2004 (8) TMI 414 - HC - Companies Law

Summary

Issues Involved:
1. Appointment of Provisional Liquidator.
2. Rights of the applicant as a creditor.
3. Impact of RBI notification on the company's assets.
4. Ownership and rights concerning the ICICI bond.
5. Applicability of section 531 of the Companies Act (fraudulent preference).
6. Entitlement to accrued interest on the bond.

Detailed Analysis:

1. Appointment of Provisional Liquidator:
The Reserve Bank of India (RBI) filed a petition under section 45-MC1(d) of the Reserve Bank of India Act to wind up CRB Capital Markets Ltd. The court appointed the Official Liquidator as the Provisional Liquidator on 22-5-1997, directing him to take control and custody of all the company's assets, properties, and books of account.

2. Rights of the Applicant as a Creditor:
The applicant, M/s. Morepen Finance Ltd., claimed to have given an Inter Corporate Deposit (ICD) of Rs. 70 lakhs to the company on 15-1-1997. The company endorsed and delivered an ICICI Bond of Rs. 1 crore to the applicant and issued two post-dated cheques. The applicant argued that it became the bond's owner due to the endorsement and was entitled to sell the bond and adjust the proceeds towards the principal and interest.

3. Impact of RBI Notification on the Company's Assets:
On 15-4-1997, the RBI issued a notification under section 45-MB of the RBI (Amendment) Act, 1997, prohibiting the company from dealing with its properties and assets without RBI's permission. Consequently, the post-dated cheques issued by the company were dishonoured, leading the applicant to file a writ petition.

4. Ownership and Rights Concerning the ICICI Bond:
The applicant claimed to be the holder in due course of the bond, asserting ownership and the right to get it registered in its name. The Official Liquidator, RBI, and the ex-Director contested this, arguing that the applicant was merely an unsecured creditor and that the bond endorsement might be a fraudulent preference under section 531 of the Companies Act.

5. Applicability of Section 531 of the Companies Act (Fraudulent Preference):
Section 531(1) of the Companies Act deems any transfer of property made within six months before the commencement of winding up as a fraudulent preference if it benefits one creditor over others. The court examined whether the bond endorsement constituted a fraudulent preference. It concluded that the transaction was bona fide, contemporaneous, and for valuable consideration, thus not amounting to fraudulent preference.

6. Entitlement to Accrued Interest on the Bond:
The court held that the applicant, as the holder in due course, had the right to the bond and the accrued interest. The ICICI was directed to register the bond in the applicant's name and pay the interest. The Registrar of the Delhi High Court was also directed to release the accrued interest deposited with him to the applicant.

Conclusion:
The court concluded that the applicant was the holder in due course of the bond, entitled to its registration and the accrued interest. The RBI notification and the provisional winding-up order did not affect the applicant's rights. The application was allowed, and the ICICI was directed to register the bond in the applicant's name and pay the accrued interest.