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2010 DIGILAW 3893 (MAD)

Ist Petitioner v. Ist Respondent

2010-09-01

P.JYOTHIMANI

body2010
Judgment :- 1. These applications are relating to the various lands situated in Medak District, Andhra Pradesh stated to belong to the assets of the company, namely Maxworth Orchards India Limited (for brevity, "the Company"). The said company, against which Company Petition in C.P.No.57 of 1998 is filed for winding up on 24.2.1998, was incorporated with the main object of acquiring by purchase, lease, concession, grant, licence or otherwise lands and cultivate, grow, produce or deal in any plantation, agricultural crops, vegetables, fruits and fruit products, trees of all kinds and own, manage and sell the same both in India and abroad; selling land with or without trees, plants, agricultural, floricultural and horticultural produce in all its forms and selling trees, plants, agricultural, horticultural, floricultural produce with or without lands, fell, harvest and remove partially or fully and market the same either in wholesale or retail in India or abroad; assisting any person in procuring land and rendering all services as lessees, managers, agents, consultants and advisors and to develop them to make suitable for cultivation of agricultural crops, plantations, forestry, horticultural and floricultural and to render services to any person in procuring finance from banks, financial institutions, provide all types of management services for developing the land and operating farms; and acting as an export house for all kinds of produce, including agricultural, horticultural and floricultural, dairy, poultry and farm products, including food grains, cereals, seeds, oil, oil seeds, plant, flowers, vegetables, fruits and edible oils, meat, fish, eggs and food and food products and preparation of any nature. 2. The company is stated to have brought during the course of its business within its possession approximately 20000 Acres of land and thousands of customers have invested in the plantations and they in turn have been given piece of land and the company undertook to maintain the land by entering into separate maintenance agreements with the customers. 3. 2. The company is stated to have brought during the course of its business within its possession approximately 20000 Acres of land and thousands of customers have invested in the plantations and they in turn have been given piece of land and the company undertook to maintain the land by entering into separate maintenance agreements with the customers. 3. The petitioner in C.P.No.57 of 1998, M/s.EPC Industries Limited, Mumbai, with whom the company is stated to have entered into an agreement for supply of Drip Irrigation System and which is stated to have sold the pipes to the company, raised a bill for ` 2,22,96,465.54, out of which ` 1,70,93,353.60 is stated to have been paid and there is a balance amount of ` 52,01,910.26 payable and when the petitioner in C.P.No.57 of 1998 issued a statutory notice on 2.12.1997, the letter came to be returned as the company is stated to have closed its registered office at Karumuthu Centre, Chennai. It was in those circumstances, the above company petition came to be filed for winding up. 4. Pending admission of the said company petition, Mr.K.Alagiriswami, learned Senior Counsel was appointed as an Administrator of the company on 12.2.2001 and subsequently, by an order dated 6.2.2006 passed in C.A.No.353 of 1998, he came to be appointed as a Provisional Liquidator. 5. In the meantime, the company petition which was filed on 24.2.1998 came to be admitted by this Court on 14.2.2003 with a direction to effect publication in "India Today" and "Makkal Kural", while dispensing with gazette notification. However, the Official Liquidator was not appointed as Provisional Liquidator and the assets of the company were not taken over by the Official Liquidator. 6. Originally, even after filing of the company petition in the year 1998 and when it was not admitted, the company was represented by a counsel and during that time a scheme of revival by the unsecured creditors came to be filed before this Court for approval in C.A.No.63 of 2001 and it was in that application the Administrator came to be appointed on 12.2.2001 and after the Administrator took charge, he has been overseeing the functions of the Board of Directors of the company and has been taking steps to protect the interest of various creditors of the company. It is stated that the said scheme did not go through at all. It is stated that the said scheme did not go through at all. In the meantime, it is seen that another scheme was placed before this Court in C.P.No.119 of 2007, in supersession of the scheme in C.A.No.63 of 2001 and that came to be rejected in the dismissal of the said company petition by this Court on 5.3.2008, against which Original Side Appeal is stated to have been filed. 7. The first respondent (P.Ananthalakshmi), as it is seen in the records of the company produced by the learned Administrator, was transferred from the Land Acquisition Department of the company to the Legal Department with effect from 2.1.1996 and designated as a Legal Executive of the company. She is stated to have executed a sale deed on 17.3.2003 in favour of the second respondent (Koduru Venkateswara Prasad) selling an extent of 24 Acres of land at Kollur Village and Osmannagar Village, Medak District, Andhra Pradesh. The said sale deed executed by her, which was also registered, shows that it was executed by her in individual capacity and the recital shows as if she has purchased the property in her name under an earlier sale deed dated 16.11.1995. The portion of the recital, which is relevant for the purpose of these applications, is as follows: "WHEREAS the VENDOR is/are in exclusive possession, enjoyment and absolute owner of Agricultural Dry Land bearing Survey No.191, admeasuring area Ac.15-29 Gts., Kollur Village, Ramachandrapuram Mandal, UNDER G.P.KOLLUR, Medak District, A.P., MPP R.C.PURAM, and Survey No.30, admeasuring area Ac.8-11 Gts., situated at OSMANNAGAR VILLAGE, thus total admeasuring area Ac.24-00 Gts., or 9.72 Hectors, Ramachandrapuram Mandal and G.P., Medak District. A.P., MPP R.C.PURAM, has purchased the said above property through a Registered SALE DEED Vide Document No.5109 of 1995 of Book I, Dated 16th day of November, 1995 Registered at R.O.Sangareddy, Medak District, A.P., having Patta Pass Book bearing No.s.Y-439637/502 and Y-294108/19 both are issued by MRO R.C.PURAM, Medak District, A.P., RESPECTIVELY." 