation was aware of the fact that a
winding up petition is pending in this Court against it.
Thereafter the winding up petition was admitted. The order
of winding up may have been made subsequently but
applying the principles of relation back, which have statutory
recognition in terms of sections 441 of the Companies Act,
Mr.Sawant's submissions would require acceptance. The
claims against the company have yet to be received by the
IA 1454-24 in CP 924-03
Liquidator and, thereafter, would be required to be
adjudicated. In these circumstances, interest of justice would
be served if, firstly the Liquidator is directed to advertise and
issue a public notice inviting claims from all interested
parties, including workmen of the Company in liquidation
and upon adjudication thereof, if the amount to the credit of
the company or the funds lying with the Liquidator insofar as
the subject company is concerned, fall short so as to enable
him to meet the dues of the secured creditors, workmen and
others, including statutory dues, then, he can call upon the
Bank of Baroda to deposit Rs.3,53,17,000/- in terms of prayer
clause (b) of the report and on such a communication being
received from the Official Liquidator, Bank of Baroda shall
comply with the same and deposit monies within eight weeks
from the date of receipt of such communication. Report is
made absolute in terms of prayer clause (b) with liberty as
above."
14. In the year 2011 itself the Applicant filed Regular Civil Suit
No.50 of 2011 before the Civil Judge Senior Division at Kalyan inter
alia seeking a declaration that the sale agreement dated 5 th September
2007 was valid, subsisting and binding. On 20 th March 2012, an
interim order was passed by the Kalyan Civil Court restraining the
Official Liquidator from dispossessing the Applicant from the said
property.
15. On 12th September 2012, the Bank of Baroda, who was the only
creditor of the Respondent no.1 - company in liquidation, made an
application to recall the order dated 13th October 2011 passed by
IA 1454-24 in CP 924-03
this Hon'ble Court and for other prayers. The said matter had
come up for consideration on 12th September 2012. This Hon'ble
Court directed that in the event of the Official Liquidator receiving
any claims from the workers/creditors of the Company, the
Official Liquidator was directed to adjudicate the same and call
upon the applicant bank to deposit the necessary amounts by
giving 14 days clear notice in writing. Upon receipt of such notice,
the applicant was entitled to move an application seeking
necessary reliefs. The order was passed without going into the
merits of the application since the Official Liquidator had not
received any claims from any of the workers/creditors of the
Company.
16. On 25th January 2023, the Official Liquidator filed an application
in the Kalyan Civil Court under Order VII Rule 11(b) and (d) of the
Code of Civil Procedure, 1908 (the "CPC") for rejection of the plaint in
view of Section 536(2) of the Companies Act, 1956.
17. On 18th August 2023, the plaint came to be rejected and
thereafter on 30th August 2023, this application came to be filed.
IA 1454-24 in CP 924-03
18. On 6th September 2023, a notice was issued by the Official
Liquidator informing that possession of the said property would be
taken on 14th September 2023. On 4th October 2023, the Official
Liquidator filed its reply to the winding up petition. It is submitted on
behalf of the Applicant that in the said reply, the Official Liquidator has
admitted that it has received no claims with respect to the company in
liquidation.
19. Mr.Sanjay Jain, learned Counsel for the Applicant would submit
that since the sale agreement dated 5th September 2007 was entered
into before the passing of the winding up order dated 26 th July 2010,
the Applicant is a bonafide purchaser of the said property for
consideration without notice of the winding up proceedings. That, the
sale agreement dated 5th September 2007 is a bonafide transaction in
the ordinary course of business of the company, which bonafides of the
Applicant and the transaction are fortified by the following facts :
(i) the Applicant gave public notice dated 16th February 2007 before
purchasing the subject Property and received no objections;
(ii) Bank of Baroda gave its NOC before the transaction inter alia
setting out that its dues qua the Company are settled;
(iii) MIDC granted its approval to the transaction on 14 th August
IA 1454-24 in CP 924-03
2007, thus demonstrating that even according to them there was
no embargo on the transfer;
(iv) the Applicant paid a sum of Rs.5,40,900/- to MIDC as differential
premium for transfer of the Subject Property; and
(v) the Applicant settled the dues of the Petitioner against the
Company, as evident from the Memorandum of Understanding
dated 6th August, 2011 after coming to know of the captioned
Petition and the orders passed therein.
