9911796707
TMI Blog2008 (9) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... s duly informed to the Registrar of Companies, and the same was registered also. At that juncture, the company in liquidation wanted to sell the property in order to discharge the portion of the credit facilities out of commercial compulsion. Accordingly, the company had conveyed the property to the applicant by way of two sale deeds dated February 11, 1999 and February 16, 1999 and put them in absolute possession of the property. In the meanwhile, the applicant received a letter from the official liquidator about the winding up of the company and also about taking possession of the schedule property. The applicant raised objection. Despite the same, the official liquidator over locked the premises. Hence, the applicant filed C. A. No. 1275 of 1999 (V. G. P. Finances Ltd. v. Official Liquidator [2005] 127 Comp Cas 1 (Mad)), for directing the official liquidator to deliver possession of the property. The said application was dismissed for default on August 14, 2002. The applicant came to know that the application was not the proper remedy and necessary application to validate the disposition of the property by the court has to be filed. Accordingly, the applicant filed an applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of a secured creditor has to be shared among all the creditors, since the individual secured creditor has the option of standing outside the winding up, even post winding up to realise its security; that the only statutory exception is the fictional statutory pari passu charge under section 529A; that the Indian Bank does not belong to the class of secured creditors covered under section 529A(l)(b ) ; that its position would not improve more than security created in its favour; that its priority would not extend to its entire unrealised sums, which might be in excess of its security; that the appellants have been keeping quiet for all these years; that the appeals have been filed with ulterior motives; that it is well known that the equity favours the vigilant and not the indolent; that under the circumstances, the learned single judge was perfectly correct in allowing the application, and hence that order has got to be sustained and all the appeals be dismissed. The court also heard the official liquidator. The admitted facts are as follows : The company in liquidation which was wound up as per the order dated March 10, 1999, in C. P. No. 201 of 1996, approached the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1275 of 1999 was taken up for consideration by the learned single judge and as a result, the application was allowed directing the official liquidator to deliver vacant possession of the property to the applicant. This order dated August 9, 2005, is the subject-matter of challenge in this appeal. The prime contention put forth by the applicant before the learned single judge and also as the first respondent before this court is that the sale transactions covered under the aforesaid two sale deeds, were bona fide ; that all the transactions are not void ab initio in terms of section 536(2) of the Companies Act, 1956 and hence it cannot be declared as void by the court; that the entire consideration for the conveyance of the property was actually paid to the company by way of cheques and payments, and hence it was a bona fide transaction which would not fall under the mischief of section 536(2) of the Companies Act, 1956; and that under the circumstances, a direction has got to be given to the official liquidator to hand over the possession of the property. On the contrary, the stand that was taken by the official liquidator before the learned single judge was that the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration. No costs." The learned single judge on remittal was required to decide the question whether the transfer was valid or void. The learned single judge has taken the view that the sale transactions were valid, and hence these three appeals have arisen. At the outset, it has to be pointed out that these three appellants never appeared as parties before the learned single judge. It was contended by the appellants' side that the official liquidator who took delivery of possession of the property pursuant to the order of winding up, has actually represented the entire body of creditors. All the three appellants called themselves as secured creditors. As far as the appellant in O. S. A. No. 201 of 2005, namely, Indian Bank, was concerned, what was hypotheca to Indian Bank for raising loans by the company under liquidation earlier in point of time, was certain movables and also machinery. What were actually mortgaged and conveyed under the deeds were the immovable properties, namely, the lands. Further, when the official liquidator visited the property on June 8, 1999, the Indian Bank was also very well available. Along with the applicant, the Indian Bank also raised its obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for winding up) shall be void. There are two important aspects here. First is, that the word 'void' need not automatically indicate that any disposition should be ab initio void. The legal implication of the word Void' need not necessarily be a stage of nullity in all contingencies. Black's Law Dictionary gives the meaning of the word 'void' as having different nuances in different connotations. One of them is of course 'null, or having no legal force or binding effect'. And the other is 'unable in law, to support the purpose for which it was intended'. After referring to the nuances between void and voidable the lexicographer pointed out the following : The word "void" in its strictest sense, means that which has no force and effect, is without legal efficacy, is incapable of being enforced by law, or has no legal or binding force, but frequently the word is used and construed as having the more liberal meaning of "voidable". The word "void" is used in statutes in the sense of utterly void so as to be incapable of ratification, and also in the sense of voidable and resort must be had to the rules of construction in many cases to determine in which sense the Legislature intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Division Bench. The learned judges stated thus : Now here as regards section 227(2) the court has to steer a middle course between two extremes. On the one hand the words of the section are wide enough to include any sale or payment that a company may make after the date of the winding up petition. On that basis any business would practically have to be stopped if a petition was presented, because it would be unsafe to dispose of any of the company's assets. For instance, a mill company might not be able to buy a ton of coal for the use of its furnaces, or, on the other hand, it might not be able to sell any of its goods in the ordinary course of business. Consequently, the court has very properly laid down that, speaking generally, any bona fide transaction carried out and completed in the ordinary course of current business will be sanctioned by the court under section 227(2). On the other hand it will not allow the assets to be disposed of at the mere pleasure of the company, and thus cause the fundamental principle of equality amongst creditors to be violated. To do so would in effect be to add to the preferential debts enumerated in section 230 a further category of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts would be very circumspect in the matter of validating the payments and the interest of the creditors as well as the company would be kept uppermost in consideration. Be that so, the said decision is not sufficient to support the contention that disposition during the interregnum would be irretrievably void. 20. 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-to-day transactions, make payments of salary to the staff and other employees and meet urgent contingencies. An inter pretation which could lead to such a catastrophic situation should be averted. That apart, if any such view is adopted, a fraudulent company can deceive any bona fide person transacting business with the company by stage managing a petition to be presented for winding up in order to defeat such bona fide customers. This con sequence has been correctly voiced by the Division Bench in the impugned judgment." From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the company under liquidation, entering into the agreement therefor and raising the entire loan of Rs. 65.20 lakhs were all ten months prior to the filing of the petition for winding up. Now at this juncture, it is pertinent to point out that these loan trans actions could not have been entered into for the purpose of defeating or defrauding the creditors. Nowhere the official liquidator came out with the case stating that the said loan transactions were entered into in order to defeat or deceit the secured creditors. From the resolution passed for raising loan facility and even if necessary, to part with the properties of the company, it would be indicative of the fact that the company was in financial needs. It is true that in the agreement for raising loans, entered into between the applicant and the company in liquidation, it was not stated that the loan was raised for day-to-day transactions. But, it should not be forgotten that the company in liquidation was carrying on its business even at the time of filing of the winding up petition and also till the winding up order was made. Their Lordships of the apex court in the aforementioned case have pointed out that the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
