2001 (1) TMI 858 - HC - Companies Law

Summary

Issues Involved:
1. Withholding of transfer bonds.
2. Payment of interest on bonds.
3. Validity of transfer under the Companies Act.
4. Jurisdiction of the writ court.

Issue-wise Detailed Analysis:

1. Withholding of Transfer Bonds:
The petitioners, a company, purchased 41 bonds issued by M/s. Small Industries Development Bank of India (SIDBI) from one Sri Sankarlal Saraf. They deposited these bonds with SIDBI for transfer and registration. SIDBI, however, withheld the transfer of these bonds. The court noted that the SIDBI cannot interfere with the right of transfer between Sri Sankarlal Saraf and the petitioner-company accrued prior to the initiation of the company petition by the Reserve Bank of India.

2. Payment of Interest on Bonds:
The petitioners requested SIDBI to issue interest cheques for the period of June 31, 1997, to June 30, 1998. SIDBI failed to pay the interest, thereby depriving the petitioners of their property rights. The bonds specify the rate of interest, and the Union of India stands as guarantor for the repayment of principal and interest. The court recognized the petitioners' entitlement to interest as the bona fide purchasers of the bonds.

3. Validity of Transfer under the Companies Act:
The court examined sections 531, 531A, and 532 of the Companies Act. Section 531 deals with fraudulent preference, invalidating transfers made within six months before the winding-up commencement. Section 531A addresses avoidance of voluntary transfers not made in the ordinary course of business. Section 532 voids transfers for the benefit of all creditors. The court highlighted that the transfer of bonds from M/s. CRB Capital Markets Ltd. to Sri Sankarlal Saraf occurred within the period attracting section 531, thereby challenging the validity of Saraf's ownership and subsequent transfer to the petitioners.

4. Jurisdiction of the Writ Court:
The respondents argued that disputed questions of fact and commercial transactions should not be decided in a writ petition. The court agreed, emphasizing that the writ jurisdiction under Article 226 of the Constitution is restricted when property rights are challenged under the authority of law. The court suggested that the petitioners could either institute a suit or proceed under section 446 of the Companies Act before the appropriate court for adjudication. The court dismissed the writ petition, stating that it is not the forum for fact-finding.

Conclusion:
The court dismissed the writ petition, advising the petitioners to seek appropriate jurisdiction under the Companies Act. The interim order, if any, was vacated, and no costs were awarded. The judgment emphasized the necessity of addressing the validity of the bond transfers and the payment of interest through proper legal channels, not through writ jurisdiction.