TaxTMI 
TaxTMI 
2010 (2) TMI 595
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....ons of sections 531A and 536 of the Companies Act, 1956 and prayed for the same to be declared as null and void ab initio. 3. Notices were issued to the aforesaid purchasers mentioned in the report of the official liquidator, pursuant to which M/s. Daya Builders filed I.A. No. 2201 of 2009. 4. It was stated in the said interlocutory application that the company in liquidation had purchased the aforesaid land for a sum of Rs. 3 lakhs by two sale deeds dated January 10, 1994 and January 12, 1994, from Shri Pranesh Kumar Sinha and Shri Rakesh Kumar Sinha. In the ordinary course of its business activities the said land was sold by the company to Shri Rajani Ranjan, Priya Ranjan and Prabhat Ranjan (Ranjan brothers) for a sum of Rs. 4 lakhs at a profit of Rs. 1 lakh and it received the said payment as per the details given therein by three bank drafts. It is further stated that the said Ranjan brothers sold 1.13¼ acres of land out of the said 1.57 acres on September 16, 2002, to the said applicant M/s. Daya Builders and Properties P. Ltd., for a sum of Rs. 21,38,000 and received payments by four bank drafts as per the details given therein. Thereafter, the applicant got its ....
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....nts as mentioned in the earlier interlocutory applications of the subsequent purchasers. They also claimed that they have got the land from the company in the ordinary course of its business and were bona fide purchasers for value and they had no knowledge of the intention of the managing director of the company nor also the knowledge of the winding up proceedings prior to the sale/transfer of the lands in favour of the subsequent purchasers on September 16, 2002. Their further claim is that the land purchased by them was barren, without any approach road and without any civic amenities and they developed the same by filling earth, sand, etc., and after spending substantial amount they could be able to sell the same to the subsequent purchasers for the higher amount. They also claimed to be not related to any of the directors/shareholders of the company nor in any way connected with the affairs of the company. 8. Learned counsel for the purchasers and subsequent purchasers have sought to argue that all of them were bona fide purchasers for value from the company and the price for the land has also been paid by them through bank drafts, details of which have been mentioned and ar....
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....and the purchasers and subsequent purchasers and it is not at all possible to assail the same in view of the aforesaid facts. 12. Learned counsel further submit that the reasons for abnormal increase in the value of land between January, 1998 to September, 2002, have been clearly explained in the interlocutory application filed by the Ranjan brothers, wherein it is stated that the price of the land escalated due to development of the land, construction of the approach road and other civic amenities followed by revision of valuation of the land by the State Government from time to time and further that the original purchasers developed the land and erected boundary wall all around it. Further, on June 27, 2002, Bodh Gaya was declared as World Heritage by UNESCO resulting in sudden price rise and consequently the lands could be sold to the subsequent purchasers at a much higher price. In support of his aforesaid stand, learned counsels rely upon a decision of a Division Bench of the Madras High Court in the case of N. Babu Janardhanam v. Official Liquidator, Golden Cine Studios (P.) Ltd. [1993] 78 Comp. Cas. 490 , in pages 501 and 502 of which it has been, inter alia, held as foll....
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....rcise its discretion in this manner in a case such as the present, where the primary relief sought by the petition is an order under section 210 that the other shareholders be ordered to purchase the shares at a stated price." 14. Learned counsel also rely upon an order of this court dated May 3, 2007, by which this court declined to annul the sale deed dated October 20, 1997, in favour of one Smt. Shakun Kedia with respect to a piece of land belonging to the company in liquidation which had been purchased for a consideration of Rs. 5 lakhs, holding that not even a single circumstance has been indicated to even remotely suggest that the sale in question was a sham transaction lacking bona fides. It is alleged by learned counsel that the present purchasers-applicants fall in the same category as Smt. Shakun Kedia and would therefore be entitled to the same benefit. 15. Learned counsel also submit that the company cannot be permitted to raise such plea, since the official liquidator now represents the company, as it is itself equally guilty of entering into the said transaction and thus the principle as laid down in the maxim "In pari delicto potior est conditio defendentis" as....
