2007 (5) TMI 328 - HC - Companies Law

Winding up Appointment and powers of provisional liquidator, Winding up Avoidance of voluntary transfer

Summary

Issues:
1. Validity of an agreement for sale/sale deed executed by a company in liquidation within one year of the winding up petition.
2. Jurisdiction of the provisional liquidator to question the sale deed without a formal winding up order.
3. Bona fide purchaser defense in the context of the sale transaction.

Issue 1: Validity of the agreement for sale/sale deed:
The official liquidator sought to set aside an agreement for sale/sale deed executed within a year of the winding up petition, citing Section 531A of the Company Act, 1956. This section deems any property transfer within a year before the petition presentation void against the liquidator. The purchaser's counsel argued the sale was in the ordinary course of business, relying on judgments supporting bona fide transactions. The provisional liquidator's request to annul the sale deed was challenged for being premature without a formal winding up order.

Issue 2: Jurisdiction of the provisional liquidator:
The court addressed the question of whether the provisional liquidator had the authority to question the sale deed under Section 531A without a formal winding up order. It was clarified that once a winding up petition is admitted, and a provisional liquidator appointed, they possess the same powers as the official liquidator. The provisional liquidator can take steps to protect the company's interests even before a formal winding up order is passed, as per the provisions of the Act.

Issue 3: Bona fide purchaser defense:
The purchaser, a bona fide buyer, argued that the transaction should not be annulled as she had paid a substantial amount for the property in the normal course of business. The court noted the lack of evidence suggesting any malpractice or lack of bona fides in the sale transaction. Considering the circumstances and the absence of evidence indicating any impropriety, the court declined to annul the sale deed executed by the ex-managing director in favor of the purchaser.

In conclusion, the court disposed of the report and its replies, ruling in favor of the purchaser as a bona fide buyer, and rejecting the official liquidator's request to annul the sale deed. The judgment clarified the provisional liquidator's authority to act in the absence of a formal winding up order and emphasized the importance of demonstrating bona fides in such transactions under the relevant provisions of the Company Act, 1956.