Delhi High Court
Reserve Bank Of India vs Crystal Credit Corpn. Ltd. on 17 July, 2018
$~CP-18
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 17.07.2018
+ CO.PET. 389/2001
RESERVE BANK OF INDIA ..... Petitioner
Through
versus
CRYSTAL CREDIT CORPN. LTD. ..... Respondent
Through Ms.Isha Khanna, Adv. for the OL.
Mr.Rajesh Pathak, Adv. for the
applicant in CA 1983/2013.
Mr.Naresh K.Daksh, Adv. for the
applicant in CAs.203-205/2010.
Mr.Abhay K.Das, Mr.Shanthanu
Singh and Mr.Murari Babu, Advs. for
applicant in 4458/2016.
CORAM:
HON'BLE MR. JUSTICE JAYANT NATH
JAYANT NATH, J. (ORAL)
CA No.1983/2013
1. This application is filed on behalf of Sh.Sunil Mehra to restrain the
OL from interfering in the peaceful possession of the property measuring 6
Nali of Khata No.9, situated at Village Chohanpata, Patti Chopra Ranibagh
Tehsil and District Nainital.
2. It has been pleaded in the application that Smt.Nita Pant and
Mr.Rajesh Kumar Aggarwal had jointly purchased this property in a court
CO.PET.389/2001 Page 1
auction.
3. A complaint filed by one Sh.Pratap Singh Bhandari was allowed
by the District Consumer Redressal Forum, Nainital vide its judgment dated
12.11.1999. In the execution, the property is said to have been auctioned
pursuant to the order of the learned Civil Judge (Senior Division), Nainital.
As per the auction report dated 19.07.2002, the highest bidder was
Sh.Rajesh Kumar Aggarwal and Smt.Nita Pant who had made the bid jointly
for Rs.4 lacs. On 19.08.2002 the concerned court of the learned Civil Judge,
Nainital confirmed the sale of land by auction and directed issue of the sale
certificate. On 30.10.2002, the court noted that sale certificate has been
issued under the signatures of the court.
4. The case of the applicant is that thereafter said Smt.Nita Pant and
Mr.Rajesh Kumar Aggarwal sold the property to various purchasers and the
said property was purchased by the applicant vide sale deed dated
02.12.2010. It is further pleaded that this winding up petition was filed on
10.12.2001 and the OL was appointed as the provisional liquidator on
20.11.2002 i.e. after the above sale was confirmed. Hence, it is pleaded that
the applicant is a bona fide purchaser and should be entitled to retain the
possession of the said property. Reliance is placed on the judgment of this
court in this case itself dated 6.5.2005 reported as Reserve Bank of India v.
Crystal Credit Corporation Ltd., 121 (2005) DLT 375.
5. The learned counsel for the OL has objected to this application. She
has pleaded that the chain of title by which the applicant has become the title
holder is not clear. She has also pointed out that the Ex. Director whose
statement was recorded never revealed about this particular property.
6. On a query from the court, the learned counsel for the OL was unable
CO.PET.389/2001 Page 2
to clarify as to whether this property formed part of the assets of the
respondent company as per the balance sheet available of the respondent
company.
7. It can be seen from the perusal of the facts that the property in
question has been auctioned prior to the appointment of the OL as the
provisional liquidator. The auction has taken place pursuant to the order of
the civil court and the sale was confirmed much prior to the appointment of
the OL as the liquidator.
8. As per judgment noted above of this court passed in this case reported
as 120(2005) DLT 375 this court in the said order dated 06.05.2005 was
dealing with a matter somewhat identical to the facts of this application.
The legal position was spelt out by this court in paragraph 5 of the said
judgment dated 06.05.2005, which read as follows:
"3. The undisputed position in law can be summarized as
follows:
After the winding up orders are passed and the liquidator is
appointed, it is he alone who has the power to take charge of the
assets of the company. Further, such assets can be sold only by
the OL under the supervision of the Company Court. Any
transfer/sale of the assets by any other person is void. This legal
position is stated in Section 536 of the Companies Act, 1956
(for short `the Act') which reads as under:
"536. Avoidance of transfers, etc., after commencement of
winding up.-(1) In the case of a voluntary winding up, any
transfer of shares in the company, not being a transfer made
to or with the sanction of the liquidator and any alteration in
the status of the members of the company made after the
commencement of the winding up, shall be void.
