1998 (12) TMI 450 - HC - Companies Law

Issues Involved:
1. Winding up of Shri Ambica Mills Ltd.
2. Possession and sale of the textile mill at Baroda.
3. Validity of the agreement dated 2-9-1989 between Shri Ambica Mills Ltd. and the applicant company.
4. Compliance with the Supreme Court's order and undertaking.
5. Compliance with the Companies Act provisions.
6. Specific performance of the agreement.
7. Permissions and legal requirements under various statutes.
8. Financial implications and liabilities, including those towards ONGC and debenture holders.

Issue-wise Detailed Analysis:

1. Winding up of Shri Ambica Mills Ltd.:
Company Petition No. 66 of 1988 was filed for the winding up of Shri Ambica Mills Ltd. Following a reference under the Sick Industrial Companies (Special Provisions) Act, 1985, the Board for Industrial & Financial Reconstruction (BIFR) opined that the company should be wound up. The High Court passed the winding-up order on 17-1-1997, appointing the official liquidator to take charge of the company's assets.

2. Possession and sale of the textile mill at Baroda:
The official liquidator took possession of all properties except the textile mill at Baroda due to an appeal by the applicant company claiming to be the purchaser. The applicant sought a direction for the official liquidator to execute the conveyance deed based on an agreement dated 2-9-1989 or permission to file a suit for specific performance.

3. Validity of the agreement dated 2-9-1989:
The agreement was for a total consideration of Rs. 4,01,00,000. The applicant claimed the agreement was valid and enforceable. However, the official liquidator argued that the agreement was void as it violated the Supreme Court's injunction and undertaking given by Shri Ambica Mills Ltd. The High Court found that the agreement was entered into in violation of the Supreme Court's order and was thus void under sections 23 and 24 of the Indian Contract Act, 1872.

4. Compliance with the Supreme Court's order and undertaking:
Shri Ambica Mills Ltd. had given an undertaking to the Supreme Court not to alienate, charge, or encumber its immovable assets without the Court's leave. The High Court noted that the agreement for sale of the Baroda unit was in violation of this undertaking and the Supreme Court's order. The Supreme Court had dismissed the applicant's interim application seeking permission to transfer the assets, reinforcing that the dues of ONGC must be paid first from the company's assets.

5. Compliance with the Companies Act provisions:
The resolution passed in the extraordinary general meeting on 30-3-1989 for the sale of the Baroda unit did not disclose the Supreme Court's injunction, violating sections 173 and 293(1)(a) of the Companies Act. The High Court held that the resolution was invalid due to non-disclosure of material facts, making the agreement void.

6. Specific performance of the agreement:
The High Court rejected the applicant's request for specific performance, stating that the agreement was void and could not be enforced. The Court noted that the applicant had not complied with its obligations under the agreement, such as redeeming the debentures. The Court also denied the alternative prayer to permit the applicant to file a suit for specific performance, as the agreement was void and contrary to public policy.

7. Permissions and legal requirements under various statutes:
The applicant claimed to have obtained necessary permissions under the Urban Land (Ceiling & Regulations) Act, 1976, and other legal requirements. However, the official liquidator disputed this, and the High Court found no evidence of compliance with these legal requirements.

8. Financial implications and liabilities:
The applicant had paid only Rs. 5 lakhs as earnest money and had not redeemed the debentures worth Rs. 3.95 crores. The High Court emphasized that the company's assets must first be used to clear the dues of ONGC, as directed by the Supreme Court. The Court found that the applicant had failed to fulfill its financial obligations under the agreement and had benefited from the use of the property without making the necessary payments.

Conclusion:
The High Court dismissed the application, holding that the agreement was void, violated the Supreme Court's order, and did not comply with the Companies Act provisions. The Court directed the official liquidator to take possession of the Baroda unit and act in accordance with the winding-up order. The applicant was ordered to pay costs of Rs. 10,000 to the official liquidator.

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