IDBI BANK LIMITED THROUGH DGM (LEGAL) versus THE OFFICIAL LIQUIDATOR, OFFICE OF THE OFFICIAL LIQUIDATOR OF COMPANIES & ANR.

Citation: [2019] 15 S.C.R. 549 · Decided: 17-10-2019 · Supreme Court of India · Bench: MOHAN M. SHANTANAGOUDAR, AJAY RASTOGI · Disposal: Dismissed

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Judgment (excerpt)

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IDBI BANK LIMITED THROUGH DGM (LEGAL)
v.
THE OFFICIAL LIQUIDATOR, OFFICE OF THE
OFFICIAL LIQUIDATOR OF COMPANIES & ANR.
(Special Leave Petition (Civil) No. 33825 of 2009)
OCTOBER 17, 2019
[MOHAN M. SHANTANAGOUDAR AND
AJAY RASTOGI, JJ.]
Company (Court) Rules, 1959: rr.96, 99, 24 and 101 –
Winding up petitions, advertisement – Mandatory requirement –
Held: The advertisement of a winding up petition is mandatory –
However, if the petitioning creditor fails to advertise the petition
within the prescribed time, r.101 accords discretion to the court to
substitute such petitioning creditor with another creditor or
contributory, if latter is capable and desirous of prosecuting the
winding up petition – In the instant case, no such advertisement
was made – No other creditor or contributory expressed willingness
to prosecute the original winding up petition – At the same time, as
noted by the Division Bench of High Court, there were other
unsatisfied secured creditors of KOFL who were not given the option
to step into the shoes of the petitioning creditor in terms of r.101 –
Given the absence of a specific provision mandating that the petition
only be advertised by petitioning creditor, the Company Court has
the discretion to direct the publishing of an advertisement to secure
the interest of other creditors – In such situations, the winding up
proceedings cannot be dismissed, as it would frustrate the very
objective of securing the interest of all creditors – Clearly, the
submission for the Petitioner that the winding up petition deserves
to be dismissed as all creditors of KOFL have been satisfied is belied
by the existence of the proceedings before the DRT – The records
showed that the settlement of dues was only with respect to the
unsecured creditors of KOFL, which was carried out pursuant to
the orders issued by the Company Judge – Therefore, given that the
secured creditors of KOFL have still not been satisfied  and are
bound to be affected by any order dismissing the winding up
proceeding, the Company Court is directed to issue appropriate
directions to the Official Liquidator for publishing the advertisement
of the proceedings in accordance with law.
   [2019] 15 S.C.R. 549
549
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SUPREME COURT REPORTS
[2019] 15 S.C.R.
Companies Act, 1956: ss.293, 531 – Whether the agreement
to sell executed by KOFL in favour of petitioner amounted to
fraudulent preference and consequently whether the petitioner has
a right to seek the execution of sale deed in its favour – Held: s.531
is a provision that deals with the effect of winding up of a company
on its antecedent transactions – It provides that a transfer or any
other act done in relation to the property of a company within a
period of six months before the commencement of its winding up
(“twilight period”) shall be deemed to be a fraudulent preference
of its creditors and accordingly be invalid – In the instant case,
s.531 should be read in conjunction with s.293, which stipulates
that the sale of the whole, or substantially the whole of the property
of a public company requires the consent of its general meeting  –
s.531 provides that any act relating to the property of a company
may qualify as a fraudulent preference if two conditions are met –
First, the dominant motive in the mind of the company (as represented
by its directors or general body of shareholders) should be to prefer
a particular creditor – Second, the said act must be undertaken
during the period of six months preceding the filing of the winding
up petition of the company – While the first requirement ensures
that the dominant intention to defraud creditors is detected, the
second ensures that there is a level of commercial certainty and
finality of transactions for those interacting with the company –
s.293(1) requires the consent of the general meeting of a company
in case of a sale or disposition of the whole or substantial whole of
its property – s.293(1) is applicable to the instant case in view of
the categorical finding by both the Courts below that the subject
property is the only immovable property of KOFL – Notably, no
approval from the general meeting of KOFL was obtained – There
was only a Board resolution permitting Respondent No.1 to execute
agreements of sale and other documents for the purpose of selling
the subject property – In the absence of the requisite approval from
the general meeting, the instant application for execution of a sale
deed cannot be a

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