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Official Liquidator, High Court of Karnataka Vs. V. Viswanathan and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKarnataka High Court
Decided On
Case NumberCompany Application Nos. 76, 293 of 1974, 211 of 1975, 128 of 1977 and 30 of 1978 in Company Petitio
Judge
Reported in[1984]55CompCas70(Kar); 1982(2)KarLJ513
ActsCompanies Act, 1956 - Sections 531
AppellantOfficial Liquidator, High Court of Karnataka
RespondentV. Viswanathan and ors.
Appellant AdvocateS. Vijayashankar, Adv.
Respondent AdvocateTukaram S. Pai, Adv.
Excerpt:
.....order as they substantially involve common questions of law fact as well as they are inter-connected. if the company failed to redeem and the pledge not being a creditor acted on his rights as a pledgee, it will not be open to the official liquidator to claim that the pledge in his favour was a preferential treatment of a creditor. i must not fail to make a reference to the fact that in a petition under s......common questions of law fact as well as they are inter-connected. for purposes of disposal of company application no. 128 of 1977 made by the official liquiditor, the facts stated therein may be taken as the main application. the prayer in the said application is : 1. for a declaration that the pledge of certain machinery by the company in liquidation, namely, m/s. sriranga fertiliser and industries p. ltd., in favour of challam, who is respondent no. 5 in that application, is a fraudulent preference; 2. for a declaration that the pledge is void as against the official liquidator; and 3. for a direction to respondent no. 6, gnanashekharan, to return the pledged machinery to the official liquiditor, he having purchased the same from respondent no. 5, challam. 2. i must straightaway.....
Judgment:

Chandrakantaraj Urs, J.

1. The above applications filed in Company Petition No. 6 of 1973 are disposed of by the following order as they substantially involve common questions of law fact as well as they are inter-connected. For purposes of disposal of Company Application No. 128 of 1977 made by the official liquiditor, the facts stated therein may be taken as the main application. The prayer in the said application is :

1. for a declaration that the pledge of certain machinery by the company in liquidation, namely, M/s. Sriranga Fertiliser and Industries P. Ltd., in favour of Challam, who is respondent No. 5 in that application, is a fraudulent preference;

2. for a declaration that the pledge is void as against the official liquidator; and

3. for a direction to respondent No. 6, Gnanashekharan, to return the pledged machinery to the official liquiditor, he having purchased the same from respondent No. 5, Challam.

2. I must straightaway state that these prayers cannot be granted as I shall give the reasons after briefly setting out the facts leading to these series of applications.

3. In Company Petition No. 6 of 1973, M/s. Sriranga Fertiliser and Industries P. Ltd., by an order made by this court was directed to be wound up. In company Application No. 76 of 1974, the official liquidator proved for a direction from this court to summon all the directors and other respondents therein and direct them to deliver all assets of the company to his possession. In Company Application No. 293 of 1974, the official liquidator in Company Petition No. 6 of 1973 prayed for a direction to respondent No. 2, P.S.V. Challam, to deliver the machinery which the company in liquidation had pledge with the said Challam. In Company Application No. 211 of 1975, the official liquidator prayed for a direction to the said Challam to deposit Rs. 56,000 being the value of the machineries sold to respondent No. 2 therein and deliver all the movable assets to the official liquidator. Company Application No. 128 of 1977 was filed by the official liquidator for a declaration that the pledge of the machinery by the in favour of the fifth respondent therein was a fraudulent preference and further to declare that the pledge of the machinery was void as against the official liquidator with a direction to respondent No. 6 therein to deliver the machinery pledged to the official liquidator. Company Application No. 30 of 1978 was filed by the official liquidator for condonation of the delay in filing Company Application No. 128 of 1977.

4. Having regard to the decision to be rendered in this common order, Company Application No. 40 of 1978 is allowed and the delay is condoned.

5. The question which falls for determination is whether the pledge of certain machineries of the company in liquidation with Challam was fraudulent preference. What was pledge was the goods that were originally hypothecated to the Indian Overseas Bank. Residency Road, Bangalore, which is also one of the respondents in one of the applications. In order to discharge the amount due on that hypothecation, the machineries were pledged with the aforementioned Challam, who obtained a discharge of the hypothecation debt by the company in liquidation from the Indian Overseas Bank. At that point of time, Company Petition No. 6 of 1973 had been dismissed on the ground that it was not pressed. It was only later, on August 30, 1973, by a curious procedure, the petition was revived and the order of winding up of the company came to be made. It is not disputed that the pledge took place when there were no proceedings pending against the company in liquidation. In any event, the transaction took place when no petition was pending and the official liquidator cannot claim that the transaction was a fraudulent preference made in favour of the aforementioned Challam. The official liquidator gets jurisdiction only after the order to wind up the company is made. The transactions anterior to the winding up order within the prescribed period of six months under s. 531 of the Companies Act, 1956, would be hit by the provisions of that section only when one of the creditors of the company has been preferred by the directions in discharging the debts of the company. In the instant case, it is nobody's case that P. S. V. Challam was a creditor of the company. Under the agreement of pledge, he had the liberty to sell the machinery in case the pledge was not redeemed within the stipulated time therein. In accordance with the term in the agreement, he subsequently sold the machineries pledged with him after complying with the requirements of law by issuing notice that the machineries pledged would be sold if they were not redeemed. If the company failed to redeem and the pledge not being a creditor acted on his rights as a pledgee, it will not be open to the official liquidator to claim that the pledge in his favour was a preferential treatment of a creditor.

6. For the above reasons, the prayers made in the Company Application No. 128 of 1977 are required to be rejected.

7. It is contended that the Indian Overseas Bank has been described as a preferential creditor. This does not appear to be correct position. In any event, the transaction between the bank and the company in liquidation was a transaction against the hypothecation of the machinery and in that position, if it was a secured creditor and it ceased to be secured creditor the moment the pledge machineries were redeemed by the mode of pledging the same to Mr. Challam and Challam discharging the debt to the bank. Therefore, the creditor and debtor relationship itself with the bank and the company in liquidation had ceased. I must not fail to make a reference to the fact that in a petition under s. 433 of the Act, a party should be cautions when the company petition is closed, before the same is allowed to be revived as in the instant case.

8. With these observations, all the company applications are disposed of as not maintainable.


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