Gujarat High Court
Shreeji Concast Ltd. vs Shreeji Oxygen P. Ltd. And Anr. on 22 September, 2006
Equivalent citations: [2007]138COMPCAS717(GUJ)
Author: K.A. Puj
Bench: K.A. Puj
JUDGMENT K.A. Puj, J.
1. The applicant, original respondent-company, has filed this application praying for recalling and reviewing the order dated August 25, 2005, passed by this Court in Company Petition No. 66 of 2002 and for restoration of the said winding up petition. Since the winding up order was passed on August 25, 2005, and the present application was filed on April 26, 2006, the applicant has also prayed for condonation of delay in filing this application.
2. The brief facts giving rise to the present application are as under:
3. That the original petitioning creditor, i.e., Shreeji Oxygen P. Ltd., opponent No. 1 herein, has filed Company Petition No. 66 of 2002 for winding up of the present applicant-company under Sections 433 and 434 of the Companies Act, 1956, and pursuant to filing of the said petition, this Court passed an order on August 25, 2005, whereby the present applicant-company was ordered to be wound up and the official liquidator attached to this Court was appointed as the liquidator of the company with a direction to collect the detail with regard to the secured creditors and after obtaining details, in presence of secured creditors, if any, as well as the directors of the applicant-company, to take possession of the assets of the applicant-company by exercising his powers as a liquidator conferred on him under the provisions of the Companies Act, 1956.
4. Pursuant to the said order, the official liquidator took possession of the registered office, all properties effect and actionable claims of the applicant-company on November 8, 2005.
5. It is the case of the applicant-company that the applicant-company has already cleared the dues of secured creditors, i.e., Bank of India and in fact, a letter dated November 9, 2005, to this effect has already been issued by the said bank to the official liquidator. It is also the case of the applicant-company that the debt due to the original petitioner was not disputed. However, due to severe financial constraints, the applicant-company was not in a position to discharge its liabilities earlier. However, subsequent to passing of winding up order and at the time of moving this application, the promoters/directors are of the view that due to overall market scenario becoming positive and the future prospects of the company looking bright, they are ready and willing to infuse fresh funds to revive the applicant-company and, therefore, the liquidity position of the applicant-company shall also improve. In anticipation thereof, the applicant-company has executed a consent term for full and final settlement of the entire outstanding liability due to opponent No. 1/original petitioning creditor at Rs. 55 lakhs. As per this consent terms, the applicant-company has agreed and undertaken to pay opponent No. 1 company a sum of Rs. 55 lakhs as full and final settlement towards its outstanding liability in 11 equal monthly instalments starting from August 7, 2006, and ending on April 22, 2008.11 postdated cheques for the amount mentioned in the consent terms were handed over by the applicant-company to the opponent on April 12, 2006, the day on which the said consent terms have been executed.
6. The director of the applicant-company has given an undertaking to the effect that he shall honour the settlement and all the post-dated cheques given to opponent No. 1 shall be honoured on the due dates. A copy of this undertaking is also placed on record of this application.
7. It is also the case of the applicant-company that it has no other liability. Pursuant to the advertisement in the newspaper, no other creditor has supported the petition. It is also the say of the applicant-company that it has a bright future prospect inasmuch as the budgetary provisions imposing countervailing duty on the import of scrap, which created a level playing field for the domestic manufactures. There is a robust growth in the housing sector coupled with overall positive industrial development has created huge demands of the products of the applicant-company. Some of the customers have shown interest in buying huge quantities from the applicant-company if the applicant-company restarts its plant.
8. It is in the above background of the matter, the present application is filed for recalling and reviewing of the winding up order as well as for restoration of the winding up petition.
9. This Court has issued notice on July 14, 2006. On July 21, 2006, the court has passed an order recording the submissions made on behalf of the respective parties. Opponent No. 1 has confirmed the fact regarding settlement and joint prayer was made for recalling of the winding up order. However, the deputy official liquidator has made his submission before the court that pursuant to the winding up order, he has filed his compliance report being O.L.R. No. 11 of 2006 and the same is pending before the court taking up company matters as per the roster. After obtaining theorder from the hon'ble Chief Justice, both these matters were placed before this court.