8. In the counter affidavit filed by the first respondent (P.Ananthalakshmi) dated 22.12.2003 before this Court, she has stated that as per the terms of her appointment with the company, the job profile entailed her to enter into agreements with land owners and it is based on the same she has entered into such agreements in respect of those lands and the lands were purchased by the company in her name during her tenure. The following is the relevant passage from her counter affidavit: "8. In reply to para 9 of the Memo, I submit that service terms with the applicant company when I was under their employment called for a job profile which entailed entering into agreements with land owners, and as such these agreements were entered into by me with the sole purpose of fulfilling the duties assigned to me by the applicant company. The lands purchased were registered by the applicant company in my name during my tenure as an (sic) emphatically assert that I have been unnecessarily dragged into this controversy, and from the fact that the administrator himself says so it is apparent that he was at least aware that I am not in any way involved. I being dragged into this controversy and being required to undergo mental trauma and severe disruption of my normal life, as also the fact that I had to repeatedly interact with counsel and expend monies, is a matter which I take seriously. I place on record that I intend to proceed legally against any and all those who may be found responsible for having thus involved me in these and any other proceedings without legal justification, what I am going through." 9. In the said affidavit, while the first respondent (P.Ananthalakshmi) has stated that she was holding the power on behalf of the company, she has categorically stated that she has not entered into any transaction and registered the document in the office of the Sub Registrar, Sangareddy. 10. It is stated that the fourth respondent (M/s.Vajra Farms and Engineers), represented by its Power Agent – Sri Raghujie has executed a sale deed dated 17.3.2003 in favour of second respondent (Koduru Venkateswara Prasad) in respect of an extent of 3 Acres in Kollur Village and Osmannagar Village, Medak District, Andhra Pradesh. The description of the property which was sold is as follows: "Agricultural Dry Land bearing Survey No.191, admeasuring area Ac.0-11 Gts. Kollur Village, Ramachandrapuram Mandal, UNDER G.P.KOLLUR, Medak District. A.P., MPP R.C.PURAM, and Survey No.30, admeasuring area Ac.2-29 Gts., situated at OSMANNAGAR VILLAGE, thus total admeasuring area Ac.3-00 Gts., or 1.21 Hectors, Ramachandrapuram Mandal and G.P., Medak District. Ap.P., MPP. R.C.PURAM, Z.P.P. Medak at Sangareddy, Registration Sub-District Sangareddy, Registration District Medak at Sangareddy." 11. Kollur Village, Ramachandrapuram Mandal, UNDER G.P.KOLLUR, Medak District. A.P., MPP R.C.PURAM, and Survey No.30, admeasuring area Ac.2-29 Gts., situated at OSMANNAGAR VILLAGE, thus total admeasuring area Ac.3-00 Gts., or 1.21 Hectors, Ramachandrapuram Mandal and G.P., Medak District. Ap.P., MPP. R.C.PURAM, Z.P.P. Medak at Sangareddy, Registration Sub-District Sangareddy, Registration District Medak at Sangareddy." 11. The second respondent (Koduru Venkateswara Prasad), having purchased the said land, in his turn has sold the said 3 Acres along with the other extent under a registered sale deed dated 13.8.2003 to the third respondent (Sunkara Venkateswara Rao). He has also sold another extent of 18 Acres of land to the third respondent. Thus, under three sale deeds dated 13.8.2003, viz., Document Nos.7314 to 7316 of 2003, the second respondent has sold the total extent of 21 Acres of land purchased from respondents 1 and 4, as stated above, to the third respondent. 12. All these sale deeds are sought to be set aside in these applications by the learned Administrator on the ground that the sales are relating to the lands of the company after filing of the winding up petition, which was on 24.2.1998, and which came to be admitted on 14.2.2003, and therefore, they are null and void. It is also stated by the learned Administrator that on coming to know about the clandestine attitude of the respondents in intentionally attempting to alienate the properties of the company under liquidation, he has moved an application in C.A.No.740 of 2003 praying for an order of injunction restraining the respondents therein from alienating lands purchased by the company with the funds of the company and also for a direction to the Administrator to effect publication of such order in leading local dailies. An order of injunction was granted by this court on 24.4.2003, which was extended until further orders by a subsequent order dated 18.11.2003. 13. It is the case of the learned Administrator that in spite of the order of injunction which has been widely advertised in various newspapers, the sales have been effected. The said factum of the sale was revealed only when the learned Administrator visited the spot in Andhra Pradesh with regard to sale of another property of the company and immediately, the learned Administrator has obtained the registered copies of those documents. 14. The said factum of the sale was revealed only when the learned Administrator visited the spot in Andhra Pradesh with regard to sale of another property of the company and immediately, the learned Administrator has obtained the registered copies of those documents. 14. It is the case of the learned Administrator that the first respondent had no independent right to act except to act on behalf of the company and the sale effected is fraudulent and with an intention of defrauding the company, the first respondent had conspired with the second respondent. Public notices were issued on behalf of the purchasers in Deccan Chronicle by an advocate – P.K.Ramesh regarding the sale of the 27 Acres of land, about which objection was made on behalf of the company by V.R.Alva, Advocate, High Court of Andhra Pradesh. 15. It is the further case of the learned Administrator that nobody has a title or power to sell the property of the company after the company petition was filed for winding up and the sale deeds do not convey any title to the purchasers. It is stated that the second respondent has involved in dubious transactions in collusion with another then employee of the company, Sri Ravi Babu, by fabricating the documents and sold some other lands of the company in Siddhavaram, about which, on behalf of the company, criminal prosecution has been launched. 