20. Mr.Jain, learned Counsel for the Applicant, would submit that the
said transaction was entered into in the interest of the company as the
company required monies to pay its debts and liabilities. That, in view
of settled law that Section 536(2) of the Companies Act, 1956 is an
enabling section which does not render a transaction entered into by a
company from the date of filing of the winding up petition till the date
of the winding up order void ab-initio. Learned Counsel would submit
that the Company Court has the power or rather absolute discretion to
declare that a transaction entered into by a company between the date
of filing of the winding up petition and the date of the winding up
order is not void but is valid, subsisting and binding and in the interest
of justice. It is submitted that the transaction of the Applicant has been
shown to be bonafide and in the interest of the business of the
company, and therefore, in the interest of justice, the same be declared
IA 1454-24 in CP 924-03
as valid, subsisting and binding.
21. Learned Counsel submits that it is an admitted position that the
Official Liquidator has not received any claims from the workers,
employees or creditors. That, even the dues of the petitioner have been
settled by the Applicant. That, therefore, there are no claims which the
company has to meet through the liquidation process, and that, there is
no reason therefore for the sale agreement dated 5 th September 2007 to
be void.
22. Mr.Jain has relied upon the following decisions in support of his
contentions :
(i) S.P. Khanna vs. S.N. Ghosh1
(ii) Pankaj Mehra and Another vs. State of Maharashtra and Others2
23. It is, therefore, submitted that the reliefs, as sought for in the
application, be granted.
24. On the other hand, Mr.Ranjeev Carvalho, learned Counsel for the
Official Liquidator, has opposed the application.
25. At the outset, Mr.Carvalho would submit that the transaction falls
1 1975 SCC Online Bom 263
2 (2000) 2 SCC 756
IA 1454-24 in CP 924-03
foul of the provisions of the Companies Act, 1956 and attracts the
provisions of Section 536(2) of the said Act. Learned Counsel would
submit that the presentation of the winding up petition was in the year
2003. The winding up petition came to be admitted on 4 th February
2005. That, in view of Section 441 of the Companies Act, 1956, the
winding up of a company by the Court shall be deemed to commence at
the time of the presentation of the petition for the winding up. That,
the sale transaction has taken place only in the year 2007 as per the
sale deed dated 5th September 2007 executed between the said
company and the Applicant, which is much after the date of the
presentation of the petition, without in any manner obtaining leave of
this Court. That, therefore, the said sale is void ab-initio and non-est in
the eyes of law.
26. Mr.Carvalho would further submit that the petitioner in the
winding up petition had advertised the petition in the Free Press
Journal and the Maharashtra Government Gazette in the year 2005
when the winding up petition was admitted by this Court by order
dated 4th February 2005 and that it is a settled law that publication of a
notice is a constructive notice to the public at large in respect of the
pendency of petition for winding up of the company in liquidation.
IA 1454-24 in CP 924-03
That, therefore, the contention of the Applicant that the Applicant and
the company in liquidation were not aware of the winding up petition,
does not hold any water and ought not to be countenanced by this
Court.
27. Mr.Carvalho would submit that in view of the pending winding
up petition, which was duly advertised, the company in liquidation had
no right in law to sell and the Applicant had no right and/or could not
claim any rights and/or equities to purchase the said property from the
company in liquidation, which had no power to execute any
conveyance deed, transfer any properties during the pendency of the
liquidation proceedings and in support, the learned Counsel draws the
attention of this Court to Section 536(2) of the Companies Act, 1956.
