2005 (5) TMI 666 - HC - Indian Laws

Summary

Issues Involved:
1. Fraudulent transfer of property.
2. Validity of Agreement to Sell.
3. Adequacy of consideration for the property.
4. Attornment of tenants.
5. Allegations of perjury and forgery.
6. Applicability of Sections 531A and 536(2) of the Companies Act, 1956.

Detailed Analysis:

1. Fraudulent Transfer of Property:
The primary issue revolves around the alleged fraudulent transfer of the company's unencumbered asset, H-3, Block B-1, Mohan Cooperative Industrial Estate, New Delhi-44, by the then Director (Respondent No. 3) to his wife (Respondent No. 4) for Rs. 47,00,000/-, which is claimed to be significantly lower than the market value of Rs. 5,00,00,000/-. The applicants argue that this transfer is fraudulent and hit by Section 531A of the Companies Act, 1956, and should be declared void.

2. Validity of Agreement to Sell:
The respondents counter that the Agreement to Sell dated 1st October 1999 was preceded by an earlier Agreement to Sell dated 26th June 1996, with initial and subsequent payments made in 1996 and 1998 respectively. They argue that the transaction was conceived much earlier and was bona fide. The Court found that the Power of Attorney dated 26th June 1996, referenced in the Agreement to Sell, supports the respondents' claim of an earlier agreement, thus lending credence to the transaction's genuineness.

3. Adequacy of Consideration for the Property:
The respondents justified the consideration of Rs. 46,00,000/- based on the property's market value at the time, considering it was partially tenanted. The Court noted that the entire sale consideration was paid by July 1998, and the tenants had attorned in favor of Respondent No. 4, further supporting the transaction's legitimacy.

4. Attornment of Tenants:
The applicants' argument that the Agreement to Sell dated 26th June 1996 was fabricated was weakened by the fact that tenants started paying rent to Respondent No. 4 from September 1998. This attornment was corroborated by letters and affidavits from the tenants, which were deemed significant by the Court in establishing the transaction's authenticity.

5. Allegations of Perjury and Forgery:
The applicants alleged that the respondents committed perjury by filing false documents. However, the Court found no merit in these allegations, noting that the documents and the sequence of events provided by the respondents were consistent and plausible.

6. Applicability of Sections 531A and 536(2) of the Companies Act, 1956:
The Court concluded that the transaction did not fall under the mischief of Section 531A as it was bona fide, for valuable consideration, and occurred more than a year before the winding-up petition was filed. The principles from Monark Enterprises v. Kishan Tulpule and Ors. and Sunder Lal Jain v. Sandeep Paper Mills Pvt. Ltd. were applied, emphasizing that the burden of proving lack of good faith or valuable consideration lies on the Official Liquidator or the creditors challenging the transfer. Additionally, the Court referenced Estate Development Ltd. in Re, noting that Section 536(2) would not apply as the contract was concluded prior to the winding-up.

Conclusion:
The applications were dismissed, and the Court found no merit in the claims of fraudulent transfer, inadequate consideration, or perjury. The transaction was deemed bona fide and valid, with no costs awarded.