16. With the above said averments, the learned Administrator has filed these applications for setting aside the sale deeds dated 13.8.2003 registered as Document Nos.7314 to 7317 of 2003 on the file of the District Registrar of Medak District at Sangareddy; sale deeds dated 17.4.2003 registered as Document Nos.2409 and 2410 of 2003 on the file of the Sub Registrar Office, Sanga Reddy; sale deed dated 16.11.1995 registered as Document No.5109 of 1995 by which the first respondent has purchased the property from her vendor to the extent of 24 Acres; and also for a consequential order of injunction restraining the respondents from in any manner interfering with the possession of the applicant company or dealing with it in any manner, including creating any further encumbrance with the properties mentioned therein. 17. The third respondent (Sunkara Venkateswara Rao) filed C.A.No.185 of 2006 to vacate the order of injunction granted by this Court on 25.11.2003 in C.A.No.1937 of 2003 in C.A.No.63 of 2001. 18. 17. The third respondent (Sunkara Venkateswara Rao) filed C.A.No.185 of 2006 to vacate the order of injunction granted by this Court on 25.11.2003 in C.A.No.1937 of 2003 in C.A.No.63 of 2001. 18. It is the case of the respondents that the sale deeds executed by the first respondent (P.Ananthalakshmi) in favour of the second respondent dated 17.3.2003 in respect of 24 Acres of land were executed in her individual capacity and there is nothing to presume that the said property belongs to the company and even if there was an order of injunction, it does not bind the first respondent to sell away her individual property, which she has purchased earlier under the sale deed dated 16.11.1995. It is the further case of the respondents that the first respondent (P.Ananthalakshmi) has never acted as General Power of Attorney of the company and she was the absolute owner of the property having purchased the same long prior to the initiation of the proceedings for revival of the company in C.A.No.63 of 2001. 19. It is the case of the respondents, as submitted by Mr.P.Jayaraman, learned Senior Counsel, that no General Power of Attorney document was produced before this Court and it is not known whether such power of attorney was a registered document and inasmuch as the original documents are with the respondents, there is no need to interfere with the said sales. 20. It is his submission that in the absence of any document produced by the learned Administrator to the effect that the property belonged to the company or that the company by a resolution of the Board of Directors has authorised the first respondent as a General Power of Attorney, even if the first respondent has played fraud on the company, it is for the company to take action only against the first respondent and insofar as the other respondents, they are the bonafide purchasers. Even the purchase by the first respondent (P.Ananthalakshmi) in the year 1995 was not as a General Power of Attorney of the company, the purchase by the third respondent was only after giving public notice. 21. Even the purchase by the first respondent (P.Ananthalakshmi) in the year 1995 was not as a General Power of Attorney of the company, the purchase by the third respondent was only after giving public notice. 21. It is the case of the respondents, as submitted by the learned Senior Counsel, that even the application filed by the Administrator in I.A.No.217 of 2005 in O.S.No.71 of 2004 on the file of the Principal Junior Civil Judge Court, Sangareddy to implead himself as a party came to be dismissed on 25.1.2006, on the basis of the recital in the document No.5109 of 1995, dated 16.11.1995 and therefore, the same is contrary to the contention of the learned Administrator. 22. It is his contention that by applying the provisions of the Benami Transactions (Prohibition) Act, 1988, even assuming that the first respondent has acted as benami on behalf of the applicant company, that does not take away the right of the first respondent inasmuch as the property has been purchased in the name of the first respondent in her individual capacity and the first respondent has never acted as a trustee of the properties of the company and therefore, these applications are liable to be dismissed. 23. Section 536 of the Companies Act, 1956 (for brevity, "the Act"), which avoids certain transfers after commencement of winding up proceedings, is as follows: "Section:536. Avoidance of transfers, etc., after commencement of winding up.- (1) In the case of a voluntary winding up, any transfer of shares in the company, not being a transfer made to or with the sanction of the liquidator and any alteration in the status of the members of the company made after the commencement of the winding up, shall be void. (2) In the case of a winding up by or subject to the supervision of the Court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall unless the Court otherwise orders, be void." and it no doubt contemplates that any disposition made after commencement of the winding up proceedings be void unless the Court otherwise decides. 24. Likewise, Section 537 of the Act, which is as follows, also contemplates avoidance of certain attachments, executions, etc., in winding up proceedings. "Section: 537. 24. Likewise, Section 537 of the Act, which is as follows, also contemplates avoidance of certain attachments, executions, etc., in winding up proceedings. "Section: 537. Avoidance of certain attachments, executions, etc., in winding up by or subject to the supervision of Court:- (1) Where any company is being wound up by or subject to the supervision of the Court:- (a) any attachment, distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up; or (b) any sale held, without leave of the court, of any of the properties or effects of the company after such commencement, shall be void. (2) Nothing in this section applies to any proceedings for the recovery of any tax or impost or any dues payable to the Government." 25. While explaining about the commencement of the winding up by Court, Section 441 of the Act, which is as follows: "Section: 441. Commencement of winding up by Court.- (1) Where, before the presentation of a petition for the winding up of a company by the Court, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Court, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken. (2) In any other case, the winding up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up." especially in sub-section (2) states that the winding up shall be deemed to have commenced from the date of presentation of the petition for winding up. On the facts of the present case, the winding up petition was presented on 24.2.1998. 26. Section 450 of the Act, while explaining about the appointment and powers of the Provisional Liquidator, states as follows: "Section: 450. Appointment and powers of provisional liquidator. (1) At any time after the presentation of a winding up petition and before the making of a winding up order, the Court may appoint the Official Liquidator to be liquidator provisionally. 