TaxTMI 
TaxTMI 
TaxTMI 
1998 (11) TMI 501
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....joined in these proceedings as respondents. Mr. K.G. Vakharia, senior advocate, with Mr. Tushar Mehta with Mr. D.S. Nanavati have appeared for Rushvi Ltd. Mr. S. N. Soparkar with Mr. D.S. Nanavati have appeared for Rutuja Ltd. and Mr. M.G. Nagarkar has appeared for Jain Corporation. Mr. Ashok L. Shah has appeared for the official liquidator. Mr. M.B. Buch has appeared for ICICI; Mr. R.M. Desai has appeared for IDBI; Mr. J.T. Trivedi has appeared for Bank of India and Union Bank of India who are all secured creditors. Mr. Thakar has appeared for ONGC which has also a substantial claim against the company in winding up and Mr. D.S. Vasvada has appeared for the Textile Labour Association which represents the workers of the erstwhile mill company. Company Petition No. 66 of 1988 was filed on April 12, 1988, for winding up Shri Ambica Mills Ltd. During the pendency of that petition, the affairs of this company were investigated before the Board for Industrial and Financial Reconstruction (BIFR) and after obtaining the opinion from the said Board, the winding up order came to be passed on January 17, 1997. This mill company is having its properties amongst others situated at four place....
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....urchasers for value of this parcel of land. Company Application No. 189 of 1997 prays for a direction to lift the attachment made by the official liquidator on the said property situated in final plot No. 2 of T.P. Scheme No. 7. Company Application No. 205 of 1997, seeks leave to file a suit against Shri Ambica Mills Ltd. for a declaration that the plaintiff is the absolute owner of the leasehold rights in respect of the property conveyed to the applicant. Application No. 559 of 1997, prays for a declaration that the applicant is a bona fide purchaser for value without notice of that property. Company Application No. 403 of 1998, filed by Jain Corporation is concerning a parcel of land situated at final plot No. 6 of T.P. Scheme No. 7 admeasuring 1,169 square metres. This applicant also claims to be a bona fide purchaser for value and prays that the applicant may be put in actual possession of the land in question, and also seeks a declaration that the applicant is the absolute owner of the leasehold rights of the said property. M/s. Rushvi Ltd. principally contended in support of the aforesaid prayers that they have entered into an agreement to purchase the aforesaid parcel of l....
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....t they are not to be made to suffer. As stated above, in Company Application No. 99 of 1997, it has been already contended specifically that the original transaction itself was a bona fide transaction and the applicant-company is a bona fide purchaser for value. Similar is the plea of Rutuja Ltd. applicants in Company Applications Nos. 189 of 1997, 205 of 1997, and 559 of 1997. In the affidavit of one Dhanesh Badarmal Jain, a director of this applicant-company, in support of Company Application No. 189 of 1997, it is stated that, by an agreement, dated June 14, 1988, Shri Ambica Mills Ltd. (now in liquidation) entered into an agreement to sell a parcel of land admeasuring 9,215 square metres at the rate of Rs. 650 per square metre for a total price of Rs. 59,89,750. Out of this amount, the earnest money of Rs. 5,98,975 was paid by a cheque, dated June 14, 1988. From the remaining amount, a further payment of Rs. 50,000 was made by a cheque on June 13, 1990, and payment of Rs. 48,91,544 was made on July 26, 1990. As in the case of Rushvi Ltd., in this case also, the balance amount is said to have been paid in cash for the purpose of purchase of stamps and other legal expenses. Thi....
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....opposed. As far as Company Application No. 403 of 1998, filed by M/s. Jain Corporation is concerned, it is being taken up along with the applications filed by the other two purchasers and since no documents are enclosed with the application and since the parcel of land covered in this application forms a part of the same property, this application is also being opposed on the basis of the reports which are filed in the other matters. Mr. Shah, learned counsel for the official liquidator, states that the official liquidator is adopting the statements made in those reports as far as this matter is concerned and in the event any documents are produced in any higher forum, the official liquidator reserves the right to file his detailed report. From amongst the secured creditors, ICICI has filed its reply in the two applications filed by Rushvi Ltd. as well as Company Applications Nos. 189 of 1997 and 559 of 1997, filed by Rutuja Ltd. Thereafter, replies and further replies and rejoinders have been filed by the parties concerned. After the aforesaid part of this order was dictated, Mr. Nagarkar has tendered a true copy of the agreement of purchase, dated August 16, 1988, in Company A....
