: 1 : IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY APPLICATION NO.883 OF 2008 IN COMPANY PETITION NO.642 OF 1983 In the matter of M/s.Shreeniwas Cotton Mills Ltd. (in liquidation) In the matter of Section 536(2) with Section 446 of the Companies Act, I 1956 ; Adinath Builders Pvt.Ltd. ...Applicant V/s. The Official Liquidator of . M/s.Shreeniwas Cotton Mills. Ltd.& Anr. ...Respondents Mr.Virag Tulzapurkar, Senior Counsel i/b Desai Desai & Carrimjee for the Applicant. (In C.A. No.883 of 2008) Mr.Iqbal Chagla, Senior Counsel with Mr.Virag Tulzapurkar, Senior Counsel, Mr.Cyrus Ardeshir and Mr.Rahul Dwarkadas i/b Wadia Gandhy & Co. for the Applicant. (In C.A. No.1294 of 2007) Mr.B.R. Zaiwala, Senior Counsel with Mr.Arif Doctor, Mr.Mukul Taly, Mr.Yusuf Sheikh and Mr.Rakesh Mishra i/b S. Mahomedbhai & Co. for the Intervenor - Meghal Homes Pvt.Ltd. Mr.D.D. Madon, Senior Counsel i/b Dave & Co. for Respondent No.2 - Mr.Ranganath Somani. Mr.S.M. Dharap for Shreeniwas Girni Kamgar Kruti Samiti. Mr.V.P. Sawant, Official Liquidator present. Mr.Sudhir Talsaniya i/b Mr.Y.M. Pendse for the Applicant - R.M.M.S (In C.A. No.1578 of 2008). Mr.M.P.S. Rao i/b M.V. Kini & Co. for State Bank of India. : 2 : CORAM : S.J. VAZIFDAR, J. DATED : 16TH JANUARY, 2009. P.C. : 1. The applicant seeks permission to purchase and acquire from Respondent No.2 - Rangnath B. Somani 6302 issued, subscribed and fully paid up equity shares of the face value of Rs.100/- each of the company in liquidation. . The company was ordered to be wound up by an order dated 25.7.1984. 2. It is not necessary to deal with the details of schemes presented under Section 391 of the Companies Act by various parties including three Somani brothers and Meghal Homes Pvt.Ltd. sponsored by Videocon Limited. The scheme presented by latter was on affidavit. . The scheme presented by the Somanis was rejected by a learned single Judge of this Court. The Division Bench (to which I was a party) set aside the judgment and allowed the scheme subject to certain modifications. In an appeal filed by Meghal Homes Pvt.Ltd. the Supreme Court set aside the order and judgment of the Division Bench and remanded the matter to the Company Court for fresh consideration. : 3 : . Thereafter the scheme presented by the Somanis under Section 391 of the Companies Act was withdrawn. 3. Company Application No.1294 of 2007 has been filed by one Venkateshwar Somani under Section 466 of the Companies Act for a permanent stay of the winding up order. That company application is pending. 4. Mr.Zaiwala, the learned Senior Counsel appearing on behalf of Meghal Homes Pvt.Ltd. opposed the present application for transfer of the shares. He submitted that the Court ought not to allow the application lightly or mechanically and ought to exercise its discretion carefully while granting such an order. He relied upon the judgment in re Onwad Building Society, 1891 2 Queen’s Bench Division, 463. I proceed on the basis that the submission is well founded. 5. In the facts of the present case, there are no grounds which disentitle the Applicant to the reliefs claimed. In fact the transfer is in the interest of the public in general and to the company, its shareholders and creditors in particular. . The winding up order was passed almost twenty : 4 : five years ago. There are proposals to revive the company including by the Applicant and its group and Meghal Homes Pvt. Ltd. Whether the attempts are bona-fide or not is another matter. Which of the rival schemes or proposals ought to be preferred is also an aspect that must be considered in appropriate proceedings. There is not a single creditor, who has opposed this application for transfer. The workers who have been kept out of their dues for many years, have not only not opposed the application but have supported the same as the Applicants’ proposal ensures payment of their dues. 6. Mr.Zaiwala however submitted that the transfer is mala-fide as by the transfer of shares the transferee will be acquiring the properties of the company at a considerably low price. 7. There is no question of the transferee acquiring the properties of the company at a low price. It is important to note that irrespective of whether this transfer is allowed or not, the existing shareholders also intend supporting Company Application No.1294 of 2007 under Section 466 of the Companies Act. Thus whether it is the existing shareholders or the transferee, who holds the shares, makes little difference to the rights of the company, its shareholders, creditors or any other person : 5 : including Meghal Homes Pvt.Ltd. 8. Whether the application under Section 466 or whether any other application for reconstruction or otherwise in respect of the company in liquidation ought to be allowed or not is entirely within the power and control of the Company Court. If in fact any prejudice is caused to the company or to any other person, there are adequate safeguards to prevent the same. Suffice it to state that the transfer per-se will not affect the rights of any party including Meghal Homes Pvt. Ltd. or confer any rights qua such proposal in the transferees favour. 