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TMI Blog2004 (7) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,61,32,881 towards interest till 30th April, 1999) as on the date of filing of the petition. Notice dated 25th May, 1999 was served upon the respondent under section 433( e ) read with section 434 of the Act calling upon the respondent to pay the said amount with future interest within 21 days from the receipt of the notice followed by another notice dated 4th September, 1999 as certain typographical mistakes crept in the earlier notice. As in spite of these notices payment was not made, present petition was filed. 3. After notice was served upon the respondent and the respondent appeared, parties negotiated the matter which resulted into settlement. Application recording the settlement along with consent terms of settlement was filed vide CA 815/2000. Pursuant to this settlement some payments were made by the respondent which fact was recorded in the order dated 25th May, 2000. The Court accordingly disposed of the petition in view of the settlement directing that the parties shall be bound by the consent terms. However, the respondent could not adhere to the terms of the settlement and pay the amount as agreed. Clause 12 of the consent terms entered into between the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposal was given which was contained in CA No. 881/2002 itself. During the pendency of the said CA and after the remand of the case the respondent gave another proposal by filing CA No. 1082/2002. However, this was also not acceptable to the petitioner. The orders passed on subsequent hearing reveal that the respondent had improved upon its offer and submitted fourth revised proposal. Since the matter could not be settled CA No. 881/2002 in which prayer for recall of the order dated 16th July, 2002 was made whereby Provisional Liquidator had been appointed, was heard and by detailed order dated 28th May, 2003 the Court rejected the prayer of the respondent to recall the order dated 16th July, 2002 finding the same to be fully justified and valid. In the said order this Court also considered the request of the respondent as to whether the respondent could be given further opportunity and after considering the matter from all angles concluded that the respondent was not in a position to make the payment. However, still one more opportunity was given to the respondent by fixing repayment schedule. In order to understand the circumstances in which the Court arrived at the aforesaid co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 002, which is upheld by the Division Bench, is reiterated. The company petition, therefore, stands admitted to hearing and citation is directed to be published in The Indian Express (English Edition) and Nav Bharat Times (Hindi Edition) and the Delhi Gazette. An order is also required to be passed for appointment of the Provisional Liquidator. However, in order to give one more opportunity to the respondent I am of the opinion that repayment schedule of the balance outstanding could be modified to the following schedule: ( a )An instalment of Rs. 15 lakhs as upfront amount would be payable before June 7, 2003; ( b )Monthly instalment for the subsequent months of the year 2003 at Rs. 10 lakhs payable before first seven days of every month; ( c )Monthly instalment of Rs. 15 lakhs from January 1, 2004 for a period of six months, and thereafter a monthly instalment of Rs. 18 lakhs till the payment of entire liability; ( d )An affidavit to be filed by a promoter director of the respondent company agreeing and undertaking in this Court to pay according to the aforesaid mode within fifteen days." 6. It was followed by consequential direction contained in para 16, which r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... good reason to proceed with this appeal, which is dismissed." 9. It is in this backdrop the petitioner filed CA No. 1022/2003 for appointment of the Provisional Liquidator. As far as CA No. 1393/2003 is concerned, it is filed by the respondent wherein prayer is made to direct the petitioner to deposit in this Court a sum of Rs. 5.24 crores, which was given by the respondent-company to the petitioner during the pendency of this petition. 10. Mr. Rajiv Nayar, Senior Advocate made submissions on behalf of the petitioner and Mr. Amit Chadha argued the matter for the respondent. Now I shall take up the two applications for consideration. CA No. 1022 of 2003 11. In view of the aforesaid factual matrix disposal of this application does not pose any problem. As is clear from the narration of facts, vide order dated 28th May, 2003, while admitting the petition for hearing and directing citation to be published the Court pointed out that an order is required to be passed for appointment of Liquidator and in these circumstances order of publication of citation and appointment of Provisional Liquidator was kept in abeyance until further orders. However, in order to give anot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of presentation of the petition for winding up. Therefore, winding up order would relate back, in the instant case, to 12th October, 1999 when the winding up petition was filed. Further, the order of winding up would enure to the benefit of all the creditors and the contributors of the company as if it had been made on a joint petition of creditors and contributors. Thus, any payments made, submitted the learned counsel, after 12th October, 1999 to any creditor shall belong to all the creditors and, therefore, amount of Rs. 5.24 crores paid to the petitioner should form part of common kitty. Learned counsel in support of this proposition also relied upon the judgment of Bombay High Court in the case of Castwell Engg. Corpn. v. Bombay Castwell Engg. (P.) Ltd. [1984] 55 Comp. Cas. 75. 15. Learned counsel for the petitioner, on the other hand, disputed the aforesaid position in law and submitted that judgment in the case of Castwell Engg. Corpn. ( supra ) has no application to the facts and circumstances of the present case. His submission was that whatever is paid to the petitioner belongs to it and it is only for balance amount due to the petitioner that it shall l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would include, depending upon the nature of business, receiving money from the debtors and making payment to the creditors in the ordinary course of business. Thus, from the date of filing of the petition till the passing of winding up order, if it is passed ultimately in a petition, numerous such transactions would be entered into by the company. If the effect of the relation back of the winding up order i.e., relating it back to the date of filing of the petition is to direct all such creditors, who received payment in the meantime, to pay back the amount, effect would be to unsettle all such