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TMI Blog2003 (4) TMI 464X X X X Extracts X X X X X X X X Extracts X X X X ..... t in this appeal, lent and advanced on diverse dates in January, 1996, Rs. 16 lakhs and also Rs. 1 crore to the company and the company was to pay on this intercorporate loan with an interest at 24 per cent, per annum and the loan was for a period of six months. As the company failed to pay the loan, a winding up petition was presented by the second respondent, the petitioning creditor, in the month of August, 1998. On such petition, the winding up court by an order passed on or about September 2, 1998, admitted the petition and granted certain instalments as the company could not dispute the claim. The learned company judge also directed that in default of such payment the petitioning creditor shall be at liberty to publish advertisement. Thereafter, on or about September 24, 1998, a suit was filed in the original side of this hon'ble court by some of the shareholders of the said company. The suit was numbered as 287 of 1998 ( Soumendra Nath Dey v. Howrah Motor Company Ltd ) . The suit was between two groups of shareholders of the said company and the plaintiffs were alleging mismanagement of the said company against the defendants and, inter alia , prayed for framing of sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , granted leave to the company to sell the Guwahati property in order to give effect to the settlement between the said company and the petitioning creditor for liquidating the dues of the petitioning creditor. It may be noted that the present appellant appeared and opposed the said application and the order of the learned judge granting leave. The learned judge, while granting leave, gave opportunity to the plaintiffs to purchase the said property or to find a purchaser at a higher price. But the said proposal was not found acceptable to the plaintiffs some of whom are appellants here. The learned judge, however, granted leave with the observation that the said order is subject to any step as may be required by law and is also subject to any order which may be passed by the company court in connection with the winding up application which has been admitted. It may be noted that the said order dated October 18, 2001, was not appealed by some of the appellants who were parties to the same. On May 14, 2002, an application was made before the company court by Shrabani Dey, one of the appellants herein, for substitution in place of Luxmi Tea in the winding up proceeding and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the winding up petition should be disposed of in accordance with the terms of settlement which was produced before the court. The company judge noted the contentions of some of the contributories that the property, which is sought to be transferred to the petitioning creditor by the company, may fetch a better price if the same is sold by auction. But the learned judge did not accept the said contention as it found that the suit court while granting leave to the company to sell Guwahati property to liquidate the dues of the petitioning creditor gave an opportunity to the same contributories to buy that property at a higher price or to bring better offer but they failed to do so. Apart from that the learned judge noted that the contributories themselves took the stand before the court that the valuation of the said property which is sought to be transferred to the petitioning creditor was Rs. 1 crore 91 lakhs in 1995. In that view of the matter the learned company judge noted that the property which is sought to be transferred to the petitioning creditor is for repayment of a debt which works out to more than Rs. 4 lakhs and the petitioning creditor also proposed to pay a sum of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the order of the company judge was passed in the best interest of the company so that it is not wound up and survives. It was urged that the price at which the Guwahati property was to be sold to the petitioning creditor is the best bargain and the appellant, even though was given an opportunity could not bring a better offer. On the other hand, it was pointed out that the appellants have always tried their best to see that the company cannot satisfy the debts of the petitioning creditor and made various attempts so that the settlement between the petitioning creditor and the said company cannot be worked out. According to counsel, three such attempts were unsuccessfully made. Two applications for winding up of the company, one by Shraboni Dey and one by Debraj Dey, both the appellants herein, were dismissed. An application by some shareholders including Shraboni Dey seeking to be substituted in the place of Luxmi Tea was also dismissed. Learned counsel for the company also submitted that in the suit filed by some of the appellants the stand taken is that the company is to be revived and should not be wound up and that suit is pending. Now when by the order under appeal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions. 536. Avoidance of transfers, etc., after commencement of winding up (1) In the case of a voluntary winding up, any transfer of shares in the company, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members of the company, made after the commencement of the winding up, shall be void. (2)In the case of a 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. 537. Avoidance of certain attachments, executions, etc., in winding up by or subject to supervision of court (1) Where any company is being wound-up by or subject to the supervision of the court ( a )any attachment, distress or execution put in force, without leave of the court, against the estate or effects of the company, after the commencement of the winding up ; or ( b )any sale held, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt. Learned counsel also referred to various judgments in support of the aforesaid contentions. The court will consider the relevance of the points decided in those judgments to the facts of this case. While doing so, the court will point out why most of those decisions do not apply to the fact situation in the present case and this court will also indicate why this appeal has to be dismissed. Learned counsel for the appellant first relied on the Division Bench judgment of the Bombay High Court in the case of Messrs. Harinagar Sugar Mills Ltd. v. M. W. Pradhan [1967] Bom LR 294. Learned counsel relied on that judgment in order to contend that in a winding up petition, which has become representative in character, the court cannot pass an order in terms of settlement between the parties. But the question which fell for consideration in Harinagar [1967] Bom LR 294 was whether a receiver appointed in a partition suit could file a winding up petition in his own name in respect of a debt due from a company to the members of a joint family and whether the filing of a winding up petition fell within the ambit of the receiver's power. The court thought, after considering the riva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und up, no creditor should obtain an advantage over any other creditor. This is