Dismissed

Sri Patnala Venkata Ramakrishna, v. M/s. Midwest (India) Industries Limited

Telangana HC4 Nov 2013OSA/19/2012

Case brief

AI extract

What is this about?

On appeals against dismissal of applications to stay winding-up proceedings and auction of assets, the Court examined territorial jurisdiction and the validity of title acquired post-liquidation order.

What did the court decide?

No order as to costs. Appellants may submit representations to the Official Liquidator to be furnished particulars of assets and liabilities.

Sri Patnala Venkata Ramakrishna, Vs M/s. Midwest… — Company and Corporate | Telangana HC (2013)

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*** THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND**

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THE HON’BLE SRI JUSTICE M.S.K.JAISWAL

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+ O.S.A.Nos.19 and 20 of 2012

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%Date: 04.11.2013

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#Sri Patnala Venkata Ramakrishna and others.

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…appellants.

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and

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$M/s. Midwest (India) Industries Limited, Hyderabad and others.

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…Respondents

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! Counsel for appellants: Sri P.Venu Gopal

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^ Counsel for Respondents :Sri M.Anil Kumar

< GIST:

> HEAD NOTE:

? Cases referred

THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY

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AND

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THE HON’BLE SRI JUSTICE M.S.K.JAISWAL

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O.S.A.Nos.19 and 20 of 2012

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COMMON JUDGMENT: (Per the Hon’ble Sri Justice L.Narasimha Reddy)

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These two OSAs arise out of a common order, dated 21.08.2012, passed by a learned Single Judge of this Court in Company Application Nos.1598, 1599, 1600 & 1601 of 2011 in Company Petition No.39 of 2000. Hence, they are disposed of, through a common judgment.

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For the sake of convenience, the parties are referred to, as arrayed in O.S.A.No.19 of 2012.

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M/s. Midwest (India) Industries Limited, the 1^st respondent herein, was undertaking the activity, inter alia, of receiving deposits from various sources and to lend amounts to the individuals or agencies. On account of certain irregularities that have taken place in the business of the 1^st respondent, not only various proceedings were initiated by the depositors, but complaints, under the relevant provisions of IPC, were also filed. Obviously, feeling the threat of prosecution and other steps, the Managing Director of the 1^st respondent Company, by name, Dr. Pinna N.R., and others filed W.P.No.32498 of 1998 before this Court, for a Writ of Mandamus directing the respondents therein to conduct proper enquiry, before registering any crime against them. The list of the respondents included the Reserve Bank of India (RBI). Over the period, the depositors also got themselves impleaded. A learned Single Judge of this Court rendered a judgment reported in Dr.Pinna N.R. v.

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Commissioner of Police^[1] . A set of directions was issued, as to the nature of steps that must be taken vis-à-vis the Company. One of them was that proceedings must be initiated for winding up of the 1^st respondent-Company, before this Court.

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Accordingly, C.P.No.39 of 2000 was filed by the RBI, under Section 45-M of the Reserve Bank of India Act (for short “the RBI Act”). After hearing the concerned parties and following the prescribed procedure, the learned Single Judge passed an order, dated 10.10.2000, directing winding up of the 1^st respondentCompany.

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In the course of the sale of assets of the 1^st respondent Company, several applications came to be filed. The appellants herein filed Company Application No.1598 of 2011, under Section 457(1)(c) of the Companies Act, 1956 (for short ‘the Act’), read with Rule 9 of the Companies (Court) Rules, 1959, with a prayer to stay all further proceedings, including the auction of the property of Acs.9.16 guntas of land in Survey No.451 of Puppalguda Village, Rajendranagar Mandal, Ranga Reddy District, in pursuance of a notice published on 01.08.2011, which, in turn, was issued in compliance with the orders, dated 05.07.2011, passed by this Court in C.A.No.675 of 2011. The plea of the appellants was that the property was purchased by them in the year 2005, not being aware of any claim vis-à-vis the property by the Official Liquidator. It was also urged that the very institution of the company petition was without jurisdiction, since it was filed contrary to the mandate under Section 10 of the Act. Other grounds were also urged. Similar application in C.A.No.1600 of 2011 was filed by some other individuals. The applications were opposed by the Official Liquidator and the Association of the Depositors. Through common order, dated 21.08.2012, the learned Single Judge dismissed the applications. Hence, these appeals.

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Sri P. Venu Gopal, learned counsel for the appellants, submits that admittedly, the 1^st respondent Company was registered at Mumbai and the winding up petition, if at all, ought to have been filed only in the Company Court, within whose territorial jurisdiction,

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the registered office of the 1^st respondent Company is located, and that filing of C.P.No.39 of 2000 in the High Court of A.P. is impermissible. He further submits that assuming that the Company Petition was properly instituted, the property purchased by the appellants ought not to have been proceeded against. He contends that the property was not part of the schedule, appended to the statement of affairs or the list of assets and that half way through, it was added. Learned counsel further submits that after various assets were brought to sale, it ultimately emerged that the money available with the Official Liquidator is in excess of the one that is required to liquidate the liabilities, and in that view of the matter, there was no necessity to put the said land in its entirety, or any part thereof to sale.

