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TMI Blog2010 (9) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... s and even afterwards it is astonishing to note that in the documents, especially Document Nos. 7314 to 7316 of 2003 executed by the second respondent (Koduru Venkateswara Prasad), the beneficiary himself has signed as a witness to the documents. In addition to the above, while the total extent transferred under the said documents sought to be set aside is 27 acres, the fourth respondent has chosen to execute a sale deed in respect of 3 acres and if that is so, the total extent of lands put together would come to 30 acres as against 27 acres and this would show the unscrupulous manner with which the sale deeds have been executed in respect of the properties of the company. The sales which are the subject-matter of these applications are not only against the interest of the creditors of the company in liquidation, but the transactions also cannot be said to be bona fide and the respective purchasers cannot be said to be the purchasers without knowledge of defective title. Therefore, it is not possible to accept the contention raised by learned senior counsel for the respondents/purchasers that such sales should not be interfered with. - C.A. NOS. 1937 TO 1939 OF 2003 & OTHER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok to maintain the land by entering into separate maintenance agreements with the customers. 3. The petitioner in C. P. No. 57 of 1998, M/s. EPC Industries Ltd., Mumbai, with whom the company is stated to have entered into an agreement for supply of Drip Irrigation System and which is stated to have sold the pipes to the company, raised a bill for Rs. 2,22,96,465.54, out of which Rs. 1,70,93,353.60 is stated to have been paid and there is a balance amount of Rs. 52,01,910.26 payable and when the petitioner in C. P. No. 57 of 1998 issued a statutory notice on December 2, 1997, the letter came to be returned as the company is stated to have closed its registered office at Karumuthu Centre, Chennai. It was in those circumstances, the above company petition came to be filed for winding up. 4. Pending admission of the said company petition, Mr. K. Alagiriswami, learned senior counsel was appointed as an administrator of the company on February 12, 2001 and subsequently, by an order dated February 6, 2006, passed in C. A. No. 353 of 1998, he came to be appointed as a provisional liquidator. 5. In the meantime, the company petition which was filed on February 24, 1998, came to be ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kollur, Medak District, Andhra Pradesh, MPP, R.C. Puram, and Survey No. 30, admeasuring area acres 8-11 Gts., situated at Osman Nagar Village, thus total admeasuring area acres 24-00 Gts., or 9.72 Hectors, Ramachandrapuram Mandal and G. P., Medak District, Andhra Pradesh, MPP R. C. Puram, has purchased the said above property through a registered sale deed vide Document No. 5109 of 1995 of Book I, dated November 16, 1995, Registered at R. O. Sangareddy, Medak District, Andhra Pradesh, having Patta Pass Book bearing Nos. Y-439637/502 and Y-294108/19 both are issued by MRO R. C. Puram, Medak District, Andhra Pradesh, respectively." 8. In the counter affidavit filed by the first respondent (P. Ananthalakshmi) dated December 22, 2003, before this court, she has stated that as per the terms of her appointment with the company, the job profile entailed her to enter into agreements with land owners and it is based on the same she has entered into such agreements in respect of those lands and the lands were purchased by the company in her name during her tenure. The following is the relevant passage from her counter affidavit : "8. In reply to paragraph 9 of the memo, I submit that se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, in his turn has sold the said 3 acres along with the other extent under a registered sale deed dated August 13, 2003, to the third respondent (Sunkara Venkateswara Rao). He has also sold another extent of 18 acres of land to the third respondent. Thus, under three sale deeds dated August 13, 2003, viz., Documents Nos. 7314 to 7316 of 2003, the second respondent has sold the total extent of 21 acres of land purchased from respondents Nos. 1 and 4, as stated above, to the third respondent. 12. All these sale deeds are sought to be set aside in these applications by the learned administrator on the ground that the sales are relating to the lands of the company after filing of the winding up petition, which was on February 24, 1998 and which came to be admitted on February 14, 2003 and therefore, they are null and void. It is also stated by the learned administrator that on coming to know about the clandestine attitude of the respondents in intentionally attempting to alienate the properties of the company under liquidation, he has moved an application in C. A. No. 740 of 2003 praying for an order of injunction restraining the respondents therein from alienating lands purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y from her vendor to the extent of 24 acres ; and also for a consequential order of injunction restraining the respondents from in any manner interfering with the possession of the applicant-company or dealing with it in any manner, including creating any further encumbrance with the properties mentioned therein. 17. The third respondent (Sunkara Venkateswara Rao) filed C. A. No. 185 of 2006 to vacate the order of injunction granted by this court on November 25, 2003, in C. A. No. 1937 of 2003 in C. A. No. 63 of 2001. 