- (1.) M. C. Jain, J. The Official Liquida tor has made the present application to declare the sale as void in terms of Section 537 (2) of the Companies Act which has been made by the U. P. F. C. respondent No. 1 in favour of respondent No. 2 of the assets allegedly belonging to M/s. Hira Floon Ltd. (In Liquidation ).
(2.) THE relevant facts may be stated briefly. A winding up petition No. 18 of 1989 was presented against M/s. Hira Floon Ltd. having its registered office at Kaloki, Anupshahr Road, Bulandshahr by one Jitendra Kumar, Proprietor of a firm Ultimate Advertising and Marketing, New Delhi. THE Company was ordered to be wound up by the Court's order dated 8-8-1989. Formerly, Hira Industries was a partnership firm and Hira Floon Ltd. (In Liquidation) was incorporated on 2-1-86, taking the running partnership firm along with all its assets, liabilities and goodwill as agreed upon between the partners of the said firm and Directors of the newly formed company. THE U. P. F. C. respondent No. 1 had allegedly advanced a loan to the partnership firm abovenamed. It took over possession of the company on 3-4-89 and sold the assets of the company to respon dent No. 2 for Rs. 4 lacs in 1990. THE winding up petition had been presented on 9-3-89 in which the winding up order was ultimayely passed on 8-8-89. Section 441 (2) of the companies Act provides that in a winding up of Company by the Court, the winding up proceedings shall be deemed to commence at the time of presentation of the petition for the wind ing up. THE winding up order having been made on 8-8-89, all its properties came into the custody of the Court, relating back to the date of presentation of the winding up petition. THErefore, the U. P. F. C. could not take possession of the assets of the Company and sell them. It is with these allegations that the Official Liquidator has presented the present application for declaring the sale effected by the U. P. EC. respondent No. 1 in favour of respondent No. 2 in respect of the assets of the Company to be void as per the provision contained in Section 537 (2) of the Companies Act. The defense put forth by respon dent No. 1-U. P. F. C. may shortly be stated thus: It granted a term loan of Rs. 2,84,000/- and Rs. 52,0007- (reduced to Rs. 29,650/-) respectively to the partnership firm- M/s Hira Industries. The partners of the said firm were Raghunath Prasad Singhal, Santosh Kumar, Harish Kumar Singhal and Smt. Madhu Singhal. To secure the above two loans, the firm mortgaged a piece of land 3 bighas 15 biswas bearing khasra No. 106 situate at Kaloli, Tehsil and Pargana Baran, District Bulandshahr in favour of U. P. F. C. by deposit of title deed. The said land belonged to one of the partners of the firm, Raghunath Prasad Singhal. Subsequently, the partners of the firm decided to change the constitution of, the firm and converted it into a Public Ltd. Company. The U. P. F. C. granted permis sion to this change subject to completion of the requisite legal formalities. But the immovable assets of the firm were never transferred to the company. The U. P. F. C. took possession of the mortgaged proper ty in pursuance of Section 29 of the State Financial Corporation Act and sold the same on 28-3-89 in favour of Mohd. Rais to whom the possession of these assets was handed over on 14-5-90. The property sold to the said purchaser never belonged to the Company (In Liquidation ). The U. P. F. C. being a secured creditor could proceed under Section 29 of the State Financial Cor poration Act and had every right to sell the property mortgaged to it to secure the loan advanced to the partnership firm. With these contentions, the U. P. F. C. has prayed for the rejection of the application made by the Official Liquidator. Notice was also issued to the pur chaser also, but he did not turn up before the Court.
(3.) THE affidavit and counter affidavit have been exchanged between the contest ing applicant-Official Liquidator on be half of the Company (In liquidation) and U. P. F. C.-respondent No. 1 have also heard the arguments advanced by the Official Liquidator and on behalf of the respon dent No. 1. The point for consideration is as to whether the property sold by the U. P. F. C.-respondent No. 1 belonged to the Com pany (in liquidation ). Some facts are un disputed that the winding up petition had been presented by a creditor against the Company in question on 9-3-89 and the winding up order was passed on 8-8-89. There can be no dispute about the legal position that as per Section 441 (2) of the Companies Act, in case a winding up of Company by the Court, the winding up proceeding is deemed to commence at the time of presentation of petition for the winding up. Section 456 (2) of the Com panies Act says that all the properties and assets of the Company shall be deemed to be in the custody of the Court as from the date of order for winding up of the company. The provisions contained in Section 37 (1) (a) and (b) of the Companies Act further provide that where any Company is being wound up by or subject to the super vision of the Court, any attachment, dis tress or execution put in force, without leave of the Court, against the estate or effects of the Company, alter the commencement of the winding up or any sale held, without leave of the Court, of any of the properties or assets of the company after such commencement shall be void. The submission of the Official Liquidator is that the Company in question (In liquida tion) had been formed to take over the running partnership business of the firm-Hira Industries along with all its assets and liabilities. As such, the property where against the U. P. F. C. proceeded, purpor tedly under Section 29 of the Slate Finan cial Corporation Act, had vested in the Company and were in the custody of the Company Court. The same, it is urged, could not be sold by the U. P. F. C. without the leave of the Court. The U. P. F. C. having acted in contravention of the provisions of the Companies Act referred to above, the complained sale is liable to be declared as void. It has been submitted that in any case, the U. P. F. C. is bound to make over the sale proceeds to the Official Liquidator for being distributed amongst eligible creditors consequent upon the winding up order. Stress has been laid on the balance sheet of the Company for the year 1986-87 and so on 8-8- 89. It has been pointed out that on the liabilities side, the loan ad vanced by the U. P. F. C. has been shown-under the title (secured loans), amounting to Rs. 5,62,500/ -. On assets side land, building, machinery etc. have been shown meaning thereby that liabilities and assets of the partnership firm had been trans ferred to the Company (In liquidation ).;