TMI Blog1998 (10) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... ver to the Applicant. On 23-9-1994 conveyance was executed in favour of the Applicant by the MSFC. On 19-6-1991, a petition for winding up of the company was presented before this Court. On 22-4-1998 an order was passed to wind up the company based on the suo moto petition on reference by the B.I.F.R. Though the papers from B.I.F.R. were received or placed before the Court on 19-6-1991 the petition was admitted on 23-10-1991 orders for winding up was passed on 22-4-1998. On 6-7-1998 the official liquidator issued a letter proposing to take possession of the registered office on 9-7-1998 and factory premises on 14-7-1998. The applicant came to be aware about this through the Ex-Management of the company and SICOM. On 13-7-1998, the applicant moved this Court. The official liquidator was directed not to take possession. Matter was adjourned to 15-7-1998. On 15-7-1998 the official liquidator sought time to file reply. Matter was adjourned on various dates before it was finally heard. In the course of the proceedings, notice was given to MSFC and SICOM as secured creditors. They have been subsequently added as Respondents. This was because on the sale of the assets which is the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se at all. Without prejudice it is contended that the sale is bona fide. 2. At the hearing of the petition it is contended that : ( a )The sale was by secured creditors, outside the winding up and as such no permission was required under section 537. ( b )The claim of the workmen would only arise on the Court passing an order for winding up or appointing a provisional liquidator. The sale having been effected before the order of winding up, there was no right created in favour of the workmen. ( c )Under section 536(2) of the Companies Act all that the Court must consider is whether the sale is bona fide and no other consideration can weigh with the Court in granting the permission. At any rate it is pointed out that the sale is not void. The sale becomes only void if the Court refuses to grant approval. Respondent No. 2 has supported the contention of the applicant. It is contended that the question of returning the sale proceeds does not arise and all that has to be examined is as to whether the sale was validly conducted or not. The manner in which the sale proceeds were dealt with, is not a question that can be gone into in the present application. It is conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the winding up or any sale held without leave of the Court, of any of the properties or effects of the company after such commencement, shall be void. Section 537, therefore, applies in a case where any sale is held of the properties of the company, whereas section 536(2) deals with transaction by the company including sale after the winding up order. Effect is, therefore, the same, if the transactions are done without the leave of the Court. In the instant case, we are concerned with a sale held by a financial institution after the presentation of a petition for winding up but before an order for winding up was made. Further, the present is a case by a secured creditors outside the winding up proceedings. I need not dwell at length on this aspect of law as this is covered by a Judgment by the Apex Court in the case of M.K. Ranganathan v. Government of Madras AIR 1955 SC 604 and the subsequent decree of the Division Bench of this Court in Maharashtra State Financial Corpn. v. Ballarpur Industries Ltd. AIR 1993 Bom. 392 where the subsequent amendments to the Act have been noted. The Apex Court was considering the provisions of sections 171 and 232 of the Companies Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Therefore, the secured creditors no longer have absolute right to the security but a pari passu charge has been created in favour of the workers. The effect of this amendment came up for consideration before a Division Bench of this Court in Maharashtra State Financial Corpn.' s case ( supra ) Bombay 392. The Court therein was considering the rights of a Corporation under section 29 of the State Financial Corporation Act. The Division Bench held that the rights of the State Financial Corporation are not obliterated under section 29. How- ever, statutory rights under section 29 to sell the property has to be exercised with the right of a pari passu charge holder in whose favour a charge is created and that as such the power under section 29 can be exercised only with the concurrence of the official liquidator and the official liquidator before giving concurrence is required to take permis- sion of the Court and act under the directions of the Court while exercising its powers on behalf of the workers. The Division Bench, therefore, held that whenever there was pari passu charge over any property of a company in winding up by virtue of the proviso to section 529 leave of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons had agreed to pay the dues of the workers, if outstanding. Nor for that matter the view of learned Judge of the Rajasthan High Court in Boolani Engg. Corpn. v. Asup Synthetics Chemicals Ltd. [1994] 81 Comp. Cas. 872 or for that matter the Judgment of the Division Bench of the Gujarat High Court in the case of Gujarat State Financial Corpn. v. Official Liquidator [1996] 87 Comp. Cas. 658 which has held that the principle laid down in M.K. Ranganathan's case ( supra ) still applies. I am, therefore, of the considered view that apart from being bound by the Judgment of the Division Bench of this Court the view of the Division Bench is in conformity with the amendment as incorporated in the Companies Act by Act 35 of 1985. My attention was invited to another Judgment of another Division Bench of this Court in the case of State Industrial Investment Corpn. of Maharashtra Ltd. v. Maharashtra State Financial Corpn. [1988] 64 Comp. Cas. 102. A perusal of the said Judgment would show that the Act 35 of 1985 whereby section 529 was amended and section 529A was introduced was not considered as the transactions were previous to that date and what was followed was the vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company are warned that in cases covered by sub-section (2) of section 536 or section 537(1)( b ) any transac-tion falling within that section are subject to the scrutiny of the Court and unless the Court otherwise orders, be void. A power is, therefore, con- ferred on the Court. This is so because there may be genuine transactions effected with the purpose of reviving or rehabilitating the company. There may be other transaction done in the best interest of its business. A secured creditor may want to realise his dues without waiting for the winding up order to be made. Power is, therefore, conferred on the Court to approve such transaction if bona fide and if so, they would not be void. The power under section 536(2) or section 537(1)( b ) will also enable the Court to have a control on the assets so that in the event permission of the Court is sought before the order of winding up is made or provisional liquidator is appointed the Court can always grant permission subject to conditions. The sale held by Respondent No. 2 is, therefore, subject to the approval of this Court. 6. That takes me to the Judgment of the single Judge of the Madras High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make it subject to such condition as the Court may impose. 8. That brings me to the last contention that this Court should only consider as to whether the transaction is bona fide and not go into aspects of the sale proceeds as it cannot be done in the present application. The very purpose of the Court granting sanction or approval is that the Court can make such orders which are required injustice and equity to protect the interest of all the creditors beginning with the secured creditors. By Amendment Act of 1985 workers have a pari passu charge on the property secured by the secured creditors. If the secured creditors are allowed to sell the assets without considering the pari passu charge of the workers this again would defeat the very objective of the amendment. As held by a Division Bench of this-Court in Maharashtra State Financial Corpn. v. Ballarpur Industries Ltd. ( supra ) by virtue of the amendment the workers have a pari passu charge on the assets of the secured creditors. It is, therefore, open to the Court to grant permission by imposing conditions for the same. 9. In the instant case after considering the fact that the sale was by public auction ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
