TMI Blog2009 (8) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... hether there was any collusion or not; but has raised the question as to whether the transaction was a fraudulent preference or not; that in the instant case, all would clearly indicate that there was no fraudulent preference at all; and that the ld Single Judge has erred in coming to the conclusion that it was a fraudulent preference. Appellant had no knowledge about the financial crisis or crunch of Kothari Orient Finance Limited at the relevant time; that apart from this, so long as it is not a fraudulent preference, it cannot be stated that it was intended to defeat the interest of the depositors; that in the case on hand, it cannot in any way affect the interest of the depositors since the company is having all assets both movable and immovable which were very well available; that under the circumstances, it cannot be termed as fraudulent preference, and hence the order of the ld Single Judge has got to be set aside and a direction be issued for registration of the sale deed. HELD THAT:- The entire case of the appellant rests on the agreement dated 17.2.2000, which was executed by the Director of Kothari Orient Finance Limited on the one side and the appellant bank on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been created pending the proceedings and also in order to avoid the transaction being called as a fraudulent preference. The conduct of the parties would clearly indicate that in appraisement of the financial crisis, a resolution came to be passed by the board of directors authorising one of the directors who entered into an agreement for sale of the only one immovable property in favour of the appellant bank which, in the considered opinion of the Court, cannot but be termed as a fraudulent preference, and that too when there are number of banks and depositors in thousands to whom the company under winding up owed crores of money. This Court is unable to notice any infirmity either factually or legally, and hence the order of the learned Single Judge has got to be sustained. In the result, this original side appeal is dismissed confirming the order of the ld Single Judge. The parties are directed to bear their costs. - M. Chockalingam And R. Subbiah, JJ. For the Appellant : T. K. Seshadri, M/s. Shivakumar Suresh For the Respondents : AR.L. Sundaresan, S. R. Sundar JUDGMENT M. Chockalingam, J. This appeal challenges an order of the learned Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner; that the petitioner had no knowledge about the financial crunch of the above company; that the petitioner was a bonafide purchaser who was never aware of the arrears and claims of the other creditors if any of the said company or the interest of the other creditors; that under the circumstances, there was no option than to approach this Court for suitable direction, and hence the application was to be ordered. 3. The Administrator appointed by this Court filed his report inter alia stating that the alleged agreement for sale dated 17.2.2000 relied on by the petitioner, was a fraudulent preference in favour of the petitioner; that the petitioner is just as any other creditor of the company; that when the company was in a financial crunch, the petitioner appeared to have prevailed upon persons in the management of the company; that at that point of time, the petitioner entered into an agreement for purchase of the property at ₹ 1.05 crores and upon the said process had conveniently attempted to adjust the outstanding receivable from the company while thousands of creditors of the company whose moneys have been utilised for the purpose of acquisition of the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed who availed credit facilities from the appellant bank, was liable to pay ₹ 60 lakhs and odd; but it was unable to pay the same; that at that time, they came forward to make one time settlement; that on 31.3.1999, a board resolution was also passed to sell the property pursuant to which it was Kothari Orient Finance Limited which sent a letter addressed to the appellant on 2.2.2000, informing its intention to sell the property; that pursuant to the same, the agreement for sale was entered into on 17.2.2000 wherein the total sale consideration is fixed at ₹ 105 lakhs; and that an advance of ₹ 41 lakhs was paid by the bank. 6. The learned Senior Counsel pointing to the agreement for sale entered into between the parties, would submit that out of ₹ 105 lakhs, ₹ 41 lakhs was paid as advance, and the rest of the amount namely ₹ 64 lakhs, was to be paid by the appellant bank to Kothari Orient Finance Limited; that originally they could not; that thereafter, no objection certificate from the Income Tax Department was also sought for and issued on 18.4.2000; that it was Kothari Orient Finance Limited which came forward with another letter dated 30.