TMI Blog2013 (2) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... a proposed industrial co-operative society. MIDC declined to grant its no objection after the order of winding-up was passed. First and foremost, it is evident that there was no disposition of the property before the order of winding-up was passed on 27 March 2008. Secondly, even assuming that there was such a disposition before the order of winding-up came to be passed, it is evident that there is no foundation or basis on which the Court could have arrived at the conclusion that the transaction was in the best interest of the company. Admittedly, the transaction involving the sale of the property of the company, was not in the ordinary course of business. The fact that such a transaction is in the interest of the company has to be pleaded and proved. There is a complete failure to make a disclosure of the essential terms of the transaction both before the learned Company Judge and in appeal before this Court. As stated earlier, there is no written document evidencing the terms of the transaction. All that the Appellant states is that an amount of Rs.30.00 lakhs was paid to the company between May 2007 and September 2007. There is neither any pleading nor any proof on the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment Corporation (`MIDC') in respect of a plot of land bearing No.H-16, at Waluj Industrial Area, in the Taluka of Gangapur near Aurangabad. On 7 April 1997, a company petition for winding-up was presented before the Company Court Company Petition No.327 of 1997 (Ms. Jaipur Golden Transport Co. Ltd. Vs. M/s. Hindustan Transmission Products Limited). 3. The Appellant claims to have paid an aggregate sum of Rs.30.00 lakhs to the company for the acquisition of the lease hold rights of the plot of land between 14 May 2007 and 26 September 2007. Admittedly, no document by way of an agreement for sale or a transfer deed was executed between the company and the Appellant. The Income Tax returns filed by the Appellant for the period up to 31 March 2008 and thereafter reflected the amount as an investment. MIDC received two letters, one dated 31 December 2007 from the company and the second dated 26 March 2008 of the Appellant. By those letters, the consent of MIDC was sought for effecting a transfer in favour of the Appellant as a chief promoter of a proposed industrial co-operative society. That is the capacity in which the Appellant also sought the consent of MIDC. 4. On 27 Marc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pliance including registration or notorization of all the requisite documents relating to the transfer of said Industrial Plot No.H-16 from MIDC Waluj Industrial Area, Aurangabad, which is held by our company named M/s.Hindustan Transmission Products Ltd." 5. The Official Liquidator moved his report before the learned Company Judge initially invoking sections 531(1) and 531(A). Subsequently, during the course of the proceedings, the Liquidator submitted that since the sale of the property was after the presentation of the company petition for winding-up, the transaction is void under sections 536(2) and 537(1)(b) of the Companies Act. Accepting the contention of the Official Liquidator, the learned Single Judge has held that: (i) Admittedly no document was executed between the Appellant and the company transferring the lease hold rights. According to the Appellant, the entire consideration was paid between 14 May 2007 and 26 September 2007. If this was so, the alleged sale would have been finalized on or before 14 May 2007, but this is belied by the circumstance that the power of attorney which was executed on 12 October 2007 in favour of the spouse of the Appellant authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of the company; (iv) The disposition has taken place in pursuance of an oral agreement with the company for the transfer of the immovable property for a consideration of Rs.30.00 lakhs in addition to which transfer charges (Rs.27.00 lakhs) and service charges (Rs.7.00 lakhs) were payable to MIDC. Payments were made between 14 May 2007 and 26 September 2007. Possession was handed over on 14 November 2007; (v) Any disposition after the commencement of winding-up proceedings is not absolutely void since Section 536(2) enables the Court to grant its sanction. Though no new rights can be created or completed after an order of winding-up, the transaction could not be completed because of an attachment levied by IDBI Bank which was raised by the Recovery Officer of the Debt Recovery Tribunal. The learned Company Judge has not considered the provisions of Section 536(2); (vi) In the present case, the possession of the Appellant is liable to be protected under section 53(A) of the Transfer of Property Act, 1882. 7. On the other hand, the learned counsel appearing on behalf of the Official Liquidator submits that: (i) The question of validating a transaction under section 536(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, Section 53(A) is not attracted since neither was there a written agreement nor are the terms of the transaction ascertained; (viii) The order of winding-up in the present case was passed by the learned Company Judge of this court on 27 March 2008 on three petitions for winding-up, which were registered respectively in 1997, 1999 and 2007. All the three petitions were considered together when the ultimate order of winding-up was passed. The institution of the proceedings for winding-up would, hence, relate back to the filing of the first petition in 1997 and any disposition of assets made after that date would be unlawful. In any event, this submission has not been urged before the learned Single Judge and has been sought to be canvassed for the first time in appeal. 8. The rival submissions now fall for consideration. 9. Section 536 of the Companies Act, 1956 provides as follows: "536. Avoidance of transfers, etc; after commencement of winding up.