Learned Counsel, therefore, submits that since the sale agreement
dated 5th September 2007 was executed after the commencement of
winding up proceedings in the year 2003, the agreement in itself is null
and void, non-est, runs contrary to the principles of Indian Contract
Act, 1872, as the parties to the transaction lacked competence / locus
to enter into the transaction.
IA 1454-24 in CP 924-03
28. Mr.Carvalho submits that under Section 456 of the Companies
Act, 1956, all the property and effects of the company shall be deemed
to be in the custody of the Official Liquidator, as from the date of the
winding up of the company. Learned Counsel, therefore, submits that
since the sale agreement dated 5th September 2007 is null and void and
non-est in the eyes of law, the application be dismissed and the
Applicant be directed to handover peaceful possession of the said
property to the Official Liquidator. Mr.Carvalho has relied upon a
Division Bench decision of this Court in the case of Sunita Vasudeo
Warke vs. Official Liquidator and Others 3.
29. I have heard the learned Counsel at length and also considered
the rival contentions. Mr.Jain has submitted that he has instructions to
not to file any rejoinder in the matter. Therefore, this Court proceeds
accordingly.
30. The Applicant has sought the following prayers :
(a) This Hon'ble Court be pleased to order and declare that the Sale
Agreement dated 5th September 2007 being Exhibit-F above is valid,
subsisting and binding;
(b) This Hon'ble Court be pleased to order and declare that the Sale
3 2013(2) Mh.L.J. 777
IA 1454-24 in CP 924-03
Agreement dated 5th September 2007 annexed as Exhibit-F above is
not affected by Section 536(2) of the Companies Act, 1956;
(c) This Hon'ble Court be pleased to pass an order of permanent
injunction restraining the Official Liquidator, High Court, his servants,
agents and representatives from in any manner whatsoever disturbing
the possession of the Applicant with respect to the said Property and
taking any action against Applicant pursuant to the Orders dated 4 th
February 2005 and 26th July 2010 annexed as Exhibit-I & J above,
passed by this Hon'ble court in the captioned Petition;
(d) This Hon'ble Court be pleased to pass an order to recall and / or
set aside the Orders dated 4th February 2005 being Exhibit-I and 26 th
July 2010 being Exhibit-J passed by this Hon'ble Court in the captioned
Petition.
31. It is not in dispute that the company petition was presented on
25th August 2003 and admitted on 4 th February 2005. A perusal of the
order dated 4th February 2005 clearly indicates that the company was
represented at the time of admission of the winding up petition.
However, at the time of passing of the winding up order dated 26 th
July 2010, none was present for the company and it has been recorded
in the said order that the Respondent no.1-company was absent though
served. That, the Official Liquidator came to be appointed with usual
powers under the Companies Act,1956.
32. The Official Liquidator proceeded with the liquidation
IA 1454-24 in CP 924-03
proceedings and held meetings with the ex-directors as well as the
petitioner and Bank of Baroda, who was the secured creditor. On 17 th
June 2011, the representative of Bank of Baroda had confirmed that
the dues had been settled in OTS scheme and stated that the company
in liquidation had a credit balance of Rs.4,382/- which was agreed to
be deposited with the Official Liquidator. The petitioner had stated
that the factory premises of the company in liquidation had already
been sold and transferred during the period of liquidation. The Official
Liquidator, thereafter, had proceeded to visit the factory premises of the
company in liquidation on 25th June 2011 situated on the said property,
when it was found that the Applicant was functioning from the said
property. In paragraph 8 of the affidavit-in-reply it has been stated that
one Mr.Joseph Abraham, Managing Director of the Applicant informed
that the Applicant had purchased the said factory premises belonging to
the company in liquidation in the year 2007, which is after the date of
admission order dated 4th February 2005, for a total consideration of
Rs.1,25,00,000/- from the company in liquidation vide registered sale
deed dated 5th September 2007. It is not in dispute that the said
consideration has been paid to the company in liquidation and that the
sale agreement has been registered.
