2002 (4) TMI 871 - HC - Companies Law

Summary

Issues Involved:
1. Validity and binding nature of the sale deed executed by R.P.S. Benefit Fund Ltd. in favor of the applicant.
2. Bona fide nature of the transaction.
3. Fair market price of the property.
4. Intent to defeat the claims of depositors and creditors.
5. Entitlement to the reliefs sought by the applicant.
6. Validity and binding nature of the sale transaction.

Detailed Analysis:

1. Validity and Binding Nature of the Sale Deed:
The applicant sought a declaration that the sale deed executed by R.P.S. Benefit Fund Ltd. (RPSB) is valid and binding, and cannot be challenged in the winding-up proceedings. The court noted that the sale deed in question was executed and registered, and the applicant had paid a significant portion of the sale consideration. However, the court had to consider whether the sale was bona fide and in the interest of the company and its creditors.

2. Bona Fide Nature of the Transaction:
The applicant argued that the transaction was bona fide, entered into without knowledge of the winding-up petitions, and that the sale consideration was used to pay off depositors. However, the court found that the transaction was not bona fide. The court highlighted that RPSB was under heavy financial pressure from depositors and had been conducting its affairs fraudulently. The sale was executed at a price significantly lower than the market value, and there was no evidence of genuine negotiations or efforts to secure the best price for the property.

3. Fair Market Price of the Property:
The court examined the market value of the property, noting that it was purchased by RPSB for Rs. 1,63,01,250 in 1995 and had been valued at Rs. 1,86,30,000 in 1998. Despite this, the property was sold to the applicant for Rs. 1,65,00,000 in 1999. The court found that the sale price was significantly below the market value, which was assessed at Rs. 3,46,61,115 by the registering authority. The court concluded that the property had been sold for less than 50% of its market value, indicating that the transaction was not conducted in good faith.

4. Intent to Defeat the Claims of Depositors and Creditors:
The court found that the sale was executed with the intent to siphon off funds and defeat the claims of depositors and creditors. The directors of RPSB had engaged in fraudulent activities, and the sale was part of a scheme to benefit the directors at the expense of the company's creditors. The court noted that substantial amounts had been siphoned off, and the transaction was designed to prefer certain creditors over others.

5. Entitlement to the Reliefs Sought by the Applicant:
The applicant sought an order declaring the sale valid and binding, and permission to discharge the mortgage to the Bank of Madura. The court found that the applicant was not entitled to the reliefs sought, as the transaction was not bona fide, and the sale price was significantly below the market value. The court held that the sale deed was not binding in the winding-up proceedings.

6. Validity and Binding Nature of the Sale Transaction:
The court concluded that the sale transaction was not bona fide, not conducted in good faith, and not in the interest of the company or its creditors. The sale price was significantly below the market value, and the transaction was part of a scheme to siphon off funds. The court held that the transaction was not valid or binding and dismissed the applications with costs.

Conclusion:
The court dismissed the applications, holding that the sale transaction was not bona fide, not conducted in good faith, and not in the interest of the company or its creditors. The sale price was significantly below the market value, and the transaction was part of a scheme to siphon off funds. The applicant was not entitled to the reliefs sought, and the sale deed was not binding in the winding-up proceedings.