CHETAN K. SINGH Vs. CITI BANK

JUDGEMENT

(1.) THIS appeal filed under Section 483 of the Companies Act, 1956 (for brevity "the Act") is directed against the order dated May 7, 2009, passed by the learned company judge in Company Application No. 803 of 2007 in C. P. No. 374 of 2002 (Chetan K. Singh v. Citi Bank N.A. : [2009] 150 Comp Cas 409 (P & H)). The application filed by the appellant an ex -director of respondent No. 3 company (in liquidation) under Section 536 of the Act seeking post sale approval in respect of the property belonging to the company (in liquidation) has been dismissed doubting the bona fides of the sale made apart from other grounds.

(2.) THE brief facts of the case are that a winding up petition was filed by the respondent -Citi Bank being C. P. No. 374 of 2002 on November 12, 2002, before this Court. The Allahabad Bank -respondent No. 2 six months prior in time had filed O. A. No. 117 of 2002 before the Debts Recovery Tribunal, New Delhi (for brevity "the DRT"). The property of respondent No. 3, i.e., M/s. Venire Industries Ltd. (in liquidation) was attached by the Debts Recovery Tribunal vide order dated July 19, 2002, which included the industrial plot which is the subject -matter of dispute in the present application. A copy of the order has been placed on record as annexure R11 with the written statement. Plot No. J15 Jagamara Bhubneshwar measuring about one acre was purchased by the respondent -company (in liquidation) which is situated at Bhubneshwar (Orissa) from the Government of Orissa by way of 90 years lease. The Allahabad Bank entered into a one -time settlement with the respondent -company (in liquidation) for a sum of Rs. 201 lakhs on March 23, 2005 (Al) and the Debts Recovery Tribunal vide its order dated October 12, 2004, had permitted the respondent -company (in liquidation) to seek a prospective buyer of the mortgaged property (A2). Consequently, the respondent -company found a buyer, namely, M/s. Siksha "O" Anusandhan having its principal office at 224, Dharam Vihar Khandagiri Bhubneshwar who agreed to purchase the aforesaid property for a sum of Rs. 200 lakhs. Accordingly, an agreement to that effect was entered into on March 3, 2005 (A3), i.e., prior to the date of one -time settlement. The respondent -company addressed a letter on March 31, 2005, to the Director of Estates, Government of Orissa to transfer the property in favour of M/s. Siksha "O" Anusandhan after the sale consideration was realised and paid to the Allahabad Bank (A4). On April 20, 2005, the Allahabad Bank wrote to the Director of Estates, Government of Orissa informing him that the mortgage had since been redeemed and Plot No. J15 was no longer subject to any charge (A5). The Allahabad Bank withdrew its recovery application since its claim had been settled and the original application was disposed of vide order dated August 22, 2005 (A6). The Government of Orissa permitted the transfer of the aforesaid property in favour of M/s. Siksha "O" Anusandhan vide memo dated July 21, 2007 (A7). The appellant -applicant has stated that tripartite deed is required to be executed for effecting the formal transfer in favour of M/s. Siksha "O" Anusandhan.

(3.) THE application was opposed by the official liquidator by filing a detailed reply by stating that mere attachment did not confer any right on the attached creditor in respect of the property of the company in winding up. The purpose of attaching is to avoid private alienation of the said property and it continues to remain the property of the owner despite such attachment. The bona fides of the sale transaction have been doubted by the official liquidator by pleading that the one time settlement with Allahabad Bank was reached for a sum of Rs. 201 lakhs and the property was sold for almost the same amount of Rs. 200 lakhs. Accordingly it has been submitted that the transaction has to be regarded as a sham transaction with the object of disposing of the valuable property and assets of the company to defeat the winding up proceedings and to defraud the other creditors of the company. The amount of loan taken from the Allahabad Bank was secured by the personal guarantees of the two directors of the company which includes Chetan K. Singh who is the applicant -appellant. The whole transaction has been an attempt on the part of the ex -directors to avoid their personal guarantee by fraudulent sale of valuable assets of the company in winding up.