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , so long as it is not a fraudulent preference, it cannot be stated that it was intended to defeat the interest of the depositors; that in the case on hand, it cannot in any way affect the interest of the depositors since the company is having all assets both movable and immovable which were very well available; that under the circumstances, it cannot be termed as fraudulent preference, and hence the order of the learned Single Judge has got to be set aside and a direction be issued for registration of the sale deed. 10. Contrary to the above contentions, it is contended by the learned Senior Counsel for the second respondent that in the instant case, Kothari Orient Finance Limited actually availed loan from the appellant bank; that as on 31.3.1999 the balance was actually ₹ 60,55,055/-; that apart from that, the appellant bank should have gone into the auditor's report and financial situation; that under the circumstances, the appellant cannot be allowed to state that they did not know about the financial crunch under which it was put; that in the case on hand, the agreement was entered into on 17.2.2000; that as per the agreement, the sale consideration was fixed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 expressing its willingness to sell the property in question and entered into an agreement on 17.2.2000 whereby the consideration for sale was fixed at ₹ 105 lakhs; that an advance of ₹ 41 lakhs was paid by the bank; that after obtaining the no objection certificate from the Income Tax Department, a letter has also emanated from the winding up company that the balance could be adjusted in the sale consideration and also handed over possession and also the documents of title on 6.11.2000; that the contract of sale was partly performed; that it was also nearly about one year and four months prior to the winding up proceedings and under the circumstances, the Administrator should be compelled to execute a sale deed. The counter plea put forth by the Administrator was that the agreement itself was collusive and a fraudulent preference and was violative of the provisions of the Companies Act. On consideration of the factual and legal position and the contentions put forth on either side, this Court is afraid whether it can order for execution of the sale deed as asked for by the appellant. 14. The appellant was a bank from whom the company under winding up availed credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance of ₹ 64 lakhs was liable to be paid at the time of execution of the sale deed. Thus the contention put forth by the appellant's side that after the agreement was entered into, there was a letter emanated from the company on 30.10.2000 seeking adjustment of the liabilities to the balance of sale consideration. 16. Now at this juncture, it is pertinent to point out that even according to the appellant, the company under winding up owed a sum of ₹ 60,55,055/- as on 31.3.1999. The agreement was entered into on 17.2.2000. In such circumstances, after getting an advance of ₹ 41 lakhs, the liabilities owed by the winding up company could have been adjusted with the balance of consideration at that time itself. There was no need for making such a clause in the agreement as if the balance of consideration of ₹ 64 lakhs was liable to be paid by the appellant to Kothari Orient Finance Limited, company under winding up, who was actually under financial crisis. The learned Senior Counsel for the appellant brought to the notice of the Court that even this ₹ 41 lakhs of advance had not gone to the company, and out of this amount, ₹ 25 lakhs th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banks referred to above and also thousands of creditors, it would not be just or worthwhile to allow the sale transaction in question. 19. Apart from the above, what was all available in the hands of the appellant is only an agreement for sale dated 17.2.2000, and this agreement by itself will not clothe the right. Needless to say that an agreement for sale does not by itself create any interest in or charge on the immovable property covered under the agreement for sale. It was also further contended by the appellant's side that there was a part performance of the agreement under Sec.53-A of the Transfer of Property Act, and under such circumstances, it became necessary to issue a direction to the Administrator to execute a sale deed. This contention cannot be countenanced in view of the agreement entered into between the parties and also the conduct of the parties to the agreement. Clauses 8 and 10 of the agreement entered into on 17.2.2000 read as follows: 8. The VENDOR has agreed to deliver all original title deeds and vacant possession of the schedule mentioned property on the date of registration of Sale Deed to the PURCHASER. ... 10. If the PURCHASER fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d insolvent, would be deemed in his insolvency a fraudulent preference, shall in the event of the company being wound up, be deemed a fraudulent preference of its creditors and be invalid accordingly: 22. From the above provision, it is clear that if any transfer of property is effected six months prior to the presentation of the winding up proceedings, it cannot be termed as a fraudulent transfer. In the instant case, what was available in the hands of the appellant was only an agreement for sale dated 17.2.2000, as referred to above. Under Sec.54 of the Transfer of Property Act, it would not clothe him any right or interest over the said property. So long as registration of sale deed is not done, it cannot be said to be a transfer of property in the eye of law. Merely because the possession and the documents were handed over, it cannot also clothe him any right to have the benefit under Sec.531 of the Companies Act. Had it been true that the handing over of documents and possession was made on 6.11.2000, and a letter therefor was also made that day itself as contended by the appellant's side, the long and unexplained delay in filing the company petition could not have oc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