33. Thereafter, the Official Liquidator had filed Official Liquidator's
IA 1454-24 in CP 924-03
Report No.269 of 2011 seeking the following prayers :
(a) Whether this Hon'ble Court would be pleased to declare the sale
of the property of the Company (In Liqn.) situated at Plot No.2 & 5,
Industrial Estate situated at Village - Chikhaloli, Sub-District Thane as
void in terms of provisions of sec 537(1)(b) read with section 536 of
the Companies Act, 1956 and also to direct the purchaser M/s. Helbon
Engineers Pvt. Ltd to handover possession of the said premises to the
Official Liquidator forthwith;
(b) In view of para 4 and 11 above whether this Hon'ble Court
would be pleased to direct the Bank of Baroda to deposit Rs.353.17 lacs
(i.e. amount received Rs.338.32 lacs as per compromise proposal
sanctioned plus interest of Rs.14.85 lacs for the delayed period) along
with interest payable on the said amount as per the prevailing rate of
interest at the point of time with the Official Liquidator forthwith;
34. The Applicant had also taken out Company Application No.325
of 2011 to declare the sale agreement dated 5 th September 20007 as
valid and binding on all the parties concerned and to restrain the
Official Liquidator, his servants, agents or otherwise by an order of
injunction of the Court from taking any steps qua the said property.
35. The Official Liquidator's report as well as the company
application, as noted above, came up for hearing on 13 th October 2011
when the Applicant was allowed to withdraw the said application with
IA 1454-24 in CP 924-03
liberty to adopt appropriate proceedings against the company in
liquidation and particularly in relation to the agreement dated 5 th
September 2007 and the Official Liquidator was directed not to
dispossess the Applicant from the said property in its possession and
the Applicant was directed to maintain status-quo initially for a period
of two months which was extended for some more time. The Official
Liquidator was directed to advertise public notice inviting claims and
upon adjudication thereof, if the amount to the credit of the company
in liquidation fell short to meet the dues of the creditors, then in that
event, the secured creditor viz. Bank of Baroda was directed to deposit
Rs.3,53,17,000/-. Thereafter, the Official Liquidator had invited claims
by advertisement in the Free Press Journal and Nav Shakti dated 12 th
December 2011, however, no claims were received.
36. Bank of Baroda preferred Company Application No.345 of 2012
to recall the order dated 13 th October 2011 and the matter came up for
consideration on 12th September 2012, when the Court disposed of the
application directing that in the event the Official Liquidator receiving
any claims from the workers / creditors of the company in liquidation,
the Official Liquidator would adjudicate the same and call upon Bank
of Baroda to deposit the necessary amounts by giving fourteen days'
IA 1454-24 in CP 924-03
clear notice in writing and upon receipt of such notice, Bank of Baroda
was entitled to move an application seeking necessary reliefs. It was
clearly recorded that the said order was passed without going into the
merits of the application since till the date of the order, the Official
Liquidator had not received any claims from the workers / creditors of
the company. Thereafter, as recorded above, the Applicant filed Civil
Suit No.50 of 2011 before the Civil Judge Senior Division at Kalyan
inter alia seeking a declaration that the agreement dated 5 th September
2007 executed between the Applicant and the company in liquidation
was valid and subsisting. The Kalyan Court, by order dated 20 th March
2012, granted temporary injunction restraining the Official Liquidator
from dispossessing the Applicant or interfering with its possession of
the said property till the final decision of the suit. However, the Official
Liquidator had filed an application for rejection of the plaint under
Order VII Rule 11 (b) and (d) of the CPC and by order dated 18 th
August 2023 the plaint was rejected under Order VII Rule 11(d) of the
CPC on the ground that Civil Court had no jurisdiction to deal with the
subject matter and therefore the suit was barred.
37. Thereafter, the Official Liquidator issued letter dated 6 th
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September 2023 to the Applicant and their Advocate requesting them
to handover the possession of the said property on 14 th September
2023.
