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Bombay High Court
D.Y.CHANDRACHUD, A.A.SAYED, JJ.
Sunita Vasudeo Warke
Vs.
Official Liquidator and others
Decided on : 11/1/2013
Parliament has used the words "unless the Court otherwise orders" to dilute the rigour of the word "void" by conferring a power on the Court to protect a bona fide transaction. This principle is incorporated to protect bona fide transactions carried out and completed in the ordinary course of the current business of a company. The presentation of a petition for winding-up does not by itself disable a company from carrying on it s business. Companies in the ordinary course of business have to carry out transactions involving a disposition of properties as an incident of their business activities. These transactions are not foreclosed, for to hold otherwise would bring the business to a grinding halt. The law would not permit such a consequence by disabling a company from attending to business in the ordinary course merely because a petition for winding-up is instituted.
The law recognizes this position and the practical necessity for a company against which a petition for winding-up has been presented to continue its business. In order that Section 536 (2) of the Companies Act, 1956 can be invoked by the Court to "otherwise order", there has to be a disposition of property of the company; a disposition which has been made after the commencement of winding-up proceedings.
Companies Act, 1956 - Section 536(2) - Transfer of assets of company. - Where transfer was not completed before passing of an order of winding-up therefore an application seeking direction to Official Liquidator to complete transfer, not maintainable. - It is thus well established that once a winding-up order is passed the undertaking and the assets of the company pass under the control of the liquidator whose statutory duty is to realize them and to pay from out of the sale proceeds its creditors. Such creditors acquire on such order being passed the right to have the assets realized and distributed among them pari passu. No new rights can thereafter be created and no uncompleted rights can be completed, for doing so would be contrary to the creditors right to have the proceeds of the assets distributed among them pari passu.
In view of the judgment of the Supreme Court it is now a settled principle of law that if a transfer is not completed before an order of winding-up has been passed, an application would not be maintainable before the Court for a direction to the Official Liquidator to complete the transfer. This principle necessarily follows the settled legal position that upon the passing of an order of winding-up, no new rights can be completed and no uncompleted rights can be completed.
Transfer of Property Act, 1882 - Section 53-A - Essential condition for exercise of. - For exercise of Section 53-A of Act, a contract must be in writing and terms of transaction must be capable of being ascertained from language of written statement. - The protection which has been sought under Section 53-A of the Transfer of Property Act, 1882 is clearly unavailable. In order to attract Section 53-A, there must be a contract in writing and the terms of the transaction must be capable of being ascertained from the language of the written document. The law on this aspect is enunciated by the Supreme Court in Rambhau Namdeo Gajre v. Narayan Bapuji Dhotra (Dead) through LRs, (2004) 8 SCC 614 : 2004 (5) All MR 1189 (SC). There is no written document in the present case. The terms of the transaction cannot be ascertained with even a reasonable degree of certainty.
1. The judgment of the learned Company Judge impugned in the appeal arose from a report of the Official Liquidator seeking : (i) A declaration that the sale of the immovable properties of the company in liquidation is null and void; (ii) A direction permitting the Liquidator to take possession of the property. While allowing the request of the Official Liquidator, the learned Company Judge has held that the Appellant had not made out a case under section 536(2) of the Companies Act, 1956 for validating the alleged transfer of property in question in favour of the Appellant by the company in liquidation.
2. Hindustan Transmission Products Limited, the company now in liquidation, obtained a lease on 7 September 1990 from Maharashtra Industrial Development Corporation (`MIDC') in respect of a plot of land bearing No.H-16, at Waluj Industrial Area, in the Taluka of Gangapur near Aurangabad. On 7 April 1997, a company petition for winding-up was presented before the Company Court 1.
3. The Appellant claims to have paid an aggregate sum of Rs.30.00 lakhs to the company for the acquisition of the lease hold rights of the plot of land between 14 May 2007 and 26 September 2007. Admittedly, no document by way of an agreement for sale or a transfer deed was executed between the company and the Appellant. The Income Tax returns filed by the Appellant for the period up to 31 March 2008 and thereafter reflected the amount as an investment. 1 Company Petition No.327 of 1997 (Ms.Jaipur Golden Transport Co. Ltd. Vs. M/s.Hindustan Transmission Products Limited) MIDC received two letters, one dated 31 December 2007 from the company and the second dated 26 March 2008 of the Appellant. By those letters, the consent of MIDC was sought for effecting a transfer in favour of the Appellant as a chief promoter of a proposed industrial co-operative society. That is the capacity in which the Appellant also sought the consent of MIDC.
4. On 27 March 2008, an order of winding up was passed by the Company Judge. That order of the Company Court came to be passed in three petitions including a reference made by the B.I.F.R. under the Sick Industrial Companies (Special Provisions) Act, 1985 recording that the net loss of the company had exceeded the net worth and that it would not be possible to revive the company in a reasonable period. On 10 April 2008, MIDC informed the company that it was rejecting its request for a no objection certificate to transfer the plot of land. Upon MIDC declining to grant its consent for the transfer of the plot, the Appellant states that the transaction was carried out in her original name. Though the proposed disposition originally envisaged a transfer of the lease hold rights to the Appellant as a chief promoter of a proposed industrial co-operative society, the basis of the proposal was altered after the passing of the order of winding-up, so as to provide that the lease hold rights would be transferred to the Appellant in her individual capacity. The reply filed by the Appellant to the report of the Official Liquidator states that the company had executed a special irrevocable power of attorney dated 12 October 2007 in favour of the spouse of the Appellant. The company is alleged to have resolved in a meeting of its Board of Directors dated 12 September 2007 to sell the plot to the proposed industrial cooperative society. The special irrevocable power of attorney which is executed by Rattan Kumar Dhalia acting as a Director of the company in favour of the spouse of the Appellant, inter alia, contains the following recital : "1. I, the undersigned Mr.Rattan Kumar Thalia, Director of M/s. Hindustan Transmission Products Ltd. have been authorized by our Company (viz. Hindustan Transmission Products Ltd.) under a Board Resolution dated 12/09/2007 to identify a buyer, negotiate and finalize the sale transaction with purchaser and also to sign all necessary papers and documents for the sale transaction in respect of our c
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