PODAR FINANCE (P.) LTD Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) The Hon'ble Supreme Court vide order dated 11.3.2011 passed in the Petition for Special Leave to Appeal (Civil) No. 3580/ 2011 has observed that the Division Bench of this Court while passing the order dated 25.10.2010 in D.B.C. Special Appeal No. 2/2010 while dealing with the issue whether the applicant-Poddar Finance Private Limited (hereinafter referred to as the "Poddar Finance") was a contributory or not, has only relied upon the balance sheet of the Company to say that the applicant-Poddar Finance was not a contributory and at the same time, the matter was disposed of in the alternative on the assumption that it may be a contributory. Hence, the Apex Court has required the High Court to record finding on the above issue after taking into consideration all the documents.

(2.) Pursuant to the aforesaid order of the Apex Court, the applicant-Poddar Finance has filed misc. application No. 49/2011 before the Division Bench of this Court on 22.3.2011. It is averred in the application that the applicant-Poddar Finance is holding 1,65,010 equity shares of Rs. 10/- each and 12,478 preference shares of Rs. 100/- each of M/s Jaipur Spinning and Weaving Mills Ltd. (hereinafter referred to as "Jaipur Spinning Mills") and the aforesaid shares were acquired from Shree Shakti Mills Limited, Bombay (hereinafter referred to as "Shakti Mills") on 25.1.1979 and transferred on 10.5.1979. The aforesaid shares have been reflected in the balance sheets for the year ended March 1981 and March, 1983. The value of the aforesaid shares was shown Nil in the balance sheet ended March, 1984. On company being wound-up, it was advised that said shares could not be reflected as their value had become Nil for the purpose of accounting, as such, they were removed from the balance sheets of the applicant-Poddar Finance for the subsequent years. The share certificates constitute prima facie evidence of applicant's title over the shares in question and therefore, Jaipur Spinning Mills and Official Liquidator are stopped from contending contrary. In terms of section 428 of the Companies Act, 1956 (hereinafter referred to as "the Act"), the holder of fully paid up shares is deemed to be a contributory. Hence, it was prayed that applicant-Poddar Finance be held to be a contributory of Jaipur Spinning Mills in liquidation and finding to this effect may be sent to the Apex Court.

(3.) The application has been contested by the Official Liquidator by filing reply contending that list of contributories has not been settled so far. It was necessary for the Ex-management to cooperate the Official Liquidator in the matter of recovery of assets of the company as well as in settling the list of contributories and creditors. Winding up proceedings have already taken place by selling plant and machinery and making payment partly to the secured creditors. It is contended by the Official Liquidator in the reply that applicant-Poddar Finance never approached the Official Liquidator that it is a contributory. The share certificates stood in the name of Shakti Mills and the details of cost of purchase have not been given by the applicant. The provisions for transfer of shares are contained in sections 108, 108A, 108B, 108C, 108D, 108E, 109, 110 of the Act. Since folio number of the shares claimed to be transferred has been changed, fresh share certificates should have been issued. The shares held by Shakti Mills could not have been transferred legally for the reason that it was under liquidation vide order dated 21.1.1981 passed by Bombay High Court in Company Petition No. 308/78, which was presented on 25.4.1978. After presentation of petition, shares could not have been transferred. Transfer of shares is void by virtue of provisions of section 536(2) of the Act. Reliance has also been placed on the provisions of sections 531 and 531A of the Act. There is no clear mention in the balance sheet of the applicant-Poddar Finance that money was invested for acquisition of shares in question. The applicant-Poddar Finance has failed to establish that it is a contributory of the company in liquidation.