TaxTMI 
TaxTMI 
1998 (6) TMI 578
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.... unable to pay it's debts to the tune of ₹ 53,58,457/- as on 15-2-1997, in spite of the statutory notice dated 9-6-1997 served on the respondent company. It was further alleged that the respondent Company is heavily indebted and its liabilities to the extent of ₹ 110 crores are more than its assets and that the respondent is convening an extra ordinary General Meeting on 20-5-1998 to consider inter alia to pass a resolution relating to transfer or otherwise disposing of the hotel division known as 'Quality-inn-Aruna' at no. 144, Sterling Road. Nungarnbakkam, Chennai 34 to M/s. Aruna Foods Limited claiming to be a subsidiary of the respondent company pursuant to an alleged Memorandum of Understanding dated 31-3-1998. During the pendency of the Company Petition for winding up of the respondent company, any disposition of the property made shall unless the Court otherwise Orders be void as contemplated under Section 536(2) of the Companies Act. Therefore the applicant prayed for ad-interim injunction in relation to item No. 1 of the Notice dt. 31-3-1998 of the Company extra ordinary General Meeting to be held on 20-5-1998 and also for similar prayer restraining....
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....the tune of ₹ 35 lakhs. As per Section 434(1)(a) of the Companies Act, if the debt due is above ₹ 500/- and other conditions are fulfilled, the order of winding up can be passed. Therefore we need to go deep into the actual amount due to the petitioner by the respondent when admittedly the debt due is ₹ 35 lakhs which is much more than the amount prescribed under law. 11. The next allegation that the respondent M/s. Aruna Sugars and Enterprises Limited have to pay a debt of ₹ 110 crores to various creditors and their assets are much lesser than the debts of ₹ 110 crores due to various creditors. The presumption that the respondent company is un-able to pay its debts, was also challenged by the respondent company on the ground that their assets are much more than debts and have got sufficient means to pay off their debts. These are all matters which should be gone into during the enquiry in the main C.P. No. 380/1997 wherein the respondent have yet to file their counter, which the respondent explained by saying that the counter is ready to be filed into the Court. This ground also can be gone into during the enquiry of the main Company Petition and not....
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.... the status of its members, made after the commencement of the winding up, shall, unless the Court otherwise orders, be void." Sub Section 2 of Section 536 was relied upon by the respondent and contended that Quality-Inn-Aruna at No. 144, Sterling Road, Nungambakkam, Chennai 34' is one of the several divisions of the respondent company and it comes under the hotel division, known as M/s. Aruna Foods Limited a subsidiary and almost entirely controlled by the respondent which is holding of 97.42% of the equity shares approximately and to prove the bona fides, the respondent has assured that it would not in any manner alienate any of the equity shares in the subsidiary company M/s. Aruna Foods Limited to which the hotel division is vested in view of the restructuring proposal. To that effect the respondent has also further submitted an affidavit sworn by one Mr. N. Subramanian Director in M/s. Aruna Foods Limited Company to the effect that till the disposal of the company petition, the said hotel division which is to be vested with M/s. Aruna Foods Limited as per the proposal in item No. 1 to the notice dt. 31-3-1998 would not be either transferred or sold to any third party....
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....ld all genuine and proper transactions, exercising a sound discretion normally validating transactions which are benign and honest; transactions which have been done in the best interest of the company and in the ordinary course of the company's business." The Courts have uniformly held allowing any disposition during the pendency of the insolvency proceedings entirely on the circumstances of the case, if it is done in the interest of the company honestly in the ordinary course of business of the Company and without causing any harm to the interest of the creditors which includes the unsecured creditors also. In Hindustan Overseas Private Limited v. R. P. Jhunjhunwala, [1976]2SCR226 the Supreme Court held that the inherent powers of the Court have not been taken away or restricted by Section 433(1) of the Companies Act which would go to show that apart from what is stated in Section 433(1) of the Companies Act, me Court in its inherent powers can pass such justifiable orders which required under any particular circumstance of the case. In R.C. Mehta & Co. v. Himabhai Manufacturing Co. Limited, 1970 (40) Com Cas 1230 : 1971 Tax LR 1855) the Gujarat High Court held that t....