AI Structured Summary
Not yet generated for this judgment
Judgment
B.V. Pinto
This application is filed by the Official Liquidator u/s 537 of the Companies Act stating that this Court has passed an order on 1.3.2005 in COP 38/2003 winding up the Company by name M/s. K.A.H. Metal Sections Pvt. Ltd., by virtue of Section 449 of the Companies Act. It is stated in the petition that the winding up petition was presented on 21.2.2003 and on the same day proceedings are commenced for winding up the Companies in Liquidation. It is further alleged that the entire assets of the Company in Liquidation was sold to the second respondent for a consideration of ` 9,10,000/- and to the third respondent, who has purchased the scrap material for a sum of ` 85,000/-, hence, the same is in violation of Section 537 of the Indian Companies Act. Therefore the petitioner has prayed for declaring the sale of the assets of the Company by Respondent No. 1 to Respondent Nos. 2 and 3 as null and void and further to direct the respondents to handover the assets of the Company to the applicant.
Heard Sri V. Jayaram, learned Counsel appearing for the Applicant and Sri Gururaj Joshi, learned Counsel appearing for Respondent No. 1.
It is submitted by Sri C.G. Gopalswamy, learned Counsel appearing for Respondent No. 2 that as on the date of sale, the lease-hold rights vested in the Company had already extinguished and therefore the fresh lease Deed has been executed between respondent No. 2 and the KIADB [Karnataka Industrial Areas Development Board]. Therefore, the question of transferring the "assets" of the Company does not arise as on that day.
It is contended by the learned Counsel for the petitioner that since the winding up proceedings commenced on 21.2.2003, ail sale effected thereafter is null and void and therefore the Sale Deed executed by the first respondent in favour of the second respondent deserves to be declared as null and void since the sale has been effected on 20.6.2004 and the Sale Deed has been executed on 11.2.2005. Whereas the final order in COP 38/2003 is passed on 1.3.2005.
Sri Gururaj Joshi, learned Counsel appearing for Respondent No. 1 on the other hand submits that Respondent No. 1 is a statutory authority established under a Special Act namely State Financial Corporation Act [for short ''SFC'' Act] and that in respect of the amounts payable to the first respondent, the first respondent has exercised its power u/s 29 of the SFC Act and has held an auction after seizing the assets of the Company in November 2000, the loans having been advanced to the Company under Liquidation right from 1991, 1993 to 2000. It is further submitted by him that the first sale notice was published on 3.3.2001, the second sale notice was published on 19.3.2001 and the third sale notice was published on 6.10.2001. Respondent No. 1 or Respondent No. 2 were not aware of the date of filing of the winding up proceedings which was infact filed on 21.2.2003. However, in pursuance of powers u/s 29 of the SFC Act, first Sale Notification was published on 20.6.2004 and on 7.9.2004, the sale was finalised for a sum of ` 9.1 lakhs. It is further submitted by the learned Counsel that the second respondent has paid the entire amount to the first respondent on 18.10.2004 and the lease deed was executed by KIADB on 11.2.2005. Therefore, the entire transaction of transfer of interest has occurred much prior to the date on which the final order is passed in COP No. 38/2003.
Learned Counsel has relied on the following rulings to assert that the action taken by the first respondent is protected vis-a-vis, the provisions of Section 537 of the Companies Act:-
(1) AIR 2003 SCW 1524 [International Coach Builders Ltd., v. Karnataka State Financial Corporation], para 31 reads as follows:-
Finally, counsel for the SFCs urge chat the view we are to take would obliterate the difference between a creditor opting to stay outside winding up and one who opts to prove his debts in winding up. We are unable to accept it. As a result of the amendments made by the Act of 1985 in the Companies Act, 1956, the SFCs as secured creditors, must seek leave of the Company Court for the limited purpose of ensuring that the pari passu charge in favour of the workmen is safeguarded by imposition of suitable conditions under the supervision of the Company Court. If this amounts to impeding their hitherto unimpeded rights, so be it. Such is the Parliament intendment, according to us. This impediment is of a limited nature for the specific purpose of protecting the pari passu charge of the workmen''s dues and subject thereto. SFCs can continue to exercise their statutory rights as secured creditors without being reduced to the status of unsecured creditors required to prove their debts in insolvency and stand in line with other unsecured creditors. Neither is the apprehension expressed justified, nor the contention sound.
(2) Bakemans Industries Pvt. Ltd. Vs. New Cawnpore Flour Mills and Others, , Heading [B], which reads as follows:-
(B) State Financial Corporations Act (53 of 1951), S. 29- Companies Act (1 of 1956). S. 446 - Scope - Financial Corporation intending to exercise statutory power under S. 29 - Same will prevail over general powers of Company Judge under Companies Act, 1956 -Proceedings under S. 29 of 1951 Act would prevail over winding up proceedings before company Judge.
(3) 2007(3) KCCR 2084 (DB) [M/s. Chaitra Fertilizers and Chemicals Private Limited v. The Manager Karnataka State Financial Corporation-West Branch and Another], the heading portion reads as under:-
State Financial Corporations Act, 1951-Section 29-Companies Act, 1956-Section 537(1)(b)-Recovery of Debts Due To Banks And Financial Institutions Act, 1993-Section 19-Transfer before the order of Winding Up-when the transfer of the assets took place under an agreement executed before the order of Winding Up, held, the same could not be invalidated by the Company Court.
(4) Unreported decision of this Court in COA No. 343/2005 in COP No. 159/2002 [Modayil Properties Pvt. Ltd., V. Precision Panel Works Ltd., & others], para 9 reads as under:-
In the light of the aforesaid observations, it is needless to state that before the winding up order dtd. 25.02.2005 the sale of the assets of the company on 24.04.2003, In a public auction by the KSIIDC in favour of the applicant, in exercise of jurisdiction under Sec. 29 of the SFC Act cannot be said to be either illegal or invalid. The sale by public auction conducted after the order of winding up, require the permission of the company court.
On a careful reading of the aforesaid decisions and also the chronology of the events that have occurred in this case, I am of the opinion that the action taken by the first respondent in transferring the asserts of the Company is fully protected in view of Section 29 of the SFC Act and therefore, Section 537 of the Companies Act cannot be invoked by the Official Liquidator.
8 In that view of the matter, the petition fails and accordingly, the same is dismissed. However, if there is any claim made by the workmen of the Company before the Official Liquidator, the first respondent shall be liable to satisfy the said claims in accordance with law.