(2) In the case of a winding up by [the Court], an disposition
CO.PET.389/2001 Page 3
of the property (including actionable claims) of the
company, and any transfer of shares in the company or
alteration in the status of its members, made after the
commencement of the winding up, shall [unless the Court]
otherwise orders, be void."
4. Sub-section (2) of Section 536, however, empowers the
winding up court to order otherwise which includes power to
give its approval to such sales if in a particular case the
circumstances so justify. It is because of this provision
contained in Sub-section (2) of Section 536 that prayer made is
by the applicant for approving the sale by this court.
5. Obviously, the purpose behind sub-section (2) of Section 536
is to prevent improper disposition or dissipation of property so
as to affect the assets otherwise available for distribution among
the creditors of a company in winding up. But the court is,
however, given the discretion to uphold all proper transactions
which otherwise appear to be proper transactions. What is to be
borne in mind, while examining such a transaction, is that the
assets of the company should be made available for distribution
pari passu amongst the creditors of the company and that no
creditor should obtain an advantage over his fellow creditors. In
Andhra Bank Ltd.Vs. Provisional Liquidator, Godavari Sugars
& Refineries Ltd., reported as (1954) 24 CC 149 after scanning
through the case law on the point culled out the following
principles which are to be kept in mind in such cases:
(i) Transactions bona fide entered into and completed in the
ordinary course of trade must be protected.
(ii) If the disposition is made for the purpose of preserving the
business as a going concern, then also the discretion of the
court must be exercised.
(iii) A disposition must not be validated merely because the
party bona fide entered into the transaction.
CO.PET.389/2001 Page 4
(iv) Knowledge of the presentation of the winding up is
immaterial.
..................
"8. The factors which weigh in favour of the applicant would be
the following:
(a) Sale in question is conducted by the court at Nainital.
(b) This sale is in execution of a decree in favor of a decree
holder.
(c) The execution itself was filed in the year 2001 and it can
logically be deduced that the decree must have been passed
prior to that date. Even order to sell the property in auction was
passed on 29th October, 2002. Winding up orders were passed
this court in Delhi on 20th November, 2002. Within 15 days
thereof the property was put to auction on 3rd December, 2002
at Nainital. The said winding up orders as on the date of auction
were neither in the knowledge of the Civil Judge, Nainital nor
in the knowledge of public as citation was published in the
newspapers only on 11th February, 2003. However, by that
date, the applicant had deposited the sale consideration and was
put in possession of the property.
(d) Before putting the property to auction, it was got evaluated
by a valuer appointed by the Civil Judge and the property is
sold at a consideration which is more than the value fixed by the
valuer.
(e) Perusal of the auction report reveals that the necessary
procedure which is required for auctioning such properties by
the court was followed and it was an open public auction in
which number of persons participate. The bids were allowed to
start a minimum price fixed in the valuation report and inter se
bidding took place in which the bidders kept on revising their
bids and ultimately bid of the applicant at Rs. 6,05,000/-, being
the highest bid, was accepted."
CO.PET.389/2001 Page 5
9. From the perusal of the above order, in my opinion, there is a clear
commonality of the facts in application that was the subject matter of the
adjudication of the court in the above case when compared to the facts of
this case. The same orders would have to follow in this case
10. The application is accordingly allowed. The OL will not interfere with
the peaceful possession of the applicant in this case. The application stands
disposed of.
11. The liberty is granted to the OL to take steps for realisation of the
dues under section 446 of the Companies Act, 1956 against the decree
holder.
CA Nos.203-205/2010
12. List these applications for arguments on 20.08.2018.
CA No.4458/2016
13. The learned counsel for the OL seeks some time to file an additional
affidavit opposing the present application.
14. List on 20.08.2018.
JAYANT NATH, J.
JULY 17, 2018/v
CO.PET.389/2001 Page 6