10. The court thereafter passed further order on August 11, 2006, directing the applicant to issue public advertisement in two newspapers, namely, Times of India, Ahmedabad edition, and Saurashtra Samachar, Bhavnagar edition, stating therein that the applicant has preferred M.C.A. No. 100 of 2006 praying for recalling of the winding up order passed by the court in Company Petition No. 66 of 2002, and if any one has objection against recalling of the said order he may either appear before this Court or file his objection in this regard. The hearing was fixed on September 15, 2006.
11. Pursuant to the aforesaid order, the applicant-company has issued the advertisement as directed. Affidavit of publication along with copies of the advertisement appeared on August 22, 2006, and August 21, 2006, in Times of India and Saurashtra Samachar respectively, are placed on record. No one has filed any objection against recalling of the winding up order nor any one has remained present to object against recalling of the winding up order.
12. The matter is, therefore, taken up for final hearing. Mr. Tushar Hemani, learned advocate appearing for the applicant has reiterated his submissions which are made in the present application. Mr. Premal Joshi, learned advocate appearing for respondent No. 1-company has confirmed the fact regarding settlement and did not raise any objection if the court recalled the winding up order.
13. Mr. Samir Bundela, learned advocate appearing for the official liquidator has, however, raised very serious objection against maintainability of the present application as well as recalling of the winding up order. He has submitted that the application is filed very late and no explanation is offered for occurrence of delay. After the winding up Order is passed, the applicant-company has no locus standi to file this application before this court. It is only the-official liquidator who represents the company after the winding up order is passed. He has further submitted that pursuant to the winding up order, the official liquidator has already taken possession of the assets of the company and the official liquidator has also filed compliance report before this court. He has further invited the attention of the court to the fact stated and averments made by the official liquidator in O.L.R. No. 11 of 2006. At the time when the representatives of the official liquidator have gone to take over the possession of the registered office of the company, they were told that the registered office has already been sold to one Mr. Kamlesh Patel, director of opponent No. 1-original petitioning creditor, vide agreement dated November 1, 2001. The said agreement clearly reveals that the company in liquidation was unable to repay the loan and/ or borrowed money to Shri Kamlesh Patel and hence, the company in liquidation has given the power of attorney to sell and/or transfer of the company's property situated at 204-205, second floor, Aristo Complex, Waghwadi Road, Bhavnagar to Shri Kamlesh Patel in spite of the fact that the said property was mortgaged with Bank of India, Bhavnagar. It is also stated that the said transaction was made on November 1, 2001, and the petition was filed on March 21, 2002, i.e., within six months prior to filing of company petition. He has further submitted that the said agreement was, therefore, deemed to be a fraudulent preference within the meaning of Sections 531 and 531A of the Companies Act, 1956. The official liquidator has, therefore, taken the possession of the registered office of the company, by sealing and pasting the legal notice on the main gate of the registered office of the company.
14. Even at the time of taking over possession of the factory premises of the company in liquidation, the representatives of the official liquidator were told that some portion of the land of factory approximately Rs. 3,595 sq. mtrs. which fell into survey No. 329 in plot No. 3 has also been sold by the company in liquidation on October 16, 2000, to Shri Kamlesh Patel and the said land is separated by fencing. In this connection, agreement dated October 16, 2000, was handed over to the representative of the official liquidator. Accordingly, the possession of the factory premises was also taken over by the representatives of the official liquidator on November 8, 2005.
15. In view of the above matter, the official liquidator in his report has sought for a direction to ratify his action of taking possession of assets and properties of registered office and factory premises and also for preparation of inventory of machineries and assets of the company, lying in both the premises and valuation from the registered Government approved valuer and for constitution of sale committee comprising of official liquidator as chairman and secured creditors, workers' union, if any, as members so that the assets of the said company can be sold and direction to the secured creditor to appoint the security guards at their cost to protect the assets of the company and further direction to secured creditors to deposit a sum of Rs. 50,000 with the official liquidator to meet the advanced official expenses and for direction to opponent No. 1 company to place all the records and full details of properties purchased from the company in liquidation and also the list of directors and secured creditors of opponent No. 1 company.
16. This Court has passed an order on March 3, 2006, in O.L.R. No. 11 of 2006 directing opponent No. 1 company to place on record full fact/details of the property purchased from the company in liquidation and also the list of directors and secured creditors of opponent No. 1 company.