26. Section 450 of the Act, while explaining about the appointment and powers of the Provisional Liquidator, states as follows: "Section: 450. Appointment and powers of provisional liquidator. (1) At any time after the presentation of a winding up petition and before the making of a winding up order, the Court may appoint the Official Liquidator to be liquidator provisionally. (2) Before appointing a provisional Liquidator, the Court shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing, the Court thinks fit to dispense with such notice. (3) Where a provisional liquidator is appointed by the Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order, but otherwise he shall have the same powers as a liquidator. (4) The Official Liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator, of the company, on a winding up order being made." Accordingly, when a petition for winding up is presented, it is open to the Court to appoint Official Liquidator to be a Provisional Liquidator pending the winding up order. Of course, for such appointment, the procedure contemplated is notice to be given to the company. While appointing the Official Liquidator as Provisional Liquidator, the Company Court can impose specific powers and in the absence of such powers specifically explained, the general powers of the liquidator as contemplated under Section 451 of the Act would apply. But when once the winding up order has been made, the Official Liquidator appointed by the Court as a Provisional Liquidator ceases to be a Provisional Liquidator and he will become the liquidator of the company with all powers vested on him under Section 451 of the Act, which is as follows: "Section: 451. General provisions as to liquidators. (1) The liquidator shall conduct the proceedings in winding up the company and perform such duties in reference thereto as the Court may impose. (2) Where the Official liquidator becomes or acts as liquidator, there shall be paid to the Central Government out of the assets of the company such fees as may be prescribed. General provisions as to liquidators. (1) The liquidator shall conduct the proceedings in winding up the company and perform such duties in reference thereto as the Court may impose. (2) Where the Official liquidator becomes or acts as liquidator, there shall be paid to the Central Government out of the assets of the company such fees as may be prescribed. (3) The acts of a liquidator shall be valid, notwithstanding any defect that may afterwards be discovered in his appointment or qualification: Provided that nothing in this sub-section shall be deemed to give validity to acts done by a liquidator after his appointment has been shown to be invalid." 27. It is no doubt true that under Section 446 of the Act, which is as follows: "Section: 446. Suits stayed on winding up order. (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose. (2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of- (a) any suit or proceeding by or against the company; b) any claim made by or against the company (including claims by or against any of its branches in India); (c) any application made under section 391 by or in respect of the company; (d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company, whether such suit or proceeding has been instituted, or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960 (65 of 1960). (3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court. (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court." after the winding up order has been made or the Official Liquidator is appointed as a Provisional Liquidator after filing of the petition for winding up, no suit or any other legal proceedings pending in any other Court shall be proceeded with and the Company Court shall have jurisdiction to decide those matters. 28. Section 449 of the Act, which is as follows: "Section: 449. Official Liquidator to be liquidator. On a winding up order being made in respect of a company, the Official Liquidator shall, by virtue of his office, become the liquidator of the company." also makes it mandatory that on the winding up order having been made, the Official Liquidator shall be the liquidator of the company. On the facts of the present case, as elicited above, even though the company petition was filed for winding up on 24.2.1998, the winding up order has not been passed so far and therefore, the appointment of the Administrator for administering the company during the pendency of the proceedings for winding up is well within the powers of the Company Court, especially as per Rule 9 of the Companies (Court) Rules, 1959, which is as follows: "Rule 9. Inherent powers of Court.- Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the Court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court" 29. The appointment of the Official Liquidator compulsorily as a liquidator comes to operation only after the winding up order is passed by the Company Court and till such order is passed it is the discretion of the Company Court either to appoint the Official Liquidator as Provisional Liquidator or to make the Administrator to administer the affairs of the company. The appointment of the Official Liquidator compulsorily as a liquidator comes to operation only after the winding up order is passed by the Company Court and till such order is passed it is the discretion of the Company Court either to appoint the Official Liquidator as Provisional Liquidator or to make the Administrator to administer the affairs of the company. On the facts of the present case, even though it is true that the Administrator came to be appointed on 12.2.2001, subsequently by an order dated 6.2.2006 passed in C.A.No.353 of 1998 this Court appointed the Administrator as Provisional Liquidator, such appointment cannot take away the powers of the Administrator to administer the affairs of the company and therefore, one cannot raise a technical objection, pending passing of the final order of winding up if the Company Court desires to appoint a Provisional Liquidator, it can only be an Official Liquidator. In such event, if the Company Court desires to appoint a Provisional Liquidator before passing the order of winding up, it is certainly a healthy trend that the Official Liquidator should be appointed as a Provisional Liquidator. But, it does not take away the powers of the Company Court to appoint any other person like Administrator as a Provisional Liquidator, in which event he will have the restricted powers of the Administrator under the supervision and control of the Company Court. Be that as it may, on the facts of the present case, these applications have been filed by the learned Administrator only as an Administrator and not as a Provisional Liquidator, as it is seen from the records. 