1984 (11) TMI 259 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the transaction between the company and respondent No. 1.
2. Application of the law of limitation.
3. Estoppel due to acceptance of rent by the official liquidator.
4. Bona fides of the transaction.
5. Just and equitable considerations for granting relief to the official liquidator.

Summary:

1. Validity of the Transaction:
The official liquidator sought a declaration that the transaction between respondent No. 1 and the company, entered into after the filing of the winding-up petition, is void u/s 536(2) of the Companies Act. The court held that since the agreement was executed after the filing of the winding-up petition, the transaction is void by statute, and the official liquidator is entitled to claim possession of the premises.

2. Application of the Law of Limitation:
Respondent No. 1 contended that the official liquidator's application is barred by Article 59 of the Limitation Act. The court rejected this contention, stating that u/s 536(2) of the Companies Act, the transaction is deemed void by statute, and there is no need for a declaration. Even if a declaration was sought, the limitation period would be twelve years, making the application timely.

3. Estoppel Due to Acceptance of Rent:
Respondent No. 1 argued that the official liquidator is estopped from claiming the transaction is void because he accepted rent. The court found that the acceptance of rent by the official liquidator, even without prejudice, cannot validate a void transaction. Therefore, this contention was also rejected.

4. Bona Fides of the Transaction:
Respondent No. 1 claimed the transaction was bona fide, as he had spent considerable money on the premises and had been in possession since the agreement. The court held that the question is not about the bona fides of respondent No. 1 but whether the transaction was in the interest of the company's business or its creditors. Since the transaction did not meet this criterion, the argument failed.

5. Just and Equitable Considerations:
Respondent No. 1 argued that it would not be just and equitable to grant relief to the official liquidator due to the delay and his investments in the premises. The court emphasized that the primary consideration is whether the transaction was in the interest of the company or its creditors. Since it was not, the court granted relief to the official liquidator.

Conclusion:
The judge's summons was made absolute in terms of prayers (a) and (b), directing respondent No. 1 to hand over possession of the premises to the official liquidator. Respondent No. 1's submissions for alternative reliefs were rejected, except for granting an eight-week period to vacate the premises.