- (1) In the case of a voluntary winding up, any transfer of shares in the company, not being a transfer made to or with the sanction of the liquidator and any alteration in the status of the members of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that the mere presentation of a petition for winding-up would not enable a company to escape a penal liability for the dishonour of a cheque under section 138 of the Negotiable Instruments Act, 1881 by putting forth the ground that the payment of a cheque would amount to a disposition of the property of the company and would hence be void under section 536(2). The Supreme Court adopted a less rigorous construction of the expression "void" in the context of Section 536(2), noting that the Court has the power to direct otherwise. The Supreme Court observed thus: "14. ... ... ... ... the word "void" need not automatically indicate that any disposition should be ab initio void. The legal implication of the word "void" need not necessarily be a stage of nullity in all contingencies. Black's Law Dictionary gives the meaning of the word "void" as having different nuances in different connotations. One of them is of course "null, or having no legal force or binding effect." And the other is "unable in law, to support the purpose for which it was intended." ... ... .. ..." 15. For discerning the legislative idea in employing the word "void" in the context set out in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors' right to have the proceeds of the assets distributed among them pari passu. ... ... ..." In view of the judgment of the Supreme Court it is now a settled principle of law that if a transfer is not completed before an order of winding-up has been passed, an application would not be maintainable before the Court for a direction to the Official Liquidator to complete the transfer. This principle necessarily follows the settled legal position that upon the passing of an order of winding-up, no new rights can be completed and no uncompleted rights can be completed. 13. The second aspect of the matter which needs emphasis in a case such as the present, relates to the circumstances on the basis of which the Court exercises discretion, even assuming that there was a completed transfer of the property after the initiation of winding-up proceedings, to direct that a disposition will not be void. The exercise of discretion by the Court to "otherwise direct" arises where the disposition has in fact been completed after the commencement of winding-up proceedings for it is then for the Court to decide whether the disposition was of such a nature or in circumstances where it would ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of a learned Single Judge of the Calcutta High Court in J. Sen Gupta (Private) Limited 1962-COMPANY CASES-Vol.XXXII-876, the underlying principles for the exercise of discretion by the Court have been summarized as follows : "It seems to me, therefore, upon considering various authorities on this subject that the following principles are doubtless applicable to sub-section (2) of section 536 of the Companies Act, 1956: 1. The court has an absolute discretion to validate a transaction; 2. This discretion is controlled only by the general principles which apply to every kind of judicial discretion; 3. The court must have regard to all the surrounding circumstances, and if from all the surrounding circumstances it comes to the conclusion that the transaction should not be void, it is within the power of the court under section 536(2) to say that the transaction is not void; 4. If it be found that the transaction was for the benefit of and in the interests of, the company or for keeping the company going or keeping things going generally, it ought to be confirmed." 15. In a judgment of a learned Single Judge of this Court in Kanchan Kumar Dhar, Official Liquidator Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The case of the Appellant before the Court is that there was an oral agreement under which the property was to be sold to the Appellant for Rs.30.00 lakhs. There is admittedly no written document evidencing the transaction which is alleged. Significantly, the original proposal which the Appellant submitted, was in her capacity as the chief promoter of a proposed industrial co-operative society. MIDC declined to grant its no objection after the order of winding-up was passed. The Appellant alleges that thereafter there was an agreement under which she sought to acquire the property in her personal capacity. This agreement is set up by the Appellant in paragraph 16 of the reply that was filed before the Company Judge to the report of the Official Liquidator. The case of the Appellant now is that she was persuaded to enter into a transaction of purchase; that the company executed a special irrevocable power of attorney in favour of her spouse on 12 October 2007; that the company had in its meeting of the Board of Directors on 12 September 2007 recorded the sale of the plot to the proposed industrial co-operative society, but that since the MIDC had reservations to the proposal, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rotection which has been sought under section 53A of the Transfer of Property Act, 1882 is clearly unavailable. In order to attract Section 53A, there must be a contract in writing and the terms of the transaction must be capable of being ascertained from the language of the written document. The law on this aspect is enunciated by the Supreme Court in Rambhau Namdeo Gajre Vs. Narayan Bapuji Dhotra (Dead) through LRs (2004)8-SCC-614. There is no written document in the present case. The terms of the transaction cannot be ascertained with even a reasonable degree of certainty. 19. For these reasons, we are of the view that the learned Single Judge was not in error in declining to order that the alleged disposition in favour of the Appellant would not be void. Clearly the disposition is unlawful and void for the reasons indicated above. There is no merit in the submission that the learned Single Judge has not considered the provisions of Section 536(2) since it is evident that the learned Single Judge has had due regard to the statutory provisions in question and to the underlying principles which guide the exercise of discretion by the Court. Hence, and for the aforesaid reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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