17. In compliance of the said report, opponent No. 1 company has filed detailed affidavit-in-reply on April 29,2006, along with which details called for were filed. It is stated in the said reply that the company in liquidation was indebted to both, Shri Kamlesh Patel, director of opponent No. 1 company in his individual capacity and opponent No. 1 company itself by an amount of Rs. 74,87,346 and Rs. 58,82,872 respectively. In support of this averment, copy of the balance-sheet for the year ended March 31, 2006, is placed on record. The company in liquidation has admitted the debt. However, it was unable to repay the same and hence the winding up petition was filed and subsequently winding up order was passed. In order to settle the debts of Shri Kamlesh Patel, the company /liquidation has offered to sell its office premises and part of the open land adjacent to its factory premises and an agreement to sell was executed in favour of the said Shri Kamlesh Patel by the company in liquidation way back on November 22, 2000. However, as there was no immediate buyer available for the said properties, it was mutually decided that Shri Kamlesh Patel be given an irrevocable power of attorney to sell off these properties to any buyer at a later stage. Pursuant to the same, power of attorney dated November 1, 2001,came to be executed by the company in liquidation in favour of the said Shri Kamlesh Patel. The company in liquidation created mortgage in favour of the said Shri Kamlesh Patel also on November 1, 2001. After execution of this power of attorney, the company in liquidation passed entry in its books of account and reduced the outstanding debt of the said Shri Kamlesh Patel by an amount of Rs. 30 lakhs as per the value of the properties mentioned in the power of attorney. In view of the same, in so far as the company in liquidation is concerned, it has sold off its properties to settle the outstanding dues of Shri Kamlesh Patel which can never be termed as preferential or fraudulent transfer as the agreement tp sell the land was executed in November, 2000, which is more than six months prior to filing of the winding up petition. It is further submitted that the properties have been sold off at the prevailing market rate and that none of these properties were mortgaged properties as alleged by the official liquidator. As stated earlier, the outstanding dues of the Bank of India have already been paid off and it has already written a letter dated November 9, 2005, to this effect to the official liquidator.
18. It is further submitted in the said affidavit-in-reply that the official liquidator has illegally and in an unauthorised manner taken the possession of the registered office premises of the company in liquidation without appreciating that the said office premises has already been sold off to Shri Kamlesh Patel and documentary evidence to such effect have already been placed on record. It is, therefore, submitted that Shri Kamlesh Patel is the owner of the said premises and also in possession of the said premises. The company in liquidation has no right, title or interest in the said property. Nothing whatsoever belonging to the said company in liquidation is lying in the said premises. It is, therefore, submitted that this Court should not ratify the action of the official liquidator of taking possession of the said premises and the official liquidator may be directed to immediately remove the seal and legal notice from the said office premises.
19. After having heard Mr. Tushar Hemani, learned advocate appearing for the applicant, Mr. Premal Joshi, learned advocate appearing for opponent No. 1 and Mr. Samir Bundela, learned advocate appearing for the official liquidator and after having gone through the contents of the miscellaneous civil application, official liquidator's report as well as the affidavit-in-reply to the official liquidator's report, filed by the present applicant and after having considered the statutory provisions and the relevant case law on the subject, the court is of the view that the court has ample power under Rules 6 and 9 of the Companies (Court) Rules read with Order 47, Rule 1 of the Civil Procedure Code to entertain the review application, if the circumstances so warrant. Thus the opponent No. 1 original petitioning creditor the only creditor which had filed the winding up petition before comes to court and since the matter was settled between the petitioning creditor as well as the present applicant-company and that settlement ha4 been placed on record and since no one has raised any objection against recalling of the winding up order and even dues of the secured creditor already been satisfied, no useful purpose would be served keeping alive the winding up order. Accordingly, the said winding up order required to be recalled. It is true that the present application is filed late. However, the applicant has prayed for condonation of delay and looking to the celebrated principles envisaged by Section 5 of the Indian Limitation Act as well as various judgments of the courts taking liberal view while interpreting the provisions of Section 5 of the Indian Limitation Act, the court exerciser its discretion in favour of the applicant and condone the delay in filing application. The court Sot the view that a very strong and meritorious case should not be thrown at the very threshold only on the technical ground of delay especially when the real interested party, i.e., opponent No. 1 had not raised any objection against condonation of such delay and/or