9911796707
TMI Blog1998 (11) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... arious secured creditors have also joined in these proceedings as respondents. Mr. K.G. Vakharia, senior advocate, with Mr. Tushar Mehta with Mr. D.S. Nanavati have appeared for Rushvi Ltd. Mr. S. N. Soparkar with Mr. D.S. Nanavati have appeared for Rutuja Ltd. and Mr. M.G. Nagarkar has appeared for Jain Corporation. Mr. Ashok L. Shah has appeared for the official liquidator. Mr. M.B. Buch has appeared for ICICI; Mr. R.M. Desai has appeared for IDBI; Mr. J.T. Trivedi has appeared for Bank of India and Union Bank of India who are all secured creditors. Mr. Thakar has appeared for ONGC which has also a substantial claim against the company in winding up and Mr. D.S. Vasvada has appeared for the Textile Labour Association which represents the workers of the erstwhile mill company. Company Petition No. 66 of 1988 was filed on April 12, 1988, for winding up Shri Ambica Mills Ltd. During the pendency of that petition, the affairs of this company were investigated before the Board for Industrial and Financial Reconstruction (BIFR) and after obtaining the opinion from the said Board, the winding up order came to be passed on January 17, 1997. This mill company is having its properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ruhuja Ltd. are concerning a parcel of land from final plot No. 2 of T.P. Scheme No. 7 admeasuring 9,215 square metres; It is contended by the applicant that they are bona fide purchasers for value of this parcel of land. Company Application No. 189 of 1997 prays for a direction to lift the attachment made by the official liquidator on the said property situated in final plot No. 2 of T.P. Scheme No. 7. Company Application No. 205 of 1997, seeks leave to file a suit against Shri Ambica Mills Ltd. for a declaration that the plaintiff is the absolute owner of the leasehold rights in respect of the property conveyed to the applicant. Application No. 559 of 1997, prays for a declaration that the applicant is a bona fide purchaser for value without notice of that property. Company Application No. 403 of 1998, filed by Jain Corporation is concerning a parcel of land situated at final plot No. 6 of T.P. Scheme No. 7 admeasuring 1,169 square metres. This applicant also claims to be a bona fide purchaser for value and prays that the applicant may be put in actual possession of the land in question, and also seeks a declaration that the applicant is the absolute owner of the leasehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1994, to June 15, 1996. Thus, through this rejoinder a plea is taken that the present directors are not bound by what was done by the erstwhile directors of Rushvi Ltd. thereby contending that they are not to be made to suffer. As stated above, in Company Application No. 99 of 1997, it has been already contended specifically that the original transaction itself was a bona fide transaction and the applicant-company is a bona fide purchaser for value. Similar is the plea of Rutuja Ltd. applicants in Company Applications Nos. 189 of 1997, 205 of 1997, and 559 of 1997. In the affidavit of one Dhanesh Badarmal Jain, a director of this applicant-company, in support of Company Application No. 189 of 1997, it is stated that, by an agreement, dated June 14, 1988, Shri Ambica Mills Ltd. (now in liquidation) entered into an agreement to sell a parcel of land admeasuring 9,215 square metres at the rate of Rs. 650 per square metre for a total price of Rs. 59,89,750. Out of this amount, the earnest money of Rs. 5,98,975 was paid by a cheque, dated June 14, 1988. From the remaining amount, a further payment of Rs. 50,000 was made by a cheque on June 13, 1990, and payment of Rs. 48,91,544 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial liquidator has filed his reports in Company Applications Nos. 189 of 1997, and 559 of 1997. Though no report has been filed in Company Application No. 205 of 1997, the permission to file a suit is opposed. As far as Company Application No. 403 of 1998, filed by M/s. Jain Corporation is concerned, it is being taken up along with the applications filed by the other two purchasers and since no documents are enclosed with the application and since the parcel of land covered in this application forms a part of the same property, this application is also being opposed on the basis of the reports which are filed in the other matters. Mr. Shah, learned counsel for the official liquidator, states that the official liquidator is adopting the statements made in those reports as far as this matter is concerned and in the event any documents are produced in any higher forum, the official liquidator reserves the right to file his detailed report. From amongst the secured creditors, ICICI has filed its reply in the two applications filed by Rushvi Ltd. as well as Company Applications Nos. 189 of 1997 and 559 of 1997, filed by Rutuja Ltd. Thereafter, replies and further replies and