HENKEL CHEMICALS (I) LTD. Vs. GARWARE NYLONS LIMITED

JUDGEMENT

(1.) This application is for seeking validation under Section 536(2) of the Companies Act, 1956 ("the Act") of (i) a pledge agreement between the Applicant and the Company in liquidation, (ii) invocation of the pledge and (iii) transfer of shares belonging to the Company in liquidation.

(2.) Garware Nylons Limited is a Company in liquidation (hereinafter referred to as "the Company"). The Applicant was a purchaser of yarn from the Company before the winding up petition was presented. Since its inception in the year 1975, the Applicant has been purchasing yarn from the Company. On 8 October 1992, the present Company Petition was filed against the Company. Subsequent to the filing of this petition, a reference was filed by the Company before BIFR. The reference was registered as Case No.46 of 1993. As a result of the reference, the winding up proceedings could not proceed. The Company, however, continued to carry on its business during the pendency of the reference. During this period, the Company approached the Applicant seeking assistance for procurement of raw material. On 1 December 1994, an agreement was arrived at between the Applicant and the Company, in terms of which the Applicant agreed to supply raw material to the Company upto a certain quantity annually for its manufacturing purposes.

(3.) On behalf of the Applicant it is submitted by Mr. Dwarkadas, learned Senior Counsel for the Applicant, that the subject transactions were entered into bona fide and in the ordinary and regular course of business and were in the interest of the Company so as to enable it to continue carrying on its business when its reference was pending before the BIFR. Learned Counsel relies upon the judgment of a learned Single Judge of this Court in Board of Industrial and Financial Reconstruction vs. M/s. Hindustan Transmission Products Ltd.<SLINK_NO>1</SLINK_NO> in support of his submissions. (This judgment was confirmed in Appeal by a Division Bench of this Court in the case of Sunita Vasudeo Warke vs. Official Liquidator, 2013 2 MhLJ 777 Learned Counsel further submits that the pledge, which was created bona fide and for the benefit of the Company, was validly invoked under Section 176 of the Contract Act, 1872 and the transfer of shares was made validly in pursuance of such invocation. Learned Counsel relies upon the cases of R Mathalone vs. Bombay Life Assurance Co. Ltd., 1953 AIR(SC) 385 Dhani Ram and Sons vs. Frontier Bank Ltd, New Delhi, 1962 AIR(P&H) 321 (V 49 C 84) and Commissioner of IncomeTax, Madurai vs. M. Ramaswamy, 1985 57 CompCas 7 in support of his submissions. On the other hand, it is submitted by Mr. J.P. Sen, learned Senior Counsel appearing for the Official Liquidator, that there are three separate transactions in the present case, namely, (i) pledge of 14,99,998 shares, (ii) transfer of 2,21,420 shares and (iii) transfer of 14,99,998 shares, effected on different dates and in that order.