9911796707
TMI Blog1988 (4) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1913, with its registered office at Rayonpuram, Perumbavoor, Kerala State. The company was incorporated on July 19, 1945, and it commenced its business in March, 1946. It was carrying on its business profitably during its early years. In 1975, there was an unprecedented strike by the workers lasting for about six months and there was also a devastating fire in the factory in 1976 in which large quantities of raw materials was gutted. After this unfortunate event, the company was industrially sick for the succeeding five years, though it was employing over 1500 workmen. A mode of rehabilitation was earnestly desired by the company. For this purpose, a consortium of four All-India financial institutions consisting of IDBI, IFCI, ICICI and IRBI met and discussed ways and means of rehabiliating the unit. I am told that the financial consortium ultimately expressed its preparedness to advance a loan of Rs. 511 lakhs. In fact, out of this sanctioned loan, a substantial part of the loan has already been received by the company and the balance sanctioned loan amount is only Rs. 225 lakhs. I may also incidentally refer to an earlier loan granted by the above financiers to the company. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the liabilities of the company are statutorily suspended. Counsel for the petitioner submitted before me that the application is made with utmost good faith and honesty and that there are adequate and sufficient reasons and persuasive circumstances for this court to exercise the power under section 536(2) of the Companies Act in favour of the company., I feel that it is, now apposite to quote section 536(2) of the Companies Act. "In the case of winding up by or subject to the supervision of the court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding-up, shall, unless the court otherwise orders, be void". Before considering the merits of the case, I must be fully informed of my power under section 536(2). I must know the real width, ambit, content and scope of the said provision. What is the power encapsuled in the said section? A serious incidental question is as to whether, it is open to me to make an order granting leave for the disposition-by the company of its assets as sought for at the present stage, when n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D), considering Mites Aircraft's case [1948] Ch 188; [1948] 1 All ER 225; [1948] 18 Comp Cas 250 (Ch D), and other cases including the decision of Chitty J. and Pennycuick J. in Carden y. Albert Palace Association [1887] 56 LJ Ch 166; and In re Douglas Griggs Engineering Ltd., [1963] Ch 19; [1962] 2 WLR 893; [1962] 1 All ER 498 Buckley J. said (at page 727 of 34 Comp Cas): "I think I am bound to look at Vaisey J.'s decision in Miles Aircraft's case [1948] Ch 188; [1948] 1 All ER 225; [1948] 18 Comp Cas 250 (Ch D) with considerable care to see whether it is in fact an authority which I ought to feel myself bound to follow to the conclusion that I have no jurisdiction to make the order asked for in the present case". An elaborate consideration is made by Buckley J. on this question and he finally said (at page 728 of 34 Comp Cas): "In these circumstances, with greatest respect to Vaisey J., from whose view as to jurisdiction, I think I am, in the circumstances, at liberty to differ, I hold that I have jurisdiction and that on the facts of this case, I should exercise my jurisdiction here and now, notwithstanding that no winding-up order has yet been made". This decision has been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Das v. Kota Biran (P) Ltd. [1972] Tax LR 2285. The court held thus (head note...); "In the absence of any prohibition in the law, there is no reason why the court should be precluded from examining the propriety of a proposed disposition during the pendency of a winding-up petition if the company has a genuine case requiring early consideration. The High Court has, therefore, jurisdiction under section 536(2) to authorise a disposition of a company's property during the pendency of a winding-up petition notwithstanding that a winding-up order has not been made". The same conclusion has been reached by the Bombay High Court in the decision in Kamani Metallic Oxides Ltd. v. Kamani Tubes Ltd. [1984] 56 Comp Cas 19. Though the conclusion was identical with the conclusion of the Rajasthan High Court, the reasoning was slightly different. This is clear from the following observation (at page ...): The "expression 'In the case of winding-up' means ' during winding-up proceedings' and not 'after-winding-up order is passed', or 'upon passing such order'. Hence, the court can authorise disposition of the company's assets under section 536(2) even before the winding-up order is passed". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a potential nature. In the event of passing an order of winding up, the creditors' distributive share in the assets of the company will be affected, if the loan amounts received with sanction of this court from the financiers are not utilised for reviving the company or augmenting the assets of the company. Certainly, this is so because an additional secured debtor is emerging in the fray of creditors. Now, I turn to consider the reverse side of the picture, namely, if I grant sanction, what would be the effect? First and foremost my concern in this aspect is to examine the honesty and good faith spotlighted in the petition on which the reliefs in the petition are founded. If the request of the company is allowed and leave for disposition is granted, certainly, there is a well-grounded hope of reviving or rehabilitating the company and if the company succeeds, the company may be in a position to pay all its debts including the debts of the respondents who are opposing this petition. I have to decide this question on the materials available before me, facts disclosed and the circumstances developed in the case. One illuminating fact which is relevant and pertinent is that very ..... X X X X Extracts X X X X X X X X Extracts X X X X
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