2008 (11) TMI 398 - HC - Companies Law

Winding up - Custody of company s property - Held that - The consent decree dated 20-11-1998 passed by the City Civil Court in Civil Suit Nos. 3111 of 1998 to 3115 of 1998 and also the consent decree dated 21-1-1999 passed in Civil Suit No. 3110 of 1998 are still not satisfied and hence the Official Liquidator is permitted to execute the said decree against the respondents/judgment debtors for recovery and realization of the decretal amount. The Official Liquidator is further permitted to take possession of the security being office Nos. 202, 203 and 204 admeasuring about 1,100 sq.ft. 1,115 sq.ft. and 890 sq.ft respectively, situated at 2nd floor, in the building Swagat C.G. Road, Ahmedabad with undivided share in the open terrace and shares held by them if any as Members of Association. Since the Official Liquidator is permitted to recover the decretal amount with interest, there is no question of issuing any direction for recovery of any mesne profit and/or compensation for use of the above referred premises by the respondents.

Issues Involved:
1. Permission to execute the Consent Decree.
2. Taking possession of the Securities.
3. Payment of mesne profit/compensation.
4. Validity of the Agreement and Memorandum of Understanding (MoU).
5. Satisfaction of the Consent Decree.
6. Powers of the Company Court under the Companies Act, 1956.

Detailed Analysis:

1. Permission to Execute the Consent Decree:
The Official Liquidator sought permission to execute the Consent Decree dated 20-11-1998 and 21-1-1999 to recover Rs. 7,07,18,00,000 with interest at 36% per annum from 1-1-2000 till payment or realization. The Court granted this permission, emphasizing that the Consent Decree was not satisfied and thus still enforceable.

2. Taking Possession of the Securities:
The Official Liquidator requested to take possession of Office Nos. 202, 203, and 204 in the 'Swagat' Building, which were given as security for the loan. The Court allowed this request, noting that the properties were still subject to the charge created in favor of the Company-in-liquidation.

3. Payment of Mesne Profit/Compensation:
The Official Liquidator also sought mesne profit or compensation at Rs. 30 per sq. ft. per month from 1-2-1999 until possession is handed over. The Court, however, did not issue a direction for mesne profit, as the Liquidator was permitted to recover the decretal amount with interest.

4. Validity of the Agreement and Memorandum of Understanding (MoU):
The respondents argued that the liability was transferred to VFPL through agreements dated 7-9-1999 and 8-9-1999, and PFSL had issued a 'No Due Certificate'. The Court found these agreements and the subsequent pursis dated 21-9-1999, which claimed satisfaction of the decrees, to be fraudulent and collusive. The agreements were declared void ab initio as they were not executed through a registered document, which is required for transactions involving immovable property.

5. Satisfaction of the Consent Decree:
The respondents claimed that the Consent Decree was satisfied and recorded by the City Civil Court on 21-9-1999. The Court, however, found that the satisfaction was based on fraudulent documents and that the properties offered as substituted securities did not exist. Consequently, the Consent Decree was not considered satisfied, and the Official Liquidator's right to execute the decree remained intact.

6. Powers of the Company Court under the Companies Act, 1956:
The Court emphasized its powers under Section 446 of the Companies Act, 1956, to ensure that the assets of the Company-in-liquidation are protected and equitably distributed among creditors. The Court cited the case of Official Liquidator of Aryodaya Spg. & Wvg. Mills Co. Ltd. v. Charansingh Dhupsingh, which highlighted the Company Court's authority to administer justice and prevent unnecessary litigation.

Conclusion:
The Court permitted the Official Liquidator to execute the Consent Decree and take possession of the securities. The agreements dated 7-9-1999 and 8-9-1999 were declared void, and the satisfaction of the Consent Decree recorded on 21-9-1999 was deemed fraudulent. The application by the Official Liquidator was allowed, and a stay was granted against the implementation of the order until 10-12-2008.

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