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TMI Blog2024 (7) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... d - the jurisdiction vested is equitable and is meant to be exercised as such. If even bonafide transaction for a consideration would not be protected, then the company, only by the fact that the process of winding up has started, would benefit itself by unjust enrichment. Such a result is clearly to be avoided while exercising power under the said provision. In the case of Pankaj Mehra and Another vs. State of Maharashtra and Others [ 2000 (2) TMI 718 - SUPREME COURT ], the Hon'ble Supreme Court has considered the impact of the legislative direction in Section 536(2) that any disposition of the property of the company made after the commencement of the winding up shall be void. The Hon'ble Supreme Court has observed that there are two important aspects: first is, that the word void need not automatically indicate that any disposition should be ab-initio void. That, the legal implication of the word void need not necessarily be a stage of nullity in all contingencies. The Hon'ble Supreme Court has observed that the manner in which the word void has been employed in Section 536(2), the same means voidable. In the facts of the case, the Applicant has conducted its due dil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitting the winding up petition. 6. In or around 2006-07, the Applicant learnt about the intention of the said company to transfer its leasehold rights and sell the structures standing on the said land. That, accordingly negotiations ensued between the Applicant and the said company for transfer of the said property. That, at the time of negotiations, the directors of the said company represented to the Applicant that the said property was free of all and any encumbrances and subject to the approval of MIDC and the same could be transferred to the Applicant for valuable consideration. That, at the relevant time, the said company informed the Applicant that it had only one creditor i.e. Bank of Baroda, however, its dues were being cleared by the said company. On 16th February, 2007, the Applicant issued a public notice inviting objections to the transfer of the said property, however no objections were received. On 29th June, 2007, the Respondent No.1-company applied to MIDC for transfer of the said property in favour of the Applicant. On 4th July, 2007 and 27th July, 2007, the Bank of Baroda issued its letter confirming that the Respondent No.1-company has paid all its dues and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r were settled by the Applicant. 13. On 13th October 2011, keeping all contentions open, an order was passed by this Court permitting the Applicant to withdraw the said Company Application No.325 of 2011 with liberty to adopt appropriate proceedings against the company in liquidation and particularly in relation to the sale agreement dated 5th September 2007. The Applicant was protected from dispossession for a period of two months and status-quo was directed to be maintained at the site accordingly, which order was extended for some more time. Also, the following order was passed on the Official Liquidator's Report No.269 of 2011 : In the light of the withdrawal of the company application and the order made therein, presently Mr.Sawant appearing for Liquidator states that the Liquidator is not seeking any reliefs in terms of prayer clause (a) of this report. The request of Liquidator to pass orders in terms of prayer clause (a) is deferred for a period of eight weeks from today. 2. As far as prayer (b) is concerned, Mr.Sawant states that Bank of Baroda was one of the secured creditor of the company in liquidation. The representative of Bank of Baroda informs the Liquidator in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be treated equally and particularly in the light of section 529 and 529A of the Companies Act, would rank pari pasu and, therefore, their claim is on par as stated in the statutory provisions. 6. Today claims of workmen and others have to be invited. They have to be adjudicated. Therefore, the Bank of Baroda cannot retain any sums as that would mean that one of the creditors and that too claiming to be a secured one gets preference over others. 7. Mr.Sawant, therefore, submits that the report be made absolute in terms of prayer clause (b). Having heard Mr.Sawant at some length and with his assistance perusing the report and annexures, including the letter dated 4th July 2007, leaves me in no manner of doubt that the bank appears to have agreed to one time settlement with the company in liquidation, post admission of this company petition. Atleast the company in liquidation was aware of the fact that a winding up petition is pending in this Court against it. Thereafter the winding up petition was admitted. The order of winding up may have been made subsequently but applying the principles of relation back, which have statutory recognition in terms of sections 441 of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company. 16. On 25th January 2023, the Official Liquidator filed an application in the Kalyan Civil Court under Order VII Rule 11(b) and (d) of the Code of Civil Procedure, 1908 (the CPC ) for rejection of the plaint in view of Section 536(2) of the Companies Act, 1956. 17. On 18th August 2023, the plaint came to be rejected and thereafter on 30th August 2023, this application came to be filed. 18. On 6th September 2023, a notice was issued by the Official Liquidator informing that possession of the said property would be taken on 14th September 2023. On 4th October 2023, the Official Liquidator filed its reply to the winding up petition. It is submitted on behalf of the Applicant that in the said reply, the Official Liquidator has admitted that it has received no claims with respect to the company in liquidation. 19. Mr.Sanjay Jain, learned Counsel for the Applicant would submit that since the sale agreement dated 5th September 2007 was entered into before the passing of the winding up order dated 26th July 2010, the Applicant is a bonafide purchaser of the said property for consideration without notice of the winding up proceedings. That, the sale agreement dated 5th Septembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon the following decisions in support of his contentions : (i) S.P. Khanna vs. S.N. Ghosh 1975 SCC Online Bom 263 (ii) Pankaj Mehra and Another vs. State of Maharashtra and Others (2000) 2 SCC 756 23. It is, therefore, submitted that the reliefs, as sought for in the application, be granted. 24. On the other hand, Mr.Ranjeev Carvalho, learned Counsel for the Official Liquidator, has opposed the application. 25. At the outset, Mr.Carvalho would submit that the transaction falls foul of the provisions of the Companies Act, 1956 and attracts the provisions of Section 536(2) of the said Act. Learned Counsel would submit that the presentation of the winding up petition was in the year 2003. The winding up petition came to be admitted on 4th February 2005. That, in view of Section 441 of the Companies Act, 1956, the winding up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up. That, the sale transaction has taken place only in the year 2007 as per the sale deed dated 5th September 2007 executed between the said company and the Applicant, which is much after the date of the presentation of the petition, withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h.L.J. 777. 