2012 (11) TMI 363 - HC - Companies Law

Transfer after the commencement of winding up - Held that - Though the occupant has been found to be in possession of the said property the circumstances in which she was so placed are unclear. The occupant has relied on the alleged letter dated 14th November, 2007 where there is a reference to the occupant having been placed in possession of the said property by HTPL. The occupant has however not produced any possession receipt that may have been executed between the parties which would indicate the basis on which the possession was handed over. The occupant merely relied on an alleged letter dated 31st December, 2007 addressed by the Company to MIDC seeking their no objection for the transfer of the said property to the occupant as a Chief Promoter of the proposed Society. Apart from the fact that the said letter does not disclose any agreement in favour of the occupant in her personal capacity or the terms and conditions of any such alleged agreement, it is a settled position that such a letter would not constitute an agreement in writing for the purpose of Section 53A. The Official Liquidator is correct in his submission that Section 53A of the Transfer of Property Act has no application in the present case in the absence of any agreement in writing from which the terms of the alleged transaction is capable of being ascertained with reasonable certainty. The occupant has not made out any case for validating the alleged transfer of the said property in her favour by the Company in liquidation. The Official Liquidator is therefore directed to take physical possession of the said property for the benefit of the creditors and workers of the Company in liquidation - pending the Official Liquidator taking possession of the said property for two weeks on the request of occupant who shall not part with possession of the said property or induct any third party therein.

Issues Involved:
1. Validity of the sale of property to the occupant.
2. Authority of the Official Liquidator to take possession of the property.
3. Application of Section 536(2) and Section 53A of the Transfer of Property Act.

Analysis of the Judgment:

1. Validity of the Sale of Property to the Occupant:
The primary issue revolves around whether the sale of the property situated at H16, MIDC Waluj Industrial Area, Waluj, Aurangabad to the occupant is valid. The occupant claims to have paid Rs. 30 lakhs to Hindustan Transmission Products Limited (HTPL) for the property. However, no formal sale agreement or transfer deed was executed, and the amount paid was shown as an "investment" in the occupant's income tax returns.

The court noted that the property was initially allotted to HTPL by MIDC and leased under specific conditions, including a clause that prohibited transfer without MIDC's prior written consent. The transaction between the occupant and HTPL lacked the necessary documentation and MIDC's consent, rendering it incomplete and incapable of validation under Section 536(2) of the Companies Act, 1956.

2. Authority of the Official Liquidator to Take Possession:
The Official Liquidator sought directions to take possession of the property, arguing that the transaction was void under Sections 536(2) and 537(1)(b) of the Companies Act since it occurred after the winding-up petition was filed. The court agreed, stating that no completed transfer had occurred, and the property still stood in HTPL's name. The court emphasized that any disposition of property after the commencement of winding-up is void unless validated by the court, which was not the case here.

3. Application of Section 536(2) and Section 53A of the Transfer of Property Act:
The occupant argued for validation of the transaction under Section 536(2) of the Companies Act, claiming it was bona fide and in the company's interest. However, the court highlighted that the transaction was neither completed nor in the company's best interest. The court cited precedents, emphasizing that validation under Section 536(2) requires the transaction to be in the company's interest and not merely bona fide.

Regarding Section 53A of the Transfer of Property Act, the occupant claimed protection under this section, asserting possession in part performance of the contract. The court rejected this claim, noting the absence of a written agreement and the necessary terms to constitute a transfer. The court referenced Supreme Court judgments clarifying that Section 53A applies only when there is a written contract with ascertainable terms, which was not present in this case.

Conclusion:
The court concluded that the occupant failed to establish a valid and completed transfer of the property. The Official Liquidator was directed to take physical possession of the property for the benefit of HTPL's creditors and workers. The court granted a two-week stay on taking possession, during which the occupant was prohibited from parting with or inducting any third party into the property.

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