rejoind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue to supply gas as hitherto charging at the rate of Rs. 1,000 for one thousand cubic metres subject, however, to the undertaking by the respondents which has been given and has been accepted here, that the said respondents will not charge, encumber or alienate, except with leave of this court, any of their immovable assets included in the respective undertakings and that they will make their immovable assets available for discharging the respective liabilities on account of the difference in the price of all the gas supplied to and further during the pendency of the appeals as permitted by orders made by the court while disposing of the appeals. The undertaking will be filed within four weeks from today." The undertaking filed by the above-referred Shri Brahmbhatt reads as follows: "Undertaking I, Prahladbhai S. Brahmbhatt, do hereby solemnly affirm, undertake and state as under: 1.I am working as Secretary in Shri Ambica Mills Ltd. respondent No. 10, herein which is one of the members of respondent No. 1, i.e ., Association of Natural Gas and Consuming Industries of Gujarat. 2.I am conversant with the facts and circumstances leading to the present proceedings and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due to injunction granted by the Hon'ble Supreme Court pending the permission under the Urban Land Ceiling Act from the Government of Gujarat and release of charge of financial institution. The part of consideration still receivable has been shown under Schedule 8 of sundry debtors others." The aforesaid entries in the audit report make it clear that though the mill company had entered into a memorandum of understanding on June 14, 1988, conveyance deed was not executed due to ( i ) injunction granted by the Supreme Court, ( ii ) pending permission under the ULC Act from the Government of Gujarat, and ( iii ) release of charge of financial institution. The same state of facts are reflected in the above-referred entry No. 23. Thus, from the report of the official liquidator, it is made clear that right at the time when the main company petition for winding up was filed, there was a pre-existing injunction granted by the Hon'ble Supreme Court restraining the mill company from alienating the assets which was principally for clearing of the dues of ONGC. It is also clear that an undertaking was given to the Hon'ble Supreme Court in that behalf and it is continued to be reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27, 1987 ; and they recorded in their audit reports in 1991-92 and 1993-94 that in view of the injunction of The Hon'ble Supreme Court, conveyance of the property could not be executed. That is also indicated in the statement given to the official liquidator by the aforesaid Rajesh Jaykrishna as recently as on March 27, 1997, whereas this very Rajesh Jaykrishna has signed the power of attorney allegedly on behalf of the company authorising conveyance. From amongst the creditors, the ICICI is one which had sanctioned a loan of Rs. 100 lakhs which came to be disbursed (the total liability to the ICICI comes to Rs. 150 lakhs which includes the amount of interest as well). By an indenture of contributory mortgage dated January 20, 1984, between Shri Ambica Mills Ltd. and the ICICI (amongst others), this amount was secured by creating a mortgage in favour of the ICICI (and other creditors). By the said mortgage, the entire land and property of Unit No. 1 situated in T.P. Scheme No. 7 (excluding a part admeasuring 5,810 square metres held by a chemical division) and the property in T. P. Scheme Nos. 16 and 9 were mortgaged to the ICICI and other creditors. By way of giving adequate se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion against the said Rajesh Jaykrishna if in their view he has in any way caused any deception or fraud whereby they have parted with money without getting anything in return. The question for my consideration is as to whether all these pleas of the present directors or their erstwhile predecessors can be taken against the company in winding up. Mr. Vakharia as well as Mr. Soparkar pressed into service the above-referred subsequent developments, namely, paying money to the seller as per the agreement. Both of them submitted that they had a certificate of title clearance given by their advocate. They had taken a search in the revenue record and subsequently names of the applicants have been duly entered into the revenue record. It is submitted that they obtained the clearance certificate from income-tax authorities and also the clearance from the State Government as well under the provisions of Urban Land Ceiling Act. It was, therefore, submitted that whatever that was expected was already done and nothing more was expected. As far as this plea is concerned, what is also material to note is that the applicants were given to understand that the property was being sold by the mill c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uires