TMI Blog1982 (6) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... prospective buyer or buyers of the shares may apply for the right debentures in their name or names or may apply for splitting of the shares so as to partly renounce their right to apply in favour of their nominees. It was rightly contended that if the right of splitting is lost, the prospective buyer or buyers would be reluctant to purchase the shares and as respondent No. 1 company cannot itself apply for the debentures for want of funds, the company would be put to loss, inasmuch as after June 26, 1982, the shares would be quoted on ex-right basis, obviously at proportionately lesser price. We found substance in the contention and hence we heard the matter urgently but as the hearing continued beyond court hours on May 25, 1982, and as some order was necessary before 26th, we passed the operative order reserving the reasons to be given later. Before we consider the merits of the objections raised by the appellants, we would like to state a few relevant facts. The appellant-company, Kamani Metallic Oxides Ltd. and the respondent-company belong to what is known as Kamani Group of Companies. The members of the Kamani family own about 80% of the paid up capital of the appellant-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion reads as follows : "In the case of a winding-up by or subject to the supervision of the court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding-up, shall, unless the court otherwise orders, be void." It is contended that even though all dispositions of property made after the commencement of the winding up which relates back to the date of the application for winding up, are hit by this provision, the court cannot otherwise direct unless there is an order winding up the company. In support of this proposition reliance is placed by Shri Kapadia, the learned counsel for the appellant-company, on the decision of the Mysore High Court in Mandya National Paper Mills Ltd. v. Rai Bahadur Shreeram Durgaprasad Private Ltd. [1967] 37 Comp. Cas. 201 and the decision of the Gujarat High Court in R. C. Mehta Co. v. Himabhai Manufacturing Co. Ltd. [1970] 40 Comp. Cas. 1230 . In the first case, the company, which was sought to be wound up, sought permission of the court under section 536(2) to mortgage certain assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise in futility if the transaction which was valid at its inception will have to be declared valid only to save it from a remote possibility of its becoming void if the company is ordered to be wound up. Therefore, the plain language of the section clearly indicates the scope of the court's jurisdiction. The language indicates that, in the event of a company being wound up, all those dispositions of property made by the company between the date of presentation of the petition for winding up and the date on which an order for winding up is made shall be void. But the nature of the transaction which has become void can be examined by the court at the instance of a party interested in the disposition of property............Section 536(2) would come into play only when a winding-up petition is presented which is ultimately granted and the company is ordered to be wound up and such company having made dispositions of the property during the period between the presentation of the petition and the date of the winding-up order. In order to see that, since the presentation of the petition, the directors of the company do not fritter away the assets of the company, a wholesome provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B. Gopal Das v. Kola Biran Board (P.) Ltd. [1972] Tax LR 2285. In R. C. Mehta's case [1970] 40 Comp. Cas. 1230 (Guj.), the judge based his decision on the following three factors, viz ., (1) the plain language of section 536(2) shows that the order contemplated by the said provision can be passed only after a winding up order is passed. (2) The order would become otiose if no winding up order is passed ultimately. (3) The liquidator who can challenge the transaction is not in the picture. These were considerations which weighed with Vaisey J. in In re Miles Aircraft Ltd. [1948] 1 All ER 225; 18 Comp. Cas. 250 (Ch. D). With respect we are unable to agree with this view. Firstly, the opening clause of section 536(2) "In the case of winding up" does not mean "after the winding up order is passed" or "upon passing such order". It means "during winding up proceedings", which admittedly commence on the date on which the petition for winding up is filed. This interpretation which we are putting does not leave bona fide dispositions of assets of the company, open to challenge at the hands of the liquidator, in the event of the winding up order being passed. Sometimes dispositions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "As has been stated, section 536 finds a place in that portion of the Act which deals with the effect of winding-up on antecedent and other transactions, and there is nothing in sub-section (2) or the scheme of the Act to show that the court cannot authorise a disposition in a case where the winding-up petition is pending but a winding-up order has not been made. On the other hand, it may well be argued that, in the absence of any prohibition in the law, there is no reason why the court should be precluded from examining the propriety of a proposed disposition during the pendency of a winding-up petition if the company has a genuine case requiring early consideration." We are respectfully in agreement with this view. We are, therefore, of the view that even before a winding up order is made, the jurisdiction of the court can be invoked under section 536(2) for permission for disposal of the assets of the company. On merits we find that the objections raised on behalf of the appellants are motivated, perhaps as contended by the respondents, to further stifle the working of the company. The appellant-company is merely a creditor and even assuming that the company is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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