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.... the said respondents will not charge, encumber or alienate, except with leave of this court, any of their immovable assets included in the respective undertakings and that they will make their immovable assets available for discharging the respective liabilities on account of the difference in the price of all the gas supplied to and further during the pendency of the appeals as permitted by orders made by the court while disposing of the appeals. The undertaking will be filed within four weeks from today." The undertaking filed by the above-referred Shri Brahmbhatt reads as follows: "Undertaking I, Prahladbhai S. Brahmbhatt, do hereby solemnly affirm, undertake and state as under: 1.I am working as Secretary in Shri Ambica Mills Ltd. respondent No. 10, herein which is one of the members of respondent No. 1, i.e., Association of Natural Gas and Consuming Industries of Gujarat. 2.I am conversant with the facts and circumstances leading to the present proceedings and, therefore, I am competent as well as authorised to give this undertaking on behalf of respondent No. 10-company pursuant to their hon'ble court's order, dated April 15, 1987, passed in Civil Misc. Petitions Nos. 7....
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....vable has been shown under Schedule 8 of sundry debtors-others." The aforesaid entries in the audit report make it clear that though the mill company had entered into a memorandum of understanding on June 14, 1988, conveyance deed was not executed due to (i) injunction granted by the Supreme Court, (ii) pending permission under the ULC Act from the Government of Gujarat, and (iii) release of charge of financial institution. The same state of facts are reflected in the above-referred entry No. 23. Thus, from the report of the official liquidator, it is made clear that right at the time when the main company petition for winding up was filed, there was a pre-existing injunction granted by the Hon'ble Supreme Court restraining the mill company from alienating the assets which was principally for clearing of the dues of ONGC. It is also clear that an undertaking was given to the Hon'ble Supreme Court in that behalf and it is continued to be reflected in the audit reports of the company including in its report for 1993-94. Along with the report of the official liquidator, he has filed a statement signed on March 27, 1997, by one Rajesh Jaykrishna, ex-director of Shri Ambica Mills Ltd.....
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....ecently as on March 27, 1997, whereas this very Rajesh Jaykrishna has signed the power of attorney allegedly on behalf of the company authorising conveyance. From amongst the creditors, the ICICI is one which had sanctioned a loan of Rs. 100 lakhs which came to be disbursed (the total liability to the ICICI comes to Rs. 150 lakhs which includes the amount of interest as well). By an indenture of contributory mortgage dated January 20, 1984, between Shri Ambica Mills Ltd. and the ICICI (amongst others), this amount was secured by creating a mortgage in favour of the ICICI (and other creditors). By the said mortgage, the entire land and property of Unit No. 1 situated in T.P. Scheme No. 7 (excluding a part admeasuring 5,810 square metres held by a chemical division) and the property in T. P. Scheme Nos. 16 and 9 were mortgaged to the ICICI and other creditors. By way of giving adequate security, properties of mill Nos. 2 and 3 were also mortgaged under this very document. The document was registered with the Registrar of Companies on February 2, 1984, vide entry No. 780 under section 125 of the Companies Act. The indenture of contributory mortgage has been produced by the ICICI and ....
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....taken against the company in winding up. Mr. Vakharia as well as Mr. Soparkar pressed into service the above-referred subsequent developments, namely, paying money to the seller as per the agreement. Both of them submitted that they had a certificate of title clearance given by their advocate. They had taken a search in the revenue record and subsequently names of the applicants have been duly entered into the revenue record. It is submitted that they obtained the clearance certificate from income-tax authorities and also the clearance from the State Government as well under the provisions of Urban Land Ceiling Act. It was, therefore, submitted that whatever that was expected was already done and nothing more was expected. As far as this plea is concerned, what is also material to note is that the applicants were given to understand that the property was being sold by the mill company so that the unpaid gratuity of the workers will be paid. That clearly indicates the mill company was in financial difficulties. It is also material to note that the clearance under the Urban Land Ceiling Act given by the State Government was subject to certain conditions and condition No. 1 thereof sp....