transactions which were entered into in the interregnum, even when they were bona fide. Such a position, if accepted, would have serious consequences and would lead to multiple, nay, unsurmountable and unmanageable litigation. Not only this, other effect may be more serious. The moment winding up petition is filed against a company people would stop dealing with such a company providing that in case ultimately winding up orders are passed in such a petition they would be drawn to the court for paying back the amount received. This may sound death knell to the company the moment winding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 227 of the English Companies Act, 1948, although that section is not identically worded and is couched as under: "In a winding up by the Court, any disposition of the property of the company, including things in action, and any transfer of shares, or alteration in the status of the members of the company, made after the commencement of the winding up, shall, unless the court otherwise orders, be void." 20. Any disposition of property etc. after the commencement of the winding up, is rendered void by the aforesaid provision and it can be saved only if the Court otherwise orders. Although while examining a particular transaction, no yardstick is provided which the Court is to apply if it has to order otherwise, Courts in England have held that "each case must be dealt with on its own facts and particular circumstances (special regard being had to the question of the good faith and honest intention of the persons concerned), and that the court is free to act according to the judge s opinion of what would be just and fair in each case". [See Steane s (Bournemouth) Ltd., In re [1950] 1 All ER 21. On the other hand, in section 531 of the Act, the Legislature has specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cknowledged and it was agreed that interest thereon @ 12 per cent shall be paid from a specific date as well as quantified cost of the petition. Certain other terms were also accepted. The consent terms provided that in the event of company failing to pay any instalments on its respective due dates or the last instalment, the petition was to stand admitted and was to be advertised as mentioned therein. Certain instalments amounting to Rs. 31,010.64 were paid. Even thereafter further sum of Rs. 37,500 was paid, thus, making a total of Rs. 68,150.64. But thereafter Bombay Castwell Engineering Pvt. Ltd. committed a default. In view of this default, the citation was published. Bombay Castwell Engineering Pvt. Ltd. was granted some more adjournments to enable it to pay the balance. Ultimately four post-dated cheques were given. The petitioner, however, refused to accept these cheques or to agree to any adjournment for realising the cheques and insisted that they were entitled to order of winding up against the company which had undisputedly admitted its liability and was unable to pay the debt. It was in these circumstances hearing of the petition had to proceed. However, the Court pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an ordinary suit but for fear of a winding-up order going against it. However, when settlements do not work out, then the contest reopens. In my opinion, the petitioners cannot be heard to say that they will retain the amount collected before the admission of the petition, namely, Rs. 31,010.64, and the amount collected during the pendency of the petition for hearing and final disposal, namely, Rs. 37,500, and at the same time press the petition for winding-up. An order for winding-up does not ensure for the benefit of an individual creditor who obtains the order, but for all creditors. It is not an individual right but representative right. The creditor who first comes to the court and used the process of the court cannot feather his nest and enrich himself by collecting payment on the strength of consent terms. He must be relegated to the same position in which he was when he presented the petition for winding-up. Section 531 of the Companies Act, 1956, cannot be used as a shield to retain the money. Section 531 is one of the sections which deals with effect of winding-up on antecedent transactions. The section, so far as it is relevant, makes any payment made by the company six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... September 14, 1987. In the meanwhile, however, the parties acted in terms of the agreement. A deed of mortgage in relation to the said plot was executed by M in favour of its bankers and permission of the Collector for the transfer obtained. On August 12, 1987, the workmen of the company filed a winding up petition against the company, which was later allowed and the Official Liquidator took charge of the assets. He also took possession of the plot in question treating it as the company s and submitted a report that the transfer of the leasehold rights therein was void in terms of section 531A of the Companies Act, 1956, not having been made in the ordinary course of business. M filed an application for a direction to the Official Liquidator to deliver possession of the plot. The workmen also filed an application for a declaration that the transfer was a fraudulent preference within the meaning of section 531 of the Companies Act." (p. 90) 26. It was in these circumstances the Court was called upon to decide whether leasehold rights realised by firm M in a property belonging to the company pursuant to consent decree obtained in a suit amounted to fraudulent preference . In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he passing of the order for winding up the company. ( vi )That the fact that the agreement dated February 18, 1987, contained a clause which stated that the said plot or building thereon was not encumbered by any claim of workmen of decree or order of the Court or Tribunal by itself was not sufficient to invalidate the impugned transaction or warrant a finding that the transaction was not entered into in good faith and for valuable consideration. ( vii )That the validity of the impugned transaction was not affected even if no resolution for entering into it was actually passed by the board of the company as the company had entered into and adopted the transaction throughout and implemented it after receiving consideration therefor. The doctrine of indoor management protected the transferee and the transferor. There was nothing to show that the transferee was aware of the alleged infirmity in respect of the resolution. ( viii )That section 25FF of the Industrial Disputes Act had no application to the case, nor was the contention that without the workmen s consent, no transfer could be effected as the workmen are deemed to be co-owners of the undertaking sustainable. ( ix )Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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