38. It is not in dispute that in or around 1981, the land underlying
the said property was leased in favour of the company in liquidation
after which the said company in liquidation constructed two sheds on
the said property. It is also not in dispute that the Applicant, after
learning about the intention of the Respondent no.1-company to
transfer its leasehold rights and sell the structures, entered into
negotiations with the company in liquidation for transfer. That, based
on the negotiations and representations of the directors of the company
in liquidation, that the said property could be transferred to the
Applicant for valuable consideration subject to approval of the MIDC
and subject to the dues of the secured creditor viz. Bank of Baroda, on
16th February 2007, the Applicant issued a public notice inviting
objections to the transfer of the said property in its favour, however, no
objections were received. On 4th July 2007 and 27th July 2007, Bank of
Baroda issues its letters confirming that the company in liquidation had
paid all its dues and that the bank had released all the documents kept
with it as security. On 29 th June 2007 the company in liquidation
IA 1454-24 in CP 924-03
applied to the MIDC for transfer of the said property in favour of the
Applicant. On 14th August 2007, the MIDC granted its approval for
transfer of the said property in favour of the Applicant subject to
payment of differential premium of Rs.5,40,900/- which was duly paid
by the Applicant. Thereafter, on 5th September 2007, the said company
entered into an agreement for sale for transfer of the said property in
favour of the Applicant for a consideration of Rs.1,25,00,000/-. As
noted above, the sale agreement has been duly registered and the
entire consideration of Rs.1,25,00,000/- has been paid by the Applicant
to the company in liquidation. The bank statements annexed to the
petition and the correspondence indicate that the payment has been
made.
39. It has been submitted by the Applicant that soon after purchase
of the said property, the Applicant has invested substantial sum of
monies for installation of plants, equipments, raw materials, stock-in-
trade for manufacturing, electrical transformers, tanks and other
engineering and fabrication works. That, the Applicant employed
around 100 workers whose livelihood is depending on the Applicant
and that the Applicant has also availed of financial assistance of about
Rs.4,24,00,000/- by mortgaging the said property. The said mortgage
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has been registered/noted with the office of the Registrar of
Companies, as can be evidenced from Exhibit H to the application. It
has been submitted that the Applicant learnt of the winding up petition
only on 25th June 2011 when the representative of the Official
Liquidator i.e. the Respondent no.2 visited the said property informing
that the possession of the said property would be taken over by the
Respondent no.2 and that the Applicant was not aware of the winding
up petition until then and that only thereafter, after making necessary
enquiries and searches, that it was learnt that the winding up petition
was filed on 25th August 2003 and was admitted on 4th February 2005
and made absolute on 26th July 2010. The admission order dated 4th
February 2005 had clearly recorded that the Respondent-company
disputed the liability of the petitioner. The order dated 26 th July 2010
which passed the winding up order though recorded that the company
was served, however, none was present on behalf of the company. No
doubt, notices with respect to the admission and winding up of the
company would have been published, but it is not in dispute that
pursuant to MOU dated 6th August 2011, the Applicant has settled the
dues of the petitioner. The sale transaction is dated 5th September 2007
and despite the public notice dated 16 th February 2007 inviting
objections to the transfer and despite the pendency of the petition, no
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objections were received from any one including the petitioner. The
petitioner also appears to have missed the said public notice to raise
any objection with respect to the transfer. It is not in dispute that as on
date, there is no liability against the company in liquidation and that
there are no creditors as all the creditors including the Bank of Baroda
have admittedly been paid. There also do not appear to be any
workers' dues. There is no material shown which is contrary to the
above facts or to demonstrate lack of bonafides. There is also no
material to demonstrate that the transaction of sale is not for valuable
consideration.
