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TMI Blog2011 (12) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Mr. Nagesh states that the company in liquidation had not only entered into an agreement to sell on 18th March, 1998 but had also handed over possession of plot no. B-532 in the J.V.G. Hills Layout forming part of survey nos. 94 to 97 and part of 189, admeasuring 500 square yards to Sri T. Chandra Sekhar Reddy prior to the appointment of the Provisional Liquidator on 5th June, 1998. He points out that the present applicant is the owner of the aforesaid land by virtue of a gift deed registered in his favour on 31st January, 2008. 2. Since the agreement to sell, receipt of consideration and handing over of possession by the company in liquidation are prior to the injunction order as well as appointment of Provisional Liquidator, issue notice to the Official Liquidator. Mr. Rajiv Bahl, Advocate accepts notice on behalf of the Official Liquidator. He prays for and is granted four weeks' time to file a reply affidavit. List on 3rd January, 2012. CA 2349/2011 1. Present application has been filed under Sections 536 and 537 of the Companies Act, 1956 (for short 'Act') challenging the Report No. 200 submitted by Mr. J.P. Aggarwal in relation to plot No. C-363 in survey N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s discretion under Section 536(2) read with Section 537 (1)(b) of the Act and order transfer of property in applicant's favour, by directing the Official Liquidator to execute a sale deed in favour of the applicant in respect of the aforesaid plot. 4. On the other hand, Mr. Bahl, learned counsel for the Official Liquidator submits that this Court should not exercise its discretion under Section 536(2) read with Section 537(1)(b) of the Act as the alleged sale transaction had not been completed before the date of appointment of the Provisional Liquidator. He further submits that in case the relief as sought for by the applicant is granted, it would amount to creation of a right which was not in existence on the date when the Provisional Liquidator was appointed. 5. Having heard the parties at length, this Court is of the view that the primary issue that arises for consideration in the present proceedings is the scope and ambit of Section 536(2) and Section 537 (1) (b) of the Act. The said Sections are as under:- "536. Avoidance of transfers, etc. after commencement of winding up-. ** ** ** (2) In the case of a winding up by [the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter presentation of the winding-up petition. The discretion is to be exercised on recognized principles which guide the exercise of judicial discretion generally with particular attention to the interest of the company. The Court can validate such impugned transaction in those bona fide cases which demand protection of equitable consideration. ( See B.B. Khanna v. S.N. Ghose 1976 Tax L.R. 1740)." 8. Keeping in view the aforesaid judgments as well as the explicit language of the Sections reproduced hereinabove, this Court is of the view that it has the discretion to validate any disposition of the property made after passing of the winding up order, but the said discretion is not an untrammeled one, as it has to be exercised on sound judicial principles. In the opinion of this Court, while validating any disposition of the property after the appointment of the Provisional Liquidator, the Company Court, has to keep in view all surrounding circumstances and if it finds that the transaction is a bona fide one for the benefit of the company, then alone the same would be validated. 9. In the present case, the Provisional Liquidator was appointed by this Court on 5th Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. New Kaiser-I-Hind Spg. Wvg. Co. Ltd. AIR 1970 SC 1041/ 40 Comp. Cas. 689 SC) has held as under:- "38. The effect of a winding-up order is that except for certain preferential payments provided in the Act the property of the company is to be applied in satisfaction of its liabilities pari passu . Pari passu distribution is to be made in satisfaction of the liabilities as they exist at the commencement of the winding-up. (cf. Sections 528 and 529 of the Act; Ghosh on Indian Companies Law, 11th Ed., Vol. 2, p. 1073). The effect of a winding-up order on rights already completed as against rights yet to be completed is succinctly stated by Lord Halsbury in Bank of Scotland v. Macleod [1914] AC 311 at pp. 317, 318 as follows: "Rights in security which have been effectually completed before the liquidation must still receive the effect which the law gives to them. But the company and its liquidators are just as completely disabled by the winding-up from granting new or completing imperfect rights in security as the individual bankrupt is by his bankruptcy. This, indeed, is the necessary effect of the express provisions of the Companies Act that the estate is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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