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TMI Blog2012 (10) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... eclared sick under Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 on 18.3.2002 and as per the order of the Bench, the company was ordered to be wound up and the same was followed by change of management. Even thereafter, neither the company nor its promoter has come forward with any acceptable or viable proposal for revival of the company, which compelled the Board for Industrial and Financial Reconstruction (BIFR) to recommend for winding up the company in terms of Section 20(1) of the Act in case No. 12 of 2001 dated 27.3.2003. The proceeding was forwarded to this court for further necessary action in accordance with law. This Court entertained the same and taken it on record as CP. No. 207 of 2003. 2. Originally, the company petition was ordered on 1.2.2007 and the order was on 6.12.2007, reopened in view of the order passed in CA. No. 2933/2007 and the company court on second occasion, on the failure of the company to prove their bonafide claim regarding revival, ordered winding up the company with other incidental directions. On the strength of such order, the official liquidator has taken charge of the assets and liabilities of the company an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same is invalidated and the assets of the company is allowed to be sold by phoenix ARC, it is likely to affect the revival scheme, which will intern cause serious prejudice to the company as well as to its workers, who will be deprived of their source of livelihood. 5. Per contra, the official liquidator and the second respondent who is one of the secured creditors and decree holder, have opposed the relief sought for in the applications both factually and legally. The legal objection raised herein is that the transaction held by the applicant, after winding up order was passed, is void ab initio and after the company is ordered to be wound up, the assets and liabilities including shares of the company shall be in the hands of the official liquidator, who is the only person competent to deal with the same and the company court under section 536(2), has no authority to consider the validation of sale of shares effected after winding up order. On facts, the bonafide nature of the transaction is also seriously questioned by the official liquidator and by the contesting objector. 6. Heard the rival submissions made on both sides. 7. The point that arises for consideration here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up by (the Tribunal)/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 (Tribunal) otherwise orders, be void. As Section 536(1) deals with the case of voluntary winding up, the same is not applicable to the instant case. Under relevant provisions of law in Section 536(2), validation or otherwise of any disposition of the property including actionable claims 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 depend upon the decision of the Company Court. The plain reading of this Section does not limit the exercise of jurisdiction of this court to decide voidable nature or otherwise of the transaction. The section only says that subject to company court direction, any disposition after the commencement of winding up shall be void, but while saying so, no outer limit is fixed regarding the period of disposition of property, which is required to be validated by the company court, as such, the interpretation to be drawn i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions effected during both periods (i) interregnum period between the presentation of the petition for winding up and passing of winding up order and (ii) transactions made after the winding up order is passed till completion of winding up process. 13. In Pankaj Mehra (2000) 2 SCC 756 case, the question arose for consideration before the Supreme court was whether the Company escape from penal liability under Section 138 of the Negotiable Instruments Act (for short "the NI Act") on the premise that the petition for winding up of the company has been presented and was pending during the relevant time. When the company challenged the criminal proceedings initiated against them under Section 138 of NI Act by way of batch of writ petitions, the Division Bench of Bombay High court held that the company cannot avert its liability on the mere ground that such a petition was presented prior to the company being called upon by a statutory notice to pay the amount of the cheque and dismissed the batch of writ petitions. Challenging the order of the Division Bench, batch of appeals by way of Special Leave came to be filed before the Supreme Court. It was sought to be contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supp SCC 167) case would support the contention raised on the side of the applicant that the sale effected after winding up order is passed is not ab initio void and the same is subjected to the decision of this Court. 15. The Division Bench of Bombay High court (Nagpur Bench) in S.P. Kanna, Dy. Official Liquidator, Lakmi Bank Ltd. case ( 1976 Mh.LJ 150), laid down the principles that the power under section 536(2) could be exercised by court, while proceedings of winding up were going on and dissolution had not reached. The Bombay High court in para 10 of its judgment referred to Section 441, which indicates the stage of commencement of winding up from the time of presentation of petition for winding up, observed that in the body of sub section (2) of Section 536, there is no terminus quo stated of this period and it is obvious that power under section 536(2) can be exercised by the court, while the proceedings of winding up are going on and the dissolution has not reached. 16. The same view was also expressed by the Division Bench of Delhi High court in 2012 IV AD (Del) 381 in Guptajee Charitable Trust and batch of cases, wherein, it is observed in para 3 of its judgment that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has jurisdiction over the matter and nothing is stated to show that the transfers made, after winding up order, but before the dissolution of the company are not subject to the jurisdiction of the court. The Delhi High court has also in para 24 referred to the judgments of (i) Division Bench of Bombay High Court in S.P. Khanna v. S.N. Ghosh case (1976 Mh.LJ 150) and (ii) Gujarat High Court in Sidhpur Mills Company Ltd. in (1987) 1 Com LI 71. In both the cases, the Division Bench of Bombay High Court and the learned single judge of Gujarat High court observed that "the court can validate such impugned transactions, by way of transfer of shares after the winding up order in such bonafide cases, which demand protection of equitable consideration and the Court then directed the company to register the said transfers". After referring to all the earlier judgments, the Delhi High court in para 25 answered the question in affirmative that the court has jurisdiction under section 536(2) to validate transfer of shares taken place after the winding up order, as the winding up process is still continuing and the company has not yet been dissolved. 18. The Division Bench of Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the disposition of the property is effected whether before or after winding up order is made, but relates to exercise of jurisdiction of this court in issuing directions, whether before or after winding up order is made, as such, the observation is not strictly applicable to the issue involved in the present case. 21. The learned counsel for the respondents has also relied upon the principles laid down by Bombay High Court in Rathnam P.V. Case (2012) 171 comp cas 389 relied upon by the applicant's side. It may be true that the Bombay High court in para 24 (ii) of the same judgment, observed that "the application under section 536(2) may be made at "any time after the transfer of shares", which transfer must have taken place after presentation of the winding up petition, but before passing of the winding up order". One of the observations so laid down by the Bombay High court is without any discussion in this regard in the foregoing paragraphs. The Bombay High court has in the foregoing paragraphs referred to the judgments of Delhi High Court in H.L. Seth v. Warewell Cycle Co. (India) Ltd. (1992) 46 DLT 599 and Division Bench of Bombay High court in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant has also drawn the attention of this Court to the negotiation, as seen from the letter dated 2.6.2010 enclosed at page 102 of typed set dated 11.7.2012 filed by the applicant, started from the beginning of the year 2010 and Bill dated 24.9.2010 enclosed at page 103 of the same typed set raised by the second respondent in the name of the applicant towards professional services, due diligence fees along with service tax, education cess and secondary education cess for banking and financial services rendered by him. The letter dated 27.9.2010 enclosed at page 104 of the same typed set issued for verification of title deeds. The assignment in favour of the second respondent was made by IOB only by document dated 30.12.2010 and the same referred to out of court settlement for ₹ 7.09 crores. Again another bill dated 31.12.2010 was raised in favour of the applicant for banking and financial services rendered by him and the same was followed by letter dated 3.1.2011 by the second respondent/assignee to the guarantor and the applicant Dr. Kathirvel and the reading of contents of the same would reveal that the applicant herein took active part in negotiating with the bank and in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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