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TMI Blog1983 (9) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... g a market price of more than five lakh rupees for a paltry amount of Rs. 85,000 to M/s Sandeep Paper Mills Pvt. Ltd., respondent No. 1, on February 15, 1980. It is alleged that the transfer was not in the ordinary course of business of the company and that it was not bona fide and for valuable consideration. It is further averred that respondent No. 2 started two concerns by the name of M/s Param Rubber Industries, and M/s Param Rubber and Allied Industries, respondent No. 5. He, along with some others, also floated another concern by the name of M/s Param Rubber Industries P. Ltd., respondent No. 6. All the assets of the company are now either in the name of M/s Param Rubber Industries or M/s Param Rubber and Allied Industries or M/s Param Rubber Industries P. Ltd. Respondent No. 2 took away the mixing mill and 1,500 mandrels of the company illegally and unauthorisedly which are now with either M/s Param Rubber Industries or M/s Param Rubber and Allied Industries or M/s Param Rubber Industries P. Ltd. He did so in collusion with other shareholders of the company in order to defeat the claims of the creditors, who now want to run the factory belonging to the company. It is, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank asked the branch manager to arrange for the sale of the boiler at the price assessed by the technical officer. Subsequently, on February 11, 1980, M/s Northland Conveyors and Beltings (P.) Ltd. gave a final offer of Rs. 80,000., Thereafter, respondent No. 1 revised its quotation and increased the amount to Rs. 85,000. The undepreciated original value of the boiler was Rs. 40,900 odd. In the above circumstances, the boiler was sold bona fide for a consideration of Rs. 85,000 which was its then market value. It is alleged that it was sold in good faith to respondent No. 1 and the amount of consideration was paid to the bank in order to liquidate the company's debt. Respondents Nos. 2, 5 and 6 supported the version of respondent No.3 and controverted the allegations of the petitioner. They further denied that M/s. Param Rubber Industries or M/s. Param Rubber and Allied Industries were started out of the illegal gains or illegal sale of the assets of the company. Consequently, all of them prayed that the application was liable to be dismissed. The first question that arises for determination is whether the transfer of the boiler was made in good faith and for valuable considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lvent from the Receiver in whom the insolvent's property vests for the benefit of the creditors. Such will be mostly cases of benami transactions in favour of some relative of the insolvent or a person in whom he has full confidence that he will hold it ultimately for the benefit of the insolvent or persons in whom he may be interested. Or it may be that a person finding himself over head and ears in debts wishes to convert his assets into liquid assets with the collusion or connivance of the transferee. In both cases, the intention clearly is to shield the assets against the claims of creditors and in such cases, though the transfer may have been for consideration, either adequate or otherwise, but having been entered into with a view to defraud or delay the creditors, the transferor and the transferee sharing the common intention, the transaction must be annulled and the assets must be brought into the common hotchpot for the benefit of the insolvent's creditors." It is further observed by their Lordships that it is not necessary in annulment proceedings to prove that the transferor who has been subsequently adjudged an insolvent should have been honest and straightforward in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en Rs. 75,000 and Rs. 80,000. The regional manager informed the branch manager accordingly. It may also be mentioned that M/s. Northland Conveyors and Beltings P. Ltd., another intending purchaser, gave an offer of Rs. 80,000 for it. When respondent No. 1 found that the company was not ready to sell it for Rs. 60,000, it raised the offer to Rs. 85,000. In these circumstances, it was sold to respondent No. 1 for the said price. No relationship between the directors of the company and the directors of respondent No. 1 has been established and, therefore, it cannot be expected that they would have sold it for a lesser amount. The company has also not retained the consideration but it has been utilised for repayment of its loan to the bank. Thus, it cannot be held that the price of the boiler was five lakh rupees or thereabout and it was sold for (a much) lesser amount. There is also no evidence that respondent No. 1 entered into the transaction with a view to screening the assets of the company from the liquidator or to defraud the creditors. It also cannot be held that the transferee was lacking in bona fides. Mr. Sharat Chander referred to Official Liquidator, Victor Chit Fund P. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anent managing director and Mr. R. K. Grover, the permanent director of the company. No record is available as to who were appointed as directors thereafter. Mr. Gian Singh admittedly died in October, 1979. The statement of Mr. Grover is that the books of the company were in the possession of Mr. Gian Singh. The books were summoned from the official receiver and he did not produce the same on the ground that no books were handed over to him. No record from the Registrar of Companies has been got produced by either of the parties. It is evident from the evidence that the dispute started among the directors inter se and the company was in a very bad shape. It also stopped working in January, 1979. In the circumstances, the only course open is to refer to the affidavits and statement? of the parties. The petitioner in his various affidavits has stated that Messrs R. S. Dugal, Hoshiar Singh, S. K. Aggarwal and R. K. Grover were not the directors of the company. He has, however, not stated as to who else were the directors. On the other hand, the categorical stand of Mr. Grover in his affidavits as well as in his statement is that the above-said persons were the directors and they auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been held but as he did not attend them, he ceased to be a director. He also urges that the meeting dated November 16, 1979, was not a properly convened meeting. I have duly considered the argument. It is not necessary to go into the question as to whether Mr. R. K. Grover ceased to be a director or not as section 290 of the Act validates the acts of the directors in certain circumstances. It provides that the acts done by a person as a director shall be valid notwithstanding that it may afterwards be discovered that his appointment was invalid by reason of any defect or disqualification or had terminated by virtue of any provision contained in the Act or in the articles. Even if it may be assumed that Mr. Grover ceased to be a director in view of section 283, the resolution dated November 16, 1979, cannot be held to be illegal in view of section 290 ibid on that ground. Now, I advert to the second part of the argument, wherein it is stated that the meeting dated November 16, 1979, was not a properly convened meeting. Reference has been made by Mr. Sharat Chander to the notice, annexure R-1 (at page 207 of the paper-book) wherein Mr. Grover requested Mr. Dugal to attend the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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