2010 (3) TMI 1221 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the attachment order dated 21st April, 2007.
2. Legitimacy of the transaction between the appellants and M/s. Arsh International Chemical Pvt. Ltd.
3. Application of Section 536(2) of the Companies Act, 1956.

Summary:

Issue 1: Validity of the attachment order dated 21st April, 2007
The appellants challenged the attachment order dated 21st April, 2007, arguing that the Official Liquidator did not attach the plot until September 2007, despite the winding-up order dated 26th April, 1999. They contended that the delay of nine years was crucial and relevant for the prayers made in the company application.

Issue 2: Legitimacy of the transaction between the appellants and M/s. Arsh International Chemical Pvt. Ltd.
The appellants asserted that they acquired the subject plot from M/s. Arsh International Chemical Pvt. Ltd. in good faith, paying a total sum of Rs. 1,75,00,000/-. They claimed that the records did not reveal any litigation or fault with the title of M/s. Arsh International Chemical Pvt. Ltd. However, the respondents, including the Official Liquidator, argued that the transfer of the subject plot was void u/s 536(2) and 537(1) of the Companies Act, 1956, as it was executed after the winding-up petition was filed.

Issue 3: Application of Section 536(2) of the Companies Act, 1956
The appellants argued that the transaction should be regularized u/s 536(2) of the Companies Act, 1956, as they acted in good faith and were unaware of the winding-up order. The court, however, noted that the Directors of the company in liquidation entered into the transaction with full knowledge of the winding-up proceedings, attempting to keep the valuable assets out of the reach of the court and the Official Liquidator. The court emphasized that the principles under Section 536(2) allow saving transactions undertaken under compulsion to protect the company's property, but in this case, the transaction was not in good faith.

Conclusion:
The court found no error in the learned Single Judge's decision to dismiss the company application. The appeal was dismissed, and the court suggested that the appellants could pursue substantive proceedings against all parties, including the Official Liquidator, for appropriate declarations and reliefs pertaining to their title.