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....bject mentioned in the memorandum of association is ultra vires and void and cannot be rectified. 18. Learned counsel for the purchasers and subsequent purchasers faced with the said position, submit that although in clear terms the sale of land has not been mentioned among the main objects or ancillary objects in the memorandum of association but the object clause has to be given a wider meaning. It is alleged that the company admittedly by name and function is a builder and developer company and as part of its functions it would purchase land and where a transfer is in the benefit of the company, it may even sell the said land which cannot be considered to be not bona fide. It is further submitted by learned counsel that clause 34 of the memorandum of association permits the company to do all such other things as may be deemed incidental or conducive to the attainment of the main objects or any of them and thus, the said clause would confer a right upon the company to sell the land which were in its possession in furtherance of its business. 19. I have considered the submissions made by learned counsel for the purchasers and subsequent purchasers as also the official liquid....
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....er companies with similar or allied objects. 4.To invest the capital and other moneys of the company in the purchase or upon the security of shares, stocks, debenture stock, bonds, mortgages, obligations and securities of any kind issued or guaranteed by any company (Corporation or undertaking) of whatever nature and wheresoever constituted or carrying on business, and shares, stocks, debentures, debenture stocks, bonds, mortgages, obligations and other securities issued or guaranteed by any Government, Central or Provincial, Commissioners, Municipal, Local or other authority or body of whatever nature, whether in India or abroad." 22. It is evident from a perusal of the said main objects that the company must carry on the business of finance of houses, buildings, factories, constructions including the purchases of land as also business of non-banking finance company and further to carry on the activities of builders and developers of property. For the said reason while the objects of the company read with its incidental or ancillary objects provide for the purchase, etc., of the land and also to develop and dispose apartments, houses, flats, rooms, huts and other accommodati....
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....r.-Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business, or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of petition for winding up by or subject to the supervision of the court or the passing of a resolution for voluntary winding up of the company shall be void against the liquidator." 27. It is evident from a perusal of the aforesaid provision that two types of transactions by the application of the said provision would be void against the official liquidator. The first requirement for either of those transactions is that it should be made within one year before the presentation of a petition for winding up. Once that condition is satisfied, the said transaction must be a transfer or delivery which has not been made in the ordinary course of its business. Alternatively, even if the said transfer or delivery has been made in the ordinary course of business, the same has not been made in favour of a purchaser or encumbrancer in good faith and for valuable consider....
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....ive to the attainment of the above objects or any of them'. The memorandum of association must like any other document be construed according to accepted principles applicable to the interpretation of all legal documents and no rigid canon of construction is to be applied to such a document Like any other document, it must be read fairly and its import derived from a reasonable interpretation of the language which it employs : Egyptian Salt and Soda Co. Ltd. v. Port Said Salt Association Ltd. [1931] AC 677 ; AIR 1931 PC 182. As observed in Ashbury Railway Carriages &. Iron Co. v. Riche [1875] LR 7 HL 653 : 'The covenant, therefore, is not merely that every member will observe the conditions upon which the company is established, but that no change shall be made in those conditions ; and if there is a covenant that no change shall be made in the objects for which the company is established. I apprehend that that includes within it the engagement that no object shall be pursued by the company or attempted to be attained by the company in practice, except an object which is mentioned in the memorandum of association. Now, my Lords, if that is so-if that is the condition upon whi....
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.... loan of the company was to the extent of Rs. 21,45,695.80 and its current liabilities also stood at Rs. 3,12,08,721.53 as against which its assets were to the tune of Rs. 19,08,876.15 and current assets to the tune of Rs. 53,08,971.06. 32. In the above circumstances, it is evident that the company was in heavy debts owing huge amounts to its creditors and was not in a position to pay the amount. Under such circumstances when it must have been in contemplation of being wound up, the sale of the land on behalf of the company just two and half months prior to the filing of the application for winding up, cannot be considered to be a bona fide act even if the main objects of the company would have permitted it to enter into such a transaction. More so, when admittedly the same land has been sold just four and half years subsequently at seven and half times the price at which it was sold by the company. 33. So far as the application of the maxim "in pari delicto" is concerned, the same can have no application in the face of the statutory provisions contained in section 531A of the Companies Act which makes it evident that any such transaction which would be entered into by the co....