IDBI BANK LIMITED THROUGH DGM (LEGAL)versusTHE OFFICIAL LIQUIDATOR, OFFICE OF THE OFFICIAL LIQUIDATOR OF COMPANIES & ANR.

                          [2019] 15 S.C.R. 549                           549


       IDBI BANK LIMITED THROUGH DGM (LEGAL)                             A
                                  v.
        THE OFFICIAL LIQUIDATOR, OFFICE OF THE
       OFFICIAL LIQUIDATOR OF COMPANIES & ANR.
          (Special Leave Petition (Civil) No. 33825 of 2009)
                                                                         B
                        OCTOBER 17, 2019
           [MOHAN M. SHANTANAGOUDAR AND
                  AJAY RASTOGI, JJ.]
       Company (Court) Rules, 1959: rr.96, 99, 24 and 101 –
Winding up petitions, advertisement – Mandatory requirement –            C
Held: The advertisement of a winding up petition is mandatory –
However, if the petitioning creditor fails to advertise the petition
within the prescribed time, r.101 accords discretion to the court to
substitute such petitioning creditor with another creditor or
contributory, if latter is capable and desirous of prosecuting the
                                                                         D
winding up petition – In the instant case, no such advertisement
was made – No other creditor or contributory expressed willingness
to prosecute the original winding up petition – At the same time, as
noted by the Division Bench of High Court, there were other
unsatisfied secured creditors of KOFL who were not given the option
to step into the shoes of the petitioning creditor in terms of r.101 –   E
Given the absence of a specific provision mandating that the petition
only be advertised by petitioning creditor, the Company Court has
the discretion to direct the publishing of an advertisement to secure
the interest of other creditors – In such situations, the winding up
proceedings cannot be dismissed, as it would frustrate the very
objective of securing the interest of all creditors – Clearly, the       F
submission for the Petitioner that the winding up petition deserves
to be dismissed as all creditors of KOFL have been satisfied is belied
by the existence of the proceedings before the DRT – The records
showed that the settlement of dues was only with respect to the
unsecured creditors of KOFL, which was carried out pursuant to
                                                                         G
the orders issued by the Company Judge – Therefore, given that the
secured creditors of KOFL have still not been satisfied and are
bound to be affected by any order dismissing the winding up
proceeding, the Company Court is directed to issue appropriate
directions to the Official Liquidator for publishing the advertisement
of the proceedings in accordance with law.                               H
                                 549
550            SUPREME COURT REPORTS                      [2019] 15 S.C.R.


A            Companies Act, 1956: ss.293, 531 – Whether the agreement
      to sell executed by KOFL in favour of petitioner amounted to
      fraudulent preference and consequently whether the petitioner has
      a right to seek the execution of sale deed in its favour – Held: s.531
      is a provision that deals with the effect of winding up of a company
      on its antecedent transactions – It provides that a transfer or any
B     other act done in relation to the property of a company within a
      period of six months before the commencement of its winding up
      (“twilight period”) shall be deemed to be a fraudulent preference
      of its creditors and accordingly be invalid – In the instant case,
      s.531 should be read in conjunction with s.293, which stipulates
C     that the sale of the whole, or substantially the whole of the property
      of a public company requires the consent of its general meeting –
      s.531 provides that any act relating to the property of a company
      may qualify as a fraudulent preference if two conditions are met –
      First, the dominant motive in the mind of the company (as represented
      by its directors or general body of shareholders) should be to prefer
D     a particular creditor – Second, the said act must be undertaken
      during the period of six months preceding the filing of the winding
      up petition of the company – While the first requirement ensures
      that the dominant intention to defraud creditors is detected, the
      second ensures that there is a level of commercial certainty and
E     finality of transactions for those interacting with the company –
      s.293(1) requires the consent of the general meeting of a company
      in case of a sale or disposition of the whole or substantial whole of
      its property – s.293(1) is applicable to the instant case in view of
      the categorical finding by both the Courts below that the subject
      property is the only immovable property of KOFL – Notably, no
F     approval from the general meeting of KOFL was obtained – There
      was only a Board resolution permitting Respondent No.1 to execute
      agreements of sale and other documents for the purpose of selling
      the subject property – In the absence of the requisite approval from
      the general meeting, the instant application for execution of a sale
      deed cannot be allowed as doing so would be allowing the Petitioner
G     to sidestep the mandatory requirements of s.293(1) – A bare reading
      of s.531 shows that in addition to any transfer of property, it covers
      “any other act relating to the property” – These terms indicate that
      s.531 is comprehensive and includes indirect transactions within its
      scope – The Petitioner is not precluded from benefiting from s.531
H     on account of non-fulfilment of the six-month condition – Therefore,
  IDBI BANK LTD. THR. DGM(LEGAL) v. OFFICIAL LIQUIDATOR, OFFICE OF        551
              THE OFFICIAL LIQUIDATOR OF COMPANIES


the agreement to sell cannot be termed as a fraudulent preference         A
under s.531.
      Transfer of property: It is well-settled that the sale of an
immovable property can only be effectuated through a sale deed
and an agreement to sell does not transfer any right, title or interest
in the immovable property.                                                B
      Dismissing the Special Leave Petitions, the Court
       HELD: 1. From a reading of Rules 96, 99, and 24, it is
clear that the advertisement of a winding up petition is mandatory.
In the event that the petitioning creditor fails to advertise the
petition within the prescribed time, Rule 101 accords the Court           C
with the discretion to substitute such petitioning creditor with
another creditor or contributory, if the latter is capable and
desirous of prosecuting the winding up petition. The winding up
proceedings are proceedings in rem and have an impact on the
rights of people, in general. In a situation where the petitioning
creditor fails to advertise the petition and no other creditor or         D
contributory comes forward to prosecute it, Rule 101 should not
be read in a manner that absolutely bars the continuation of a
winding up petition. This is particularly so when there are
unsatisfied creditors who should have been given an opportunity
to prosecute the petition, but were deprived of the same due to
                                                                          E
the failure to advertise. Indeed, Rule 101 is only limited to
instances where the petitioning creditor fails to advertise the
petition. However, there is nothing in the language of Rules 24,
96, or 99 to indicate that only such petitioning creditor can
advertise the petition. Given the absence of a specific provision
mandating that the petition only be advertised by petitioning             F
creditor, Company Court has the discretion to direct the
publishing of an advertisement to secure the interest of other
creditors. In such situations, the winding up proceedings cannot
be dismissed, as it would frustrate the very objective of securing
the interest of all creditors. [Para 8, 11.3] [561-B; 562-G-H; 563-
A-C]                                                                      G
       2. Due to the lack of adequate advertisement of the winding
up petitions, it appears that the secured creditors of KOFL were
constrained to approach the DRT for recovery of their dues by
filing O.A. Further, upon learning of the decision of the Company
Judge dismissing the winding up petition, one of the secured              H
552            SUPREME COURT REPORTS                    [2019] 15 S.C.R.


A     creditors (SBI) also approached the DRT to secure its interest.
      Based on this, the DRT had directed that the amount to be
      returned to KOFL be attached so that the banks have an
      opportunity to recover their dues from KOFL. This clearly goes
      on to show that the secured creditors of KOFL were relevant
      stakeholders who were affected by the non-advertising of the
B     winding up petition. They should have been called upon to
      indicate whether they would want to step into the shoes of the
      petitioning creditors as per Rule 101. The records show that the
      settlement of dues has only been with respect to the unsecured
      creditors of KOFL, which was carried out pursuant to the orders
C     issued by the Company Judge. This is supported by the fact that
      the advertisement dated 24.08.2005 issued by KOFL inviting
      claims from recoveries made by its Administrator, was only limited
      to the depositors or unsecured creditors of the company.
      Therefore, given that the secured creditors of KOFL have still
      not been satisfied and are bound to be affected by any order
D     dismissing the winding up proceeding, the decision of the Division
      Bench reviving C.P. No. 179 of 2001 is upheld and the Company
      Court is directed to issue appropriate directions to the Official
      Liquidator for publishing the advertisement of the proceedings
      in accordance with law. The other winding up petition, C.P. No.
      180 of 2001 filed by the wife of Respondent No. 3 continues to
E     remain on record, as the impugned proceedings pertain to C.A.
      No. 734 of 2011, which was filed in C.P. No. 179 of 2001 only. The
      impugned judgment and decree does not contain any direction
      qua C.P. No. 180 of 2001, which shall therefore remain unaffected.
      [Paras 11.4-11.7] [563-D-H; 564-A-C]
F           3. Section 531 is a provision that deals with the effect of
      winding up of a company on its antecedent transactions. It provides
      that a transfer or any other act done in relation to the property of
      a company within a period of six months before the
      commencement of its winding up (“twilight period”) shall be
G     deemed to be a fraudulent preference of its creditors and
      accordingly be invalid. For the purpose of the present case,
      Section 531 should be read in conjunction with Section 293, which
      stipulates that the sale of the whole, or substantially the whole of
      the property of a public company requires the consent of its
      general meeting. It is also well-settled that the sale of an
H     immovable property can only be effectuated through a sale deed
  IDBI BANK LTD. THR. DGM(LEGAL) v. OFFICIAL LIQUIDATOR, OFFICE OF     553
              THE OFFICIAL LIQUIDATOR OF COMPANIES


and an agreement to sell does not transfer any right, title or         A
interest in the immovable property. Section 293(1) is applicable
to the present case in view of the categorical finding by both the
Courts below that the subject property is the only immovable
property of KOFL. Notably, no approval from the general meeting
of KOFL has been obtained. There is only a Board resolution
                                                                       B
dated 31.03.1999 permitting Respondent No. 1 to execute
agreements of sale and other documents for the purpose of selling
the subject property. In the absence of the requisite approval
from the general meeting, the instant application for execution of
a sale deed cannot be allowed as doing so would be allowing the
Petitioner to sidestep the mandatory requirements of Section           C
293(1). Therefore, C.A. No. 1208 of 2002 deserves to be
dismissed on this ground alone. [Para 14, 17.1] [565-B-C; 566-
F-H; 567-A-B]
      Suraj Lamp & Industries (P) Ltd. (2) v. State of Haryana,
      (2012) 1 SCC 656 : [2011] 11 SCR 848 ; Bank of India             D
      v. Abhay D. Narottam, (2005) 11 SCC 520 – relied on
       4. The agreement cannot be termed as a fraudulent
preference under Section 531. Under Indian company law, Section
531 of the 1956 Act (now Section 328 of the Companies Act, 2013)
is the cornerstone provision that lays down the requirements for       E
a transaction to amount to a fraudulent preference. Framed along
the lines of Section 320 of the English Companies Act of 1948, it
provides that any act relating to the property of a company may
qualify as a fraudulent preference if two conditions are met. First,
the dominant motive in the mind of the company (as represented
by its directors or general body of shareholders) should be to         F
prefer a particular creditor. Second, the said act must be
undertaken during the period of six months preceding the filing
of the winding up petition of the company. While the first
requirement ensures that the dominant intention to defraud
creditors is detected, the second ensures that there is a level of     G
commercial certainty and finality of transactions for those
interacting with the company. [Para 17.2] [567-C-E]
      Jayanthi Bai v. Popular Bank Ltd., AIR 1966 Ker 296;
      Official Liquidator, Victor Chit Fund (P.) Ltd. v. Kanhiya
      Lal & Ors., (1972) 42 Com Cas 196 (Del) – approved               H
554            SUPREME COURT REPORTS                     [2019] 15 S.C.R.


A             5. The Division Bench has entirely ignored the second
      requirement under Section 531. Solely based on an examination
      of factors indicating a dominant motive of the management of
      KOFL to benefit the Petitioner, it went on to hold that the
      agreement to sell constitutes a fraudulent preference. In doing
      so, it has failed to appreciate that the said agreement was executed
B
      on 17.02.2000, while the winding up petitions were filed on
      02.07.2001, signifying that there was a gap of over sixteen months
      between the two events, as opposed to the six-month period
      contemplated under Section 531. Similarly, it failed to consider
      that even the transfer of possession of the subject property
C     occurred on 06.11.2000, which was also before the six-month
      period preceding the filing of the winding up petition. Clearly
      then, the Division Bench has erred in ignoring the time limit
      stipulated under Section 531 and holding that the transaction
      qualifies as a fraudulent preference. The same cannot be
      disregarded as it is crucial for ensuring commercial certainty for
D
      parties transacting with a company. Section 531 is comprehensive
      and includes indirect transactions within its scope. Thus, the
      Petitioner is not precluded from benefiting from Section 531 on
      account of non-fulfilment of the six-month condition. Therefore,
      the agreement to sell dated 17.02.2000 cannot be termed as a
E     fraudulent preference under Section 531. [Paras 17.3-17.5] [567-
      F-H; 568-A-D]
            Manik Ratan Guin & Ors. v. Prokash Chandra
            Chattopadhyay, (1953-54) 58 CWN 545 (Cal); National
            Conduits (P) Ltd. v. S.S. Arora, AIR 1968 SC 279 :
F           [1968] SCR 430; Lt. Col. RK Saxena v. Imperial Forestry
            Corporation, 2001 CLC 1746 –relied on
                            Case Law Reference
      [1968] SCR 430                 relied on               Para 11.1
      [2011] 11 SCR 848              relied on               Para 17.1
G
      (2005) 11 SCC 520              relied on               Para 17.1
             CIVIL APPELLATE JURISDICTION: Special Leave Petition
      (Civil) No. 33825 of 2009.
            From the Judgment and Order dated 17.08.2009 of the High Court
H     of Judicature at Madras in O.S.A. No. 284 of 2003.
  IDBI BANK LTD. THR. DGM(LEGAL) v. OFFICIAL LIQUIDATOR, OFFICE OF             555
              THE OFFICIAL LIQUIDATOR OF COMPANIES


      With                                                                     A
      S.L.P. (Civil) No. 5143 of 2018.
       R. P. Bhat, Sr. Adv., Ms. Madhu S., Sumit Gupta, Ms. Subhashree
Mohapatra, Siddharth Raj Agarwal, Ms. Astha Tyagi, Advs. for the
Petitioner.
      Sriram Parakkat, B. Ragunath, P. Arun Kumar, Vijay Kumar,                B
K. K. Mani, Ms. T. Archana, Advs. for the Respondents.
      The Judgment of the Court was delivered by
      MOHAN M. SHANTANAGOUDAR, J.
      1. The instant SLPs have been preferred by IDBI Bank (erstwhile          C
United Western Bank) (hereinafter “the Petitioner”) against the
judgments dated 17.08.2009 and 28.07.2017 passed by the High Court
of Judicature at Madras in O.S.A. No. 284 of 2003 and O.S.A. No. 396
of 2013 respectively, which relate to Company Petition (C.P.) No. 179
of 2001. Vide the impugned judgments, the High Court dismissed an
application seeking the execution of a sale deed in favour of the Petitioner   D
by one Kothari Orient Finance Limited (hereinafter “KOFL”) and also
revived the winding up proceedings initiated against KOFL.
      2. The factual background to the instant petitions is as follows:
       2.1 On 20.03.1992, KOFL availed a working capital loan of Rs.
55 lakhs from the erstwhile United Western Bank (now taken over by             E
the Petitioner). As on 31.03.1999, the amount owed was Rs.60.55 lakhs.
KOFL defaulted on the same. Consequently, it proposed a one-time
settlement to the Petitioner for repayment of its dues. Towards this end,
KOFL offered to sell its property – Office Space Nos. 102 and 103, 1 st
Floor, Prestige Point, admeasuring 2056.89 sq. ft. and situated at No. 33,     F
Haddows Road, Nungambakkam, Chennai [hereinafter “the subject
property”].
       2.2 Pursuant to the same, KOFL and the Petitioner executed an
agreement to sell dated 17.02.2000 with respect to the subject property
for a consideration of Rs.1.05 crores. According to this agreement, the
Petitioner paid Rs. 41 lakhs as advance and the balance of Rs. 64 lakhs        G
was to be paid at the time of the completion of the sale transaction. This
was done in pursuance of the authority vested with Mr. Pradeep D.
Kothari (Director of KOFL and Respondent No. 1 in SLP No. 5143/
2018, hereinafter “Respondent No. 1”) by the resolution dated
31.03.1999 passed by the Board of Directors of KOFL, giving him the            H
556            SUPREME COURT REPORTS                          [2019] 15 S.C.R.


A     right to execute agreement(s) of sale for the said property to improve
      the liquidity of the company.
             2.3 It is important to note that on 18.04.2000, in accordance with
      the provisions of the Income Tax Act, 1961, a ‘No Objection Certificate’
      was issued by the income tax authorities for the sale of the subject
B     property for a consideration of Rs.1.05 crores. Later, vide letter dated
      06.11.2000, possession of the property was also handed over to the
      Petitioner by KOFL.
             2.4 Issues surfaced when two company petitions were filed on
      02.07.2001, being C.P. No. 179 of 2001 and C.P. No. 180 of 2001 by one
      Mr. S. Ramaiah (Respondent No. 3 in S.L.P. (Civil) No. 33825/2009)
C
      and his wife respectively. Having deposited monies with KOFL, which
      had been defaulted upon, they preferred these company petitions under
      Section 433(e) and (f) and Section 434 of the Companies Act, 1956
      (hereinafter “the 1956 Act”) seeking the winding up of KOFL and the
      repayment of their dues (hereinafter “winding up petitions”). When
D     these petitions came up before the learned Company Judge on 05.12.2001,
      it was observed that the liabilities of KOFL (including outstanding secured
      loans) were more than the assets. Consequently, the petitions were
      admitted and directions were issued for appointment of an Administrator
      and a Provisional Liquidator for KOFL. In addition to this, directions
      were also issued for publishing the company petitions in an English and
E
      Tamil daily, as well as in the Government Gazette.
            Genesis of S.L.P. (Civil) No. 33825 of 2009
              2.5 In April 2002, the Petitioner filed Company Application (C.A.)
      No. 1208 of 2002 in the aforesaid winding up petition being C.P. No. 179
      of 2001, seeking a direction to the Administrator to execute a sale deed
F
      in its favour for the subject property, as per Section 536(2) of the 1956
      Act.
             2.6 Vide order dated 21.04.2003, the learned Company Judge
      dismissed this application on the ground that the agreement to sell
      amounted to a fraudulent preference in favour of the Petitioner, as it
G     ignored other similarly placed creditors. The appeal preferred by the
      Petitioner was numbered as O.S.A. No. 284 of 2003. On 17.08.2009, it
      was dismissed on the basis that the agreement to sell suffered from
      legal infirmities and was a fraudulent preference. This order passed by
      the Division Bench has been impugned in the instant S.L.P. filed by the
H     Petitioner before this Court.
IDBI BANK LTD. THR. DGM(LEGAL) v. OFFICIAL LIQUIDATOR, OFFICE OF THE          557
 OFFICIAL LIQUIDATOR OF COMPANIES [MOHAN M. SHANTANAGOUDAR, J.]


      Interim Proceedings                                                     A
       2.7 In the interim, Mr. Pradeep D. Kothari (Respondent No. 1)
filed C.A. Nos. 2482-2485 of 2007, seeking permission to pay amounts
due to the unsecured creditors of KOFL out of his own personal funds.
By order dated 09.10.2007, the learned Company Judge disposed of
these applications, directing Respondent No. 1 to deposit Rs. 4.69 crores     B
with the Administrator towards full and final settlement of the dues of
the unsecured creditors of KOFL. It was also directed that remaining
amount (if any) should be refunded back to him after payment to the
depositors.
       2.8 On 23.06.2009, based on a perusal of the interim and final
                                                                              C
report filed by the Administrator, the learned Company Judge noted that
6,464 out of the total 10,968 depositors (unsecured creditors) of KOFL
had been paid by the Administrator to the extent of 20% and 30% of the
funds had been brought in by the Director. For the remaining 4,504
depositors, it was observed that the entire claims of about Rs. 5.87 crores
had been settled by Respondent No. 1 privately. Since part of the amount      D
due to them was covered by recoveries made from debtors of KOFL,
an amount of Rs. 1.95 crores remained out of the Rs. 4.69 crores
deposited by Respondent No. 1. Consequently, this amount was directed
to be refunded back to him. Vide this order, the learned Company Judge
also discharged the Administrator on the basis that his primary obligation
                                                                              E
of redemption of dues of unsecured creditors had been fulfilled.
      2.9 Against this backdrop, the original Company Petitions came
up for hearing before the Company Court on 21.06.2010. Notice was
issued to the petitioning creditor, S. Ramaiah, who is arraigned as
Respondent No. 3 herein.
                                                                              F
      Genesis of S.L.P. (Civil) No. 5143 of 2018
       2.10 On 03.03.2011, the Petitioner filed another company
application, C.A. No. 734 of 2011 in C.P. No. 179 of 2001 seeking the
discharge of the Official Liquidator, who was acting as the Provisional
Liquidator of KOFL (Respondent No. 2 in the SLPs before us). This
application was made on the ground that there were no other claims left       G
to be settled against the company, and therefore, the services of the
Official Liquidator were no longer required. The application was opposed
by Respondent No. 1 on the ground that it would prejudice other creditors
of the company and was a mala fide attempt by the Petitioner to grab
the subject property. Meanwhile, the Official Liquidator filed a report on    H
558            SUPREME COURT REPORTS                         [2019] 15 S.C.R.


A     16.01.2013 seeking permission to advertise and invite claims from
      unsettled creditors of KOFL, if any.
             2.11 By order dated 04.10.2013, the learned Company Judge
      allowed the application and discharged the liquidator in view of the fact
      that unsecured creditors of KOFL had been settled. Further, given the
B     lack of adequate advertising of the winding up petition, and the
      unwillingness of any other creditor or contributory of KOFL to prosecute
      the petition in terms of Rule 101 of the Companies (Court) Rules, 1959
      (hereinafter “1959 Rules”), the original winding up petition, C.P. No.
      179 of 2001, was dismissed. The Official Liquidator was directed to
      return investments worth Rs. 1.27 crores which were lying with him,
C     back to KOFL after deducing administrative expenses incurred by him.
             2.12 Soon after this order, one of the secured creditors of KOFL,
      State Bank of India (hereinafter “SBI”) approached the Debts Recovery
      Tribunal, Chennai (hereinafter “DRT”) for securing its interest and
      sought an injunction restraining the Official Liquidator from refunding
D     the sum of Rs. 1.27 crores to KOFL. By order dated 13.12.2013, the
      DRT ordered that the said sum be attached once it is transferred to
      KOFL, so that the banks can recover their dues from the company.
             2.13 In the interim, Respondent No. 1 filed an appeal against the
      order of the Company Court dismissing the winding up petition. By order
      dated 28.07.2017, a Division Bench of the High Court revived the winding
E     up proceedings on the basis that it would be unjust and inequitable to
      wind up the company only for the reason that no other creditor or
      contributory was willing to prosecute the winding up petition. Taking
      note of the secured creditors of KOFL who had still not been satisfied
      and had consequently approached the DRT, C.P. No. 179 of 2001 was
      revived and the Official Liquidator was directed to continue the winding
F
      up proceedings under the supervision of the Company Judge. This order
      of the Division Bench in O.S.A. No. 396 of 2013 has been impugned in
      the aforementioned S.L.P. (Civil) No. 5143 of 2018 filed by the Petitioner
      before this Court.
            3. In view of this factual background, two issues arise for
G     consideration before this Court:
            First, whether the winding up proceedings against KOFL should
      be revived.
             Second, in the event that the proceedings should be revived, can
      a sale deed be executed based on the agreement to sell dated 17.02.2000
H     entered into by the Petitioner and KOFL.
IDBI BANK LTD. THR. DGM(LEGAL) v. OFFICIAL LIQUIDATOR, OFFICE OF THE             559
 OFFICIAL LIQUIDATOR OF COMPANIES [MOHAN M. SHANTANAGOUDAR, J.]


        4. Learned Senior Counsel for the Petitioner argued that the             A
winding up petition deserves to be dismissed, as all the creditors of KOFL
have now been satisfied in accordance with the orders of the Company
Judge and there are no other proceedings pending against KOFL before
any fora. Further, since no creditor had challenged the order of the
Company Court dismissing the winding up proceedings, it was submitted
                                                                                 B
that the proceedings do not merit revival at this stage. As regards the
execution of a sale deed, learned Senior Counsel refuted the finding that
the agreement to sell amounts to a fraudulent preference. Relying on
the provisions of Section 531 of the 1956 Act, he argued that the
agreement to sell cannot be deemed as a fraudulent preference as the
agreement to sell was not executed within the six-month period preceding         C
the filing of the winding up petition. In addition to this, he also adverted
to the lack of any fraudulent intention underlying the transaction and
drew support from the No Objection Certificate issued by the Income
Tax authorities to argue that the sale was not undervalued. Lastly, it was
submitted that Section 293(1) of the 1956 Act is inapplicable to the present
case, as the subject property does not form the whole or substantial             D
whole of the property owned by KOFL. Thus, he stated that the approval
of the Board of Directors vide resolution dated 31.03.1999 was sufficient,
and no approval from the general meeting was required.
        5. Per contra, learned Counsel for Respondent No. 2 (Official
Liquidator) submitted that the winding up proceedings were correctly             E
revived, as there are several secured creditors of KOFL that have still
not been satisfied. He also argued that the subject property is the only
property of KOFL and cannot be transferred without the approval of the
general meeting in terms of Section 293(1) of the 1956 Act. With respect
to the agreement to sell, it was submitted that it is a fraudulent preference
                                                                                 F
in favour of the Petitioner. To substantiate this, he relied on the provisions
of the agreement which state that the remaining consideration of Rs.64
lakhs would be paid only at the time of registration of the property. In
light of this, he submitted that the adjustment of the said amount was not
contemplated in the agreement and by doing so, the clause itself has
been rendered redundant.                                                         G
       6. We have considered the arguments advanced by both sides
and perused the material on record. Since the issue of fraudulent
preference hinges on the survival of the winding up petition, we shall
first proceed to examine whether the Division Bench was correct in
reviving the winding up proceedings.                                             H
560            SUPREME COURT REPORTS                          [2019] 15 S.C.R.


A           Revival of the winding up petition
              7. From a bare perusal of the decision of the Division Bench, it is
      evident that the requirements governing the advertisement of winding
      up petitions under the 1959 Rules are crucial for the determination of
      this issue. It would therefore be useful to note the relevant rules, which
B     are reproduced hereunder:
            “R.96. Admission of petition and directions as to
            advertisement - Upon the filing of the petition, it shall be posted
            before the Judge in Chambers for admission of the petition and
            fixing a date for the hearing thereof and for directions as to the
            advertisements to be published and the persons, if any, upon whom
C           copies of the petition are to be served. The Judge may, if he thinks
            fit, direct notice to be given to the company before giving directions
            as to the advertisement of the petition.
            R.99: Advertisement of petition - Subject to any directions of
            the Court, the petition shall be advertised within the time and in
D           the manner provided by rule 24 of these rules. The advertisement
            shall be in Form No. 48.
            R.24: Advertisement of petition -
            (1) Where any petition is required to be advertised, it shall, unless
            the Judge otherwise orders, or these rules otherwise provide, be
E           advertised not less than fourteen days before the date fixed for
            hearing, in one issue of the Official Gazette of the State or the
            Union Territory concerned, and in one issue each of a daily
            newspaper in the English language and a daily newspaper in the
            regional language circulating in the State or the Union
F           Territory concerned, as may be fixed by the Judge.
            R.101: Substitution of creditor or contributory for original
            petitioner -
            Where a petitioner – … (2) fails to advertise his petition within
            the time prescribed by these rules or by order of Court or such
G           extended time as the Court may allow …
            (4) if appearing, does not apply for an order in terms of the prayer
            of his petition, or, where in the opinion of the Court there is other
            sufficient cause for an order being made under this rule, the Court
            may, upon such terms as it may think just, substitute as petitioner
H           any creditor or contributory who, in the opinion of the Court, would
IDBI BANK LTD. THR. DGM(LEGAL) v. OFFICIAL LIQUIDATOR, OFFICE OF THE            561
 OFFICIAL LIQUIDATOR OF COMPANIES [MOHAN M. SHANTANAGOUDAR, J.]


      have a right to present a petition, and who is desirous of prosecuting    A
      the petition.”
        8. The above rules find mention in the part relating to winding up
petitions under the 1959 Rules. They lay down the procedure for instituting
a winding up action. From a reading of Rules 96, 99, and 24, it is clear
that the advertisement of a winding up petition is mandatory. In the event      B
that the petitioning creditor fails to advertise the petition within the
prescribed time, Rule 101 accords the Court with the discretion to
substitute such petitioning creditor with another creditor or contributory,
if the latter is capable and desirous of prosecuting the winding up petition.
       9. In the instant case, while dealing with C.A. No. 734 of 2011 in
C.P. No. 179 of 2001 seeking discharge of the Official Liquidator, the          C
learned Company Judge observed that the mandatory procedure for
advertising a winding petition, as stipulated under Rules 95, 96, 99, and
24 of the 1959 Rules had not been complied with. While looking into the
implications of the failure to advertise, the learned Company Judge
adverted to Rule 101, which allows for substitution of the petitioning          D
creditor. However, since it was found that no other creditor had expressed
the desire to prosecute the original petition, C.P. No. 179 of 2001 was
dismissed. It was observed that such dismissal would not prejudice the
creditors as more than 10,000 unsecured creditors of KOFL had been
settled in the last 12 years after being given adequate notice, and even
the secured creditors would not be prejudiced, as they would still be free      E
to pursue their claims before the DRT.
        10. As noted supra, a Division Bench of the High Court set aside
the order of the Company Court in appeal. While it was observed that
the winding up petitions had not been advertised by the petitioning creditor
in accordance with the 1959 Rules, it was held that it would be unjust          F
and inequitable to wind up the company only for this reason, as there
were several secured creditors (including SBI) who had still not been
satisfied and had consequently approached the DRT. It was observed
that before dismissing the winding up petition, all the secured creditors
to whom KOFL owed money, should have been called by the Official
Liquidator to inquire whether they wanted to step into the shoes of the         G
original petitioner. Taking a broad interpretation of Rule 101, the Division
Bench held that the Rule cannot be read as an absolute bar on the
continuation of winding up proceedings, where the petitioning creditor
fails to advertise the petition. Adverting to the inherent powers vested
with the Company Court under Rule 9 and given the absence of a specific
                                                                                H
562             SUPREME COURT REPORTS                            [2019] 15 S.C.R.


A     provision mandating that the advertisement shall only be published by
      the petitioning creditor, the Division Bench observed that the Company
      Court has the discretion to direct the provisional liquidator to publish the
      advertisement, where the situation so demands. In view of this, C.P. No.
      179 of 2001 was revived and the Official Liquidator was directed to
      continue the winding up proceedings.
B
             11. Upon examining the relevant rules and the decisions rendered
      by the learned Company Judge and the Division Bench, we are inclined
      to agree with the view taken by the latter.
             11.1 By order dated 05.12.2001, the learned Company Judge had
C     directed the publication of C.P. No. 179 of 2001 in an English and Tamil
      daily as well as the Government Gazette. However, despite this order,
      no such advertisement was made. To this extent, we agree with the
      Division Bench that there has been a violation of the advertisement
      requirements under Rules 96, 99 and 24, which are mandatory in nature
      [see National Conduits (P) Ltd. v. S.S. Arora, AIR 1968 SC 279; Lt.
D     Col. RK Saxena v. Imperial Forestry Corporation, 2001 CLC 1746].
             11.2 Given this failure to advertise, the option of substitution
      provided in Rule 101 becomes relevant. In this respect, both the Courts
      below have found that no other creditor or contributory expressed
      willingness to prosecute the original winding up petition. At the same
E     time, as noted by the Division Bench, there are other unsatisfied secured
      creditors of KOFL who were not given the option to step into the shoes
      of the petitioning creditor in terms of Rule 101.
             11.3 Against this backdrop, the crucial question that arises for our
      consideration is whether a winding up petition can be dismissed solely
F     on the ground of lack of a prosecuting creditor under Rule 101, or whether
      the Company Court has the power to direct the publication of an
      advertisement by the Liquidator of the company, especially in cases where
      other unsatisfied creditors still remain. For answering this question, it is
      important to bear in mind that winding up proceedings are proceedings
      in rem and have an impact on the rights of people, in general. Thus, it is
G     mandatory to advertise such proceedings, so as to ensure that they receive
      the widest possible publicity and all relevant stakeholders have adequate
      notice. This implies that in a situation where the petitioning creditor fails
      to advertise the petition and no other creditor or contributory comes
      forward to prosecute it, Rule 101 should not be read in a manner that
H     absolutely bars the continuation of a winding up petition. This is particularly
IDBI BANK LTD. THR. DGM(LEGAL) v. OFFICIAL LIQUIDATOR, OFFICE OF THE           563
 OFFICIAL LIQUIDATOR OF COMPANIES [MOHAN M. SHANTANAGOUDAR, J.]


so when there are unsatisfied creditors who should have been given an          A
opportunity to prosecute the petition, but were deprived of the same due
to the failure to advertise. Indeed, Rule 101 is only limited to instances
where the petitioning creditor fails to advertise the petition. However,
there is nothing in the language of Rules 24, 96, or 99 to indicate that
only such petitioning creditor can advertise the petition. In our
                                                                               B
considered opinion, given the absence of a specific provision mandating
that the petition only be advertised by petitioning creditor, the Company
Court has the discretion to direct the publishing of an advertisement to
secure the interest of other creditors. In such situations, the winding up
proceedings cannot be dismissed, as it would frustrate the very objective
of securing the interest of all creditors.                                     C
       11.4 In light of this discussion, we find that it would be unjust to
dismiss the winding up petition in the instant case solely on the ground
that there is no other person willing to substitute the original creditor in
terms of Rule 101. Here, due to the lack of adequate advertisement of
the winding up petitions, it appears that the secured creditors of KOFL        D
were constrained to approach the DRT for recovery of their dues by
filing O.A. Nos. 139 of 2001, 978 of 2000; and 14 of 2002. Further, upon
learning of the decision of the Company Judge dated 04.10.2013
dismissing the winding up petition, one of the secured creditors (SBI)
also approached the DRT to secure its interest. Based on this, vide order
dated 13.12.2013, the DRT had directed that the amount to be returned          E
to KOFL be attached so that the banks have an opportunity to recover
their dues from KOFL. This clearly goes on to show that the secured
creditors of KOFL were relevant stakeholders who were affected by
the non-advertising of the winding up petition. They should have been
called upon to indicate whether they would want to step into the shoes         F
of the petitioning creditors as per Rule 101.
       11.5 Clearly, the submission of the learned Senior Counsel for the
Petitioner that the winding up petition deserves to be dismissed as all
creditors of KOFL have been satisfied is belied by the existence of the
proceedings before the DRT. The records show that the settlement of            G
dues has only been with respect to the unsecured creditors of KOFL,
which was carried out pursuant to the orders issued by the Company
Judge. This is supported by the fact that the advertisement dated
24.08.2005 issued by KOFL inviting claims from recoveries made by its
Administrator, was only limited to the depositors or unsecured creditors
of the company.                                                                H
564             SUPREME COURT REPORTS                           [2019] 15 S.C.R.


A             11.6 Therefore, given that the secured creditors of KOFL have
      still not been satisfied and are bound to be affected by any order dismissing
      the winding up proceeding, we uphold the decision of the Division Bench
      reviving C.P. No. 179 of 2001, and direct the Company Court to issue
      appropriate directions to the Official Liquidator for publishing the
      advertisement of the proceedings in accordance with law.
B
            11.7 We hasten to add here that the other winding up petition,
      C.P. No. 180 of 2001 filed by the wife of Respondent No. 3 continues to
      remain on record, as the impugned proceedings pertain to C.A. No. 734
      of 2011, which was filed in C.P. No. 179 of 2001 only. The impugned
      judgment and decree does not contain any direction qua C.P. No. 180 of
C     2001, which shall therefore remain unaffected.
             12. In light of the finding that the revival of the winding up petition
      by the Division Bench was correct, we will now turn to examine whether
      the agreement to sell executed by KOFL in favour of the Petitioner
      amounts to a fraudulent preference, and consequently, whether the
D     Petitioner has a right to seek the execution of a sale deed in its favour.
             Execution of sale deed
             13. Before delving into the merits of this issue, it would be useful
      to refer to the relevant provisions of the 1956 Act:
E            “S.531: 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,
F            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.
G
             S.293: Restrictions on powers of Board -
             (1) The Board of directors of a public company, or of a private
             company which is a subsidiary of a public company, shall not,
             except with the consent of such public company or subsidiary in
H            general meeting,-
IDBI BANK LTD. THR. DGM(LEGAL) v. OFFICIAL LIQUIDATOR, OFFICE OF THE           565
 OFFICIAL LIQUIDATOR OF COMPANIES [MOHAN M. SHANTANAGOUDAR, J.]


      (a) sell, lease or otherwise dispose of the whole, or substantially      A
      the whole, of the undertaking of the company, or where the
      company owns more than one undertaking, of the whole, or
      substantially the whole, of any such undertaking”.
                                                      (emphasis supplied)
       14. Section 531 is a provision that deals with the effect of winding    B
up of a company on its antecedent transactions. It provides that a transfer
or any other act done in relation to the property of a company within a
period of six months before the commencement of its winding up
(hereinafter “twilight period”) shall be deemed to be a fraudulent
preference of its creditors and accordingly be invalid. For the purpose of
the present case, Section 531 should be read in conjunction with Section       C
293, which stipulates that the sale of the whole, or substantially the whole
of the property of a public company requires the consent of its general
meeting.
       15. Here, while dealing with Company Application (C.A.) No.
1208 of 2002 filed by the Petitioner for execution of a sale deed, the         D
learned Company Judge dismissed the same on the ground that the
agreement to sell dated 17.02.2000 was a collusive transaction between
the Petitioner and the management of KOFL. It was observed that KOFL
was in financial distress even at the time that the agreement to sell was
entered into, and owed over Rs.5 crores to its other secured creditors.
                                                                               E
Given the existence of such secured and other unsecured creditors, the
transfer of the subject property in favour of the Petitioner (which was
found to be the prime property of the company) was held to be a fraudulent
preference. Further, it was observed that the Petitioner would not have
any priority over the general body of creditors merely because possession
of the property had been handed over to it. It was also held that the          F
Petitioner could not claim to be a bona fide purchaser who was unaware
of the financial crunch of KOFL, as it had access to the annual report of
KOFL for the year 1999-2000, which revealed the company’s poor
financial condition.
       16. As noted supra, the Division Bench affirmed the order of the
                                                                               G
Company Court in appeal on the basis that it would be unjust to allow the
sale transaction, especially since the property in question was the only
and prime immovable asset of KOFL and was to meet the demands of
several secured and unsecured creditors. In light of this, it was held that
the Board resolution dated 31.03.1999 was insufficient and a resolution
of the general meeting of KOFL approving the sale transaction was              H
566             SUPREME COURT REPORTS                          [2019] 15 S.C.R.


A     necessary, as required under Section 293(1). The Division Bench further
      held that the Petitioner only had an agreement to sell in its favour, which
      did not accord it with any rights by itself. Moreover, since the agreement
      to sell provided that the possession of the property be delivered to the
      vendee only at the time of completion of the transaction (which would
      be the time of registration of the sale deed), it was observed that the
B     transfer of possession on 06.11.2000 reflected the intention of the
      management of KOFL to met out preferential treatment to the Petitioner.
      Lastly, it was held that the Petitioner could not claim exclusion from
      Section 531 on the basis that the agreement to sell had been entered into
      before the six-month twilight period. This was done because the Division
C     Bench read Section 531 as relating to “transfers” of property only, and
      accordingly held the agreement to sell in question is different from a
      “transfer” which only occurs through a sale deed in terms of Section 54
      of the Transfer of Property Act, 1882. Thus, the Division Bench ruled
      that the Petitioner could not benefit from Section 531, even though the
      agreement to sell had been executed almost sixteen months before the
D     winding up petitions were filed.
             17. Upon examining the relevant rules and the decisions rendered
      by the learned Company Judge and the Division Bench, we agree with
      the conclusion of the Division Bench that C.A. No. 1208 of 2002 filed
      by the Petitioner for execution of a sale deed in its favour is liable to be
E     dismissed. This is primarily because the requirements of Section 293(1)
      of the 1956 Act have not been met.
             17.1 As stated supra, Section 293(1) requires the consent of the
      general meeting of a company in case of a sale or disposition of the
      whole or substantial whole of its property. It is also well-settled that the
      sale of an immovable property can only be effectuated through a sale
F
      deed and an agreement to sell does not transfer any right, title or interest
      in the immovable property [see Suraj Lamp & Industries (P) Ltd. (2)
      v. State of Haryana, (2012) 1 SCC 656; Bank of India v. Abhay D.
      Narottam, (2005) 11 SCC 520]. Given that C.A. No. 1208 of 2002 seeks
      execution of a sale deed in favour of the Petitioner based on a prior
G     agreement to sell, the approval of the general meeting of the company in
      terms of Section 293(1) becomes relevant. Contrary to the submission
      made by the learned Senior Counsel for the Petitioner, this provision is
      applicable to the present case in view of the categorical finding by both
      the Courts below that the subject property is the only immovable property
      of KOFL. Notably, no approval from the general meeting of KOFL has
H     been obtained. There is only a Board resolution dated 31.03.1999
IDBI BANK LTD. THR. DGM(LEGAL) v. OFFICIAL LIQUIDATOR, OFFICE OF THE           567
 OFFICIAL LIQUIDATOR OF COMPANIES [MOHAN M. SHANTANAGOUDAR, J.]


permitting Respondent No. 1 to execute agreements of sale and other            A
documents for the purpose of selling the subject property. In the absence
of the requisite approval from the general meeting, the instant application
for execution of a sale deed cannot be allowed as doing so would be
allowing the Petitioner to sidestep the mandatory requirements of Section
293(1). Therefore, in our considered opinion, C.A. No. 1208 of 2002
deserves to be dismissed on this ground alone.                                 B
       17.2 Be that as it may, in light of the contentions raised by both
the parties on whether the agreement to sell in question amounts to a
fraudulent preference, we consider it necessary to address the same.
We differ with the Division Bench inasmuch as the said agreement cannot
be termed as a fraudulent preference under Section 531. Under Indian           C
company law, Section 531 of the 1956 Act (now Section 328 of the
Companies Act, 2013) is the cornerstone provision that lays down the
requirements for a transaction to amount to a fraudulent preference.
Framed along the lines of Section 320 of the English Companies Act of
1948, it provides that any act relating to the property of a company may
qualify as a fraudulent preference if two conditions are met. First, the       D
dominant motive in the mind of the company (as represented by its
directors or general body of shareholders) should be to prefer a particular
creditor [see Jayanthi Bai v. Popular Bank Ltd., AIR 1966 Ker 296;
Official Liquidator, Victor Chit Fund (P.) Ltd. v. Kanhiya Lal &
Ors., (1972) 42 ComCas 196 (Del)]. Second, the said act must be                E
undertaken during the period of six months preceding the filing of the
winding up petition of the company. While the first requirement ensures
that the dominant intention to defraud creditors is detected, the second
ensures that there is a level of commercial certainty and finality of
transactions for those interacting with the company.
                                                                               F
       17.3 In light of this, when we look to the facts of the instant case,
it appears that the Division Bench has entirely ignored the second
requirement under Section 531. Solely based on an examination of factors
indicating a dominant motive of the management of KOFL to benefit the
Petitioner, it went on to hold that the agreement to sell constitutes a
fraudulent preference. In doing so, it has failed to appreciate that the       G
said agreement was executed on 17.02.2000, while the winding up
petitions were filed on 02.07.2001, signifying that there was a gap of
over sixteen months between the two events, as opposed to the six-
month period contemplated under Section 531. Similarly, it failed to
consider that even the transfer of possession of the subject property
occurred on 06.11.2000, which was also before the six-month period             H
568              SUPREME COURT REPORTS                        [2019] 15 S.C.R.


A     preceding the filing of the winding up petition. Clearly then, the Division
      Bench has erred in ignoring the time limit stipulated under Section 531
      and holding that the transaction qualifies as a fraudulent preference. As
      noted supra, the same cannot be disregarded as it is crucial for ensuring
      commercial certainty for parties transacting with a company.
B             17.4 Further, we differ with the reasoning of the Division Bench
      that the Petitioner cannot avail benefit of Section 531 as the agreement
      to sell does not amount to a “transfer”. A bare reading of the provision
      shows that in addition to any transfer of property, it covers “any other
      act relating to the property”. These terms indicate that Section 531 is
      comprehensive and includes indirect transactions within its scope [see
C     Manik Ratan Guin & Ors. v. Prokash Chandra Chattopadhyay,
      (1953-54) 58 CWN 545 (Cal)]. Thus, the Petitioner is not precluded
      from benefiting from Section 531 on account of non-fulfilment of the
      six-month condition.
            17.5 Therefore, it is evident that the agreement to sell dated
D     17.02.2000 cannot be termed as a fraudulent preference under Section
      531.
            18. At this juncture, we would re-emphasize that our finding on
      fraudulent preference does not affect our conclusion that C.A. No. 1208
      of 2002 is liable to be dismissed, as the non-compliance with Section
      293(1) cannot be ignored. However, given our decision in support of
E
      revival of the winding up proceedings, we observe that even if the
      infirmity with respect to Section 293 is subsequently removed by KOFL,
      any execution of a sale deed in favour of the Petitioner in the future will
      be subject to the outcome of the winding up proceedings.
             19. In view of the foregoing discussion, we uphold the decision of
F     the Division Bench of the High Court of Judicature at Madras dated
      28.07.2017 in O.S.A. No. 396 of 2013, reviving the winding up proceedings
      in C.P. No. 179 of 2001. SLP (Civil) No. 5143 of 2018 preferred before
      this Court is dismissed accordingly.
             As regards the impugned judgment of the Division Bench dated
G     17.08.2009 in O.S.A. No. 284 of 2003, we uphold the dismissal of C.A.
      No. 1208 of 2002 seeking the execution of a sale deed in favour of the
      Petitioner. SLP (Civil) No. 33825 of 2009 preferred before this Court is
      dismissed accordingly.


H     Devika Gujral                                                 SLP dismissed.