TaxTMI 
TaxTMI 
2013 (2) TMI 314
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....ting the alleged transfer of property in question in favour of the Appellant by the company in liquidation. 2. Hindustan Transmission Products Limited, the company now in liquidation, obtained a lease on 7 September 1990 from Maharashtra Industrial Development Corporation (`MIDC') in respect of a plot of land bearing No.H-16, at Waluj Industrial Area, in the Taluka of Gangapur near Aurangabad. On 7 April 1997, a company petition for winding-up was presented before the Company Court Company Petition No.327 of 1997 (Ms. Jaipur Golden Transport Co. Ltd. Vs. M/s. Hindustan Transmission Products Limited). 3. The Appellant claims to have paid an aggregate sum of Rs.30.00 lakhs to the company for the acquisition of the lease hold rights of the plot of land between 14 May 2007 and 26 September 2007. Admittedly, no document by way of an agreement for sale or a transfer deed was executed between the company and the Appellant. The Income Tax returns filed by the Appellant for the period up to 31 March 2008 and thereafter reflected the amount as an investment. MIDC received two letters, one dated 31 December 2007 from the company and the second dated 26 March 2008 of the Appellant. By....
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....ur company. Presently I am engrossed in some other matter, which are of more importance for me. I have full confidence in Mr. Vasudeo Jayaram Warke being my friend. I have decided to appoint him as my true and lawful attorney for dealing with all documentary compliance including registration or notorization of all the requisite documents relating to the transfer of said Industrial Plot No.H-16 from MIDC Waluj Industrial Area, Aurangabad, which is held by our company named M/s.Hindustan Transmission Products Ltd." 5. The Official Liquidator moved his report before the learned Company Judge initially invoking sections 531(1) and 531(A). Subsequently, during the course of the proceedings, the Liquidator submitted that since the sale of the property was after the presentation of the company petition for winding-up, the transaction is void under sections 536(2) and 537(1)(b) of the Companies Act. Accepting the contention of the Official Liquidator, the learned Single Judge has held that: (i) Admittedly no document was executed between the Appellant and the company transferring the lease hold rights. According to the Appellant, the entire consideration was paid between 14 May....
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....tablishing that the disposition was in the interest of the company on the Appellant. There is no evidence to the effect that the market price of the property was in excess of Rs.30.00 lakhs nor was there any evidence to indicate that the disposition was not in the best interest of the company; (iv) The disposition has taken place in pursuance of an oral agreement with the company for the transfer of the immovable property for a consideration of Rs.30.00 lakhs in addition to which transfer charges (Rs.27.00 lakhs) and service charges (Rs.7.00 lakhs) were payable to MIDC. Payments were made between 14 May 2007 and 26 September 2007. Possession was handed over on 14 November 2007; (v) Any disposition after the commencement of winding-up proceedings is not absolutely void since Section 536(2) enables the Court to grant its sanction. Though no new rights can be created or completed after an order of winding-up, the transaction could not be completed because of an attachment levied by IDBI Bank which was raised by the Recovery Officer of the Debt Recovery Tribunal. The learned Company Judge has not considered the provisions of Section 536(2); (vi) In the present case, the posses....
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....wer of Attorney executed in favour of the spouse of the Appellant would in fact indicate that the transaction is not bona fide; (vii) Section 53(A) of the Transfer of Property Act, 1882 requires existence of a written agreement from which the terms of a transaction can be ascertained. In the present case, Section 53(A) is not attracted since neither was there a written agreement nor are the terms of the transaction ascertained; (viii) The order of winding-up in the present case was passed by the learned Company Judge of this court on 27 March 2008 on three petitions for winding-up, which were registered respectively in 1997, 1999 and 2007. All the three petitions were considered together when the ultimate order of winding-up was passed. The institution of the proceedings for winding-up would, hence, relate back to the filing of the first petition in 1997 and any disposition of assets made after that date would be unlawful. In any event, this submission has not been urged before the learned Single Judge and has been sought to be canvassed for the first time in appeal. 8. The rival submissions now fall for consideration. 9. Section 536 of the Companies Act, 1956 provid....
