# Radha Krishna Singh v. Commissioner Village Development, U.P. & others

- **Citation:** (2000) 3 ILRA 71
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2000
- **Case number:** Liquidation) In Company Application No. 2 of 1997
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/radha-krishna-singh-v-commissioner-village-development-u-p-others-39561
- **Pages:** 5

## Text

3All] Radha Krishna Singh V. Commissioner Village Development, U.P. & others
71
filed. Learned Standing Counsel does
not dispute this position. Under the
circumstances, the court is left with no
choice but to proceed on the assumption
that the averments made in the writ
petition are correct.

7. From the averments made in the
writ petition. Undisputed position that
emerges is;

That the petitioner retired on 30th June
as Block Development Officer;

That the requisite formalities for the
grant
of
retiral
benefits
had
been
completed by the petitioner; and

That the retiral benefits which the
petitioner may be entitled have not been
granted hitherto.

8. It cannot be gainsaid that the grant
of retiral benefits to an employee of the
State is not a matter of grace or charity.
Indeed, he is entitled to retiral benefits as a
matter of legally cognizable and judicially
enforceable right. Instant case is a said
commentary of the inaction on the part of
the respondents, on account of which the
petitioner has been deprived of his lawful
dues despite his repeated approaches to the
concerned authorities.

9. On the facts and circumstances,
noticed above, in the opinion of the court,
the stage has arrived for intervention by
this court.

10. In the result, the petition succeeds
and is allowed. The respondents jointly
and severally are directed to settle the
claim of the petitioner in respect of his
retiral benefits and ensure the payment of
all the dues to him within a period of three
months, to be computed from today. Shri
K.M. Sahai., learned Standing Counsel of
the State of U.P. in whose presence this
order 'has been passed shall communicate
to the respondents promptly. Petitioner
shall also produce before the respondents a
certified copy of this order as early as
possible. However, it is made clear that the
respondents shall not wait for production
of a certified copy of this order by the
petitioner and shall initiate action on the
information received by them through Shri
K.M. Sahai, learned Standing Counsel of
the State of U.P.

11. Certified copy this order may be
given to the learned counsel appearing for
the parties within a week, on payment of
usual charges.

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In the matter of M/s Hira Floon Ltd.(In
Liquidation)
In
Company Application No. 2 of 1997
In
Company Petition No. 18 of 1989

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By the Court

1. The Official Liquidator has made
the present application to declare the sale
as void in terms of Section 537(2) of the
Companies Act which has been made by
the U.P.F.C.- respondentno.1 in favour of
respondent no. 2 of the assets allegedly
belonging to M/s Hira Floon Ltd. (In
Liquidation).

2. The relevant facts may be stated
briefly. A winding up petition no. 18 of
1989 was presented against M/s Hira floon
Ltd. having its registered office at Kaloki,
Anupshahr Road, Bulandshahr by one
Jitendra Kumar, Proprietor of a firm
Ultimate Advertising & Marketing, New
Delhi. The company was ordered to be
wound up by the court's order dated
8.8.1989. Formerly, Hira Industries was a
partnership firm and Hira Floon Ltd. (In
Liquidation) was incorporated on 2.1.86,
taking
the
running
partnership
firm
alongwith all its assets, liabilities and
goodwill as agreed upon between the
partners of the said firm and Directors of
the newly formed company. The U.P.F.C.
- respondent no. 1 had allegedly advanced
a loan to the partnership firm above
named. It took over possession of the
company on 3.4.89 and sold the assets of
the company to respondent no. 2 for Rs. 4
lacs in 1990. The winding up petition had
been presented on 9.3.89 in which the
winding up order was ultimately passed on
8.8.89. Section 44 (2) of the Companies
Act provides that in a winding up of
company by the court, the winding up
proceedings shall be deemed to commence
at the time of presentation of the petition
for the winding up. The winding up order
having been made on 8.8.89, all its
properties came into the custody of the
court, relating back to the date of
presentation of the winding up petition.
Therefore, the U.P.F.C. could not take
possession of the assets of the company
and sell them. It is with these allegations
that the official liquidator has presented
the present application for declaring the
sale effected by the U.P.F.C.- respondent
no. 1 in favour of respondent no. 2 in
respect of the assets of the company to be
void as per the provision contained in
Section 537(2) of the Companies Act.
3All] The Official Liquidator, U.P. V. The M.D.,U.P. Financial Corporation Ltd.
73