30. Now coming to Section 536 of the Act regarding the avoidance of transfers and declaring the transfers effected after the commencement of winding up proceedings as void, the same is based on the celebrated concept that when once it is brought to the notice of the Company Court about the insolvent status of the company, immediately the Company Court thinks in terms of protection of the creditors and contributories of such company and that is why, in order to protect them, the transactions are sought to be interfered with by operation of law. But that prohibition does not take away the powers of the Company Court to uphold certain transactions which after scrutinizing with the judicious mind are found to be genuine transactions. But that prohibition does not take away the powers of the Company Court to uphold certain transactions which after scrutinizing with the judicious mind are found to be genuine transactions. Therefore, the said section, in my considered view, cannot be held to be a total bar on all transactions and the same is subject to judicial scrutiny by the Company Court with power to approve certain transactions as bonafide based on the facts and circumstances. 31. Again, it is not as if on presenting a petition for winding up all the transactions of the company should come to a standstill. While after the winding up order is passed the transactions contrary to the order become void, the transactions effected from the date of filing of the petition for winding up till the actual date of order of winding up are subject to the judicial scrutiny by the Company Court and the transactions cannot be held to be void ab initio and the void nature of such transactions can be decided only on passing the order for winding up. 32. Even though under Section 536(2) of the Act the Company Court can permit any transactions which are bonafide after the filing of the petition till the winding up order is passed, such power is available to the Company Court even in respect of avoidance of a transfer effected one year before the presentation of the petition for winding up or passing of resolution for voluntary winding up or six months before the commencement of winding up, as per Sections 531 and 531A of the Act, which are as follows: "Section: 531. Fraudulent preference. Fraudulent preference. - (1) Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an individual within three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his insolvency a fraudulent preference, shall in the event of the company being wound up, be deemed a fraudulent preference of its creditors and be invalid accordingly: Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have effect with the substitution, for the reference to six months, of a reference to three months. (2) For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the Court, and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of insolvency in the case of an individual. Section: 531A. 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 or subject to the supervision of the Court or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator." 33. The contention of the learned Senior Counsel for the respondents, Mr.P.Jayaraman, that the first respondent (P.Ananthalakshmi) never acted as a General Power of Attorney and there is no record to show that she acted as a trustee of the company and therefore, the sale effected by her to the second respondent and the subsequent sale to the third respondent should be declared as bonafide is, no doubt, attractive, but, in my considered view, without substance. This view of mine is fortified by the specific stand taken by the first respondent in the counter affidavit filed by her before this Court on 22.12.2003. She has in no uncertain terms admitted that during her service under the company she entered into various agreements with the land owners and they were only for the sole purpose of fulfilling the duties assigned by the company to her and the lands purchased by the company were registered in her name. When that is the stand taken by the first respondent in the counter affidavit filed by her, the contention as if the lands were purchased in her name in the individual capacity much earlier on 16.11.1995 under document No. 5109 of 1995, has no meaning. It is not as if these vast extents of lands were in small bits here and there and these lands are contiguous in nature and there is no reason to disbelieve that these properties belong to the company. 34. The mere reason that an application filed to implead the Administrator in a suit pending on the file of the Principal Junior Civil Judge Court, Sangareddy, Andhra Pradesh came to be dismissed is not a ground for the third respondent to sustain his case that he is a bonafide purchaser in the light of the unambiguous legislative intent, which has been made out in the various provisions of the Act, as enumerated above, especially Section 446 of the Act. 35. There is ample evidence to show that when a notice was issued on behalf of the respondents through their counsel calling for objections for the purchase of 27 Acres of land, specific objections were raised on behalf of the company and in spite of such objections, the respondents have proceeded to purchase the property under various sale deeds. 35. There is ample evidence to show that when a notice was issued on behalf of the respondents through their counsel calling for objections for the purchase of 27 Acres of land, specific objections were raised on behalf of the company and in spite of such objections, the respondents have proceeded to purchase the property under various sale deeds. Such purchases have been made despite the fact that winding up petition against the company was pending and many orders came to be passed by this Court restraining the intermeddlers from interfering with the possession of the property by the company, and publications have been effected widely in Andhra Jyothi, Telugu daily in Andhra Pradesh as per the orders of this Court in various company applications and even afterwards it is astonishing to note that in the documents, especially Document Nos.7314 to 7316 of 2003 executed by second respondent (Koduru Venkateswara Prasad), the beneficiary himself has signed as a witness to the documents. 36. In addition to the above, while the total extent transferred under the said documents sought to be set aside is 27 Acres, the fourth respondent has chosen to execute sale deed in respect of 3 Acres and if that is so, the total extent of lands put together would come to 30 Acres as against 27 Acres and this would show the unscrupulous manner with which the sale deeds have been executed in respect of the properties of the company. 