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Judgment
D. Murugesan, J.—These three company applications have been filed by M/s Price and Pierce (Asia Pacific) Private Limited having its
office at Singapore.
Comp.A.No. 1337 of 2002 is filed seeking for a direction to implead the applicant as a party/2nd respondent in C.P.No. 617 of 2000.
Comp.A.No. 1782 of 2002 is filed seeking for a direction to vacate the order of status quo dated 9.1.2001 granted in C.A.No. 8 of 2001 in
C.P.No. 617 of 2000 excluding the property at Gagan Mahal Village, Mursheerabad Taluk, Lower Tank Bund Road, Hyderabad. Comp.A.No.
1783 of 2002 is filed seeking to grant necessary permission to the 2nd respondent in the application to execute the conveyance of the property
situate at Gagan Mahal Village, Mursheerabad Taluk, Lower Tank Bund Road, Hyderabad, in favour of the applicant, in terms of the agreement of
sale dated 7.9.2000 for a consideration of Rs. 21.10 crores.
Few facts relevant for the disposal of these applications may be summarized as follows:
Tamil Nadu Newsprint and Papers Limited, the 1st respondent in these company applications filed C.P.No. 617 of 2000 for an order of winding
up of Express Publication (Madurai) Limited, the 2nd respondent in these company applications, and for appointment of an Official Liquidator
under the provisions of the Companies Act, 1956. The company petition was presented on 18.12.2000. In the company petition it was alleged
that the 2nd respondent is due to the 1st respondent a sum of Rs. 11,93,91,124 for supply of newsprint for the period from 5.1.96 to 30.5.97.
Since the said amount was not paid, the 1st respondent filed C.S.No. 923 of 1999 before this Court and a compromise was entered into between
the 1st and 2nd respondents on 29.3.2000. On the basis of the compromise memo, this Court by a decree, dated 31.3.2000 directed payment by
fixing a schedule on the basis of the compromise memo. The 2nd respondent did not adhere to the schedule. Hence, the 1st respondent filed
company petition seeking an order of winding up of the 2nd respondent company. For the disposal of these applications, other details are not
necessary except by stating that as on today, the 2nd respondent has paid a sum of Rs. 7,10,83,630.20 and the company petition is still pending.
The applicant filed Comp.A.No. 1337 of 2002 on the ground that the applicant company is incorporated under the laws of Singapore and from
1996 onwards, from time to time, the applicant through its Indian Agent Newsprint Trading and Sales Corporation sold huge quantities of
newsprint to the 2nd respondent and the 2nd respondent is due in a sum of more than Rs. 25 crores to the applicant. In spite of repeated
reminders, the amount could not be realized, as the cheques issued by the 2nd respondent in favour of the applicant were dishonoured on the
ground of ""insufficient funds"". Hence, the applicant was constrained to proceed against the 2nd respondent u/s 138 of the Negotiable Instruments
Act. Statutory notice dated 8.2.2000 u/s 434 of the Companies Act was also issued to the 2nd respondent. In the reply dated 1.3.2000 to the
statutory notice, the 2nd respondent had admitted the liability. After great persuasion, the 2nd respondent entered into an agreement, dated
7.9.2000 with the applicant in regard to the settlement of the claim by assigning its property situate at Hyderabad towards the full and final
settlement by fixing the sale consideration at Rs. 21.10 crores. Subsequent to the said agreement, this Court by order dated 9.1.2001 in
Comp.A.No. 8 of 2001 in C.P.No. 617 of 2000 directed the maintenance of status quo in regard to the said property situate at Hyderabad in
addition to yet another property belonging to the 2nd respondent at Bangalore. Hence, the applicant approached this Court seeking for a direction
to implead the applicant. Subsequent to the filing of this application, Comp.A.Nos. 1782 and 1783 of 2002 were also filed seeking for vacating the
order of status quo and for conveyance of the property at Hyderabad respectively.
Mrs. Nalini Chidambaram, learned senior counsel appearing for the applicant submitted that the applicant is not a party to C.S.No. 923 of 1999
filed by the 1st respondent against the 2nd respondent before this Court. Equally, the applicant is not a party to the compromise memo dated
29.3.2000 entered into between the 1st and 2nd respondents and on which basis a compromise decree was passed. Hence, the applicant was not
aware of those proceedings. Though this Court by order dated 15.3.2000 in Appln.Nos. 1037 and 1038 of 2000 in C.S.No. 923 of 1999
directed the parties to maintain status quo till 29.3.2000, the order of status quo was vacated on 31.3.2000, in view of the disposal of the civil suit
by a compromise decree on 31.3.2000. Subsequent to the disposal of the suit only, the agreement dated 7.9.2000 was entered into between the
2nd respondent and the applicant, wherein the 2nd respondent agreed to transfer the title of the Hyderabad property in favour of the applicant
towards full and final settlement of the dues, and no objection for the conveyance was also obtained from the Income Tax Department u/s
269UL(1) of the Income Tax Act on 29.12.2000. However, alleging non-compliance of the decree passed on compromise memo, the 1st
respondent filed C.P.No. 617 of 2000 for an order of winding up of the 2nd respondent company. This Court by order dated 9.1.2001 in
C.A.No. 8 of 2001 in C.P.No. 617 of 2000 directed the parties to maintain status quo in regard to both Bangalore and Hyderabad properties.
Therefore, the applicant is not in a position to get the sale deed from the 2nd respondent in respect of the Hyderabad property on the basis of an
agreement dated 7.9.2000. Hence, these applications are filed.
