Trial Required to Assess if Cheques With Purchase Order Discharge Outstanding Dues or Not | HC

Case Details: Sufi International (P.) Ltd. v. Accurate Trans Heat (P.) Ltd. - [2024] 164 taxmann.com 176 (HC - Gujarat)

Judiciary and Counsel Details

• Ilesh J. Vora, J.
• Shailee Kapadia & Arpit A. Kapadia for the Applicant. 
• A.S. Vakil, Jeet karia & Ms C.M. Shah for the Respondent.

Facts of the Case

In the instant case, the RBI passed a prohibitory order dated 09.04.1997 directing the appellant company not to sell, transfer, or deal with its assets without the RBI’s written assent.

The RBI instituted a winding-up petition against the appellant before the Company Court, and a provisional liquidator was appointed. Respondents no 1 and 2 filed applications claiming rights over certain shares in the appellant, which they had purchased from a stock broker through open market transactions of company ‘R’.

The Share transfer agent of ‘R’ informed the respondents that the appellant previously held the shares they held before being purchased by ‘R’, and in view of the winding-up order, all of the appellant’s assets were frozen.

The Respondents filed an application before the Company Court seeking to transfer and register shares in their name; however, the Court was not persuaded and directed the liquidator to sell their rights entitlement in the open market.

The liquidator published a general public notice seeking the deposit of the appellant’s shares for de-materialization. The Respondents filed an application before the Single Judge, and vide the impugned order, the appellant was directed to transfer the said equity shares in the respondents’ name, and the said order was reserved.

It was noted that the respondents had the original share scrips and original blank transfer deeds. Also, in respondent No. 1 ‘s case, contract notes and proof of payment of consideration had not come forth, and in respondent No. 2’s case, contract notes and proof of payment were placed on the record after the Company Court reserved the order, but they did not get any chance to rebut the same.

High Court Held

The High Court held that the instant matter was to be remanded back to the Company Court to inquire when the said shares subject matter of transfer to respondent nos. 1 and 2 were sold by the appellant and to whom and whether the respondents had paid consideration for these shares.

Further, the High Court held that once it was established that the appellant had divested itself of rights in these shares and, the sale was concluded before 09.04.1997 and that consideration was paid by respondent No 1, the effect of the impugned order should follow and, thus, an instant appeal was to be disposed of.