3. The defence put forth by
respondent no. 1-U.P.F.C. may shortly be
stated thus: It granted a term loan of
Rs.2,84,000/- and Rs.52,000/- 9(reduced to
Rs.29,650/-) respectively to the partnership
firm- M/s Hira Industries. The partners of
the said firm were Raghunath Prasad
Singhal, Santosh Kumar, Harish Kumar
Singhal and Smt. Madhu Singhal. To
secure the above two loans, the firm
mortgaged a piece of land 3 big has 15
biswas bearing khasra no. 106 situate at
Kaloli, Tehsil & Pargana Baran, District
Bulandshahr in favour of U.P.F.C. by
deposit of title deed. The said land
belonged to one of the partners of the
firm,
Raghunath
Prasad
Singhal.
Subsequently, the partners of the firm
decided to change the constitution of the
firm and converted it into a public Ltd.
Company.
The
U.P.F.C.
granted
permission to this change subject to
completion
of
the
requisite
legal
formalities. But the immovable assets of
the firm were never transferred to the
company. The U.P.F.C. took possession of
the mortgaged property in pursuance of
Section
29
of
the
State
Financial
Corporation Act and sold the same on
28.3.89 in favour of Mohd. Rais to whom
the possession of these assets was handed
over on 14.5.90. The property sold to the
said purchaser never belonged to the
company (In Liquidation). The U.P.F.C.
being a secured creditor could proceed
under section 29 of the State Financial
Corporation Act and had every right to sell
the property mortgaged to it t secure the
;loan advanced to the partnership firm.
With these contentions, the U.P.F.C. has
prayed for the rejection of the application
made by the Official Liquidator.

Notice
was also issued to the
purchaser also, but he did not turn up
before the Court.

4. The affidavit and counter affidavit
have
been
exchanged
between
the
contesting applicant- Official Liquidator
on behalf of the company (In Liquidation)
and U.P.F.C.- respondent no. 1 have also
heard the arguments advanced by the
Official Liquidator and on behalf of the
respondent no. 1.

5. The point for consideration is as to
whether the property sold by the U.P.F.C.
- respondent no. 1 belonged to the
company (in liquidation). Some facts are
undisputed that the winding up petition
had been presented by a creditor against
the company in question on 9.3.89 and the
winding up order was passed on 8.8.89.
There can be no dispute about the legal
position that as per section 441(2) of the
Companies Act, in case a winding up of
company by the Court, the winding up
proceeding is deemed to commence at the
time of presentation of petition for the
winding
up.
Section
456(2)
of
the
Companies Act says that all the properties
and effects of the company shall be
deemed to be in the custody of the Court
as from the date of order for winding up of
the company. The provisions contained in
Section 537 (1) (a) & (b) of the Companies
Act further provide that where any
company is being wound up by or subject
to the supervision of the court, any
attachment, distress or execution put in
force, without leave of the court, against
the estate or effects of the company after
such commencement shall be void. The
submission of the Official Liquidator is
that
the
company
in
question
(In
Liquidation) had been formed to take over
the running partnership business of the
INDIAN LAW REPORTS ALLAHABAD SERIES [2000
74
firm- Hira Industries along with all its
assets and liabilities. As such, the property
where against the U.P.F.C. proceeded,
purportedly under section 29 of the State
Financial Corporation Act, had vested in
the company and were in the custody of
the company court. The same, it is urged,
could not be sold by the U.P.F.C. having
acted in contravention of the provisions of
the Companies Act referred to above, the
complained sale is liable to be declared as
void. It has been submitted that in any
case, the UPFC is bound to make over the
sale proceeds to the Official Liquidator for
being
distributed
amongst
eligible
creditors consequent upon the winding up
order. Stress had been laid on the balance
sheet of the company for the year 1986-87
and as on 8.8.89. It has been pointed out
that on the liabilities side, the loan
advanced by the U.P.F.C. has been shown
under the title (secured loans), amounting
to Rs.5,62,500/-. On assets side land,
building, machinery etc. have been shown,
meaning thereby that liabilities and assets
of
the
partnership
firm
had
been
transferred
to
the
company.
(In
Liquidation).