Mr. S.S. Vijayaraghavan, learned counsel appearing for the 2nd respondent supported almost all the arguments of the learned senior counsel for
the applicant and contended that the 2nd respondent may be permitted to convey the property in favour of the applicant towards the settlement of
the dues. The learned counsel submitted that in fact after a little period of lull in the business, the 2nd respondent company has picked up the
business and the circulation of the newspapers has improved and there are only two secured creditors namely, State Bank of India and Kerala
State Industrial Development Corporation. The learned counsel submitted that the 2nd respondent has assets and immovable properties worth
about Rs. 115.91 crores including the property at Hyderabad valued at Rs. 24.25 crores. As on today, more than half of the debt due to the 1st
respondent has been cleared and the balance of debt also would be cleared in a phased manner at the earliest. For such clearance of debt, the
property at Hyderabad need not be held up and in the event the 2nd respondent is permitted to convey the said property in favour of the applicant,
a debt to the tune of Rs. 21.10 crores would be cleared.
Mr. Sivakumar, learned counsel appearing for the 1st respondent, on the other hand, vehemently opposed these applications both on facts and
law. On facts, the learned counsel submitted that the applicant is not prevented from initiating independent appropriate proceedings against the 2nd
respondent including filing of a petition for winding up of the company. There is no provision under the Companies Act for impleading a third party
in the company petition and utmost this Court can permit such third party to advance the arguments in the company petition without there being any
order impleading such third party. The learned counsel would further submit that though the 2nd respondent agreed for full and final settlement of
the amount of debt due to the 1st respondent in a sum of Rs. 11,93,91,124 on or before 14.11.2000 in 12 equal monthly instalments, the 2nd
respondent failed to make the instalments which compelled the 1st respondent to file C. P.No. 617 of 2000. The admitted liability is still due from
the 2nd respondent and therefore, the 2nd respondent cannot be permitted to convey the property at Hyderabad in favour of the applicant without
discharging the entire liability to the 1st respondent. The learned counsel would further submit that this Court, as early as on 15.3.2000, ordered
status quo of the properties of the 2nd respondent situate both at Hyderabad and Bangalore. The order of status quo was lifted on 29.3.2000 only
in view of the compromise memo filed by both the 1st and 2nd respondents. The 2nd respondent knowing full well that there was a status quo
ordered by this Court, which was subsequently lifted only on the basis of the compromise memo, with mala fide intention, entered into an
agreement with the applicant on 7.9.2000. These facts were brought to the notice of the Company Court and the Company Court was fully aware
of the same and ordered status quo on 9.1.2001 in respect of both the properties. In the event, the order of status quo is vacated, the right of the
1st respondent would be impaired. On law, the learned counsel submitted that admittedly, the company petition was presented on 18.12.2000 and
the agreement which is sought to be relied upon by the applicant was dated 7.9.2000, which is within six months prior to the date of presentation
of the winding up petition. Such an agreement is hit by Section 531 of the Companies Act, as the transaction made within six months of the
presentation of the winding up petition would be invalid.
I have given my anxious consideration to the above submissions. The question as to whether the agreement dated 7.9.2000 entered into
between the 2nd respondent and the applicant was bona fide or mala fide, and whether the 2nd respondent could be permitted to convey the
property at Hyderabad in favour of the applicant on the basis of the said agreement, can be gone into only in the event the applicant surpasses the
legal hurdle pleaded by the 1st respondent placing reliance on Section 531 of the Companies Act. Section 531 of the Companies Act reads as
under :
(1) Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done
by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an
individual with in three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his
insolvency a fraudulent preference, shall in the event of the company being wound up, be deemed a fraudulent preference of its creditors and be
invalid accordingly :
Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have effect with the
substitution, for the reference to six months, of a reference to three months.
(2) For the purposes of Sub-section (1), the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of
the Court, and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of
insolvency in the case of an individual.
As per the said Section, any act relating to the property made by the company against which a petition is filed for winding up within six months
before the commencement of winding up shall be invalid. Admittedly, the company petition was filed on 18.12.2000. It is well settled law that the
order of winding up dates back to the date of presentation of the petition for winding up. Equally, the date of commencement of winding up viz.,
the date on which the petition for winding up was presented, the agreement dated 7.9.2000 was within six months prior to the date of
commencement of the winding up petition and the same is hit by Section 531 of the Companies Act. Such an agreement cannot be the basis for
seeking a direction to vacate the order of status quo granted by this Court and that too for the purpose of enabling the 2nd respondent to convey
the property at Hyderabad in favour of applicant. This Court shall not grant a seal of approval of an action of the company against which a winding
up petition is filed and is pending, when such action is hit by Section 531 of the Companies Act. The entire relief sought for in these applications is
only on the basis of the agreement, dated 7.9.2000. Such a claim cannot be entertained, as it would be an invalid transaction in the event the
winding up of the 2nd respondent is ordered. Moreover, the order of status quo dated 9.1.2001 was passed after this Court was made aware of
the agreement dated 7.9.2000. Admittedly, the company petition has not been disposed of and the admitted debt has not been discharged by the
2nd respondent to the 1st respondent. In addition to the above, in the absence of any provision for ordering the applicant to be impleaded in the
company petition either under the provisions of the Companies Act or the Rules made there under, I do not find any merit to entertain
Comp.A.No. 1337 of 2002 to implead the applicant in the company petition.
For the above reasons, I am unable to agree with the submissions made by the learned senior counsel for the applicant as to the relief sought
for in these applications. In view of my finding that the applicant cannot seek for a direction for vacating the order of status quo on the basis of a
transaction which is hit by Section 531 of the Act, the question of bona fide over the said agreement need not be gone into. Accordingly, I do not
find any merit in these applications and the same are dismissed. However, the dismissal of these applications will not stand in the way of the
applicant to take such action as it deems fit against the 2nd respondent for appropriate relief before the appropriate forum.