40. No doubt, pursuant to Section 441 of the Companies Act,
winding up of a company by Court shall be deemed to have
commenced at the time of presentation of the petition which in the
present case would be 25th August 2003. It is also provided under
Section 536(2) of the Companies Act that in the case of a winding up
by a Court, any disposition of the property of the company made after
the commencement of the winding up shall, unless the Court otherwise
orders, be void. This Court in the case of S.P. Khanna v. S.N. Ghosh
(supra) has clearly observed that if bonafides are established, then
Section 536(2) would not apply, as the said provision is clearly an
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enabling provision in favour of saving transactions in the interest of
justice. That, all transactions which are bonafide and shown to be fair,
just and reasonable, deserve to be protected because of clear equity
involved in such matters. Section 536(2) declares the transactions after
commencement of the winding up void but leaves discretion to the
Court to make appropriate orders in that regard. That, the jurisdiction
vested is equitable and is meant to be exercised as such. If even
bonafide transaction for a consideration would not be protected, then
the company, only by the fact that the process of winding up has
started, would benefit itself by unjust enrichment. Such a result is
clearly to be avoided while exercising power under the said provision.
41. In the case of Pankaj Mehra and Another vs. State of Maharashtra
and Others (supra), the Hon'ble Supreme Court has considered the
impact of the legislative direction in Section 536(2) that any
disposition of the property of the company made after the
commencement of the winding up shall be void. The Hon'ble Supreme
Court has observed that there are two important aspects: first is, that
the word "void" need not automatically indicate that any disposition
should be ab-initio void. That, the legal implication of the word "void"
need not necessarily be a stage of nullity in all contingencies. The
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Hon'ble Supreme Court has observed that the manner in which the
word "void" has been employed in Section 536(2), the same means
voidable. Paragraphs 14, 15, 19 and 20 of the said decision are
usefully quoted as under :
"14. In the above backdrop alone we an consider the
impact of the legislative direction in Section 536(2) that any
disposition of the property of the company made after the
commencement of the winding up (i.e. after the presentation
of a petition for winding up) shall be void. There are two
important aspects here. First is, that the word "void" need not
automatically indicate that any disposition should be ab initio
void. The legal implication of the word "void" need not
necessarily be a stage of nullity in all contingencies. Black's
Law Dictionary gives the meaning of the word "void" as
having different nuances in different connotations. One of
them is of course "null, or having no legal force or binding
effect". And the other is "unable in law, to support the
purpose for which it was intended". After referring to the
nuances between void and voidable the lexicographer pointed
out the following :
"The word 'void' in its strictest, means that which has no
force and effect, is without legal efficacy, is incapable of
being enforced by law, or has no legal or binding force, but
frequently the word is used and construed as having the
more liberal meaning of 'voidable'.
The word 'void' is used in statutes in the sense of utterly
void so as to be incapable of ratification, and also in the
sense of voidable and resort must be had to the rules of
construction in many cases to determine in which sense
the legislature intended to use it. An act or contract
neither wrong in itself nor against public policy, which has
been declared void by statute for the protection or benefit
of a certain party, or class of parties, is voidable only.
15. For discerning the legislative idea in employing the
word "void" in the context set out in Section 536(2) of the
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Companies Act the second aspect to be noticed is that the
provision itself shows that the word void is not employed
peremptorily since the court has power to order otherwise.
The words "unless the court otherwise orders" are capable of
diluting the rigour of the word "void" and to choose the
alternative meaning attached to that word.
19. In Gray's Inn Construction Co. Ltd., Re reported in
(1980) 1 All ER 814(CA), the Court fo Appeal (Civil Division)
considered the principle on which discretion of the court to
validate the dispositions of property made by a company,
during the interregnum between presentation of a winding up
petition and the passing of the order for winding up, has been
dealt with, Section 227 of the English Companies Act, 1948 is
almost the same as Section 536(2) of the Indian Companies
Act. Dispositions which could be validated are mentioned in
the decision. The said decision was cited before us in order to
emphasise the point that courts would be very circumspect in
the matter of validating the payments and the interest of the
creditors as well as the company would be kept uppermost in
consideration. Be that so, the said decision is not sufficient to
support the contention that disposition during the
interregnum would be irretrievable void.
