TMI Blog2018 (12) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... ch amount with interest has not been foreclosed by the impugned order. The appellant, notwithstanding the impugned order, will always be at liberty to prove its claim before the Liquidator in the winding up proceedings. The impugned order merely prevents the appellant from claiming any fraudulent preference in the matter of recovery of its claims. Therefore, this is not a case where a consent decree has been set aside on the ground of fraud simplicitor. This is only a case where the attempt of the appellant to seek a fraudulent preference has been thwarted. Further, since, by virtue of fraudulent preference, the appellant recovered an amount of ₹ 10,17,03,493/- from the Company (from sale proceeds of Amabattur property), the learned Company Judge has quite correctly ordered the refund of this amount with interest at the rate of 12% per annum, so that such amount can be appropriately dealt with in the course of winding up proceedings by the Official Liquidator. Appeal dismissed. - APPEAL NO. 331 OF 2018 In COMPANY APPLICATION NO. 341 OF 2016 - - - Dated:- 24-9-2018 - MR A.S. OKA AND MR M.S. SONAK, JJ. For The Appellant : Mr. Janak Dwarkadas, Sr. Counsel a/w. Mr. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4] The Company in liquidation is a wholly owned subsidiary of Swadeshi Mills Co. Ltd.. The appellant held a stake of 22% in Swadeshi Mills Co. Ltd. It is the case of the appellant that in terms of the Loan Agreement dated 21st September 2000, the appellant advanced a loan of ₹ 325 Lakhs to the Company which was to be repaid by the Company in terms of repayment schedule provided in the Loan Agreement. At the stage when such loan was advanced, both Swadeshi Mills Co. Ltd., as also the Company in liquidation were declared as sick Companies, in respect of whom reference was pending with the Board for Industrial and Financial Reconstruction (BIFR) under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). 5] After efforts of revival of the Company had failed, the BIFR by its order dated 22nd January 2007 made a recommendation that the Company be wound up. With full knowledge that such recommendation had been made by the BIFR, the appellant instituted Suit No. 164 of 2009 seeking to recover an amount of ₹ 13,92,45,091/- together with interest thereon from the Company relying on the Loan Agreement dated 21st September 2000. In the said Sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an amount of ₹ 10,17,03,493/- from the Company from the sale proceeds of Ambattur property, filed an application before the learned Company Judge seeking leave under section 446 of the Companies Act to further execute the consent decree dated 9th July 2009.The Official Liquidator, also filed a report seeking inter alia for setting aide the consent decree dated 9th July 2009 on the ground that it constituted a fraudulent preference and for directions to require the appellant to refund the amount of ₹ 10,17,03,493/- with interest, so that such amount is available for pro rata distribution in the course of proceedings for winding up of the company. The impugned order whilst declining leave to the appellant under section 446 of the Companies Act has accepted the Official Liquidator's report and declared the consent decree dated 9th July 2009 as illegal and void, being a fraudulent preference. The directions have also been issued in the impugned order to the appellant to refund with interest at the rate of 12% per annum, the amount of ₹ 10,17,03,493/- withdrawn by the appellant from the sale proceeds of the Company's Ambattur property. Hence, the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the learned Company Judge by misreading or in any case misconstruing the statement in a Loan Agreement has returned an erroneous finding of fraud or fraudulent preference; (d) That merely because the Loan Agreement had not stipulated any specific rate of interest, does not either mean that no interest whatsoever was payable on the loan amount admittedly advanced by the appellant to the Company or that the specification of interest at 15.76% per annum in the consent terms is some indicator of fraud or collusion. Mr. Dwarkadas submits that the Loan Agreement had in fact specified interest at bank rates. In any case, and with a view to give a quietus to the matter, Mr.Dwarkadas, on the basis of instructions from the appellant, made a statement that the appellant was not at all averse to scaling down the interest rate to 5.28% per annum which is the rate suggested by the Official Liquidator himself, as being appropriate bank interest rate. Mr. Dwarkadas submits that with such a statement, the charge of fraud or fraudulent preference no longer survives, and the impugned order therefore, warrants interference; and (e) That the learned Company Judge failed to take note of a ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15] Following