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TMI Blog2008 (12) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... ATOR REPORT NO. 107 OF 2007 IN COMPANY PETITION NO. 124 OF 2006 WITH COMPANY APPLICATION NO. 414 OF 2008 - - - Dated:- 30-12-2008 - K.A. PUJ, J. Nitin K. Mehta for the Official Liquidator. Mitul K. Shelat, K.M. Parikh, S.N. Soparkar and Amar N. Bhatt for the Respondent. JUDGMENT 1. OLR No. 107 of 2007 is filed by the Official Liquidator seeking direction to the respondent Nos. 3 4 i.e., Mrs. Dolly Neel Chokshi and Shri Neel Bhupendrabhai Chokshi as well as Anyonya Co-operative Bank Limited to place before the Court the documentary evidence of ownership over the property of the Company s registered office situated at 79, Vishwas Colony, Opp. Alkapuri Shopping Centre. The Official Liquidator has also sought for the direction to the respondent No. 5 i.e., M/s. Siddhi Vinayak Corporation to hand over the peaceful and vacant possession of the resort property situated at Akshar Chowk, Munj Mahuvad, Old Padra Road, Vadodara to the Official Liquidator, treating the said transaction as void against the Official Liquidator in terms of section 531A of the Companies Act, 1956. 2. Company Application No. 414 of 2008 is filed by M/s. Siddhi Vinayak Corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the said property during the pendency of the petition before this Court is nothing but a fraudulent transaction and, therefore, is void under the provisions of section 531A of the Companies Act, 1956 against the Official Liquidator. He has, therefore, sought the direction to the respondent No. 5 to hand over the possession of the said resort property to the Official Liquidator. 5. Over and above the averments made in the report of the Official Liquidator, Mr. Nitin Mehta, learned advocate appearing for the Official Liquidator has submitted that the winding up petition was filed on 19-7-2006 and the transaction of transfer of property took place on 14-8-2006 i.e., after the commencement of winding up, much less within a period of one year before the presentation of the winding up petition to make the transaction void under section 531A of the Companies Act, 1956. It is not for the Official Liquidator to prove and establish that the transaction was not in good faith and not for valuable consideration. As per the provisions of section 531A of the Companies Act, 1956, any transaction of sale or transfer of property of the Company, if made within a period of one year before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been realized. Therefore, the consideration paid by the respondent No. 5 could not have been said to be the fair market value of the property and hence, the transaction is not for the valuable consideration. 8. Mr. Mehta has further submitted that the respondent No. 5 has purchased the property knowing it fully well that the Company was in financial crisis and it has sold the property under compelling circumstances which have been advantageous to the Director of the Company as guarantors to the secured creditors. This factual position itself is sufficient to establish that the assets have been sold in collusion with the Ex-Directors of the Company to the mutual advantage of respondent No. 5 and the Ex-Directors as well, leaving the shell of the Company to undergo formal winding up procedure. No resolution has come on record before entering into the transaction of sale and hence, it is violative of the provisions contained in section 293(1)( a ) of the Companies Act, 1956. He has further submitted that looking at the sale deed, it appears that it is dated 1-8-2006. On page 3, the date mentioned is 14-8-2006. It is practically impossible to take cognizance of No Due Certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 30,000 immediately on 23-12-2005 by way of its commitment and for showing its interest in purchase of the said property. Thereafter, at the instance of the said Mr. Pradhan, M/s. Siddhi Vinayak Corporation wrote a letter dated 29-12-2005 showing interest in purchasing the property in question, as he wanted to submit a One Time Settlement proposal to its Secured Creditor, namely, HUDCO. M/s. Siddhi Vinayak Corporation also deposited Rs. 5 lakhs with the escrow agent M/s. K.C. Mehta Company and placed another sum of Rs. 5 lakhs with another secured creditor of the Company, namely, Anyonya Cooperative Bank Limited in no lien account. In or about January 2006, the said Mr. Pradhan informed the partners of M/s. Siddhi Vinayak Corporation that the Company has submitted a one time settlement proposal with HUDCO. However, on January 18, 2006, HUDCO issued notice under section 13(2) of the Securitisation Act and demanded an amount of Rs. 4,35,96,335 with further interest. 11. Mr. Soparkar has further submitted that once again vide its letter dated 4-3-2006 and 10-3-2006, the Company submitted one time settlement proposal to HUDCO. HUDCO vide its letter dated 14-3-2006 informed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees 5. 1,86,99,755 464128 Corporation 31-7-2006 HUDCO Bank, Vadodara 13. He has submitted that if this payment had not been made, the said authority would have taken action against the Company for attachment of the property in question. Thus, there were compelling circumstances for the Company to sell the property in question. HUDCO issued No Due Certificate on 14-8-2006 and precisely for this reason, the date is mentioned in the sale deed dated 14-8-2006. The index dated 14-8-2006 was issued only after the No Due Certificate was produced. 14. Mr. Soparkar has further submitted that the above facts clearly indicate that almost the entire sale consideration of the property in question was paid by M/s. Siddhi Vinayak Corporation towards paying of the secured and statutory dues of the Company. Same was done to save the Company s assets being sold in distress due to financial stringency and was in the larger interest of the Company. 15. Mr. Soparkar has further submitted that on 1-8-2006, M/s. Siddhi Vinayak Corporation also purchased other adjoining immovable properties beari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Act, 1956, this Court is of the view that there is no violation of the provisions contained in section 531A of the Act and the Official Liquidator is not justified in making the prayer before the Court to treat the transaction in question as void against the Liquidator. To appreciate the rival contentions between the parties, it is necessary to have a close look at the provisions of section 531A of the Act. It deals with avoidance of voluntary transfer. It reads as under : "531A. Avoidance of voluntary transfer. Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator." 19. The purpose of the section is to preserve the assets of the Company and to enable the Company to carry out transactions that might be for the benefit of those interested in the assets of the Company. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Company. No Creditor has raised any grievance against the sale of the assets of the Company. But for the sale of the assets of the Company, the Creditors would not have got their due amount. The Secured Creditors, namely, HUDCO, Anyonya Co-operative Bank Limited, Bharat Co-operative Bank Limited and Baroda City Co-operative Bank Limited had also received their due amount. Statutory Creditors, namely, Vadodara Municipal Corporation, MGVC Limited and Provident Fund Department as well as employees have also received their due payments. In light of these facts, it is not just and proper on the part of the Official Liquidator to raise any doubt against the bona fide of the transactions. Though the burden is heavily lying on the Official Liquidator to prove that the transaction in question is not bona fide nor it is for the valuable consideration or for inadequate consideration, the said burden has not been discharged by the Official Liquidator. He has simply stated that the transaction was entered into within 12 months prior to the date of the presentation of the winding up petition. This is not enough and no Court can pass an order merely on this assertion holding that the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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