granting the relief prayed for in the application. The court is also not convinced about the ground raised by the learned advocate appearing for the official liquidator that the present application is not sustainable and that the applicant has no locus standi to file this application. This submission of the learned advocate is contrary to the law laid down by the hon'ble Supreme Court in the case of Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. [2000] 101 Comp Cas 284 : AIR 2000 SC 1583, wherein the hon'ble Supreme Court has negatived the contention that after the order of winding up and appointment of the liquidator, the board of directors had no jurisdiction to move the BIFR by passing a resolution. The court has observed that in a winding up petition, the liquidator is appointed to protect the assets of the company for the benefit of its creditors, secured and unsecured and others. It is not the function of the official liquidator to start the process of rehabilitation of the company as is aimed at under the Act Despite the appointment of the official liquidator, the board of directors continue to hold all residuary powers for the benefit of the company which includes the power to take steps for its rehabilitation?] The court in that case has further observed that the board of directors in that case were not in any way by any judicial order debarred from taking recourse to the provisions of the Act for the purposes of rehabilitation of the company. If there existed a power, its exercise cannot be termed to be mala fide only because it was initiated after availing of the opportunity to make the payment of the amounts due and passing of the order of winding up of the company. These observations are very relevant to the facts of the present case. Here also, the applicant-company has moved before the court after passing of the winding up order. The directors of the company have settled the dues with the creditors and are hopeful about its future prospects. In any case, the compares not prevented by any statutory provision from approaching the court. Simply because the winding up order is passed, the company cannot be restrained from approaching the court for the purpose of recalling or reviewing the winding up order.
20. Looking at the merits of the matter and on the basis of the documentary evidence produced on record and even after publication of the advertisements in two newspapers, no one has come forward to object the recalling of the winding up order, the court is satisfied that no valid ground or justifiable reason survives for allowing the company to be wound up. The dues of the petitioning creditor were satisfied. The dues of the secured creditor, i.e., Bank of India have also been satisfied. No one has come forward to raise any objection or to stake its claim before the company. No winding up petition is pending before the court against the company in liquidation nor any unsatisfied claim remains. A positive averment is made which has not been controverted, to the effect that there is no secured or unsecured creditor of the company. In light of these facts, the court thinks it just and proper to recall the winding up order.
21. The court is of the view that despite letter dated November 9, 2005, written by Bank of India to the official liquidator, the official liquidator has joined Bank of India as party respondent in his official liquidator's report. It is nothing but complete non-application of mind by the official liquidator. There is no question of treating the agreement dated November 1, 2001, executed by the applicant with Shri Kamlesh Patel for the purpose of giving any fraudulent preference to him within the meaning of Sections 531 and 531A of the Act. Though these facts were pointed out to the official liquidator at the time when he took possession of the premises of the company in liquidation, the official liquidator has sealed the premises and pasted legal notice on the main gate of the said premises1. Such an action of the official liquidator is not held to be justified. The prayers made in the official liquidator's report are, therefore, not required to be granted, especially when no expenses have been incurred by him after the winding up order was passed. As a result of recalling of the winding up order, neither the possession of the properties of the company is retained by him nor appointment of security agencies or constitution of sale committee is required.
22. In view of the aforesaid finding and observations, M.C.A. No. 100 of 2006 is hereby allowed. The winding up order passed by this Court is recalled and the petition being Company Petition No. 66 of 2002 is restored to file.
23. On its restoration, Mr. Premal Joshi, learned advocate appearing for the original petitioning creditor submits that in view of the consent terms, the original petitioning creditor seeks permission to withdraw Company Petition No. 66 of 2002. Since no other winding up petition is pending against the company and no one enters in the shoe of the petitioning creditor, the original petitioning creditor can be permitted to withdraw Company Petition No. 66 of 2002. However, as per the present roster, this Court cannot hear the said petition and hence, registry is directed to place the said company petition before the appropriate court as per the present roster.
24. O.L.R. No. 11 of 2006 is also disposed of without granting any prayer made therein and the official liquidator is hereby directed to remove the seal and legal notice pasted on the main gate of the premises.