NGEF Limited vs. Chandra Developers (supra), the learned Single Judge of this Court in In re (Bom) Modi Stone Ltd. (in Liquidation) (2017) 202 Company Cases 551 has held that the proceedings for winding up of a Company would be deemed to have commenced on the date on which BIFR or AAIFR, as the case may be, makes recommendation for winding up of the Company. To the same effect are the rulings of Delhi High Court in Kapri International Pvt. Ltd. - 2013 SCC Online Del.2176 a nd Gujarat High Court in Indoco Remedies Ltd. vs. Official Liquidator of Kay Packaging P.Ltd. ( 2009) 150 Company Cases 770 . Therefore, it is quite clear that the winding up proceedings in the present case must be deemed to have commenced from 22nd January 2007 and not either on 27th August 2009 when the Company Petition was formally admitted or on 24th June 2011 when the Company was actually ordered to be wound up. Accordingly, we are unable to uphold Mr.Dwarkadas's first contention in support of the present appeal. 16] The issue involved before the learned Company Judge in the present case was not really whether the respondent No.2 Company was genuinely liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact, the learned Company Judge in paragraph 23 (b) of the impugned order has listed several circumstances in support of the finding that the consent decree dated 9th July 2009 and the payments recovered by the appellant in pursuance thereof, indeed constituted fraudulent preference for the purposes of Section 531 of the Companies Act. Such circumstances are very much borne from the record and consequently there is no case made out to warrant interference or to take some different view in the matter. 19] Again, the finding regards fraudulent preference is not based only on the circumstance that the consent decree had provided for payment of interest to the appellant at the rate of 15.76% per annum with quarterly rests, when in fact, no such rate of interest was at all stipulated in the Loan Agreement entered into between the appellant and the respondent No.2 Company. This was only one of the circumstances taken into consideration by the learned Company Judge. This circumstance, in the facts and circumstances of the present case, was surely not some irrelevant circumstance. The Loan Agreement had provided for interest at bank rates when it came to repayment of loan by the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h circumstances. As noted earlier, all such circumstances are duly supported by the material on record which has been critically evaluated by the learned Company Judge. Therefore, there is no case made out to take any different view in the matter. 21] Finally, there is no merit in the contention that the learned Company Judge failed to take note of the circumstance that the Swadeshi Mills Co. Ltd., of which the Company in question was wholly owned subsidiary, was itself in liquidation and therefore, the appellant was not in some favoured position qua the Company. The fact that the learned Company Judge was alive to this position is clearly reflected from paragraph 18(k) and paragraph 23(d) of the impugned order. In any case, such a situation does not wipe out dilute the several circumstances referred to by the learned Company Judge in paragraph 23(b) of the impugned order, on basis of which finding in relation to fraudulent preference was returned. 22] The impugned order, whilst declining leave to the appellant to enforce the consent decree dated 9th July 2009 had declared the consent decree dated 9th July 2009 illegal and void, being a fraudulent preference availed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ading to say that the money received by the appellant was part of the consideration money payable to the sister concern of the Company and it had no connection with the Company. The Apex Court held that it was not the source of money that was important but the cause on the basis of which the appellant was able to get the money from MGF that was relevant. The payment of large sum by MGF to the appellant was not gratuitous. It was evidently intended to patch up the brazen breach of the Court's orders committed by the Company and MGF in effecting the sale of the property inquestion. The Apex Court ruled that the creditor in arrangement with purchaser and Company receiving payment in another transaction with the sister concern of the Company amounts to a fraudulent preference. In such circumstance, the Apex Court affirmed the direction issued by the High Court requiring the appellant to deposit in the Court the amount that it had received in connection with the sale and the property of the Company. The principle explained in DCM Finance Services Ltd. (supra) applies to the present case as well. 24] For all the aforesaid reasons, therefore, we see no good ground to interfere wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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