Summary
IDBI challenged revival of winding-up proceedings and refusal to compel a sale deed under an earlier agreement. The Court upheld revival because unsatisfied secured creditors had not received the required advertisement or an opportunity to prosecute the petition. It refused execution for want of general-meeting approval, while rejecting the lower courts’ fraudulent-preference conclusion because the transaction preceded the statutory six-month period.
Issues
- Whether the winding-up petition could continue despite the original creditor’s failure to advertise.
- Whether the bank could compel execution and whether the transaction was a fraudulent preference.
Provisions considered
- Rules 96 and 99, Companies (Court) Rules, 1959Mandatory advertisement protected all stakeholders; the rules did not confine publication to the original petitioning creditor. (¶¶ 7, 8, 11.1, 11.3, 11.6)
- Section 531(1), Companies Act, 1956A preferential motive alone was insufficient without the transaction falling within the six-month statutory period. (¶¶ 13, 17.2, 17.3, 17.4, 17.5)
- Section 293(1)(a), Companies Act, 1956Required general-meeting consent was absent for disposal of the company’s only immovable property. (¶¶ 13, 17, 17.1, 18)
Held
- Winding up is a proceeding in rem requiring widest publicity. Where unsatisfied creditors had not received that opportunity, lack of a volunteer to replace the original petitioning creditor did not compel dismissal. The company court could direct the liquidator to advertise. (¶¶ 11.1, 11.2, 11.3, 11.4, 11.5, 11.6)
- Settlement of unsecured depositors did not establish satisfaction of secured creditors pursuing DRT remedies. Revival of Petition 179 of 2001 was proper; Petition 180 of 2001 was unaffected. (¶¶ 11.4, 11.5, 11.6, 11.7)
- An agreement to sell does not itself transfer title or an interest in immovable property. Execution concerning the only immovable property could not be compelled on a Board resolution alone, without the requisite general-meeting consent. (¶¶ 17, 17.1)
- Fraudulent preference required both the dominant preferential motive and an act within six months before the winding-up petition. Both this agreement and delivery of possession preceded that period. Section 531 also covers other acts relating to property, so its temporal requirement could not be avoided by treating the agreement as something other than a transfer. (¶¶ 17.2, 17.3, 17.4, 17.5)
- Rejection of the fraudulent-preference reasoning did not cure the independent approval defect. Even if approval were subsequently obtained, any future sale deed would remain subject to the winding-up outcome. (¶ 18)
Result
Both special leave petitions were dismissed. Revival of the winding-up proceedings and refusal to compel execution were upheld, with directions for lawful advertisement and the stated correction of the fraudulent-preference reasoning.