that in the event any undertaking of the company is being sold, that will have to be done with the consent of the public company in a general meeting and then only the board of directors can take any such steps. This section 293(l)(a) reads as follows : "293. Restrictions on powers of board. (1) The board of directors of a public company, or of a private company which is a subsidiary of a public company, shall not, except with the consent of such public company or subsidiary in general meeting ( a ) sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the company, or where the company owns more than one undertaking, of the whole, or substantially the whole, of any such undertaking." Mr. Shah and Mr. Buch drew my attention to the agreement of sale entered into on behalf of the mill company. As far as Rushvi Ltd. is concerned, the property which was sought to be sold is described on page 3 of that document in Gujarat and it includes "bungalow, godown, chawls, outhouse and other constructions, etc., situated on the concerned land". As far as Rutuja Ltd. is concerned, the property which is said to be sold is a land admeasurin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll, unless the court otherwise orders, be void." This section makes it very clear that in the case of winding up under the orders of court, any disposition of property of the company after commencement of the winding up is void unless the court orders otherwise. Commencement of winding up proceeding is defined in section 441(2) of the Companies Act as deemed to have been commenced at the time of presentation of the petition for winding up. In the instant case, winding up petition was filed on April 12, 1988. Prior thereto, there was a pre-existing injunction of the Hon'ble Supreme Court and an undertaking given over there. Much thereafter, the agreements to sell and the conveyances have been executed in the year 1988 and 1993, respectively. Obviously unless the court approves them, they would be void. Now, if the court approves them, it will require the court to depart from its normal rule which provides that, after commencement of winding up proceeding, all assets of the company would be frozen and they will not be tampered with. Section 531(1) deals with this aspect of the matter. It says that any transfer of property, movable or immovable, by or against a company within six mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law cannot be cured. Last but not the least, there is the question of obedience to the order passed by the Supreme Court. As has been seen above, this is a glaring case where a clear undertaking was given to the Hon'ble Supreme Court and that appears also to have been recorded in the annual reports of the company and yet one of the directors has allegedly sold the land by entering into some documents with third parties without obtaining leave from the Hon'ble Supreme Court which was the least that was expected. In fact, in view of the wording of the order passed by the Hon'ble Supreme Court, as far as the company is concerned, it was bound by that order and ought to have obtained leave of the hon'ble court. This fact was known to Mr. Rajesh jaykrishna which can be seen from his own signed statement which is filed before the official liquidator as recently as on March 27, 1997. It is also clear from The lawyer's notice given by Rutuja Ltd. that they are in any case alleging deception by the said Rajesh Jaykrishna. If this is the stale of affairs, it is nothing but a transaction which is based on fraud. Inasmuch as the 1CICI and the other creditors, had a charge over the entire prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enforced against the company. The possesion by the official liquidator of these properties is perfectly legal and justifiable. In the circumstances, no declaration as sought by the applicants that they are bona fide purchasers can be given nor can the official liquidator be directed to lift his attachment on the company's property. Similarly, no suit can lie to enforce these documents against the company. Before I part with the matter, there is one more aspect which is required to be dealt with. During the course of these proceedings, it was represented earlier to my brother M.S. Shah J. that the applicants would be ready to buy these properties if they are sold by auction. Accordingly, an order was passed by Shah }. on October 7, 1998. There was a controversy as to for what purpose that order was passed. It was submitted by Mr. Soparkar that that order was clearly for sale of the property whereas Mr. Shah and Mr, Buch submitted that the order was passed so that one knows what is the price that this property is likely to fetch. This order was passed by Shah J. in view of an earlier order passed by Balia J. on July 27, 1998, calling for valuation of the property concerned, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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