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TMI Blog2025 (1) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... ermore, it is a matter of fact that the Reserve Bank of India's (RBI) order dated April 9, 1997, directing CRBCML not to proceed with any sale, transfer, or charge on the property or assets without written consent, was not in the public domain, and the applicants had no notice of the directions passed by the Company Court. The applicants, in ignorance of such facts, apparently bought the shares from open market and paid the consideration thereof. It is not within the jurisdiction of the Company Court to investigate, at the behest of the appellants, the sale of shares by CRBCML, including the recipients or the consideration involved. Undoubtedly, the transfer of equity shares occurred during a period when such transfers were typically executed through the exchange of share certificates along with signed or blank transfer deeds. The sole requirements were a Contract Note in favour of the transferee, substantiated by the payment of the share amount to the Stock Broker. Conclusion - i) The present appeal by Appellant No. 1, CCL, and Appellant No. 2/Ex-Director, is not maintainable under Section 483 read with Sections 521 531-A of the Act. The objections raised by them to the clarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons in Company Petition No.191/1997 were preferred by the applicants about 18 years ago, and the learned Single Judge adopted the Company Application No. 782/2006 filed by the applicant, namely Murari Lal Saraf as the lead case. It is a matter of record that the applicant purchased 1500 equity shares of RIL by way of open market transactions on 25.04.1997, but the same were not transferred in his name purportedly owing to certain directions passed by this Court in the present Company Petition filed in the year 2006. It would be relevant to take notice of a communication dated 09.04.1997 which was addressed by the RBI [Reserve Bank of India] to CRBCML, in which the following mandate was given: 5. Further, the Reserve Bank of India on being satisfied that it is necessary so to do in the public interest, hereby directs your company in accordance with the provisions of section 45 MB (2) of the Reserve Bank of India Act, 1934 not to sell, transfer, create charge or mortgaged or deal in any manner with its property and assets without prior written permission of the Bank for a period of six months from the date of this Order. 4. It was the case of the applicants that such 1500 equity shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E on 15.06.1999, seeking clarifications regarding the status of 1500 equity shares of RIL held by the applicant as purchased from AGV. The DSE responded vide letter dated 22.06.1999, clarifying that since the shares belonging to CCL entities that were transferred prior to 21.05.1997 did not require any certification, they could be lodged with the company/Share Transfer Agent for registration in the name of the subsequent purchaser. Upon the applicant again approaching KARVY on or about 23.06.1999 for registration of the shares in his name, KARVY in its response vide letter dated 05.10.1999, reiterated the communication dated 06.06.1997 issued by the RBI, prohibiting transfer of shares held by CCL since the latter company was under liquidation. It was in the aforesaid backdrop that the instant applications were moved by the applicants seeking clarification on the status of the their equity shares in RIL so that the shares could be registered in their respective names. 8. Interestingly, although no replies were filed by the Ex-Management of CRBCML as well as by the Official Liquidator, the reliefs claimed in the applications were vociferously opposed. It is also a matter of record th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the CRB Group. Indeed, the order dated 22 August 1997, in Co. Pet. 280/1997, by which the Provisional Liquidator was appointed in the case of CRB Corporation Ltd, reveals that the sole ground urged before this Court, on the said occasion, was that a Provisional Liquidator has already been appointed in the case of CRBCML. There is no doubt, therefore, of the fact that CRBCML would be well aware of the transactions with respect to the aforenoted 1500 shares, and as to why payment was made by AGV to CRB Corporation. One would have expected, therefore, that, in the interests of fair play, CRBCML would have come upfront and explained the transaction, rather than seeking to stymie the legitimate claim of the applicant, who is a complete stranger to the transaction between AGV and CRB Corporation. It does not take much to read between the lines. It is apparent that the CRB Group of Companies is unwilling to release hold over the 3000 shares which have, in due course and for due consideration, been purchased by the applicant and his brothers through AGV in the open market. 30. This Court cannot possibly be an approver to such an attempt. 31. Once these facts are accepted and acknowled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed, and 26 years since the shares were purchased by the applicant from AGV. To keep this dispute alive, in the absence of any convincing reason to do so, would, in my opinion, be a travesty of justice. Given the ferocity of the opposition put up, to the present application, both by the OL and by CRBCML, I am convinced that, if any leeway is left with them to deny the applicant the right to transfer of the shares in its favour, they would take advantage thereof. 35. I am, therefore, only inclined, in the interests of balancing the equities, to enter a limited restraint on the applicant dealing with the subject shares for a period of 30 days from the date of pronouncement of this judgment, to allow the respondents an opportunity to seek their remedies against this judgment, if they so choose. 