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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY PETITION NO.743 OF 1990
In the matter of M/s.Mafatlal Engg.
Industries Limited (in Liqn.)
M/s.United Matachem Pvt. Ltd. : Petitioner
...
Ms Rubia Taneja i/b. Jhangiani, Narula & Associates for
society.
Mrs.Aruna Pai for Official Liquidator.
Mr.C.N.Mehta for Jyoti Vaswani, purchaser.
...
ig CORAM : S.A. BOBDE, J.
DATE : AUGUST 30, 2008.
ORAL ORDER
1. By this report, the Official Liquidator has prayed
that the Chairman of M/s.Anita Co-op. Housing Society
Limited be directed to issue duplicate share certificate
in respect of flat no.31-B to the Official Liquidator so
as to enable him to transfer the same in the name of
Mrs.Jyoti A. Vaswani, the auction purchaser.
2. Mafatlal Engineering Industries Limited is the company
in liquidation. It holds shares in respect of flat
no.31-B in a building owned by M/s.Anita Co-operative
Housing Society Limited. In the course of winding up, the
Official Liquidator took possession of the flat and the
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garage. Under orders of the Court, he sold it to one
Smt.Jyoti Vaswani in an auction which was confirmed by the
Court on 16.3.2007. He handed over the flat and the
garage to the auction purchaser on 3.5.2007. The auction
purchaser demanded that the Official Liquidator transfer
the shares in her name. The Official Liquidator wrote to
the management of Mafatlal Engineering Industries Limited
i.e. the company in liquidation to hand over the original
share certificate in respect of the property vide his
letters dated 4.12.2007 and 18.1.2008. The management of
Mafatlal Engineering Industries Limited informed the
Official Liquidator that they do not have original share
certificate vide
their letters dated 26.12.2007 and
23.1.2008. Therefore, the Official Liquidator wrote to
Anita Co-operative Housing Society to issue duplicate
share certificate vide his letters dated 13.2.2008 and
31.3.2008. The co-operative society in response to the
Official Liquidator’s letter, by its letter dated
17.4.2008 addressed to the Official Liquidator declined to
issue duplicate share certificate unless the Official
Liquidator clears the arrears of dues of maintenance
charges payable by the company in liquidation in view of
bye-law no.40 and rule 24(c) which, inter alia, provides
that no transfer of the share shall be effective unless it
is made in accordance with the provisions of the bye-laws
and all the liabilities of the transferor due to the
society are discharged.
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3. Mrs.Pai, the learned counsel for the Official
Liquidator submitted that Anita Co-operative Housing
Society Limited is bound to hand over duplicate share to
the Official Liquidator to enable him to give effect to
the transfer in favour of the auction purchaser without
insisting on immediate payment of arrears of dues payable
by the company in liquidation to Anita Co-operative
Housing Society Ltd. According to the learned counsel,
though the Official Liquidator has stepped into the shoes
of the company in liquidation, he does not deny the
liability of the company to clear maintenance charges to
the society
and such payment can only be in accordance
with section 529A of the Companies Act which provides that
the workmen’s dues and debts due to the secured creditors
shall be paid in priority to all debts. According to the
learned counsel, the dues of maintenance can be paid by
the Official Liquidator only after the workers’ dues are
satisfied.
4. On the other hand, Ms Taneja, the learned counsel for
Anita Co-operative Housing Society submitted that the dues
of a co-operative society have a first charge on the
members’ interest in the property of the society and such
dues do not feature in the property of the company in the
process of winding up. According to the learned counsel
for the society, any outstanding demand or dues payable to
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a society by any member or past member is the first charge
which must be satisfied de hors winding up. It is clear
that if the outstanding dues of a member payable to a
society feature in and are governed by the Companies Act
and section 529A in particular, they must be paid only in
accordance with the priority provided by section 529A of
the Act. It is, therefore, necessary to examine the
scheme of the law.
5. The Maharashtra Co-operative Societies Act, 1960,
hereinafter referred to as the “Co-operative Societies
Act”, is enacted by the State Legislature under Entry 32
of
List II of Schedule VII of the Constitution of India.