6. The submissions made by the
Official Liquidator do not stand a close
and in-depth scrutiny. Indeed, the land
stood in the name of one of the partners of
the erstwhile firm, namely Raghunath
Prasad Singhal when the loan had been
taken from U.P.F.C. by effecting simple
mortgage of the said property with
depositing of title deed. Raghunath Prasad
Singhal was one of the partners of the firm
when in existence when the loan was
advanced and as a matter of fact the loan
was advanced to the partnership firm. The
law provides that the liability of the
partner of a partnership firm is joint and
several. To day in simple words, the
partner of a firm is liable personally also in
respect of liability of the partnership firm
and his personal property can be proceeded
against by the creditor. Therefore, the
U.P.F.C. which had advanced the loan to
the firm on the basis of simple mortgage of
certain property belonging to one of the
partners,
namely,
Raghunath
Prasad
Singhal, had every right to proceed against
that property as per section 29 of the State
Financial Corporation Act.

7. Unilateral act of the partners of the
firm by converting the firm to the public
Ltd. Company and professing to transfer
all the liabilities and assets of the firm to
the newly incorporated company would
have no effect on the creditor- U.P.F.C.
The balance sheet of the company as on
31.3.87 itself contains a note that transfer
deed of immovable assets had not yet been
registered in the name of the company of
taking over all the liabilities and assets of
the partnership firm remained paper work
only with no legal effect. There is clear
averment from the side of U.P.F.C. in
affidavit of Sri D.S. Lal, Senior Manager
Law (A-7) that when the partners of the
firm had decided to change the constitution
of the firm and convert it into public ltd.
company, the U.P.F.C. granted permission
to this change subject to completion of the
required legal formalities. Note in the
balance sheet referred to above is to the
effect that the transfer deed of immovable
assets had not yet been registered in the
name of the company and it is itself clearly
an indicator that the legal formalities as to
the transfer of the assets of the partnership
firm to the company had not been
completed.

The Official Liquidator has made
reference to the case of Iftex Oils and
Chemicals
Pvt.
Ltd.
Vs.
Official
3All] Canara Bank V. Central Govt. Industrial Tribunal Cum Labour Court & another
75
Liquidator and others 1999 Company
Cases Vol. 96-page 386 to urge that
disposition
of
property
after
commencement of winding up is void
unless approved by the Court. There can
be no quarrel with this proposition but the
point of the matter is that the ownership of
the property must be shown as vesting in
the company. Unless it is shown that the
company was the owner of the property,
the sale cannot be declared to be void. On
an
analytic
scrutiny of the present
controversy in an adjudicator manner, this
Court finds that the property where against
the respondent no.1 -U.P.F.C. proceeded
under Section 29 of the State Financial
Corporation Act and sold the same had not
been transferred to the company (In
Liquidation) and was not, therefore, owned
by it. Resultantly, the official liquidator
cannot lay any claim there against. The
application made by the official Liquidator
is liable to be dismissed.

In view of the above discussion,
application
made
by
the
Official
Liquidator is found to be devoid of merit
and the same is hereby dismissed.
Application Dismissed.

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By the Court

1. The order dated 27th October, 1997
passed in L.C.A. No. 1151 of 1997 by the
presiding
officer
Central
Government