20. It is difficult to lay down that all dispositions of
property made by a company during the interregnum
between the presentation of a petition for winding up and the
passing of order for winding up would be null and void. If
such a view is taken the business of the company would be
paralysed. For the company may have to deal with very many
day-to-day transactions, make payments of salary to the staff
and other employees and meet urgent contingencies. An
interpretation which could lead to such a catastrophic
situation should be averted. That apart, if any such view is
adopted, a fraudulent company can deceive any bona fide
person transacting business with the company by stage-
managing a petition to be presented for winding winding up
in order to defeat such bona fide customers. This consequence
has been correctly voiced by the Division Bench in the
impugned judgment."
42. It is clear from the aforesaid exposition that the discretion to the
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Court by the use of the words "unless the Court otherwise orders" has
to be kept in mind. That, if all dispositions of property made by a
company in liquidation during the interregnum between the
presentation of the petition for winding up and the passing of the order
for winding up, would be null and void, that would completely paralyse
the business of company as the company has to deal with very many
day to day transactions. Such interpretation, as observed by the
Hon'ble Supreme Court, could lead to a catastrophic situation which
should be averted.
43. In the facts of the case, as noted above, the Applicant has
conducted its due diligence before entering into the sale agreement
dated 5th September 2007, has paid the entire consideration to the
company in liquidation and the sale agreement is duly registered after
obtaining permission from the MIDC and confirmation of no dues from
Bank of Baroda and has also settled the dues of the petitioner in the
winding up petition. The Applicant has also invested large sums of
monies and has also obtained financial assistance of over Rs.4 crores to
establish its business employing around 100 workmen, which has not
been disputed on behalf of the Official Liquidator. Therefore, in my
view, the Applicant as well as the transaction, evidenced by sale
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agreement dated 5th September 2007, are bonafide. Moreover,
admittedly, there are no creditors or claimants or workmen claiming
against the company in liquidation as on date. The transaction, in my
view, is not only bonafide but also fair, just and reasonable and
deserves to be protected. Accordingly, I am inclined to allow this
application. Applying the law elucidated above, to the facts of this
case, the arguments on behalf of the Official Liquidator cannot be
countenanced and there is no question of the sale of the said property
being void ab-initio or non-est in the eyes of law. Mr.Carvalho's reliance
upon the decision in the case of Sunita Vasudeo Warke vs. Official
Liquidator and Others (supra), in my view, would not assist the case of
the Official Liquidator, as the facts are distinguishable, the said
decision having been rendered in the context of an oral agreement,
although there cannot be any dispute as to the principles elucidated
therein.
44. In view of the above discussion, sale agreement dated 5 th
September, 2007 being a bonafide transaction is ratified. The
Application is made absolute in terms of prayer clauses (b) and (c),
which read thus:-
"(b) This Hon'ble Court be pleased to order and declare that
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the Sale Agreement dated 5th September, 2007 annexed as
Exhibit-F above is not affected by Section 536(2) of the
Companies Act, 1956;
(c) This Hon'ble Court be pleased to pass an order of
permanent injunction restraining the Official Liquidator,
High Court, his servants, agents and representatives from in
any manner whatsoever disturbing the possession of the
Applicant with respect to the said Property and taking any
action against Applicant pursuant to the Orders dated 4 th
February 2005 and 26th July 2010 annexed as Exhibit-I & J
above, passed by this Hon'ble Court in the captioned
Petition;"
45. Ordered accordingly.
46. In the light of the above order, it would not be necessary for this
Court to consider the prayer for recall / setting aside of the orders
dated 4th February 2005 and 26th July 2010.
47. After the order is pronounced, Mr.Carvalho seeks stay of the
order, which is opposed by the learned Advocate appearing on behalf of
the Applicant. Considering that the sale transaction is of the year 2007,
in view of what has been held as above, the request for stay is rejected.
(ABHAY AHUJA, J)
Digitally
signed by
NIKITA
NIKITA YOGESH Nikita Gadgil 31/31
YOGESH GADGIL
GADGIL Date:
2024.06.12
11:37:56
+0530
