2009 (1) TMI 478 - HC - Companies Law

Winding up - Overriding preferential payment - whether the Company-in-liquidation has no right, title and interest in the property situated at Plot No. A-28/1, MIDC, Patalganga Industrial Area, Maharashtra and that the same is not the assets of the Company-in-liquidation? - Held that - The present winding up proceedings are said to have been commenced in 1990 and the properties of the Company were sold after the commencement of the winding up proceedings and, hence, such transactions are certainly hit by the provisions of section 441(2), read with sections 530 and 530A (sic) of the Companies Act, 1956. There is nothing on record which shows that the same are not sold at market value. A proper procedure has been followed, advertisement was given, offers were invited and thereafter, the properties were sold at market value by public auction. The Court, therefore, does not find any illegality in the sale of the assets of the Company in liquidation. Accordingly, the SICOM is hereby directed to file an undertaking before this Court that the SICOM will subject itself to such directions that may be given by this Court including to bring back the proportionate amount which is required to be disbursed to the workers or any other claim which is covered by sections 529 and 529A of the Companies Act, to be treated as pari passu charge equally with the rights of the SICOM being secured creditors. The Official Liquidator is, therefore, directed to invite claims from the workers and creditors and on adjudicating the claims so received if he finds that any amount is payable to any other person covered by sections 529 and 529A to receive the payment on pari passu basis equally with the rights of the SICOM being the secured creditor, may record that finding and call upon the SICOM to bring back such amount to facilitate the disbursement thereof, in favour of eligible persons. To enable the Official Liquidator to invite the claims, the SICOM for the time being, shall deposit sum of ₹ 50,000 with the Official Liquidator within four weeks from today. This direction is necessitated as no funds are available with the Official Liquidator in respect of the Company in liquidation. The SICOM shall be liable to deposit further amount as and when required towards the expenses and/or disbursement by the Official Liquidator.

Issues Involved:
1. Restraining the Official Liquidator from interfering with the possession of property.
2. Declaration of no right, title, and interest of the Company-in-liquidation in the property.
3. Validity of property transactions during the pendency of winding-up proceedings.
4. Application of the doctrine of relation back in winding-up proceedings.
5. Legality of property disposition without court permission.
6. Market value of sold properties.
7. Liability under sections 529 and 529A of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Restraining the Official Liquidator from interfering with the possession of property:
The applicant, Indoco Remedies Ltd., sought an order against the Official Liquidator to restrain him from interfering with the possession of the property at Plot No. A-28/1, MIDC, Patalganga Industrial Area, Maharashtra. The applicant argued that the property was legally acquired and the Official Liquidator had no right to issue a notice demanding possession.

2. Declaration of no right, title, and interest of the Company-in-liquidation in the property:
The applicant also prayed for a declaration that the Company-in-liquidation had no right, title, and interest in the property, asserting that the property was not an asset of the Company-in-liquidation. The applicant's possession of the property was based on a series of transactions involving SICOM and Clarion Laboratories (P.) Ltd., which were conducted before the winding-up petition was filed.

3. Validity of property transactions during the pendency of winding-up proceedings:
The Official Liquidator contended that the property transactions conducted by SICOM during the pendency of the winding-up petition were void under section 531A of the Companies Act, 1956. The transactions were carried out without the permission of the court, and thus, the Official Liquidator argued that they should be invalidated unless validated by the court.

4. Application of the doctrine of relation back in winding-up proceedings:
An interesting question of law arose regarding whether the winding-up order relates back to the date of the commencement of winding-up proceedings. The court considered whether the commencement date was the date of the petition filed before the Bombay High Court or the date when the petition was registered in the Gujarat High Court after being transferred. The court concluded that the winding-up proceedings commenced in 1990, and thus, any transactions conducted after this date were subject to the provisions of section 441(2), read with sections 530 and 530A of the Companies Act, 1956.

5. Legality of property disposition without court permission:
The court examined whether the disposition of the property by SICOM without seeking prior permission of the court resulted in any illegality. The court noted that SICOM, as a secured creditor, exercised its rights under the State Financial Corporation Act, 1951, to sell the properties before the winding-up order was passed. The court referred to the Supreme Court's decision in International Coach Builders Ltd. v. Karnataka State Financial Corporation, which upheld the rights of secured creditors to proceed under the State Financial Corporation Act without court permission.

6. Market value of sold properties:
The court found no evidence suggesting that the properties were sold below market value. The sale process involved advertisements, invitations for offers, and public auctions, ensuring that the properties were sold at market value. Therefore, the court did not find any illegality in the sale of the assets.

7. Liability under sections 529 and 529A of the Companies Act, 1956:
The court addressed whether the amount received by SICOM from the sale of properties was subject to the provisions of sections 529 and 529A of the Companies Act, 1956. The court held that once the winding-up order is passed, it relates back to the date of commencement of the proceedings. Consequently, any amount realized by the secured creditor from the sale of assets after the presentation of the winding-up petition is subject to the claims of workers under section 529A. SICOM was directed to file an undertaking to comply with the court's directions, including bringing back the proportionate amount required for disbursement to workers or other eligible claimants.

Conclusion:
The court disposed of the company application with specific directions to SICOM to file an undertaking and deposit a sum of Rs. 50,000 with the Official Liquidator to facilitate the invitation and adjudication of claims from workers and creditors. The court emphasized the importance of adhering to the statutory provisions and ensuring that the rights of workers and other claimants are protected in the winding-up process.

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