Section 47 of the Co-operative Societies Act, 1960 reads
as follows:-
"47. Prior claim of society.-- (1)
Notwithstanding anything in any other law
for the time being in force, but subject to
any prior claim of Government in respect of
land revenue or any money recoverable as
land revenue and to the provisions of
sections 60 and 61 of the Code of Civil
Procedure, 1908.
(a) ……………………………….
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(i) ...............................
(ii) ...............................
(iii) ………………………….
(b) any outstanding demands or dues payable
to a society by any member or past
member or deceased member, in respect
of rent, shares, loans or purchase
money or any other rights or amounts
payable to such society, shall be a
first charge upon his interest in the
immovable property of the society.
Explanation – The prior claim of Government
in respect of dues other than land revenue,
shall be restricted for the purpose of
sub-section (1) to the assets created by a
member out of the funds in respect of which
the Government has a claim.
(2) No property or interest in property,
which is subject to a charge under the
foregoing sub-section, shall be transferred
in any manner without the previous
permission of the society; and such
transfer shall be subject to such
conditions, if any, as the society may
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impose.
(3) Any transfer made in contravention of
sub-section (2) shall be void.”
It would be reasonable to suppose that all properties of
the company, including money realised from the sale of
such property would be held by the Liquidator and would
be liable to be distributed to its creditor only in
accordance with the Companies Act. This would, however,
excludes property to the extent it is already charged
under another law. Section 47 of the Co-operative
Societies Act clearly creates such a charge as undisputed
in law: a jus ad rem i.e. a right to receive payment
out of property specified. A charge gives rise to
receive payment, out of a specific fund or property, and
a right to prior payment; but it does not create a right
in rem in the fund or the property, vide Govind Chandra
Pal v. Dwarka Nath Pal (ILR 35 Cal. 837), Raja Sri
Shiva Prasad v. Beni Madhab (ILR 1 Pat. 387). The only
thing to ascertain is whether the charge is, in any way,
affected by the Companies Act, 1956. It is clear that a
charge created by a law can only be nullified by another
law which overrides the former. No such provision has
been pointed out in the present case. The charge created
by the Co-operative Societies Act must be, therefore,
taken to be unaffected by the Companies Act.
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6. It is also settled law that when two enactments deal
with the same subject-matter, the one which is specially
enacted for the purpose shall prevail vide decision in
Allahabad Bank v. Canara Bank & Anr. (2004) 4 SCC 406,
paragraphs 38 to 40 on page 426). The Co-operative
Societies Act has been held to be a self-contained Code
vide Greater Bombay Coop. Bank Ltd. v. United Yarn Tex
(P) Ltd. [(2007) 6 SCC 236]. It is undoubtedly, a
special law which deals with co-operative societies
whereas the Companies Act is a general law. This special
law creates a first charge of the society of any
outstanding demand
ig or dues payable to a society by any
member or past member vide section 47. The first charge
created by the Co-operative Societies Act is not liable
to be treated as qualified or in any manner marginalised
merely because the company goes into liquidation and the
dues become payable by the Official Liquidator who steps
into the shoes of the member of the society. The society
retains its right to prior payment in respect of such
property. Any doubt that this may not be the legal
position is removed by section 167 of the Co-operative
Societies Act which reads as follows:-
“167. Companies Act not to apply.– For
the removal of doubt, it is hereby declared
that the provisions of the Companies Act,
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1956, shall not apply to societies
registered or deemed to be registered;
under this Act."
The result is that any outstanding demands or dues
payable to a society by any member or past member, in
respect of rent, shares, loans or purchase money or any
other rights or amounts payable to such society have a
first charge on any member or his successor in interest
such as the Official Liquidator in the immovable property
of the society. Such dues stand outside the winding up
by virtue of section 167 of the Co-operative Societies
Act.
7. In this view of the matter, the Chairman of Anita
Co-operative Housing Society ltd. is directed to issue
duplicate share certificate in respect of flat no.31-B to
the Official Liquidator upon the Official Liquidator
paying all the outstanding dues to the said society, in
accordance with law, so as to convey a good title to the
auction purchaser Smt.Jyoti Vaswani.
8. Official Liquidator’s report dated 4.7.2008 stands
disposed of accordingly.
S.A. BOBDE, J.
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