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Judgment
B. Manohar, J.—The Karnataka State Financial Corporation (hereinafter referred to as ''the Corporation'' for short) filed this original side appeal, challenging the order dated 17-2-2009 made on C.A. No. 916 of 2005 in Co. P. No. 251 of 1999 passed by the learned Company Judge declaring that the sale of assets of the company in liquidation effected by the appellants in favour of the second respondent in Company Application is void, for want of leave of the Company Court. The facts of the case leading to filing of this appeal is that:
M/s. Ravikiran Krafts Private Limited borrowed a sum of Rs. 67.65 lakhs from the appellant-Corporation. They had committed default in payment of installments and dues. Inspite of repeated requests, the said company failed to pay the dues. The appellant-Corporation after giving opportunity to the borrower-Company invoking its power u/s 29 of the State Financial Corporations Act, 1951 (for short, ''the Act'') took over the said Unit on 20th January, 1996. After taking over the said Unit, plant and machinery was brought to sale. The sale notification was published in a leading newspaper for seven times in order to get the maximum price.
In pursuance of the advertisement dated 4-1-2001, highest offer of Rs. 3.60 lakhs was received and the same was accepted by the appellant-Corporation on 9-2-2002. Even thereafter, an opportunity was given to the borrower-Company to bring better offer. However, the borrower-company failed to offer any better offer. Accordingly, the sale was accepted and sale communication was issued on 22-3-2002. The purchaser paid the entire sale consideration and took over the possession of the plant and machinery on the said date. It appears, that the winding up petition was filed against the borrower-Company and the Company Court passed the winding up order on 1-4-2002. However, the appellant-Corporation was not made party to the said petition, though it was a secured creditor. Thereafter, in the year 2005, the Official Liquidator filed C.A. No. 916 of 2005 u/s 537 read with Section 466 of the Companies Act, 1956 and Rule 9 of the Companies (Court) Rules, 1959 praying to declare the sale of assets in favour of the second respondent is void in-law. In the said company application, though the appellant-Corporation as well as the subsequent purchaser were made parties to the proceedings as respondents 1 and 2, notice to the second respondent was dispensed with as per order dated 30-11-2007. The Company Court, without noticing the facts that the assets of the Company in liquidation have already been sold on 9-2-2002; sale confirmation was also issued on 22-3-2002 and the purchaser had taken possession of the plant and machinery of the company, allowed the said application and declared that the sale of plant and machinery of the company in liquidation in favour of the second respondent is void. The Company Court was of the view that when the liquidation proceeding was pending before the Company Court, the State Financial Corporation has no power to sell the assets of the company in liquidation without the permission of the Court. Further the action of the appellant-Corporation is contrary to Section 229 and 229(a) of the Companies Act and directed the respondents therein to handover the assets of the company in liquidation in favour of the Official Liquidator. Being aggrieved by the said order, the appellant-Corporation has filed this appeal.
Sri K. Manjunath, learned Counsel appearing for the appellant contended that the order passed by the Company Judge declaring sale of the plant and machinery of the company in liquidation is void and directing the respondents therein to hand over the assets of the company to the Official Liquidator is contrary to law. The appellant-Corporation was not a party to the Co. P. No. 251 of 1999 and they were not aware of the pendency of the said winding up petition. The sale of the plant and machinery has been taken over by the appellant on 20th January, 1996; the sale has been effected on 9-2-2002 and it was confirmed on 22-3-2002, i.e. much prior to the passing of the winding up petition. Further, though the appellant as well as the purchaser were made parties in C.A. No. 916 of 2005, notice to the purchaser was dispensed with. The order passed in C.A. No. 916 of 2005 is not binding on the purchaser. Further, the assets of the company has already been handed over to the purchaser on 22-3-2002. Hence the order passed by the Company Judge without notice to the second respondent/purchaser cannot be sustained. He further contended that in view of the law declared in International Coach Builders Ltd. Vs. Karnataka State Financial Corpn., , the Financial Corporation u/s 29 of the Act has power to take action against the debtor/Company so long as there is no order of winding up. In the instant case, as on the date of taking action u/s 29 of the Act and subsequent to sale of the assets of the company, there was no order of winding up. Hence, the order passed by the Company Court cannot be sustainable.
On the other hand, Sri V. Jayaram, learned Counsel appearing for the respondent argued in support of the order passed by the Company Judge and contended that after initiation of the Company proceedings, the appellant-Corporation cannot alienate the plant and machinery of the company in liquidation. In the present case, the winding up petition was presented on 27-9-1999 and by virtue of Section 441(2) of the Companies Act, the winding up of the Company shall be deemed to be commenced from the date of the presentation of the petition for winding up. Hence, action of the appellant is contrary to law.
We have carefully considered the arguments addressed by the learned Counsel for the parties and perused the order impugned of the Company Court and other relevant records. The records clearly disclose that the appellant was not a party in Co. P. No. 251 of 1999. The company in liquidation had availed loan from the appellant-Corporation. For non-payment of the said loan, proceedings was initiated u/s 29 of the Act and the plant and machinery of the company in liquidation was sold on 9-2-2002. The said sale was confirmed and plant and machinery were handed over to the purchaser on 22-3-2002. Admittedly, the order of winding up of the company was passed on 1-4-2002. Further in C.A. No. 916 of 2005 filed by the Official Liquidator, though the appellant as well as the purchaser were made parties as respondents 1 and 2, notice to the second respondent i.e. purchaser was dispensed with. The Company Court without noticing the same, declared that the sale of assets of the company in liquidation is void and directed the appellant and the purchaser to hand over the assets of the company to the Official Liquidator. The order passed by the Company Court is not binding on the second respondent who is a purchaser. The records further disclose that the assets of the company in liquidation were already handed over to the purchaser on 22-3-2002. In the absence of the purchaser, the order passed by the Company Judge is nullity in-law. Hence, we are of the opinion that the order passed by the Company Court is liable to be set aside and the matter is required to be reconsidered by the Company Court after issuing notice to the purchaser. Accordingly, we pass the following:
ORDER
The appeal is allowed. The order dated 17-2-2009 made in C.A. No. 916 of 2005 passed by the Company Court is set aside and the matter is remanded back to the Company Court to reconsider the same, after issuing notice to the second respondent-purchaser.