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....is instituted. The law recognizes this position and the practical necessity for a company against which a petition for winding-up has been presented to continue its business. Consequently, in the decision of the Supreme Court in Pankaj Mehra and another Vs. State of Maharashtra (2002)2-SCC-756, it was held that the mere presentation of a petition for winding-up would not enable a company to escape a penal liability for the dishonour of a cheque under section 138 of the Negotiable Instruments Act, 1881 by putting forth the ground that the payment of a cheque would amount to a disposition of the property of the company and would hence be void under section 536(2). The Supreme Court adopted a less rigorous construction of the expression "void" in the context of Section 536(2), noting that the Court has the power to direct otherwise. The Supreme Court observed thus: "14. ... ... ... ... the word "void" need not automatically indicate that any disposition should be ab initio void. The legal implication of the word "void" need not necessarily be a stage of nullity in all contingencies. Black's Law Dictionary gives the meaning of the word "void" as having different nuances in differ....
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....o pay from out of the sale proceeds its creditors. Such creditors acquire on such order being passed the right to have the assets realized and distributed among them pari passu. No new rights can thereafter be created and no uncompleted rights can be completed, for doing so would be contrary to the creditors' right to have the proceeds of the assets distributed among them pari passu. ... ... ..." In view of the judgment of the Supreme Court it is now a settled principle of law that if a transfer is not completed before an order of winding-up has been passed, an application would not be maintainable before the Court for a direction to the Official Liquidator to complete the transfer. This principle necessarily follows the settled legal position that upon the passing of an order of winding-up, no new rights can be completed and no uncompleted rights can be completed. 13. The second aspect of the matter which needs emphasis in a case such as the present, relates to the circumstances on the basis of which the Court exercises discretion, even assuming that there was a completed transfer of the property after the initiation of winding-up proceedings, to direct that a disposition wi....
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....y course of trade and completed before the date of the winding-up order to be annuled. The discretion confided to the Court, it was held, "cannot be crystallized in rules of law in view of the varying circumstances "that may arise" Pages 20 and 21 of the Judgment in AIR-1931-BOMBAY-17. 14. In a subsequent judgment of a learned Single Judge of the Calcutta High Court in J. Sen Gupta (Private) Limited 1962-COMPANY CASES-Vol.XXXII-876, the underlying principles for the exercise of discretion by the Court have been summarized as follows : "It seems to me, therefore, upon considering various authorities on this subject that the following principles are doubtless applicable to sub-section (2) of section 536 of the Companies Act, 1956: 1. The court has an absolute discretion to validate a transaction; 2. This discretion is controlled only by the general principles which apply to every kind of judicial discretion; 3. The court must have regard to all the surrounding circumstances, and if from all the surrounding circumstances it comes to the conclusion that the transaction should not be void, it is within the power of the court under section 536(2) to say that the transactio....
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....efore the Court. The Appellant seeks to rely upon two letters addressed to MIDC by the company and by the proposed industrial co-operative society, which the Appellant claims to represent, dated 31 December 2007 and 26 March 2008. Neither of the two letters sets out the terms of the transaction or the agreed consideration. The case of the Appellant before the Court is that there was an oral agreement under which the property was to be sold to the Appellant for Rs.30.00 lakhs. There is admittedly no written document evidencing the transaction which is alleged. Significantly, the original proposal which the Appellant submitted, was in her capacity as the chief promoter of a proposed industrial co-operative society. MIDC declined to grant its no objection after the order of winding-up was passed. The Appellant alleges that thereafter there was an agreement under which she sought to acquire the property in her personal capacity. This agreement is set up by the Appellant in paragraph 16 of the reply that was filed before the Company Judge to the report of the Official Liquidator. The case of the Appellant now is that she was persuaded to enter into a transaction of purchase; that the....