36. Subject to this limited rider, the applicant would, therefore, be entitled to transfer of the 1500 RIL equity shares in its name. On perusing the order sheets in this case, I find that, vide orders dated 22 May 2020 and 31 August 2020, passed by this Court, the OL was directed to open a DEMAT account in the name of CRBCML with Stock Holdings Corporation Ltd and to covert all shares into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the Ex-Management was raised by the respondents/applicants, the same was apparently not addressed by the learned Judges constituting the Division Bench of this Court and instead they proceeded to decide the appeals on merits. It would be pertinent to refer to the operative portion of the order, wherein it was observed as under: 36. It is an admitted position that the original share certificates of 4000 RIL shares (96 in number) along with transfer deeds are in possession of Shri Anoop Jain. Now the only issue raised is of consideration for these 4000 shares. Shri Anoop Jain has relied on Delhi stock exchange register within the cycle 12.04.1997 to 25.04.1997 to show that he had paid the consideration. He also stated that he got the delivery of the shares on 02.05.1997 along with the original shares and blank transfer deed. He also states that through his proprietorship concern Jain and company Mr. Anoop Jain made the payment to Delhi Stock Exchange. 37. However, the appellants contents that the contract notes, bills for delivery of possession of shares and proof of having paid the consideration are not placed on record by the respondent No. 1. 38. The CO. APP pertaining to M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord by them after the order was reserved by the learned Company Court but hey did not get any chance to rebut the same. 41. Thus, it is necessary to attain satisfaction as to when the 4000 shares subject matter of transfer to Mr. Anoop Jain; 1500 shares subject matter of transfer to Mr. Murari Saraf, 900 shares subject matter of transfer to Mr. Banwari Lai Saraf and 600 shares subject matter of transfer to Mr. Bihari Lai Saraf brothers were sold by the Appellant No. 1, CRB Capital Markets Limited. Once it is established that CRB Capital Markets Limited had sold these shares prior to 09.04.1997, then the only satisfaction is to be obtained is the dates of contract notes, bills for delivery of possession of shares and proof of respondent No. 1 in each appeal having paid the consideration for these shares stated to have been purchased. 42. Without disturbing the decision of the learned Company Court, the matter is remanded back to the learned Company Court only for the limited purpose to inquire when the 4000 shares subject matter of transfer to Mr. Anoop Jain; 1500 shares subject matter of transfer to Mr. Murari Saraf, 900 shares subject matter of transfer to Mr. Banwari Lai Saraf an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly partly allowed in terms aforesaid. ANALYSIS DECISION: 12. Upon hearing learned Senior Counsels for the parties and on perusal of the record, at the outset, we have no hesitation in holding that the appeal filed by the appellant No.1 CRBCML, through appellant No.2 Mr. C.R. Bhansali is not maintainable in law. First things first, it is pertinent to mention that the learned Single Judge while passing the impugned order dated 25.07.2023 had delved into the issue of the maintainability of the objections that were being raised on behalf of the appellants, as also the learned Standing Counsel for the Official Liquidator and had observed as under: 18. I may observe, here, that the applicant seriously questioned the locus standi of CRBCML to contest the present application. I, too, queried of Mr. Batra as to how, once he accepted that CRBCML had, in fact, at one time been holding the 1500 shares in issue, and had thereafter sold them, CRBCML could retain any interest in the shares. Though Mr. Batra was not able to provide any satisfactory response to the query, I nonetheless heard him and, therefore, do not intend to dwell further on the issue of locus standi of CRBCML. 19. Supplementi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be shown by him were the contract note and the share transfer certificate. He points out that he has placed on record, (i) the contract note with AGV, (ii) the delivery note by AGV, which indicated that the shares had initially been held by CRBCML, (iii) the Share Transfer Form from RIL with respect to the said shares, with the signature of the Director of CRBCML figuring thereon, in which the applicant is shown as the transferee and (iv) Share Certificate dated 16 March 1995 issued by RIL to CRBCML indicating that the said shares had in fact been purchased by CRBCML from RIL, as the Distinctive Numbers of the shares were forthcoming on the Share Certificate. That the shares in controversy were, therefore, RIL shares which were originally held by CRBCML, and that they had been purchased by the applicant for consideration in the open market from AGV, submits Mr. Dayan Krishnan, cannot be doubted or questioned . In that view of the matter, there can be no justification to refuse, to the applicant, relief in the terms granted by this Court to Vikram Commercial by order dated 25 November 2010 passed in Co. App.176/1998. {bold portions emphasized} 13. In short, it is an undi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of six months before the commencement of its winding-up (hereinafter referred to as the twilight period ) shall be deemed to be a fraudulent preference of its creditors and, accordingly, be invalid. This provision must be read in conjunction with Section 531-A and Section 536 of the Act, which read as follows: 531-A. Avoidance of voluntary transfer.- Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by the Tribunal or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator. 