Mohan M. Shantanagoudar, J. - (1.) The instant SLPs have been preferred by IDBI Bank (erstwhile United Western Bank) (hereinafter "the Petitioner") against the judgments dated 17.08.2009 and 28.07.2017 passed by the High Court of Judicature at Madras in O.S.A. No. 284 of 2003 and O.S.A. No. 396 of 2013 respectively, which relate to Company Petition (C.P.) No. 179 of 2001. Vide the impugned judgments, the High Court dismissed an application seeking the execution of a sale deed in favour of the Petitioner by one Kothari Orient Finance Limited (hereinafter "KOFL") and also revived the winding up proceedings initiated against KOFL.
(2.) The factual background to the instant petitions is as follows: 2.1 On 20.03.1992, KOFL availed a working capital loan of Rs. 55 lakhs from the erstwhile United Western Bank (now taken over by the Petitioner). As on 31.03.1999, the amount owed was Rs.60.55 lakhs. KOFL defaulted on the same. Consequently, it proposed a one-time settlement to the Petitioner for repayment of its dues. Towards this end, KOFL offered to sell its property - Office Space Nos. 102 and 103, 1st Floor, Prestige Point, admeasuring 2056.89 sq. ft. and situated at No. 33, Haddows Road, Nungambakkam, Chennai [hereinafter "the subject property"]. 2.2 Pursuant to the same, KOFL and the Petitioner executed an agreement to sell dated 17.02.2000 with respect to the subject property for a consideration of Rs.1.05 crores. According to this agreement, the Petitioner paid Rs. 41 lakhs as advance and the balance of Rs. 64 lakhs was to be paid at the time of the completion of the sale transaction. This was done in pursuance of the authority vested with Mr. Pradeep D. Kothari (Director of KOFL and Respondent No. 1 in SLP No. 5143/2018, hereinafter "Respondent No. 1") by the resolution dated 31.03.1999 passed by the Board of Directors of KOFL, giving him the right to execute agreement(s) of sale for the said property to improve the liquidity of the company. 2.3 It is important to note that on 18.04.2000, in accordance with the provisions of the Income Tax Act, 1961, a 'No Objection Certificate' was issued by the income tax authorities for the sale of the subject property for a consideration of Rs.1.05 crores. Later, vide letter dated 06.11.2000, possession of the property was also handed over to the Petitioner by KOFL. 2.4 Issues surfaced when two company petitions were filed on 02.07.2001, being C.P. No. 179 of 2001 and C.P. No. 180 of 2001 by one Mr. S. Ramaiah (Respondent No. 3 in S.L.P. (Civil) No. 33825/2009) and his wife respectively. Having deposited monies with KOFL, which had been defaulted upon, they preferred these company petitions under Section 433(e) and (f) and Section 434 of the Companies Act, 1956 (hereinafter "the 1956 Act") seeking the winding up of KOFL and the repayment of their dues (hereinafter "winding up petitions"). When these petitions came up before the learned Company Judge on 05.12.2001, it was observed that the liabilities of KOFL (including outstanding secured loans) were more than the assets. Consequently, the petitions were admitted and directions were issued for appointment of an Administrator and a Provisional Liquidator for KOFL. In addition to this, directions were also issued for publishing the company petitions in an English and Tamil daily, as well as in the Government Gazette. Genesis of S.L.P. (Civil) No. 33825 of 2009 2.5 In April 2002, the Petitioner filed Company Application (C.A.) No. 1208 of 2002 in the aforesaid winding up petition being C.P. No. 179 of 2001, seeking a direction to the Administrator to execute a sale deed in its favour for the subject property, as per Section 536(2) of the 1956 Act. 2.6 Vide order dated 21.04.2003, the learned Company Judge dismissed this application on the ground that the agreement to sell amounted to a fraudulent preference in favour of the Petitioner, as it ignored other similarly placed creditors. The appeal preferred by the Petitioner was numbered as O.S.A. No. 284 of 2003. On 17.08.2009, it was dismissed on the basis that the agreement to sell suffered from legal infirmities and was a fraudulent preference. This order passed by the Division Bench has been impugned in the instant S.L.P. filed by the Petitioner before this Court. Interim Proceedings 2.7 In the interim, Mr. Pradeep D. Kothari (Respondent No. 1) filed C.A. Nos. 2482-2485 of 2007, seeking permission to pay amounts due to the unsecured creditors of KOFL out of his own personal funds. By order dated 09.10.2007, the learned Company Judge disposed of these applications, directing Respondent No. 1 to deposit Rs. 4.69 crores with the Administrator towards full and final settlement of the dues of the unsecured creditors of KOFL. It was also directed that remaining amount (if any) should be refunded back to him after payment to the depositors. 