37. With regard to the effect of Sections 441(2) and 537(1) of the Act, it is useful to quote a decision of the Rajasthan High Court in Rajasthan Financial Corporation v. The Official Liquidator, The Bharatpur Oil Mills (P.) Ltd. and others, [1963] 2 Company Law Journal 309, wherein it was held as follows: "The case before us is clearly covered by the residuary clause of in any other case as contemplated by section 441(2) of the Companies Act. Learned counsel has urged two grounds for excluding the applicability of section 441 for interpreting section 537 of the Companies Act. The first is that the expression "when any company is being wound" employed in section 537(1) is suggestive of a process a course which can only arise after the winding up order has been made. Learned counsel has urged two grounds for excluding the applicability of section 441 for interpreting section 537 of the Companies Act. The first is that the expression "when any company is being wound" employed in section 537(1) is suggestive of a process a course which can only arise after the winding up order has been made. The learned Company Judge has observed in this context that nothing could have been easier for the Legislature than saying that "after a winding up order" if it was intended that section 537 was to operate only after that event. In our opinion the argument of the learned counsel cannot be accepted. The words "is being wound up" may be suggestive of a process but the starting point of that process has been clearly laid down by section 441 of the Companies Act. Chapter VII of the Companies Act is devoted to the subject of winding up. It is divided into several chapters and in each chapter sections have been grouped under various sub-heads. Section 441 stands by itself under the sub-head "commencement of winding up." In our opinion the intention appears to be that for the purposes of this chapter the commencement of a winding up has been given fixed meaning and the doctrine of relating back appears to have been imported. This doctrine is not unfamiliar to the law of insolvency either. Section 28 of the Provisional Insolvency Act makes the date of presentation of an insolvency petition as the starting point of insolvency proceedings." 38. The Gujarat High Court in Rajratna Naranbhai Mills Co. Ltd. v. New Quality Bobbin Works, [1973] 43 Company Cases 131 observed as follows: "I should also like to take notice of section 447 which provides that an order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if it had been made on the joint petition of a creditor and of a contributory. The object of the winding-up proceedings of a company is to collect all the assets, properties and choses-in-action belonging to a company under liquidation and to distribute them to various persons having claim against the company keeping in view priorities fixed by various provisions of the Companies Act. The object of the winding-up proceedings of a company is to collect all the assets, properties and choses-in-action belonging to a company under liquidation and to distribute them to various persons having claim against the company keeping in view priorities fixed by various provisions of the Companies Act. Ordinarily, a liquidator after collecting all the assets, properties and claims in favour of the company would first pay up any secured creditor if he has not chosen to remain outside the winding up and them a preferential creditor and thereafter unsecured creditors and balance amongst the contributories. While collecting the assets of the company it will be the duty of the liquidator to realise all claims subsisting in favour of the company. It must be his endeavour to collect all the assets of the company which have been unauthorisedly, dishonestly, fraudulently or illegally taken away from the company. In order to prevent the scramble for the assets of the company, the liquidator has to step in and to take possession of and protect the assets of the company. As observed by Lindley L.J. In In re Oak Pits Colliery Co, the object of the winding up provisions of the Companies Act is to put all unsecured creditors upon an equality and to pay them pari passu. To accomplish this it was provided that any action, execution, distress or other process against the assets of the company should be suspended, otherwise winding-up would result into a scramble for the assets. Sections 531 to 537 grouped together under subheading "Effect of winding-up on antecedent and other transactions" provide for avoidance of certain transactions or recovery of payments made during certain period before the commencement of winding-up proceedings or from the commencement of winding up proceedings. There appears to be an underlying principle behind these sections. Once a company is ordered to be wound up, any transaction within certain period prior to the commencement of the winding up and all transactions after commencement of the winding up if not approved by the Court as bona fide and valid, would not be binding on the liquidator. The principle is wholesome in that by these provisions a fetter is placed on the power of the directors to dispose of the property of the company, more so when financial stability of the company is lost or it appears to be under insolvent circumstances. The principle is wholesome in that by these provisions a fetter is placed on the power of the directors to dispose of the property of the company, more so when financial stability of the company is lost or it appears to be under insolvent circumstances. Section 537 is one such section which provides that any attachment, distress or execution put in force, without leave of the court, against the estate or effects of the company after the commencement of the winding up, or any sale held, without leave of the court, of any of the properties or effects of the company after such commencement shall be void. It is immaterial and irrelevant while considering the case covered by section 537 that the person in whose favour sale is effected is in any way connected with the management of the company prior to the making of the winding up order. Sec 537 is clear and unambiguous. It provides that any attachment of the property of the company or sale thereof without leave of the court after commencement of the winding-up shall be void. In this case, it is admitted that 186 shares of National Machinery Manufacturing Company Ltd, belonged to and was of the ownership of the company in liquidation. Shares were the property of the company in liquidation. They were sold after 3rd March, 1967, and before 7th March, 1967, and sale proceedings to the tune of Rs.16,740 were taken away by the respondent. The sale of the property of the company in liquidation took place after commencement of the winding-up proceedings which commenced on November 1, 1966. If there is nothing more, section 537 should operate and sale of the shares would be void. If the respondent has taken benefit under a void transaction, it is obligatory upon him to return it and one entitled to reclaim it would be the official liquidator of the company in liquidation." 