Company Court jurisdiction to preserve assets pending a companies Act scheme; interim attachment permitted subject to deposit.

Company Court jurisdiction includes power to pass interim orders to preserve assets of a company pending consideration of a scheme under the Companies Act; the Court applied that principle and ordered interim preservation measures. The Court treated a winding up petition company as within the statutory expression "company" and held the lease fell within the six month preferential/contingent transaction period, found prima facie suspicion over a large security deposit to a related party given nominal rent, and on that basis ordered attachment of the leased property subject to lifting upon deposit of 36 crores less rent, and directed disclosure of rent receipts.

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Issues: Whether the Company Court has jurisdiction to preserve and temporarily secure assets of a company against allegedly fraudulent dispositions while a scheme under sections 391 to 394 of the Companies Act is pending, and whether interim attachment of the leased property and related interim measures should be ordered.

Analysis: The Court examined the scope of sections 390(a), 391(1), 443(1)(c), 531(1) and 536(2) of the Companies Act, 1956 and held that a company in respect of which a winding up petition has been filed falls within the expression "company" in section 390(a) and that the Company Court has power to pass interim orders to preserve assets pending consideration of a scheme. The Court considered the timing of the lease relative to the filing of the winding up petition and held that the lease transaction fell within the six-month period contemplated by section 531(1). The Court found prima facie reasons to suspect the legitimacy of the large security deposit paid to a related party given the disproportionately nominal rent and the related-party connection, and observed that the authorities and valuations on record did not dispel these suspicions. On that prima facie basis the Court concluded that interim preservation measures were necessary in the interest of creditors and that attachment of the described property should be ordered, subject to the possibility of lifting the attachment on deposit of the security deposit amount less rent.

Conclusion: The Court ordered interim preservation measures in favour of the applicant by directing attachment of the leased property described in the lease deed dated 11th September, 1995 and restrained its disposition or delivery of possession without leave of the Court; the attachment is to be lifted if the company deposits Rs. 36 crores minus rent at Rs. 10,000 per month into Court. The answering party Agache Associates is directed to furnish details of rent collected since September 1995. Other reliefs claimed in the application are left to be considered along with the scheme.

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