18. It is the case of the respondents that the sale deeds executed by the first respondent (P. Ananthalakshmi) in favour of the second respondent dated March 17, 2003, in respect of 24 acres of land were executed in her individual capacity and there is nothing to presume that the said property belongs to the company and even if there was an order of injunction, it does not bind the first respondent to sell away her individual property, which she has purchased earlier under the sale deed dated November 16, 1995. It is the further case of the respondents that the first respondent (P. Ananthalakshmi) has never acted as the general power of attorney of the company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows : "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."and it no doubt contemplates that any disposition made after commencement of the winding up proceedings be void unless the court otherwise decides. 24. Likewise, section 537 of the Act, which is as follows, also contemplates avoidance of certain attachments, executions, etc., in winding up proceedings : "537. Avoidance of certain attachments, executions, etc., in winding up by or subject to the supervision of court.-(1) Where any company is being wound up by or subject to the supervision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall cease to hold office as provisional liquidator, and shall become the liquidator, of the company, on a winding up order being made." 27. Accordingly, when a petition for winding up is presented, it is open to the court to appoint the official liquidator to be a provisional liquidator pending the winding up order. Of course, for such appointment, the procedure contemplated is notice to be given to the company. While appointing the official liquidator as provisional liquidator, the company court can impose specific powers and in the absence of such powers specifically explained, the general powers of the liquidator as contemplated under section 451 of the Act would apply. But when once the winding up order has been made, the official liquidator appointed by the court as a provisional liquidator ceases to be a provisional liquidator and he will become the liquidator of the company with all powers vested on him under section 451 of the Act, which is as follows : "451. General provisions as to liquidators.-(1) The liquidator shall conduct the proceedings in winding up the company and perform such duties in reference thereto as the court may impose. (2) Where the official liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition for winding up, no suit or any other legal proceedings pending in any other court shall be proceeded with and the company court shall have jurisdiction to decide those matters. 29. Section 449 of the Act, which is as follows : "449. Official liquidator to be liquidator.-On a winding up order being made in respect of a company, the official liquidator shall, by virtue of his office, become the liquidator of the company." 30. Also makes it mandatory that on the winding up order having been made, the official liquidator shall be the liquidator of the company. On the facts of the present case, as elicited above, even though the company petition was filed for winding up on February 24, 1998, the winding up order has not been passed so far and therefore, the appointment of the administrator for administering the company during the pendency of the proceedings for winding up is well within the powers of the company court, especially as per rule 9 of the Companies (Court) Rules, 1959, which is as follows : "9. Inherent powers of court.-Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or pass such orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n transactions which after scrutinising with the judicious mind are found to be genuine transactions. Therefore, the said section, in my considered view, cannot be held to be a total bar on all transactions and the same is subject to judicial scrutiny by the company court with power to approve certain transactions as bona fide based on the facts and circumstances. 33. Again, it is not as if on presenting a petition for winding up all the transactions of the company should come to a standstill. While after the winding up order is passed the transactions contrary to the order become void, the transactions effected from the date of filing of the petition for winding up till the actual date of order of winding up are subject to the judicial scrutiny by the company court and the transactions cannot be held to be void ab initio and the void nature of such transactions can be decided only on passing the order for winding up. 34. Even though under section 536(2) of the Act the company court can permit any transactions which are bona fide after the filing of the petition till the winding up order is passed, such power is available to the company court even in respect of avoidance of a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered view, without substance. This view of mine is fortified by the specific stand taken by the first respondent in the counter affidavit filed by her before this court on December 22, 2003. She has in no uncertain terms admitted that during her service under the company she entered into various agreements with the land owners and they were only for the sole purpose of fulfilling the duties assigned by the company to her and the lands purchased by the company were registered in her name. When that is the stand taken by the first respondent in the counter affidavit filed by her, the contention as if the lands were purchased in her name in the individual capacity much earlier on November 16, 1995, under document No. 5109 of 1995, has no meaning. It is not as if these vast extents of lands were in small bits here and there and these lands are contiguous in nature and there is no reason to disbelieve that these properties belong to the company. 