2012 (2) TMI 291 - HC - Companies Law

Companies Act 1956 - Plea filed under Rule 9 of the Companies (Court) Rules, 1959 seeking a direction to the Official Liquidator to release the land from attachment - Trust claims to have entered into an agreement to sell with company Held that - In present case, agreement to sell was executed with the Company under liquidation after the filing of the winding up petition against it and even the sale consideration is paid. In view of the provisions of Sections 531 and 531-A of the Companies Act, the transaction between the applicant Trust and the Company under liquidation has to be declared invalid and not enforceable. Ignorance of Trust of filing of the winding up petition will not validate the transaction in question Decided against the applicant.

Summary

Issues:
1. Validity of transaction between applicant Trust and Company under liquidation.
2. Interpretation of Sections 531 and 531-A of the Companies Act.
3. Claim of applicant Trust for release of land and execution of sale deed.
4. Application for stay of sale of land by Official Liquidator.

Validity of transaction between applicant Trust and Company under liquidation:
The applicant Trust filed C.A. No. 732/2008 seeking release of land from attachment and execution of a sale deed with the Official Liquidator. The Trust claimed to have entered an agreement with the Company in liquidation and paid the sale consideration. However, the Official Liquidator and a secured creditor opposed the application, citing Sections 531 and 531-A of the Companies Act. The Court noted that the agreement was made after the winding-up petition was filed, rendering the transaction invalid and unenforceable. The Court emphasized that ignorance of the winding-up petition does not validate the transaction, leading to the dismissal of the application.

Interpretation of Sections 531 and 531-A of the Companies Act:
Sections 531 and 531-A of the Companies Act were crucial in determining the validity of the transaction. Section 531 deals with fraudulent preference, deeming certain transactions as fraudulent if made before winding up. Section 531-A addresses the avoidance of voluntary transfers made within a year before winding up. The Court applied these sections to declare the transaction between the Trust and the Company under liquidation as void, emphasizing that the timing of the agreement and payment rendered it invalid under the Act.

Claim of applicant Trust for release of land and execution of sale deed:
The applicant Trust sought the release of land and execution of a sale deed, claiming an agreement with the Company in liquidation. Despite the Trust's payment of the sale consideration, the Court found the transaction invalid under the Companies Act. The Trust's plea for relief was dismissed, as the agreement was executed post the filing of the winding-up petition, falling within the purview of Sections 531 and 531-A, making it unenforceable.

Application for stay of sale of land by Official Liquidator:
In CO.A. No. 341/2009, the applicant Trust sought a stay on the sale of the land by the Official Liquidator pending the main application (CO.A. 732/08). Following the dismissal of the main application, the Court also dismissed the stay application. The dismissal was based on the invalidity of the transaction and the lack of enforceability, leading to the rejection of the stay application as well.