29. I have heard the learned Counsel at length and also considered the rival contentions. Mr.Jain has submitted that he has instructions to not to file any rejoinder in the matter. Therefore, this Court proceeds accordingly. 30. The Applicant has sought the following prayers : (a) This Hon'ble Court be pleased to order and declare that the Sale Agreement dated 5th September 2007 being Exhibit-F above is valid, subsisting and binding; (b) This Hon'ble Court be pleased to order and declare that the Sale Agreement dated 5th September 2007 annexed as Exhibit-F above is not affected by Section 536(2) of the Companies Act, 1956; (c) This Hon'ble Court be pleased to pass an order of permanent injunction restraining the Official Liquidator, High Court, his servants, agents and representatives from in any manner whatsoever disturbing the possession of the Applicant with respect to the said Property and taking any action against Applicant pursuant to the Orders dated 4th February 2005 and 26th July 2010 annexed as Exhibit-I J above, passed by this Hon'ble court in the captioned Petition; (d) This Hon'ble Court be pleased to pass an order to recall and / or set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) situated at Plot No.2 5, Industrial Estate situated at Village - Chikhaloli, Sub-District Thane as void in terms of provisions of sec 537(1)(b) read with section 536 of the Companies Act, 1956 and also to direct the purchaser M/s. Helbon Engineers Pvt. Ltd to handover possession of the said premises to the Official Liquidator forthwith; (b) In view of para 4 and 11 above whether this Hon'ble Court would be pleased to direct the Bank of Baroda to deposit Rs.353.17 lacs (i.e. amount received Rs.338.32 lacs as per compromise proposal sanctioned plus interest of Rs.14.85 lacs for the delayed period) along with interest payable on the said amount as per the prevailing rate of interest at the point of time with the Official Liquidator forthwith; 34. The Applicant had also taken out Company Application No.325 of 2011 to declare the sale agreement dated 5th September 20007 as valid and binding on all the parties concerned and to restrain the Official Liquidator, his servants, agents or otherwise by an order of injunction of the Court from taking any steps qua the said property. 35. The Official Liquidator's report as well as the company application, as noted above, came up for h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or had filed an application for rejection of the plaint under Order VII Rule 11 (b) and (d) of the CPC and by order dated 18th August 2023 the plaint was rejected under Order VII Rule 11(d) of the CPC on the ground that Civil Court had no jurisdiction to deal with the subject matter and therefore the suit was barred. 37. Thereafter, the Official Liquidator issued letter dated 6th September 2023 to the Applicant and their Advocate requesting them to handover the possession of the said property on 14th September 2023. 38. It is not in dispute that in or around 1981, the land underlying the said property was leased in favour of the company in liquidation after which the said company in liquidation constructed two sheds on the said property. It is also not in dispute that the Applicant, after learning about the intention of the Respondent no.1-company to transfer its leasehold rights and sell the structures, entered into negotiations with the company in liquidation for transfer. That, based on the negotiations and representations of the directors of the company in liquidation, that the said property could be transferred to the Applicant for valuable consideration subject to approval of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the winding up petition was filed on 25th August 2003 and was admitted on 4th February 2005 and made absolute on 26th July 2010. The admission order dated 4th February 2005 had clearly recorded that the Respondent-company disputed the liability of the petitioner. The order dated 26th July 2010 which passed the winding up order though recorded that the company was served, however, none was present on behalf of the company. No doubt, notices with respect to the admission and winding up of the company would have been published, but it is not in dispute that pursuant to MOU dated 6th August 2011, the Applicant has settled the dues of the petitioner. The sale transaction is dated 5th September 2007 and despite the public notice dated 16th February 2007 inviting objections to the transfer and despite the pendency of the petition, no objections were received from any one including the petitioner. The petitioner also appears to have missed the said public notice to raise any objection with respect to the transfer. It is not in dispute that as on date, there is no liability against the company in liquidation and that there are no creditors as all the creditors including the Bank of Baro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid has been employed in Section 536(2), the same means voidable. Paragraphs 14, 15, 19 and 20 of the said decision are usefully quoted as under : 14. In the above backdrop alone we can consider the impact of the legislative direction in Section 536(2) that any disposition of the property of the company made after the commencement of the winding up (i.e. after the presentation of a petition for winding up) shall be void. There are two important aspects here. First is, that the word void need not automatically indicate that any disposition should be ab initio void. The legal implication of the word void need not necessarily be a stage of nullity in all contingencies. Black's Law Dictionary gives the meaning of the word void as having different nuances in different connotations. One of them is of course null, or having no legal force or binding effect . And the other is unable in law, to support the purpose for which it was intended . After referring to the nuances between void and voidable the lexicographer pointed out the following : The word 'void' in its strictest, means that which has no force and effect, is without legal efficacy, is incapable of being enforced by l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alary to the staff and other employees and meet urgent contingencies. An interpretation which could lead to such a catastrophic situation should be averted. That apart, if any such view is adopted, a fraudulent company can deceive any bona fide person transacting business with the company by stage- managing a petition to be presented for winding winding up in order to defeat such bona fide customers. This consequence has been correctly voiced by the Division Bench in the impugned judgment. 42. It is clear from the aforesaid exposition that the discretion to the Court by the use of the words unless the Court otherwise orders has to be kept in mind. That, if all dispositions of property made by a company in liquidation during the interregnum between the presentation of the petition for winding up and the passing of the order for winding up, would be null and void, that would completely paralyse the business of company as the company has to deal with very many day to day transactions. Such interpretation, as observed by the Hon'ble Supreme Court, could lead to a catastrophic situation which should be averted. 43. In the facts of the case, as noted above, the Applicant has conducte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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