36. The mere reason that an application filed to implead the administrator in a suit pending on the file of the Principal Junior Civil Judge Court, Sangareddy, Andhra Pradesh came to be dismissed is not a ground for the third respondent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any judge has observed in this context that nothing could have been easier for the Legislature than saying that 'after a winding up order' if it was intended that section 537 was to operate only after that event. In our opinion the argument of learned counsel cannot be accepted. The words 'is being wound up' may be suggestive of a process but the starting point of that process has been clearly laid down by section 441 of the Companies Act. Chapter VII of the Companies Act is devoted to the subject of winding up. It is divided into several chapters and in each chapter sections have been grouped under various sub-heads. Section 441 stands by itself under the subhead 'commencement of winding up'. In our opinion the intention appears to be that for the purposes of this chapter the commencement of a winding up has been given fixed meaning and the doctrine of 'relating back' appears to have been imported. This doctrine is not unfamiliar to the law of insolvency either. Section 28 of the Provisional Insolvency Act makes the date of presentation of an insolvency petition as the starting point of insolvency proceedings." 40. The Gujarat High Court in Rajratna Naranbhai Mills Co. Ltd. v. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons after commencement of the winding up if not approved by the court as bona fide and valid, would not be binding on the liquidator. The principle is wholesome in that by these provisions a fetter is placed on the power of the directors to dispose of the property of the company, more so when financial stability of the company is lost or it appears to be under insolvent circumstances. Section 537 is one such section which provides that 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 any sale held, without leave of the court, of any of the properties or effects of the company after such commencement shall be void. It is immaterial and irrelevant while considering the case covered by section 537 that the person in whose favour sale is effected is in any way connected with the management of the company prior to the making of the winding up order. Section 537 is clear and unambiguous. It provides that any attachment of the property of the company or sale thereof without leave of the court after commencement of the winding up shall be void. In this case, it is admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sers cannot be said to be the purchasers without knowledge of defective title. Therefore, it is not possible to accept the contention raised by learned senior counsel for the respondents/purchasers that such sales should not be interfered with. 43. In the result, C. A. Nos. 1937 to 1939 of 2003, 1748 and 1749 of 2005 in C. A. No. 63 of 2001 and C. A. Nos. 301 to 303, 319 and 320 of 2006 in C.P. No. 57 of 1998 stand allowed and the respective sale deeds stand set aside and C. A. No. 185 of 2006 in C. A. No. 1937 of 2003 in C. A. No. 63 of 2001 is dismissed. Second batch C. A. Nos. 308 and 309 of 2006 in C. P. No. 57 of 1998 and C. A. Nos. 625 and 626 of 2005 in C. A. No. 63 of 2001 44. C. A. No. 308 of 2006 is filed by the learned administrator for an order to set aside the two sale deeds dated October 28, 2003 and November 22, 2003, registered as Documents Nos. 10156 and 10854 of 2003 in the office of Sub-Registrar, Medak at Sangareddy, Andhra Pradesh and for a consequential order of permanent injunction restraining the respondents from in any manner interfering with the said property. Similar is the prayer in C. A. No. 625 of 2005. 45. C. A. No. 309 of 2006 is filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in original to the officials of M/s. Maxworth Orchards (India) Ltd., at the time of the execution of the sale deeds in favour of the customers of the company. I further submit that I have not executed any other sale deeds subsequent to the said period in favour of any person, much less the alleged sale deeds vide document Nos. (1) 3520/05, dated March 29, 2005, (2) 10156/03, dated October 28, 2003, alleged to be executed by me. Furthermore, from the date of execution of the said sale deeds, I affirm that I have no right, title, or interest whatsoever in the property." 48. Further, it is relevant to point out that the photographs and signatures of the said Kamlesh Lohade filed in the said sale deeds which are sought to be set aside are, on the face of it, not like that of the first respondent, when compared to the signature of the first respondent in the affidavit. Inasmuch as it is not in dispute that all the parent deeds and original deeds relating to the said 12 acres of land which were acquired from four ex-servicemen, namely (i) K. Tataiha, s/o. K. Kotaiha, (ii) Noorulah Khan, s/o. Habeebullah Khan, (iii) R. Satyanarayana, s/o. Hanumantha Rao ; and (iv) J. Sundaramma, w/o. La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abad-29) in favour of the fourth respondent (Dr. Armada Harsha Reddy, s/o. Dr. Ramachandra Reddy, R/o. Hyderabad). 54. Document No. 11482 of 2005 relates to 1 acre of land at the same village executed by the first respondent (C. Lakshmikar Reddy) in favour of the fifth respondent (Dr. Vanakuri Divya, W/o. Govind Reddy, R/o. Hyderabad). 55. Document No. 11483 of 2005 relates to 1 acre of land situated in the same village executed by the first respondent (C. Lakshmikar Reddy) in favour of the second respondent (Kontham Suvarnalatha, w/o. Veera Reddy, R/o. H. No. 22-90/A, Saraswathi Nagar, Road No. 3, Saroonagar, Hyderabad). 56. Likewise, Document No. 11484 of 2005 relates to 4.15 acres of land situated in the said village sold by the first respondent in favour of the third respondent (Aramada Bharathi, w/o. Dr. Ramachandra Reddy, R/o. Hyderabad). 57. In these cases, the first respondent (C. Lakshmikar Reddy), who has nothing to do with the above said lands which belong to the company, has effected the fraudulent sales in collusion with the sixth respondent (Dr. A. Ramachandra Reddy, s/o. Pichi Reddy, R/o. Hyderabad) and the seventh respondent (G. Srinivas, s/o. Gangaram, R/o. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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