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Sri M. Anil Kumar, learned standing counsel for the Official Liquidator and Sri M.V.Durga Prasad, learned counsel for the 2^nd respondent, on the other hand, submit that the question of territorial jurisdiction assumed finality with the observation made by this Court in W.P.No.32498 of 1998, wherein it was clearly mentioned that the registered office of the 1^st respondent-Company must be treated as the one in Hyderabad, since the Office at Mumbai ceased to function for a long time. They contend that the appellants purchased the property, during the pendency of the Company Petition and their vendor, by name L.Purushottam Naidu, was himself a purchaser, after it changed hands from the promoters. They further submit that L. Purushottam Naidu was a party to the Company Petition and he raised all the objections, that are now sought to be raised by the appellants in the Company Petition, and when they were rejected, he not only filed OSA, but also SLP, and he was unsuccessful therein.

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At the outset, the objection raised by the appellants as to the very initiation of proceedings for winding up of the company, needs

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to be taken up. As mentioned in the earlier paragraphs, the company petition was filed not under the provisions of the Companies Act, but under Section 45-M of the RBI Act. The objection raised by the appellants is about the territorial jurisdiction. It is pleaded that under Section 10(i)(a) of the Act, it is only the High Court within whose territorial jurisdiction the registered office is located that can entertain an application for winding up. The registered office of the company under liquidation was at Mumbai. If the same state of affairs continued, by the time the company petition was filed, the objection could certainly have been sustained.

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The institution of the winding up proceedings is a sequel to the judgment rendered by this Court in Dr.Pinna N.R.’s case (supra). The aspect of territorial jurisdiction was examined by this Court and in para 25(c) , it was observed:

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“The Reserve Bank of India shall initiate criminal proceedings against the petitioners and also file an application for winding up of the second petitionercompany under Section 45-MC of RBI Act forthwith under the provisions of Indian Companies Act treating the Registered Office at Hyderabad as the Registered Office at Mumbai ceased to work for number of years and Hyderabad office was only being operated.”

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This observation became final and the company petition came to be filed at Hyderabad. No objection whatever was raised about the territorial jurisdiction at any stage of the proceedings till the order of winding up was passed. It is not at all open to the appellants to raise such an objection, at this stage. At any rate, it cannot be sustained on facts also.

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Reverting to the merits, the appellants wanted the respective items of properties purchased by them to be deleted from the purview of the liquidation proceedings. It is not in dispute that they purchased the properties after the order for winding up of the company was passed. The plea that they were not aware of the

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winding up proceedings or that their vendor was not a party to the company petition, is totally unacceptable. Once an item of property is the subject-matter of winding up proceedings, any purchase thereof would be of no legal consequence. Whether a person purchases such property with or without knowledge, he would not derive any title for it. This is so even where an attachment is ordered in a civil suit. The order of winding up entails in very serious legal consequence than an order of attachment before judgment or in the course of execution of any E.P. The learned single Judge has discussed the matter at length and held that the plea put forward by the appellants is devoid of merits. We do not find any legal or factual basis to disagree with the order passed by the learned single Judge.

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Learned counsel for the appellants submits that the Official Liquidator has assets and sale proceeds in excess of the liabilities, and that it is not necessary that the plots purchased by the appellants be brought to sale. This Court can not at all delve into such aspect. Much would depend upon the extent of liabilities and the value of the assets. This much, however can be said that it shall be open to the appellants to submit their claim before the Official Liquidator with a request to furnish the particulars of the liabilities of the company as well as the rough estimate of the value of the assets. Depending on such information, the appellants can make a representation, only in the limited context of allocation of surplus resources, if any, strictly in accordance with the provisions of the Companies Act.

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Hence, the appeals are dismissed. It is directed that, in case the appellants submit a representation about the assets and liabilities of the Company under liquidation, the Official Liquidator shall be under obligation to furnish the same within two weeks from the date of receipt of the representation. There shall be no order as to costs.

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The miscellaneous petitions filed in these appeals shall stand

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disposed of.

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____________________ L.NARASIMHA REDDY, J.

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_______________ M.S.K.JAISWAL, J. Date:04.11.2013 L.R. copy to be marked. CBS/GJ

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THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE M.S.K.JAISWAL

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O.S.A.Nos.19 and 20 of 2012 (Judgment of the Bench delivered by the Hon’ble Sri Justice L.Narasimha Reddy)