an accepted principle. But when there is no winding up order, as in the instant case, the question of one creditor obtaining advantage over the other creditor does not arise. Apart from that here no other creditor except the petitioning creditor and its sister concern has come up. The dues of the workers have also been taken care of. So the question of one creditor seeking an advantage over the other creditor does not arise at all since the winding up order has not been made at any point of time. The order, under appeal, has been made to prevent a winding up. Reliance was next placed on the Division Bench judgment of the Gujarat High Court in the case of Navjivan Mills Ltd., In re [1986] 59 Comp. Cas. 201. In this case, the court decided in favour of the power of the court regarding validating transaction pending a petition for winding up and before the winding up order is actually made. The question in dispute was whether such a power for validating an impugned transaction under section 536(2) could be exercised before the winding up order. The court held that there was no inherent restriction agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of property of the company and would be "void" under section 536(2) of the said Act. The court also considered the provisions of section 138 of the Negotiable Instruments Act. In this case there is no winding up order and that makes all the difference. Apart from that the principles laid down in paragraph 20 directly contradict the contentions of the appellant. The relevant portions of paragraph 20 are set out herein below (page 425) : "It is difficult to lay down that all dispositions of property made by a company during the interregnum between the presentation of a petition for winding up and the passing of the order for winding up would be null and void. If such a view is taken the business of the company would be paralysed, for, the company may have to deal with very many day-today transactions, make payments of salary to the staff and other employees and meet urgent contingencies. An interpretation which could lead to such a catastrophic situation should be averted." Reliance was then placed on the judgment of the Supreme Court in the case of Pulavarthi Venkata Subba Rao v. Valluri Jagannadha Rao, AIR 1967 SC 591 in order to contend that a decree passed on compromise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the creditors of the company had been paid up and except the petitioning creditor and its sister concern there is no other creditor. The dues of the workers have been taken care of. The court also recorded that there is no other unsecured creditor of the company. These findings in the order under appeal have not been questioned before us. After considering all these aspects and recording these findings, the court considered whether the winding up petition should be disposed of in terms of the settlement between the petitioning creditor and the company. The court also considered the objections of some of the contributories about the price at which the company was selling its properties and the company rejected that objection by recording reasons. Considering all these facts the company court took the view that the settlement is for the benefit of the company and should be accepted. Therefore, the order is based on the reasoned finding of the court and is not based on a compromise between the parties. So the decision in Venkata Subba Rao, AIR 1967 SC 591 is of no assistance to the appellants. The next decision cited on the same point was rendered in the case of Ruby Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent, of the contributories before passing the order under appeal. Therefore, the principles laid down in Ganesh Sarkar [1981] 85 CWN 403 have not been violated. The next case referred to by the appellant was the case of Allahabad Bank v. Bengal Paper Mills Co. Ltd. [1999] 96 Comp. Cas. 804 ; AIR 1999 SC 1715. In that case, it was a sale of a company, which was in liquidation. In a sale of a company in liquidation, the Companies (Court) Rules must be complied with. No reserve price for the sale in that case was fixed. The company was already in liquidation. It was not ascertained what was the total amount of claim, secured or unsecured. Nor was it ascertained whether the assets were adequate or inadequate. On all these grounds, the sale was held to be improper. This case has no manner of application to the present case. Here, the sale was not of a company property in liquidation. The court applied its mind regarding the value of the property and the best price that the property could fetch. An offer was made to the appellants to get a purchaser, who would pay a better price but the appellants failed to do so. So the principles in Bengal Paper Mills [1999] 96 Comp. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while delivering the judgment explained the principle of contemporanea expositio. In doing so the learned judge quoted with an approval the observation of justice Ashutosh Mookherjee in the case of Mathura Mohan Saha v. Ram Kumar Saha [1916] ILR 43 Cal 790. The relevant observations of justice Mookherjee which were set out in Desh Bandhu Gupta, AIR 1979 SC 1049 ; [1980] 50 Comp. Cas. 84 are extracted below (page 94): "It is a well settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it, although such interpretation has not by any means a controlling effect upon the courts and may be disregarded for cogent and persuasive reasons." In the instant case, the departmental circular, in my judgments, has correctly interpreted the purport of sub-section (2) of section 441 of the said Act. The said departmental circular is set out below : "In the case of a winding up by the court, the winding up dates from the date of presentation of the petition for winding up. This means if and when order is made for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Debraj Dey one of the appellants before us. It is nobody's case that the appellant will undervalue the property and there is no reason why they should do so. Therefore, when the learned company judge passed the order under appeal accepting the proposal of the company to sell the property at Guwahati in order to pay the claim of the petitioning creditor, which stood at about Rs. 4.60 crores, this court does not think that the said order was passed without proper application of mind or without proper exercise of discretion by the learned judge of the company court. The learned judge also recorded in the order under appeal that apart from satisfying the claim of the petitioning creditor, which stood at about Rs. 4.60 crores, Rs. 40 lakhs will be earmarked by the directors of the said company for meeting the statutory liability of the company and for no other purpose. Therefore, taking an overall view of the entire matter this court finds that the said order passed by the learned company court was in the best interest of the company. This court finds that if the order of the learned judge is set aside and the settlement mentioned in the order is not allowed to be worked out the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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