GUPTAJEE CHARITABLE TRUST Vs. BHARAT CARPETS LTD

JUDGEMENT

(1.) The respondent Bharat Carpets Ltd. (hereinafter referred to as the company) is a company under liquidation. Provisional winding up order was passed on 23.8.1984 in CP No.50 of 1984 and final winding up order was passed on 18.5.1987. Official Liquidator was appointed who has seized all the assets and records of the company. Liquidation proceedings are still pending. There have been certain attempts to revive/rehabilitate the company and scheme under Section 391 of the Companies Act (hereinafter referred to as the Act) is pending before the Company Court which has been filed by M/s. UCC Builders Pvt. Ltd./Respondent No.2 and M/s. Maharani Paints (India) Pvt. Ltd./Respondent No.3 herein. All the appellants are the propounder/ex management of the company. They claimed that process of rehabilitation under Section 391 of the Act does not offer any compromise or arrangement to the creditors and members of the company. However, no such claim has been filed by them so far. The respondent No.2 and 3 (hereinafter referred to as the propounder of the scheme) had moved application under Section 536 (2) of the Act read with Rule 9 of the Companies (Court) Rules, 1959 seeking validation of purchase of shares after the winding up order dated 18.5.1987. In this application, the case set up by the propounder was that a Share Purchase Agreement/MoU/Deeds of Arrangement dated 10.3.2006 was executed between the original share holders and propounders which is a composite agreement for purchase of shares and for settlement of liabilities of company in liquidation. According to the propounders, vide this agreement, they had purchased 223600 number of shares out of 3,50,000 equity shares of the company which represents 63.89% of equity. According to them, respondent No.2 holds 17650 (50.19%) shares whereas respondent No.3 holds 47950 (13.70%) shares of the company. In the application filed under Section 536(2) of the Act, it was further averred by the propounders that Mr. Puneet Gupta, one of the erstwhile Directors/shareholders who was also a party to the MoU, had maliciously sent revocation notice dated 10.4.2011 i.e. after a lapse of more than five years of the MOU/Deeds of Arrangement seeking to unilaterally revoke the MoU/Deeds of Arrangement dated 10.3.2006. Allegations were also made against other erstwhile Directors/shareholders who had sold the shares vide said MoU. It was stated in detail as to how the respondent Nos.2 & 3 had purchased the shares from time to time from the erstwhile shareholders by the execution and share transformation issued in their favour. Prayer was, therefore, made to validate the transfer of shares as per the details given in the said application in favour of the propounders and to direct the Official Liquidator to make necessary amendments in the captioned company register. Since admittedly, the transfer took place after commencement of the winding up, sub-Section (2) of Section 536 states that such a transfer of share is void. In case, the transfer is made after the winding up orders passed by the Court, then it can only be validated by the Court. It means that the transfer is treated as void but the Court which has passed the winding up order has given the power to validate the transfer.

(2.) The erstwhile shareholders (appellants herein) were put to notice of the filing of that application. Official Liquidator also entered appearance in the proceedings. As far as OL is concerned, he filed his reply affidavit inter alia stating that every document annexed with the application with regard to the purchase of the equity shares of the propounder of the scheme appeared to be legal and proper fulfilling the mandatory requirement of transfer and purchase of equity shares. He also stated that the Court had the power to valid the transfer of shares in favour of the propounders. The appellants, however, objected to the relief claimed by the propounders. The learned Single Judge examined the ambit and scope of Section 536(2) of the Act. The company Court referred to the judgment of Calcutta High Court in the case of J. Sen Gupta Private Ltd. (In Liquidation), 1962 AIR(Cal) 405 wherein the said Court has observed as under:

(3.) The company Court also took note of following discussion in The Sidhur Mills Company Limited,1987 1 CompLJ 71 (Guj.) by the Gujarat High Court in the following manner: