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IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2934 OF 2009 (Arising out of SLP(C) No.28177 of 2008)

INDIAN BANK            ...APPELLANT (S)

VERSUS

M/S V.G.P. FINANCE LTD. & ANR. ...RESPONDENT(S)

O R D E R

Leave granted. The Company in liquidation approached respondent No. 1 – M/s V.G.P. Finance  

Ltd. on 10th November, 1995 for a loan of Rs.1,00,00,000/- (Rupees one crore) for business  

purposes.  Pursuant to the correspondence a loan agreement came to be executed on 1st  

December,  1995  between  the  Company  in  liquidation  and  respondent  No.  1  herein.  

Following the loan agreement the parties entered into further agreements under which  

amounts were advanced from time to time.  According to respondent No. 1 herein, in terms  

of the loan agreement, the Company in liquidation had mortgaged the property in question  

in favour of respondent No. 1 herein.

According to respondent No. 1, as the Company in liquidation did not repay the  

amounts in terms of the mortgage deed, vide two sale deeds dated 11.2.1999 and 16.2.1999,  

the subject lands stood sold in its favour with possession.   

In  the  meantime,  it  appears  that  petition for  winding up was moved on 14th  

October,  1996  and  the  Company  was  ordered  to  be  wound  up  on  10th March,  1999.  

Following the order of winding up, the Official Liquidator issued a notice on 1st June, 1999  

for handing over the assets and effects of the Company in liquidation.

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Under  the  above  circumstances,  on  13th September,  2004,  respondent  No.  1  

herein moved the Company Court for validation of the disposition of property in question  

(see page 79).  At this stage it may be noted that there was earlier an application made by  

respondent No. 1 herein for possession.  That was on 14th September, 1999.  It was not for  

validation whereas the application for validation was moved only on 13th September, 2004.   

The first  Application dated 14th September, 1999 was numbered as Company  

Application No. 1275 of 1999.  By judgment and order dated 9th August, 2005 the learned  

Single Judge disposed of Company Application No. 1275 of 1999 in favour of respondent  

No. 1 herein which was not for validation.  The High Court directed the Official Liquidator  

to deliver possession of the property in question to respondent No. 1 herein.  This order  

stood confirmed by the impugned judgment of the Division Bench. Hence, the Indian Bank  

which claims to be a secured creditor has come by way of SLP to this Court.

On going through the entire record we find that both, the Company Court as  

well as the Division Bench, have not taken into account some of the vital aspects which a  

Company Court  is  statutorily  required to take  into account.   Firstly,  in the  impugned  

judgments there is no reference to the interest of other secured and unsecured creditors of  

the Company.  Generally, while granting validation the Company Court is required to take  

into account the list of assets held by the Company in liquidation.  It appears that in this  

case apart from the subject lands there are no other assets except goodwill.  This aspect is  

very important.  If a Company does not possess any other assets then the interest of the  

creditors, both secured and unsecured, would be jeopardized if the transfer is validated.  In  

this case it appears that Indian Bank was not heard.  It was not even made a party.  The  

Court  has  not  examined  the  list  of  creditors  both  secured  and  unsecured  whose  

security/claims  would  stand  defeated  on  validation  of  the  sale  deed.   Moreover,  it  is  

important to note that there was no prayer for validation in Company Application No.  

1275 of 1999 and even without said prayer the Court has allowed validation which was

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erroneous. The High Court has also not considered the question regarding commencement  

of  the winding up proceedings and whether  the  conveyances  stood executed after  such  

commencement?

However, to put an end to the controversy, we are restoring to the file of the  

Company Judge the application dated 13th September, 2004 moved by respondent No. 1  

herein for validation.  We direct the Company Registrar to give a proper registration to the  

Company  Application  for  validation  dated  13th September,  2004.   On  giving  the  

registration number we give liberty to respondent No. 1 herein, if so advised, to move an  

application for amendment giving better particulars in support of his claim.  We also direct  

the  Company  Registrar  to  inform  the  Indian  Bank  regarding  the  application  being  

numbered as directed hereinabove.  On completion of all these preliminaries we direct the  

Company Court to dispose of the Application for validation dated 13th September, 2004  

after considering the claims of secured and unsecured creditors as well as after taking into  

consideration assets held by the Company in liquidation as on the date of order of winding  

dated 10th March, 1999, and thereafter.  We also give permission to Indian Bank to make  

an application for impleadment in such application.   

Basically the point raised by the Indian Bank before us in this case is that the  

Company Court ought not to have granted validation of the sale deeds without taking into  

account the interest of the creditors without considering the list of assets and according to  

Indian Bank the entire transaction allegedly has taken place after the commencement of  

the winding up process.

We direct the High Court to de novo decide this matter uninfluenced by any of  

its earlier observations made in the impugned judgment.  We express no opinion on the  

merits of the case.  We grant liberty to both sides to make submissions in support of their  

case.

Before  concluding,  we  may  state  that  the  possession  of  the  lands  is  with

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respondent No. 1 herein.  Status quo as regard to possession is to be maintained till the  

Company  Court  decides  the  Application  for  validation  dated  13th September,  2004.  

However, respondent No. 1 will not encumber the property.  Respondent No. 1 will neither  

alienate the property nor create any third party rights in respect of the said property.

The appeal is disposed of accordingly with no order as to costs.

....................J. [ S.H. KAPADIA ]

New Delhi, ....................J April 24, 2009 [ AFTAB ALAM ]  

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ITEM NO.1                 COURT NO.4               SECTION XII

           S U P R E M E   C O U R T   O F   I N D I A                          RECORD OF PROCEEDINGS                      Petition(s) for Special Leave to Appeal (Civil) No(s).28177/2008

(From the judgment and order dated 09/09/2008 in OSA No.201/2005 of the HIGH COURT OF MADRAS)

INDIAN BANK                                          Petitioner(s)

                     VERSUS

M/S.V.G.P.FINANCE LTD.& ANR.                         Respondent(s)

(With prayer for interim relief and office report)(For orders)

Date: 24/04/2009  This Petition was called on for hearing today.

CORAM :         HON'BLE MR. JUSTICE S.H. KAPADIA         HON'BLE MR. JUSTICE AFTAB ALAM

For Petitioner(s) Mr. R. Venkataramani, Sr.Adv. Mr. Alto K. Joseph, Adv.

                    Mr. Shiv Ram Sharma,Adv.

For Respondent(s) Mr. Harish N. Salve, Sr.Adv.                      Mr. K.K. Mani,Adv.

Mr. Mayur R. Shah, Adv.

Mr. S. Srinivasan, Adv. Ms. Madhusmita Bora, Adv.

      UPON hearing counsel the Court made the following                            O R D E R  

Leave granted. Appeal is disposed of with no order as to costs.

         (S. Thapar)         PS to Registrar

(Madhu Saxena) Court Master

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The signed order is placed on the file.