39. If there is nothing more, section 537 should operate and sale of the shares would be void. If the respondent has taken benefit under a void transaction, it is obligatory upon him to return it and one entitled to reclaim it would be the official liquidator of the company in liquidation." 39. These passages of the Rajasthan and Gujarat High Courts have been quoted with approval by a Division Bench of K.Raviraja Pandian,J. (as His Lordship then was) and P.P.S.Janarthana Raja,J. in the judgment dated 21.7.2009 made in O.S.A.Nos.384 to 386 of 2007 (Chetan Arvind Bhagat and 8 others v. M/s.Maxworth Orchards (I) Ltd. and others) which relates to the same company under liquidation regarding the various sale transactions and the Division Bench while upholding the decision of the learned Single Judge in setting aside similar sales effected, observed as follows: "14. We entirely agree with the reasoning of the above Division Bench of the Rajasthan High Court as well as the single Bench decision of the Gujarat High Court. After taking into consideration the factual scenarios in this case, we are of the view that the learned single Judge is correct in allowing the applications filed by the Administrator, the first respondent-company and setting aside the sale deeds. Though the learned Senior counsel appearing for the appellant has relied on the case laws cited supra, those judgments are factually different and the same are not under Section 537 read with 441 of the Companies Act as in the instant case. So, we are not dealing with the above case laws cited by the learned counsel appearing for the appellant one by one." 40. For the foregoing reasons, I am of the considered view that the sales which are the subject matter of theses applications are not only against the interest of the creditors of the company in liquidation, but the transactions also cannot be said to be bonafide and the respective purchasers cannot be said to be the purchasers without knowledge of defective title. Therefore, it is not possible to accept the contention raised by the learned Senior Counsel for the respondents/purchasers that such sales should not be interfered with. 41. Therefore, it is not possible to accept the contention raised by the learned Senior Counsel for the respondents/purchasers that such sales should not be interfered with. 41. In the result, C.A.Nos.1937 to 1939 of 2003, 1748 and 1749 of 2005 in C.A.No.63 of 2001 and C.A.Nos.301 to 303, 319 and 320 of 2006 in C.P.No.57 of 1998 stand allowed and the respective sale deeds stand set aside, and C.A.No.185 of 2006 in C.A.No.1937 of 2003 in C.A.No.63 of 2001 is dismissed. (C.A.Nos.308 & 309 of 2006 in C.P.No.57 of 1998 & C.A.Nos.625 & 626 of 2005 in C.A.No.63 of 2001 42. C.A.No.308 of 2006 is filed by the learned Administrator for an order to set aside the two sale deeds dated 28.10.2003 and 22.11.2003 registered as Document Nos.10156 and 10854 of 2003 in the Office of Sub Registrar, Medak at Sangareddy, Andhra Pradesh and for a consequential order of permanent injunction restraining the respondents from in any manner interfering with the said property. Similar is the prayer in C.A.No.625 of 2005. 43. C.A.No.309 of 2006 is filed by the learned Administrator for an order of injunction against the fourth respondent, Mandal Revenue Officer, Ramachandrapuram, Medak District, Andhra Pradesh, restraining him from issuing a patta or any document to the third respondent/purchaser or to any other person claiming through respondents 2 and 3. The same relief is sought for in C.A.No.626 of 2005. 44. The land covered in the said applications is measuring 10.35 Acres or 4.35 Hectares in Survey No.191 situated in Kollur Village, Ramachandrapuram Mandal and G.P. Kollur Medak District, Andhra Pradesh and agricultural dry land in Survey No.30 measuring 1.05 Acres or 0.45 Hectares situated in Osman Nagar under G.P.Kollur, Ramachandrapuram Mandal, Medak District, Andhra Pradesh. The lands involved in these applications are used for Gandipet Project of the company, which has acquired 170 Acres which were all fenced and in which orchards have been fully developed with continuous yields. The Company is stated to have acquired the said lands from the original owners, who are all ex-servicemen and who had given General Power of Attorney to the first respondent (Kamlesh Lohade, "Poonam", 3.5.839, Hyderguda, Hyderabad, Andhra Pradesh). 45. The Company is stated to have acquired the said lands from the original owners, who are all ex-servicemen and who had given General Power of Attorney to the first respondent (Kamlesh Lohade, "Poonam", 3.5.839, Hyderguda, Hyderabad, Andhra Pradesh). 45. In the affidavit filed by the first respondent (Kamlesh Lohade) in C.A.Nos.307 to 309 of 2006, the first respondent has clearly stated that as a General Power of Attorney of the land owners, he has executed sale deeds in favour of the company between 1993 and 1995 and surrendered patta certificates and General Power Attorney originals to the company at the time of execution of the sale deeds. He has categorically stated that he has not executed any sale deeds in favour of any person either under Document No.3520 of 2005, dated 29.3.2005 or Document No.10156 of 2003, dated 28.10.2003. The relevant portion of the counter affidavit filed by the said Kamlesh Lohade is as follows: "3. I submit at the outset that I was the General Power of Attorney of the land owners (i.e., the original allottees-Ex-servicemen) in respect of the properties in Survey Nos.191 and 30 of Kollur and Osman Nagar Villages, Ramachandrapuram Mandal, Medak District. I submit that I had executed the Sale Deeds in favour of M/s.Maxworth Orchards (India) Limited and its customers in the years 1993-1995. I submit that I had also surrendered the patta certificates and G.P.A.s in original to the officials of M/s.Maxworth Orchards (India) Limited at the time of the execution of the Sale Deeds in favour of the customers of the company. I further submit that I have not executed any other Sale Deeds subsequent to the said period in favour of any person, muchless the alleged Sale Deeds vide document Nos. 1) 3520/05, dated 29.3.05, 2) 10156/03, dated 28.10.2003 alleged to be executed by me. Furthermore, from the date of execution of the said Sale Deeds, I affirm that I have no right, title, or interest whatsoever in the property." 