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.... of a public company, or of a private company which is a subsidiary of a public company, shall not, except with the consent of such public company or subsidiary in general meeting- (a) sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the company, or where the company owns more than one undertaking, of the whole, or substantially the whole, of any such undertaking." Mr. Shah and Mr. Buch drew my attention to the agreement of sale entered into on behalf of the mill company. As far as Rushvi Ltd. is concerned, the property which was sought to be sold is described on page 3 of that document in Gujarat and it includes "bungalow, godown, chawls, outhouse and other constructions, etc., situated on the concerned land". As far as Rutuja Ltd. is concerned, the property which is said to be sold is a land admeasuring 9,215 square metres including "factory and shed and other constructions". Nobody can possibly say that factory or godowns of the mill company are not a part of the undertaking of the mill company. Shri Amibica mills Ltd. was an integrated textile mill and its principal activity was production of cloth through its factory. The raw m....
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....ompanies Act as deemed to have been commenced at the time of presentation of the petition for winding up. In the instant case, winding up petition was filed on April 12, 1988. Prior thereto, there was a pre-existing injunction of the Hon'ble Supreme Court and an undertaking given over there. Much thereafter, the agreements to sell and the conveyances have been executed in the year 1988 and 1993, respectively. Obviously unless the court approves them, they would be void. Now, if the court approves them, it will require the court to depart from its normal rule which provides that, after commencement of winding up proceeding, all assets of the company would be frozen and they will not be tampered with. Section 531(1) deals with this aspect of the matter. It says that any transfer of property, movable or immovable, by or against a company within six months before the commencement of its winding up shall, in the event of the company being wound up, be deemed a fraudulent preference of its creditors and be invalid accordingly. This being the position, the applicants must show compelling circumstances for taking any such view. In fact, in the case of Navjivan Mills Ltd., In re [1986] 59 C....
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....s allegedly sold the land by entering into some documents with third parties without obtaining leave from the Hon'ble Supreme Court which was the least that was expected. In fact, in view of the wording of the order passed by the Hon'ble Supreme Court, as far as the company is concerned, it was bound by that order and ought to have obtained leave of the hon'ble court. This fact was known to Mr. Rajesh jaykrishna which can be seen from his own signed statement which is filed before the official liquidator as recently as on March 27, 1997. It is also clear from The lawyer's notice given by Rutuja Ltd. that they are in any case alleging deception by the said Rajesh Jaykrishna. If this is the stale of affairs, it is nothing but a transaction which is based on fraud. Inasmuch as the 1CICI and the other creditors, had a charge over the entire property under consideration unless their claims were satisfied (which was also the requirement under the ULC order) such sale could not have proceeded further. In the case of S.P. Chengalvaraya Naidu v. Jagannath, AIR 1994 (SC) 853; [1994] 1 SCC 1 where a decree was obtained for nondisclosure of relevant documents, the Hon'ble Supreme Court held th....
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.... lie to enforce these documents against the company. Before I part with the matter, there is one more aspect which is required to be dealt with. During the course of these proceedings, it was represented earlier to my brother M.S. Shah J. that the applicants would be ready to buy these properties if they are sold by auction. Accordingly, an order was passed by Shah }. on October 7, 1998. There was a controversy as to for what purpose that order was passed. It was submitted by Mr. Soparkar that that order was clearly for sale of the property whereas Mr. Shah and Mr, Buch submitted that the order was passed so that one knows what is the price that this property is likely to fetch. This order was passed by Shah J. in view of an earlier order passed by Balia J. on July 27, 1998, calling for valuation of the property concerned, the ICICI had submitted its valuation on September 11, 1998, which roughly indicated, that either of the two parcels of land which were sought to be sold to Rushvi Ltd. and Rutuja Ltd. would fetch approximately two crores of rupees. As against that, Mr. Soparkar and Mr. Vakharia had got the valuation done through their valuers which indicated that the parcels of....