9. Mr.Zaiwala then submitted that this was merely an attempt to avoid the rights of Meghal Homes Pvt.Ltd. in respect of about 55,000 equity shares of the company in respect whereof it has filed a suit for specific performance in this Court. 10. These 55,000 equity shares do not form the subject matter of the present Company Application. These shares constitute about 40% of the fully paid up equity share capital of the company. He stated that the shares are presently held in escrow, by M/s.Kanga & Co. A suit had been filed by some of the members of the Somani family against other members of that family in respect of the said shares in which by an order : 6 : dated 17.12.2007 in Notice of Motion No.318 of 2007 in Suit No.209 of 2007, 44,666 all rights in respect of these shares had been ordered to be frozen. The suit however has been disposed of in terms of an order dated 4.3.2008. 11. Be that as it may, the fact remains that the suit filed by Meghal Homes Pvt.Ltd. being Suit No.3014 of 2005 is still pending in this Court. There are no interim orders. Mr.Zaiwala submitted that if the present application is allowed, the transferees will be able to pass any resolution and thereby deal with the property to the detriment of the company and Meghal Homes Pvt. Ltd. 12. The apprehension is unfounded. As stated above, the Company Court will no doubt take into consideration all aspects of the matter while considering the application under Section 466 or any other proposal. This order shall not affect the rights of Meghal Homes Pvt.Ltd. to contend, if it is otherwise entitled to, that the application under Section 466 or any other application including for reconstruction ought not to be allowed. It is obvious also that this order cannot affect the rights of Meghal Homes Pvt.Ltd. in the suit filed by it for specific performance of the said 55,000 shares. : 7 : 13. To reiterate, the recognization of the transfer sought by this application, cannot and does not prejudice any other party in any manner whatsoever for the simple reason that even if the transfer is not permitted, the present shareholders are also supporting/continuing to support the application under Section 466. Ultimately therefore, Company Application No.1294 of 2007 will be decided on its own merits and any defence thereto will not be prejudiced by this order. 14. It is pertinent to note that an application for transfer of 2291 equity shares belonging to L.I.C. was made by one M.P. Lodha, who is also a Director in the Applicant. That application was allowed by an order and judgment dated 17.4.2008. The learned Judge held that he was satisfied from the material produced that the transfer ought to be allowed and that it would not be contrary to the public interest. 15. In fact the transfer of shares is in the public interest and in the interest of the company in general and its shareholders and the creditors especially the workers in particular. The Applicant intends reviving the company. Meghal Homes Pvt. Ltd. also intends reviving the company. If the Applicant is excluded from the process and the existing shareholders for some reason withdraw from the process : 8 : of revival, it would reduce the number of proposal for revival. This cannot possibly be in anyones interest. 16. Mr.Zaiwala expressed the apprehension that despite being entitled to the said 40% equity shares, Meghal Homes Pvt. Ltd. may well be excluded from the process of reviving the company, as the shares are presently the subject matter of the suit. 17. Whether Meghal is entitled to any rights in respect of the said shares can only be decided in the said suit. There is nothing that prevents Meghal Homes Pvt. Ltd. from obtaining interim orders in its favour even as regards the exercise of voting rights in respect thereof. The present application cannot possible be opposed merely on the ground that a suit filed by Meghal Homes Pvt. Ltd. is pending. Further the effect thereof can also be considered by the Company Court while considering any scheme or proposal in respect of the company including in Company Application No.1294 of 2007. 18. In the circumstances,the Company Application is made absolute in terms of prayers (a) and (b). . The operation of this order is stayed for a period of two weeks from today to enable Meghal Homes Pvt.Ltd. to challenge the same.