COMPANY APPEAL(DB) No. 7 OF 2010 (An appeal against the judgment and order dated 19.2.2010 passed in Company Petition no. 7 of 1998) DAYA BUILDERS & PROPERTIES (P) LTD AT PRESENT HAVING ITS REGISTERED OFFICE AT DOBHI ROAD, GAYA, P.S.- RAMPUR, TOWN & DISTRICT- GAYA, THROUGH ITS AUTHORIZED DIRECTOR, SANJAY SAHAY, SON OF LATE DAYANAND SAHAY, RESIDENT OF A.P. COLONY, P.S.- RAMPUR, TOWN & DISTRICT- GAYA. .--------------------------Appellant Versus M/S SHIV SHAKTI BUILDERS & FINANCIAL CO. LTD., (IN WINDING-UP) THROUGH THE OFFICIAL LIQUIDATOR, ATTACHED TO PATNA HIGH COURT HAVING ITS OFFICE AT MAURYA COMPLEX, 4TH FLOOR, ‘A’ WING, P.S. KOTWALI, TOWN & DISTRICT- PATNA. -----------------------Respondents For The appellant : Mr. Chitranjan Sinha , Sr. Advocate. Mr. Mohan Prasad Jha, Advocate For The Respondent : Mr. S.D. Sanjay, Advocate P R E S E N T THE HON'BLE MR. JUSTICE S.K.KATRIAR THE HON'BLE MR. JUSTICE KISHORE KUMAR MANDAL S.K. Katriar, J. This appeal under Section 483 of the Companies Act, 1956, has been preferred by Pendente Lite purchasers of the landed property of the respondent company under liquidation. The appellant is aggrieved by the order dated 19.2.2010, passed by the learned Company Judge, in Company Petition no. 7 of 1998, whereby sale of lands of the respondent company in favour of the transferors of the present appellant, has been set aside. 2. A brief statement of facts essential for the disposal of the appeal may be indicated. The respondent company was engaged in the business of housing construction-related activities, and its business activities are set out in its 2 Memorandum of Association. Krishna Saha, one of the Directors of the company, alienated on behalf of the company, a plot of land covering 1.57 acres, bearing plot no. 119, Khata no. 870, situate at tola Bhagwanpur, Nauza- Bodh Gaya, Thana no. 359, district- Gaya, in favour of Rajni Ranjan, Priya Ranjan, and Sri Prabhat Ranjan (Ranjan brothers, in short), by registered deed of absolute sale on 29.1.1998, for a total consideration money of Rs. four (04) lakhs. Soon thereafter, the body of share-holders passed resolution on 4.4.1998, to take steps for voluntary winding-up of the company. Accordingly, the company filed application for voluntary winding-up in this Court on 15.4.1998, which has been registered as Company Petition no. 7 of 1998. Learned Company Judge passed provisional order for liquidation of the company on 15.5.1998. The Ranjan brothers alienated the said plot of land to three persons by different registered deeds of absolute sale on 16.9.2002, for a total consideration money of Rs. 29.67 lakhs. We are concerned with only one of these alienations, whereby one portion of the land was alienated in favour of the present appellant for consideration money of Rs. 21.38 lakhs. 3. The Official Liquidator submitted to the learned Company Judge, report dated 2.12.2008, submitting therein that the aforesaid alienations were in violation of the provisions of Section 531-A of the Act. The objection raised by the Official Liquidator has been upheld by the learned Company Judge by 3 the aforesaid order dated 19.2.2010, whereby the alienations with respect to 1.57 acres of land has been set aside, and the registered documents have been declared void. Hence this appeal at the instance of one of the purchasers. 4. While assailing the order of the learned Company Judge, learned counsel for the appellant submits that the learned Company Judge has placed a very narrow and restricted construction on the relevant clauses of the Memorandum of Association setting out the aims and objects of the respondent company. He submits that commercial activities cannot be restricted in the manner as has been done by the learned Company Judge. He submits in the same vein that the power to purchase includes the power to sale. He relies on Section 16 of the General Clauses Act. He submits in the same vein that an authority has all the incidental and ancillary powers for effective exercise of the dominant power. He relies on the following judgments: (i) Egyptian Salt and Soda Company versus Port Said Salt Association, reported in A.I.R. 1931 Privy Council 182. (ii) Lakshmanswami versus Life Insurance Corporation, reported in A.I.R. 1963 S.C. 1185., and (iii) Monark Enterprises versus Kishan Tulpule reported in 1992 (74) Company Cases 89. 4 There is no allegation that the original alienation is a sham transaction. He lastly submits that the alienations are done in good faith, for valuable consideration. 5. Learned counsel for the respondent submits that the company was in serious debts and, therefore, the alienations have been made to defeat the interest of the creditors. This has to be read with the resolution taken by body of share holders, a little more than two years after the alienations, to take steps for voluntary winding-up. He, therefore, submits that it is not a bona fide transaction, and not in the ordinary course of business. 6. We have perused the materials on record, and considered the submissions of learned counsel for the parties. Section 531-A of the Act is reproduced hereinbelow: “[531-A. Avoidance of voluntary transfer.—Any transfer of property, movable or immovable, or any delivery of goods, made by a company not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by [the Tribunal] or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator.] This issue has been discussed in detail by the learned Company Judge, and has reached the conclusion that the alienation is neither in good faith, nor for valuable consideration, nor in the ordinary course of its business, for the detailed reasons assigned by him. It is evident on the face of it that the original sale in favour of the Ranjan brothers was made on 29.1.1998, and the share- 5 holders had passed the resolution on 4.4.1998 for voluntary liquidation, i.e. merely two and half months after the transaction. It is further relevant to state that a builder, which the respondent company has primarily been, earns its profits mainly from building activities for which land is essential. Therefore, it will be for the transferor company to make out an extraordinary case that sale of lands was commercially very profitable, and was in the routine course of its business activities. No such material has been brought to our notice. We further note that the respondent company which had a share capital of Rs. 2,32,000/-, incurred loss to the extent of Rs. 2,34,33,810.95, and further loss of Rs. 43,42,674.80, till 31.3.1998. The unsecured loan of the company was to the extent of Rs. 21,45,695.80, and its current liabilities also stood at Rs. 3,12,08,721.53, as against which its assets were to the tune of Rs. 19,08,876.15, and current assets to the tune of Rs. 53,08,971.06. It is thus evident that the company was in heavy debts owing huge amounts to its creditors, and was not in a position to clear all its debts. Resolution for winding-up, therefore, must have been in contemplation at the time of the original sale, which really was filed barely two and a half months after the transaction. We are, therefore, convinced, and we entirely agree with the learned Company Judge, that the original alienation was neither in the ordinary course of business, nor was a bona fide transaction, and was clearly meant to defeat the interests of the creditors. The original transaction is obviously hit 6 by the restrictions engrafted in Section 531-A of the Act, and has to be declared void ab initio. The subsequent alienations by Ranjan brothers automatically becomes void ab initio. 7. In view of the foregoing discussion, we do not wish to examine the remaining issues. However, it should not be taken to be an expression of our views of agreement in so far as the remaining issues dealt with by the learned Company Judge are concerned. 8. In the result, this appeal is dismissed. In the circumstances of the case, there shall be no order as to costs. Kishore K. Mandal, J : I agree. Patna High Court 21st May, 2010 NAFR/pkj (S.K. Katriar, J.) ( Kishore K. Mandal, J. )