2007 (1) TMI 265 - HC - Companies Law

Summary

Issues Involved:
1. Entitlement of the applicant to the possession of the property.
2. Legality of the sale deed executed during the pendency of winding-up proceedings.
3. Validity of the claim of the applicant as a bona fide purchaser.
4. Applicability of sections 531, 531A, and 536 of the Companies Act regarding the sale transaction.

Issue-Wise Detailed Analysis:

1. Entitlement of the Applicant to the Possession of the Property:
The applicant, a third party and unsecured creditor of Nirup Synchrome Limited, sought possession of Flat No. 804, Paigah Plaza, Basheer Bagh, Hyderabad. The applicant claimed possession since 31-7-2000, but the Official Liquidator locked and sealed the premises on 1-11-2000. The applicant firm argued that it was a bona fide purchaser and unaware of the liquidation proceedings. However, the court found no merit in the applicant's claim of possession since 1998, as the registered office of the company was at the premises until 21-7-2000. The applicant failed to provide evidence supporting its claim of possession or the pressures exerted on the company to execute the sale deed.

2. Legality of the Sale Deed Executed During the Pendency of Winding-Up Proceedings:
The sale deed dated 31-7-2000 was executed during the pendency of the winding-up petition, which commenced on 4-4-1996. The Official Liquidator argued that the transaction was void under section 536 of the Companies Act, as it was executed without the court's leave. The court agreed, stating that any transfer without the liquidator's sanction after the commencement of winding-up proceedings is void.

3. Validity of the Claim of the Applicant as a Bona Fide Purchaser:
The applicant claimed to be a bona fide purchaser for valuable consideration, asserting that the sale deed was executed due to pressures exerted on the company. However, the court found no evidence of any legal proceedings or other actions by the applicant to recover the debt. Additionally, the sale consideration of Rs. 4,90,000 was allegedly adjusted against the debt, but the figures did not tally with the statement of affairs filed by the ex-directors, which showed a debt of Rs. 37,31,554.41. The court concluded that the applicant's claim lacked merit and evidence.

4. Applicability of Sections 531, 531A, and 536 of the Companies Act Regarding the Sale Transaction:
The court examined the transaction under sections 531, 531A, and 536 of the Companies Act. Under section 536, any transfer without the liquidator's sanction after the commencement of winding-up proceedings is void. Section 531 deems any transfer within six months before the commencement of winding-up as a fraudulent preference, and section 531A voids any transfer not made in the ordinary course of business within one year before the winding-up petition. The court found that the sale was effected after the commencement of winding-up proceedings and was not in the ordinary course of business, making it void under these provisions.

Conclusion:
The court dismissed the application, concluding that the sale effected in favor of the applicant was a fraudulent action and void under the provisions of the Companies Act. The applicant was not entitled to any relief or possession of the property.