2001 (8) TMI 1236 - HC - Companies Law

Issues Involved:
1. Petition for winding up under section 433 of the Companies Act.
2. Application for impleadment as a party respondent.
3. Application to declare the proposed sale of assets void.
4. Application to stay sale proceedings.
5. Enforcement of an arbitrator's award by a secured creditor.
6. Locus standi of the applicant to file the applications.

Issue-wise Detailed Analysis:

1. Petition for Winding Up:
Company Petition No. 219 of 1998 was filed by a company claiming to be a creditor of Ismit Medical Technology Limited under section 433 of the Companies Act, seeking the winding up of Ismit on the grounds of its inability to pay its debts. The petition was admitted on 17-7-2001, and the required publication under rule 99 of the Company (Court) Rules was directed.

2. Application for Impleadment:
Company Application No. 312 of 2001 was filed by Mr. B. Suresh, another creditor, seeking to be impleaded as a party respondent to C.P. No. 219 of 1998. Mr. Suresh also filed two additional applications (C.A. No. 310 of 1998 and 311 of 1998) to declare the proposed sale of assets by the respondent bank as void and to stay all sale proceedings initiated by the bank.

3. Application to Declare Proposed Sale Void:
Mr. Suresh argued that the sale of assets by A.P. Mahesh Co-operative Urban Bank Limited, as advertised on 23-5-2001, would be detrimental to the interests of unsecured creditors. The court, noting that assets of a company under winding up proceedings were proposed to be sold, passed an interim order staying the sale and ordered notices in the other applications.

4. Application to Stay Sale Proceedings:
The respondent bank sought to vacate the interim order, arguing that the loans were secured by hypothecations and that proceedings under the Andhra Pradesh Co-operative Societies Act had resulted in an award for recovery of the outstanding amount. The bank contended that it was enforcing this award and that the applications were collusive and lacked locus standi.

5. Enforcement of Arbitrator's Award by Secured Creditor:
The court analyzed sections 446, 537, and 441 of the Companies Act. Section 446 mandates that no suit or other legal proceedings shall proceed against a company in winding up without the leave of the court. Section 537 declares any attachment, distress, or execution without leave of the court against the estate or effects of a company in winding up to be void. The court concluded that the bank, despite being a secured creditor, must obtain leave to enforce its security. The court also noted that the bank's award appeared to be a money decree, implying the bank had waived its security and must be treated as an unsecured creditor.

6. Locus Standi of the Applicant:
The court rejected the argument that Mr. Suresh lacked locus standi, stating that the mandate under section 537 to declare certain transactions void if carried out without leave of the court must be upheld. The court emphasized that it could not permit an illegality by rejecting the applications based on doubts about the applicant's status as a creditor.

Judgment:
- C.A. No. 312 of 2001 was allowed.
- The interim order in C.A. No. 311 of 2001 was continued until further orders.
- C.A. No. 431 of 2001 filed by the respondent bank was dismissed.
- No separate order was required in C.A. No. 310 of 2001.

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