2005 (6) TMI 296 - HC - Companies Law

Summary

Issues Involved:
1. Validation of land transfer under Section 536(2) of the Companies Act, 1956.
2. Bona fide nature of the transactions.
3. Attachment of land by the Tax Recovery Officer under the Income-tax Act.

Issue-wise Detailed Analysis:

1. Validation of Land Transfer under Section 536(2) of the Companies Act, 1956:
The applicants sought validation of land transfers made by a company in the process of winding up. The company was ordered to be wound up by the court, and the Official Liquidator took possession of its assets, including the disputed land. The applicants purchased the land through registered sale deeds before the winding-up order. They argued that the transactions were bona fide and in the ordinary course of business, necessitating validation under Section 536(2) of the Companies Act, 1956.

2. Bona Fide Nature of the Transactions:
The applicants contended that the land was the company's stock-in-trade, sold in the ordinary course of business, and the consideration was paid at the market rate. They claimed to be bona fide purchasers without knowledge of the pending winding-up petition. The Official Liquidator contested the applications, arguing that the transactions lacked bona fide as the company did not receive the consideration. The court noted that the Official Liquidator failed to provide evidence supporting the claim that the company did not receive the sale consideration. The court emphasized that the liquidator's duty is to assist the court by verifying the company's records and accounts, which was not adequately done in this case.

3. Attachment of Land by the Tax Recovery Officer under the Income-tax Act:
The Official Liquidator raised an objection based on the attachment of the land by the Tax Recovery Officer. The court clarified that Section 281 of the Income-tax Act, 1961, renders transfers void against tax claims but does not affect the winding-up process under the Companies Act. Therefore, the attachment by the Tax Recovery Officer did not preclude the court from validating the transactions under Section 536(2) of the Companies Act.

Conclusion:
The court validated the disposition of the concerned parcels of land in favor of the applicants, confirming that the transactions were made in the ordinary course of business and were bona fide. The objections raised by the Official Liquidator were not substantiated by evidence. The judgment clarified that it does not affect any liability incurred by the applicants under the Income-tax Act, 1961. Both applications were disposed of accordingly, and the registry was directed to maintain a copy of the judgment in each application.