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unction of the Official Liquidator to start the process of rehabilitation of the company as is aimed at under the Act. Despite appointment of the Official Liquidator, the Board of Directors continue to hold all residuary powers for the benefit of the company which includes the power to take steps for its rehabilitation. The Board of Directors in the instant case were not in any way by any judicial order debarred from taking recourse to the provisions of the Act for the purposes of rehabilitation of the Company. If there existed a power, its exercise cannot be termed to be mala fide only because it was initiated after availing the opportunity to make the payment of the amounts due and passing of the order of winding up of the Company. 18. We are unable to comprehend as to how the aforesaid observations could assist the appellants in sustaining the maintainability of the instant appeals. The power of ex-management, upon initiation of winding-up proceedings under Section 433 2 , 434 3 , 441 4 and 481 5 of the Act, is primarily to take measures for rehabilitation or revival of the company (in liquidation).The Ex-management may also be heard to protect assets under the control of the Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Ex-management for the revival of the company, it was in the said backdrop that it was held that company was not prevented by any statutory provision from approaching the Court simply because a winding-up order had been passed. It was in such circumstances that the Court found that there was no valid 23. Avoiding a long academic discussion, we may refer to decision of this Court in the case of Anil Kumar Sachdeva v. Four A Absestos Private Limited 1978 SCC OnLine Del 199, wherein it was reiterated that notwithstanding the appointment of the Provisional Liquidator, the Board of Directors retain some residuary power to question the continuance of the winding-up order when it is in a position to revive the company after satisfying the dues of its creditors. It is thus clear that the power to assail transactions on the anvil of Sections 521 531-A of the Act and seek appropriate reliefs primarily rests with the Provisional/Official Liquidator. While the ex-management may be said to retain some residual powers to rehabilitate or revive the company in liquidation or pray for the company being taken out of liquidation, the same cannot be construed as extending to the ex-management see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impact the company's assets and necessitate safeguarding the interests of the creditors. The learned Senior Counsel for the appellant also conceded that if the shares were purchased from the open market through a Share Broker, there could be no embargo on transferring the shares in the name of the applicants/transferees. If that is the case, it is not clear how any objection could be entertained, raised, or maintained by the appellant Ex-management of CRBCML. 26. In summary, the present appeal by Appellant No. 1, CCL, and Appellant No. 2/Ex-Director, is not maintainable under Section 483 read with Sections 521 531-A of the Act. The objections raised by them to the clarification applications preferred by the applicants/transferees in the winding-up petition cannot be entertained in law. Assuming that such jurisdiction did exist, it needs to be emphasized that there was a clear admission on the part of the Ex-management in Company Application No. 176/1998, moved by M/s Vikram Commercial Ltd., wherein similar reliefs were sought as claimed by the present applicants in the instant Company Petition 191/1997, that no shares were sold subsequent to the directions of the RBI dated 09. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a private company, below two; (e) if the company is unable to pay its debts ; (f) if the Tribunal is of opinion that it is just and equitable that the company should be wound up ; (g) if the company has made a default in filing with the Registrar its balance sheet and profit and loss account or annual return for any five consecutive financial years ; (h) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality ; (i) if the Tribunal is of the opinion that the company should be wound up under the circumstances specified in section 424G : Provided that the Tribunal shall make an order for winding up of a company under clause (h) on application made by the Central Government or a State Government.] 3. 434. COMPANY WHEN DEEMED UNABLE TO PAY ITS DEBTS (1) A company shall be deemed to be unable to pay its debts (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding [one lakh] rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efault in forwarding a copy as aforesaid, he shall be punishable with fine which may extend to [five hundred] rupees for every day during which the default continues. 6. 22. Suspension of legal proceedings, contracts, etc .-( 1) Where in respect of an industrial company, an inquiry under section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof [and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company] shall lie or be proceeded wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r order of a Court, tribunal, officer or other authority or of any submission, settlement or standing order and accordingly,- (a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any Court, tribunal, officer or other authority shall remain stayed or be continued subject to such declaration; and (b) on the declaration ceasing to have effect- (i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable as if the declaration had never been made; and (ii) any proceeding so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed. (5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded. 7. 483. APPEALS FROM ORDERS Appeals from any order made, or decision given 1 [before the commencement of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X
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