46. Further, it is relevant to point out that the photographs and signatures of the said Kamlesh Lohade filed in the said sale deeds which are sought to be set aside are, on the face of it, not like that of the first respondent, when compared to the signature of the first respondent in the affidavit. Further, it is relevant to point out that the photographs and signatures of the said Kamlesh Lohade filed in the said sale deeds which are sought to be set aside are, on the face of it, not like that of the first respondent, when compared to the signature of the first respondent in the affidavit. Inasmuch as it is not in dispute that all the parent deeds and original deeds relating to the said 12 Acres of land which were acquired from four ex-servicemen, namely (i) K.Tataiha, S/o.K.Kotaiha, (ii) Noorulah Khan, S/o.Habeebullah Khan, (iii) R.Satyanarayana, S/o.Hanumantha Rao; and (iv) J.Sundaramma, w/o.Late Sundar Rao, each having sold 3 Acres of land, are available with the company and this Court has granted an order of injunction, which was widely published in the newspapers, there is no difficulty to conclude that the said transactions are sham, nominal and illegal. Moreover, all these lands are in possession of the company, they are fenced and orchards have been fully developed with continuous yields and are under the administration of the learned Administrator. 47. There is one another reason to support the above view, namely that in the said sale deeds alleged to have been executed by the first respondent in favour of the second respondent and the consequential execution of sale deeds by the second respondent in favour of the third respondent, which are all challenged in these applications, the sale consideration has been stated as ` 40,000/-per Acre in respect of Survey No.191 and ` 30,000/- per Acre in respect of Survey No.30, while the company has sold as per the direction of this Court in C.A.NO.1331 of 2003 some of the lands in the same area at ` 1.35 Lakhs per Acre in the year 2003. 48. The third respondent, who is stated to have purchased the property without knowing the extent of lands and without verifying the authenticity and right of the second respondent in selling such properties, cannot claim any better title. It is also further relevant to note that the second respondent is being prosecuted under the Land Grabbing Act. 49. For the foregoing reasons, C.A.Nos.308 and 309 of 2006 in C.P.No.57 of 1998 and C.A.Nos.625 and 626 of 2005 in C.A.No.63 of 2001 are allowed and the respective sale deeds stand set aside. (THIRD BATCH) C.A.Nos.688 to 690 of 2006 in C.P.No.57 of 1998 50. 49. For the foregoing reasons, C.A.Nos.308 and 309 of 2006 in C.P.No.57 of 1998 and C.A.Nos.625 and 626 of 2005 in C.A.No.63 of 2001 are allowed and the respective sale deeds stand set aside. (THIRD BATCH) C.A.Nos.688 to 690 of 2006 in C.P.No.57 of 1998 50. C.A.No.688 of 2006 is filed to set aside the four sale deeds dated 1.9.2005 registered as document Nos.11481 of 2005, 11482 of 2005, 11483 of 2005 and 11484 of 2005 in the Office of Sub Registrar, Sangareddy, Medak District. All the lands are situated in S.No.191. 51. Document No.11481 of 2005 relates to 4.20 Acres of land situated at Kollur Village, Ramachandrapuram Mandal, Medak District, under G.P.Kollur Z.P.P., Medak at Sangareddy, executed by the first respondent (C.Lakshmikar Reddy, S/o.Late C.Narayana Reddy, R/o.H.No.1.2.234/36, S.B.H.Colony, Domalguda, Hyderabad – 29) in favour of the fourth respondent (Dr.Armada Harsha Reddy, S/o.Dr.Ramachandra Reddy, R/o.Hyderabad). 52. Document No.11482 of 2005 relates to 1 Acre of land at the same village executed by the first respondent (C.Lakshmikar Reddy) in favour of of the fifth respondent (Dr.Vanakuri Divya, W/o.Govind Reddy, R/o.Hyderabad). 53. Document No.11483 of 2005 relates to 1 Acre of land situated in the same village executed by the first respondent (C.Lakshmikar Reddy) in favour of the second respondent (Kontham Suvarnalatha, W/o.Veera Reddy, R/o.H.No.22-90/A, Saraswathi Nagar, Road No.3, Saroonagar, Hyderabad). 54. Likewise, Document No.11484 of 2005 relates to 4.15 Acres of land situated in the said village sold by the first respondent in favour of the third respondent (Aramada Bharathi, W/o.Dr.Ramachandra Reddy, R/o.Hyderabad). 55. In these cases, the first respondent (C.Lakshmikar Reddy), who has nothing to do with the above said lands which belong to the company, has effected the fraudulent sales in collusion with the sixth respondent (Dr.A.Ramachandra Reddy, S/o.Pichi Reddy, R/o.Hyderabad) and the seventh respondent (G.Srinivas, S/o.Gangaram, R/o.Saroornagar, Rangareddy District). For executing the said sale deeds, the Board of Directors of the Company have never authorised any person and all documents relating to the said lands are with the company. For executing the said sale deeds, the Board of Directors of the Company have never authorised any person and all documents relating to the said lands are with the company. In these cases also there has been public notice issued and respondents 6 and 7 have signed as witnesses and all the documents were executed on the same day and there has been impersonation, forgery and fabrication of the documents, about which the Caretaker of the Company, Mr.Karla Srinivasa Rao, S/o.K.Bhaskar Rao has filed a complaint registered in F.I.R.No.41 of 2006 on 18.3.2006 on the file of the Sub Inspector of Police, Sanga Reddy Police Station. 56. For the said reasons, C.A.Nos.688 to 690 of 2006 in C.P.No.57 of 1998 are allowed and the respective sale deeds are set aside and there will be an order of injunction against the respondents restraining them from interfering with the peaceful possession of the said lands by the company. (CRIMINAL PROSECUTION) C.A.No.307 of 2006 in C.P.No.57 of 1998 & C.A.No.624 of 2005 in C.A.63 of 2001 57. Considering the seriousness of the issue involved, I am of the considered view that a concerted, collusive and fraudulent act has been done against the interest of the company, which is detrimental to the interest of the creditors, depositors and contributories of the company, and therefore, apart from setting aside the sales as fraud, it is necessary that the real truth has to come out and the culprits have to be brought before the criminal court by setting criminal law in motion. In view of the same, the Central Crime Branch, Land Grabbing Cell, Thousand Lights, Chennai is directed to investigate the entire affairs and the learned Administrator is permitted to file a comprehensive complaint in addition to the materials and complaints already available and on such complaint, the Central Crime Branch, Land Grabbing Cell, Chennai shall investigate and launch criminal prosecution and set in motion the criminal law against the offenders. C.A.No.307 of 2006 in C.P.No.57 of 1998 and C.A.No.624 of 2005 in C.A.63 of 2001 are ordered accordingly.