AI Drafter 
TaxTMI 
TaxTMI 
2009 (8) TMI 1224
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....ility became irregular; that the company owed to the petitioner a sum of Rs. 60,55,055/- as on 31.3.1999; that the company approached the petitioner for one time settlement and offered the property in question in respect of which execution of sale deed is sought for at the market value; that the petitioner was constrained under the circumstances to enter into an agreement for sale dated 17.2.2000; that the consideration was fixed at Rs. 105 lakhs; that a sum of Rs. 41 lakhs was paid by the petitioner as advance at the time of agreement itself; that the balance was entirely settled out of the amounts owed by the company to the petitioner; that no objection certificate from the Income Tax Department dated 18.4.2000, was received; that on 6.11.2000, the petitioner had taken possession of the said property; that as such the petitioner had rights to compel the winding up company to execute and register a sale deed; that on 6.11.2000, the transfer was complete; that the petitioner was also put in possession of the said property; that only there was an obligation on the part of the vendor to execute and register the sale deed; that the sale deed could not be registered since there was an ....
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....hat they had no knowledge about the financial crunch of the company under winding up; that the mere fact of recording that the possession was delivered in favour of the petitioner would not in any way improve the case of the petitioner; that it was nothing but a fraudulent preference done by the persons in management of the company in favour of the petitioner; that from the records of the company, it would be quite clear that only a board resolution has been passed on 31.3.1999 authorising the directors of the Company to negotiate the business transaction and execute the sale agreement and other documents; that no resolution of the general body of members of the company was passed; that under such circumstances, the very agreement for sale is null and void which cannot be given any legal effect; that as any other creditor the remedy open to the petitioner was against the company in the manner known to law for the recovery of the said dues and not in the company petition for winding up; that it should not be allowed since the agreement was a fraudulent preference and also collusive and apart from that, it would defeat the interest of thousands of creditors who have made deposits wit....
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.... for the shareholders of the company to pass any resolution; and that the resolution made by the Board of Directors would be sufficient for the parties. 7. The learned Senior Counsel taking the Court to Sec.293 of the Companies Act, would point out that a resolution by the shareholders of the company is necessary in a case where the whole or substantial assets of the company were to be transferred; that in the instant case only a meagre part was to be transferred, and under the circumstances, the contention put forth by the other side before the learned Single Judge that the resolution of the company was not made was erroneous. 8. Pointing to Sec.431 of the Companies Act, the learned Senior Counsel would submit that in the instant case, the sale agreement was entered into on 17.2.2000 itself; that the company petition was filed on 2.7.2001, and thus the agreement was entered into one year and four months before the presentation of the winding up proceedings as contemplated under Sec.441 of the Companies Act; that under such circumstances, at no stretch of imagination, it could be called as a fraudulent transfer; that even the learned Single Judge has not determined a question....
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....cuments or give a letter therefor on 6.11.2000. 11. Added further the learned Senior Counsel pointing to Sec.54 of the Transfer of Property Act, that in a given case like this, entering into an agreement for sale will not create any right in favour of the appellant; and that the agreement for sale available in the hands of the appellant would not clothe or create any right on the appellant. The learned Senior Counsel would further add that it is the only immovable property available in the hands of Kothari Orient Finance Limited and all others are liquid assets; that the entire balance as on 31.3.1999 is Rs. 60,55,055/-; that Kothari Orient Finance Limited was not only liable to meet the demands of the creditors who have made deposits, but also other banks such as State Bank of India, Small Industrial Development Bank, Bank of Madura and other Banks and they are liable to make payment in crores; that if the appellant bank is allowed to snatch away the property pursuant to the agreement which was collusive and fraudulent preference, the interest of the depositors and banks would be defeated; that it would be against the public interest; that in appraisement of the above circumsta....
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....ould be more apt and appropriate to look into the alleged agreement for sale. Clauses 1 and 6 of the alleged agreement for sale read as follows: "1.That the PURCHASER has paid a sum of Rs. 41 lakhs (Rupees forty one lakhs only) vide pay order No.177674, dated 17th February 2000 drawn on The United Western Bank Ltd., Broadway Branch, to the VENDOR as and by way of advance towards sale consideration on signing of this Agreement and the balance of the purchase money amounting to Rs. 64 lakhs (Rupees sixty four lakhs only) shall be paid at the time of completion of the transaction. ... 6. The VENDOR has further agreed to produce necessary documents, title deeds, Resolutions as required by the Companies Act 1956 to prove its clear, marketable title and its powers to execute Sale Deed in respect of Schedule property more fully described hereunder to the PURCHASER to enable them to get necessary legal opinion to prepare the Sale Deed." 15. From the above, it is quite clear that the purchaser has paid a sum of Rs. 41 lakhs, and Rs. 64 lakhs shall be paid at the time of completion of transaction. The learned Senior Counsel pointing to these two clauses, would s....
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....rwise 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;" 18. The very reading of the above provision would clearly place a restriction on the powers of the Board that the Board of Directors of the public company should not 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 without the consent of the public company. In the instant case, it is an admitted position that there was no resolution made by the company. The Board of Directors of the winding up company had made a resolution on 31.3.1999 authorising one of the directors to negotiate for sale of the property. The learned Senior Counsel for the second respondent brought to the notice of the Court that this was the only immovable asset in the hands of the winding up company and all others are only liquid assets. When a question was raised to the appellant bank, the appellant bank on the contrary cou....
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....erty was handed over with all the documents of title. Thus it would clearly indicate the intention of the management of the company under winding up to make an unjust and preferential treatment in favour of the appellant. 21. Finally, the learned Senior Counsel for the appellant placing reliance on Section 531 of the Companies Act, would submit that it cannot be termed as a fraudulent transfer since the petition for winding up was filed six months after the transaction in question was entered into between the parties; that the winding up proceedings would commence at the time of presentation of the petition as per Sec.441 of the Companies Act; that in the instant case, CP No.179 of 2001 for winding up was presented on 2.7.2001; and that the agreement was entered into even as early as 17.2.2000 nearly about one year and four months earlier. Placing reliance on Sec.531 of the Companies Act, it is further contended by the appellant's side that the transaction cannot be termed as a fraudulent preference since it was done six months prior to the presentation of the petition for winding up, and under the circumstances it cannot be stated that the transaction was invalid because it....