1961 (12) TMI 51 - HC - Companies Law

Winding up Avoidance of transfer, etc., after commencement of and Power of court to assess damages against delinquent directors, etc.

Summary

Issues Involved:
1. Competency of proceedings under section 45H of the Banking Companies Act.
2. Legality of the compromise and sale of machinery.
3. Good faith of respondent No. 7 in purchasing the machinery.
4. Contempt of court by respondents.
5. Relief sought by the petitioner.

Detailed Analysis:

1. Competency of proceedings under section 45H of the Banking Companies Act:
The court addressed a preliminary objection raised by Mr. D.N. Awasthy, contending that proceedings under section 45H of the Banking Companies Act were not competent without an application under section 543 of the Companies Act, 1956. The petitioner's counsel, Mr. Hem Raj Mahajan, argued that the application was intended to be under section 543 as well. The court allowed the amendment to include section 543 in the petition, noting that the omission did not materially prejudice the respondents. The respondents were given an opportunity to lead further evidence if they felt prejudiced.

2. Legality of the compromise and sale of machinery:
The court examined whether the compromise and sale of the machinery were lawful. The bank had a decretal claim of Rs. 34,000 against respondent No. 8, which was compromised for Rs. 6,500, and the machinery was sold for Rs. 8,000. The court noted that the winding up of the bank commenced with the presentation of the petition, and any disposition of property thereafter was void unless the court ordered otherwise. The compromise was not in accordance with law as it was made after the appointment of the provisional liquidator. The sale of the machinery was deemed subject to the bank's charge in the absence of proof that it was sold at an under-value.

3. Good faith of respondent No. 7 in purchasing the machinery:
Respondent No. 7 claimed to be a bona fide purchaser without notice of the mortgage. The court found suspicious circumstances, such as the unlikely reliance on a 1955 advertisement for a 1957 purchase and the respondent's failure to testify. However, the court did not find sufficient grounds to set aside the sale but held it subject to the bank's charge.

4. Contempt of court by respondents:
The court found that the directors and Om Parkash Sharma were aware of the appointment of the provisional liquidator and acted without authority. Om Parkash Sharma was found guilty of contempt for disposing of the bank's property and was fined Rs. 200, with a default sentence of one month's simple imprisonment. The directors were also found guilty but were treated leniently due to their subsequent refund of the amounts. They were fined Rs. 100 each, except for one director who was fined Rs. 50, with a default sentence of fifteen days' simple imprisonment.

5. Relief sought by the petitioner:
The court directed Om Parkash Sharma to refund Rs. 1,109-10-9, which he had wrongfully retained. The directors were not held liable for the misfeasance due to their refund of the amounts. The court did not pass any order against other respondents.

Conclusion:
The court allowed the amendment to include section 543 in the petition and provided an opportunity for further evidence. The compromise and sale of the machinery were not in accordance with law and were subject to the bank's charge. Om Parkash Sharma was found guilty of contempt and misfeasance, while the directors were found guilty of contempt but were fined leniently due to their subsequent conduct. The petitioner's relief was partially granted with orders for the refund of misappropriated funds by Om Parkash Sharma.