Court allows urgent asset disposal under Companies Act amid winding-up application, sets safeguards

The court granted leave to the respondent-company to dispose of assets or shares under section 536(2) of the Companies Act due to urgency related to convertible debentures. It interpreted "In the case of a winding up" to mean "during winding up proceedings," allowing protection of transactions during the winding-up application. The court dismissed objections by the appellant-company as motivated and ordered specific conditions for the sale, including preferential purchase rights and depositing sale proceeds in court.

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Issues Involved:
1. Application u/s 536(2) of the Companies Act for permission to dispose of assets.
2. Interpretation of the phrase "In the case of a winding up" in section 536(2).
3. Merits of objections raised by the appellant-company.

Summary:

1. Application u/s 536(2) of the Companies Act for permission to dispose of assets:
The respondent-company, Kamani Tubes Ltd., sought permission u/s 536(2) of the Companies Act to dispose of its assets or alternatively, to dispose of 95,117 equity shares of Kamani Engineering Corporation Ltd. due to the urgency related to convertible debentures issued by Kamani Engineering Corporation Ltd. The court found substance in the urgency and heard the matter urgently, passing an operative order before the deadline.

2. Interpretation of the phrase "In the case of a winding up" in section 536(2):
The main contention by the appellant-company was that section 536(2) cannot be invoked unless a winding-up order is made, emphasizing the phrase "In the case of a winding up." The court examined various precedents, including decisions from the Mysore High Court, Gujarat High Court, and interpretations from English law. The court concluded that the phrase "In the case of winding up" means "during winding up proceedings," which commence on the date of the petition for winding up. The court held that it has jurisdiction to protect transactions necessary in the interest of the company and creditors during the pendency of the winding-up application.

3. Merits of objections raised by the appellant-company:
The court found the objections raised by the appellant-company to be motivated, possibly to stifle the working of the respondent-company. The appellant-company, being a creditor, would have its interests protected if the respondent-company deposited the entire sale proceeds in court. The respondent-company also offered a preferential right to the appellant-company to purchase the shares at Rs. 75 per share, provided they purchase the entire lot of 3,08,345 shares. The court found no plausible objection to the disposition and provided detailed reasons for the order passed on May 25, 1982.

Order:
The court granted leave under rules 147 and 148 of the Bombay High Court Rules to the respondents to take out a notice of motion (N/M) and provided ad-interim relief in terms of the draft N/M with specific conditions regarding the sale price, preferential purchase rights of the appellant-company, and the deposit of sale proceeds in court.

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