1957 (1) TMI 19 - HC - Companies Law

Petitions for Adjustments Post Winding-up Declared Void, Costs to Be Borne by Parties

Estates Development Ltd., In re

The court accepted petitions L.M. No. 95 of 1954 and C.O. No. 13 of 1956 to the extent that adjustments made after the winding-up petition were declared ... Charges – Registration of, Winding up – Fraudulent preference To and Avoidance of transfer, etc., after commencement of Issues Involved:1. Whether the petition is within time.2. Whether the petitioner has locus standi to maintain the petition.3. Whether the sales and adjustments are liable to be set aside.Detailed Analysis:Issue 1: Whether the petition is within time.The objection regarding limitation was not seriously pressed. In L. M. No. 95 of 1954, the official liquidator rejected Rikab Das Jain's application under section 231 on 14th September 1954, and the petition was presented on 29th November 1954. Rule 157 provides a thirty-day limitation for a petition to question an act or decision of the official liquidator. However, section 227 of the Companies Act does not necessitate an application to declare a disposition void, nor does it specify who may make such an application. The right to move the court accrues as long as the proceedings continue. C. O. No. 13 of 1956 was within time, as an identical application was refused by the official liquidator on 23rd January 1956, and the petition was presented on 20th February 1956. Thus, the objection regarding limitation loses its force.Issue 2: Whether the petitioner has locus standi to maintain the petition.The objection raised was that the company had filed appeals under the Letters Patent against the judgment of the High Court, making the petitioners contingent creditors. However, the mere fact that an appeal is pending does not change the status of the petitioners as creditors or disentitle them to safeguard their interest. The first two issues were decided in favor of the petitioners.Issue 3: Whether the sales and adjustments are liable to be set aside.The sales by auction on 14th December 1952 were completed after the petition for winding up was presented, thus allegedly void under section 227(2) of the Companies Act. However, the court found no force in this contention. There was a completed contract for sale when each item of property was knocked down to the highest bidder. The auction was conducted under a scheme sanctioned on 18th July 1952, and the properties were sold to the highest bidder with the limitation that the bid shall not fall below the reserve price. The auctioneers had complete authority to dispose of the property, and the contract was binding upon the company. The court observed that the transfers were bona fide and not meant to give fraudulent preference to any creditors, thus not void under section 227(2) or section 231 of the Companies Act.Regarding the adjustments, the directors decided to make a call of 23 percent in respect of partly paid shares, allowing shareholders to adjust call money against their dues. These adjustments were made after the winding-up petition was presented, thus void under section 227(2) of the Companies Act. The court found no fraudulent preference, but the adjustments were unauthorized payments disposing of the company's property wrongfully.In C.O. No. 14 of 1956, the petitioners claimed a secured debt based on a statement by the company's chairman excluding tea gardens from auction. The court held that this statement did not create a charge and was not binding on the property or its bona fide purchaser. Moreover, the particulars of the charge were not filed with the Registrar as required by section 109 of the Companies Act, rendering the charge void and unenforceable.Conclusion:The petitions L.M. No. 95 of 1954 and C.O. No. 13 of 1956 were accepted to the extent that the adjustments mentioned were declared void and ineffective. C.O. No. 14 of 1956 was dismissed. The parties were directed to bear their own costs in all three petitions.