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TMI Blog2015 (8) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... uly executed transfer deeds were not lodged with Company or that such transfers were not registered in record of Company does not detract from completeness of transfer – Thus, pledge of shares by Company in liquidation and transfer of shares effected during pendency of winding up were both bona fide and in interest of Company in liquidation –Official Liquidator's Report disposed of – Decided in favour of Applicant. - Company Application No. 250 of 2014, Company Petition No. 521 of 1992, Official Liquidator's Report No. 179 of 2012 - - - Dated:- 22-7-2015 - S. C. Gupte, J. For the Applicant : Mr. Janak Dwarkadas, Senior Advocate, a/w. Mr. Aditya Thakkar and Mr. Deepak Shukla, i/b. Vinod Mistry Co. For the Official Liquidator : Mr. J.P. Sen, Senior Advocate, a/w. Mr. Rakesh Reddy, for the Official Liquidator. Mr. S. Ramakantha JUDGMENT This application is for seeking validation under Section 536(2) of the Companies Act, 1956 ( the Act ) of (i) a pledge agreement between the Applicant and the Company in liquidation, (ii) invocation of the pledge and (iii) transfer of shares belonging to the Company in liquidation. 2. Garware Nylons Limited is a Company i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eased its business. Thereafter, on 31 December 1996, upon reconciliation of the accounts, the Applicant called upon the Company to clear the outstanding dues of about ₹ 1.13 crores payable by the Company to the Applicant on account of supply of raw materials and payment to critical parties/contractors. The Company, by its letter dated 3 January 1997, requested the Applicant to further support the Company in its working capital requirements, against which it offered to transfer 2,21,420 shares of GOSL held by the Company to the Applicant, thereby seeking to reduce the outstandings substantially. In pursuance of this offer, which was accepted by the Applicant, the Company, by a letter dated 14 January 1997, forwarded duly signed Transfer Deeds along with share certificates of 2,21,420 shares of GOSL. On 27 January 1997, these shares were duly transferred to the Applicant, such transfer having been recorded in the Register of Members of GOSL. Subsequent to this transfer, on 28 February 1997 the shares were sold by the Applicant. (Even this transfer is duly recorded). In spite of such transfer and considering the further critical payments by the Applicant on behalf of the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present Company Application was taken out by the Applicant seeking validation of the Pledge Agreement as well as the subsequent invocation of the pledge and transfer of shares in favour of the Applicant. 3. On behalf of the Applicant it is submitted by Mr. Dwarkadas, learned Senior Counsel for the Applicant, that the subject transactions were entered into bona fide and in the ordinary and regular course of business and were in the interest of the Company so as to enable it to continue carrying on its business when its reference was pending before the BIFR. Learned Counsel relies upon the judgment of a learned Single Judge of this Court in Board of Industrial and Financial Reconstruction vs. M/s. Hindustan Transmission Products Ltd. OLR No.145/2011, Coram: S.J. Kathawalla, J. dated 5 September 2012 in support of his submissions. (This judgment was confirmed in Appeal by a Division Bench of this Court in the case of Sunita Vasudeo Warke vs. Official Liquidator 2013(2) Mh.L.J. 777.) Learned Counsel further submits that the pledge, which was created bona fide and for the benefit of the Company, was validly invoked under Section 176 of the Contract Act, 1872 and the transfer of sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rises for consideration is whether for a transfer to be validated under Section 536 (2) of the Act, the Applicant must plead and prove not only that the transfer is bona fide but also that the transfer was in the interest of the Company. Section 536 (2) of the Act provides that any disposition of property made after commencement of winding up shall, unless the Court otherwise orders, be void. Some of the situations in which a transfer may be validated under Section 536 (2) of the Act were enumerated in the judgment of a Division Bench of this Court in Tulsidas Jasraj Parekh vs. Industrial Bank of Western India (supra). While sounding a note of caution that the discretion confided to the Court cannot be crystallized in rules of law in view of the varying circumstances of human action the Court held that it would not permit transactions bona fide entered into in the ordinary course of trade and completed before the date of the winding up order to be annulled. In respect of transactions which were not in the ordinary course of trade, the principles that would govern the exercise of discretion under Section 536 (2) were summarized in the judgment of the Calcutta High Court in J. Sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have ceased in 199495 itself. The agreement of pledge is very much a part of this agreement. It was entered into in May 1995 in the circumstances noted above. In view of the agreement of pledge, the Applicant continued to supply raw materials and make payments to critical contractors of the Company between May 1995 and August 1996. This ensured further continuance of the Company's operations and business. If any agreement is effected with the Company for ensuring continuous supply of raw materials and continuance thereby of its operations and business during the period the Company's reference is pending before BIFR and all the stakeholders are interested in the revival of the Company, such agreement can certainly be termed as an agreement in the ordinary business and bona fide in the interest of the Company. As a matter of fact, the Official Liquidator has not joined issues with any of these facts nor does the Official Liquidator in terms impugn the initial transaction of pledge of shares. Evidently, it was in pursuance of this agreement of pledge that the Applicant continued to finance the raw material supply to the Company and also continued to pay the dues of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the winding up order. It is, however, submitted that under Section 108 of the Act, the transfer is not complete unless and until the shares along with duly executed transfer deeds are lodged with the Company and registered in the Register of Members of the Company. It may be that as between both the transferor and transferee on the one hand, and the Company, whose shares are sought to be transferred, on the other, the transfer may not be complete until the share certificates along with duly executed transfer deeds are lodged with the latter. But as between the transferor and the transferee, the transaction is concluded by the transferor delivering share certificates together with duly executed transfer deeds to the transferee. The mere fact that the share certificates along with duly executed transfer deeds are not lodged with the Company or that such transfers are not registered in the record of the Company does not detract from the completeness of the transfer as between the transferor and the transferee. The Division Bench of Madras High Court in the case of M. Ramaswamy (supra) has considered the transfer of shares as between the donor and donee of shares pending completio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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