2.8 On 23.06.2009, based on a perusal of the interim and final report filed by the Administrator, the learned Company Judge noted that 6,464 out of the total 10,968 depositors (unsecured creditors) of KOFL had been paid by the Administrator to the extent of 20% and 30% of the funds had been brought in by the Director. For the remaining 4,504 depositors, it was observed that the entire claims of about Rs. 5.87 crores had been settled by Respondent No. 1 privately. Since part of the amount due to them was covered by recoveries made from debtors of KOFL, an amount of Rs. 1.95 crores remained out of the Rs. 4.69 crores deposited by Respondent No. 1. Consequently, this amount was directed to be refunded back to him. Vide this order, the learned Company Judge also discharged the Administrator on the basis that his primary obligation of redemption of dues of unsecured creditors had been fulfilled. 2.9 Against this backdrop, the original Company Petitions came up for hearing before the Company Court on 21.06.2010. Notice was issued to the petitioning creditor, S. Ramaiah, who is arraigned as Respondent No. 3 herein. Genesis of S.L.P. (Civil) No. 5143 of 2018 2.10 On 03.03.2011, the Petitioner filed another company application, C.A. No. 734 of 2011 in C.P. No. 179 of 2001 seeking the discharge of the Official Liquidator, who was acting as the Provisional Liquidator of KOFL (Respondent No. 2 in the SLPs before us). This application was made on the ground that there were no other claims left to be settled against the company, and therefore, the services of the Official Liquidator were no longer required. The application was opposed by Respondent No. 1 on the ground that it would prejudice other creditors of the company and was a mala fide attempt by the Petitioner to grab the subject property. Meanwhile, the Official Liquidator filed a report on 16.01.2013 seeking permission to advertise and invite claims from unsettled creditors of KOFL, if any. 2.11 By order dated 04.10.2013, the learned Company Judge allowed the application and discharged the liquidator in view of the fact that unsecured creditors of KOFL had been settled. Further, given the lack of adequate advertising of the winding up petition, and the unwillingness of any other creditor or contributory of KOFL to prosecute the petition in terms of Rule 101 of the Companies (Court) Rules, 1959 (hereinafter "1959 Rules"), the original winding up petition, C.P. No. 179 of 2001, was dismissed. The Official Liquidator was directed to return investments worth Rs. 1.27 crores which were lying with him, back to KOFL after deducing administrative expenses incurred by him. 2.12 Soon after this order, one of the secured creditors of KOFL, State Bank of India (hereinafter "SBI") approached the Debts Recovery Tribunal, Chennai (hereinafter "DRT") for securing its interest and sought an injunction restraining the Official Liquidator from refunding the sum of Rs. 1.27 crores to KOFL. By order dated 13.12.2013, the DRT ordered that the said sum be attached once it is transferred to KOFL, so that the banks can recover their dues from the company. 2.13 In the interim, Respondent No. 1 filed an appeal against the order of the Company Court dismissing the winding up petition. By order dated 28.07.2017, a Division Bench of the High Court revived the winding up proceedings on the basis that it would be unjust and inequitable to wind up the company only for the reason that no other creditor or contributory was willing to prosecute the winding up petition. Taking note of the secured creditors of KOFL who had still not been satisfied and had consequently approached the DRT, C.P. No. 179 of 2001 was revived and the Official Liquidator was directed to continue the winding up proceedings under the supervision of the Company Judge. This order of the Division Bench in O.S.A. No. 396 of 2013 has been impugned in the aforementioned S.L.P. (Civil) No. 5143 of 2018 filed by the Petitioner before this Court.
(3.) In view of this factual background, two issues arise for consideration before this Court: First, whether the winding up proceedings against KOFL should be revived. Second, in the event that the proceedings should be revived, can a sale deed be executed based on the agreement to sell dated 17.02.2000 entered into by the Petitioner and KOFL.;