2004 (8) TMI 400 - HC - Companies Law

Summary

Issues Involved:
1. Legality of the agreement to sell between HFC and the applicant.
2. The impact of the winding-up order on the sale of the property.
3. Interpretation of relevant provisions of the SFC Act and Companies Act.
4. Protection of the pari passu charge of workmen's dues.

Issue-Wise Detailed Analysis:

1. Legality of the Agreement to Sell Between HFC and the Applicant:
Tara Cements Private Limited, against whom a winding-up petition was filed, had mortgaged its properties with Haryana Financial Corporation (HFC). Due to non-payment, HFC auctioned the property, and the applicant's bid of Rs. 18 lakhs was accepted. An agreement to sell was entered into on January 23, 2002, with the applicant paying 25% of the total consideration and the remaining amount to be paid in installments. However, the official liquidator claimed that this agreement was null and void, terming it as "fraudulent preference" under Section 531 of the Companies Act, 1956, because the winding-up petition was filed on August 30, 1994, and the winding-up order was passed on February 28, 2003.

2. Impact of the Winding-Up Order on the Sale of the Property:
The official liquidator argued that the winding-up order relates back to the date of the petition, making the agreement to sell void. However, the court noted that HFC had taken possession of the property under Section 29 of the SFC Act on February 22, 1997, and had conducted multiple unsuccessful auctions before the successful bid on November 26, 2001. The court concluded that the actual date of the winding-up order (February 28, 2003) should be considered for determining the rights, not the date of the petition.

3. Interpretation of Relevant Provisions of the SFC Act and Companies Act:
The court referred to the Supreme Court judgment in International Coach Builders Ltd. v. Karnataka State Financial Corpn., which addressed the conflict between the rights of State Financial Corporations under Sections 29, 31, 32, and 46B of the SFC Act and the powers of the company court under Sections 529 and 529A of the Companies Act. The Supreme Court held that while SFCs have certain rights under Section 29, these rights are subject to the pari passu charge of workmen's dues once a winding-up order is passed. The SFCs cannot act independently and must seek the company court's directions.

4. Protection of the Pari Passu Charge of Workmen's Dues:
The court emphasized that the sale of the property must protect the pari passu charge of workmen's dues. The court found that HFC had followed proper procedures in auctioning the property and that the sale was reasonable. However, to safeguard the workmen's interests, the court directed that the remaining installments be deposited with the official liquidator. The official liquidator would then de-seal the premises and hand over possession to the applicant upon receiving the due installments. Future installments were also to be deposited with the official liquidator, who would manage the disbursement of funds to protect workmen's claims.

Conclusion:
The court approved the sale but imposed conditions to protect the workmen's pari passu charge. The remaining installments were to be paid to the official liquidator, who would oversee the distribution of funds to ensure the workmen's dues were safeguarded. The applications were disposed of with these directions.