2015 (3) TMI 773 - HC - Companies Law

Company in liquidation - Asset purchased before initiating liquidation - Execution of Deed of Conveyance for the said asset - Held that - The winding-up petition was filed on 15th March, 1996 and the MOU and lease agreement are dated February 1999 and March 1999. Admittedly, by the said agreement possession and lease have been granted. This will amount to variation of the terms of the 1995 agreement and disposition of property and will therefore be hit by Section 536(2) of the 1956 Act. This will render the MOU of February 1999 and the lease agreement of March 1999 void. Although a plea was taken by Counsel for the applicant that Section 536 is not mandatory but discretionary in nature and the said issue has not been raised by the Official Liquidator, the said cannot be supported as Section 536(2) of the 1956 Act makes it clear that any disposition of property after commencement of winding-up proceedings shall be void. Assuming that the said issue has not been raised by the Official Liquidator, the language of the section itself renders such disposition void as the same is without jurisdiction and non-est in the eye of law. - Decided against the appellant.

Summary

Issues:
1. Disclaiming subject premises in Mysore for sale completion by execution of deed of conveyance.
2. Validity of agreements dated April 1995, February 1999, and March 1999 in the context of company liquidation.
3. Application of Section 531 and 536(2) of the 1956 Act.
4. Claim for specific performance of the agreement and limitation period.
5. Interpretation of agreements, possession rights, and lease agreements.

Analysis:

1. The applicant sought to disclaim the subject premises in Mysore for sale completion through a deed of conveyance. The company went into liquidation in 1999, and an agreement for sale of the factory as a going concern was made in April 1995. The applicant made payments towards the consideration money, and possession was handed over in 1999. However, the official liquidator did not execute the deed of conveyance, leading to the application.

2. The validity of agreements dated April 1995, February 1999, and March 1999 was challenged in the context of company liquidation. The official liquidator argued that the 1999 agreement was void under Section 536(2) of the 1956 Act due to alleged breaches of the 1995 agreement. The applicant contended that the 1999 agreement was an extension and not void, emphasizing the lack of mala fide intentions and the absence of return of money.

3. The application involved the application of Section 531 and 536(2) of the 1956 Act. The official liquidator relied on Section 531 to challenge the agreements, while the applicant argued that Section 536(2) was discretionary and not applicable to the case. The court examined the provisions and their implications on the disposition of property during liquidation proceedings.

4. The applicant claimed specific performance of the agreement and argued that the limitation period had not expired. However, the court noted that the agreement was to be completed by 1998, and the applicant failed to take legal action within the limitation period under Article 54 of the Limitation Act. The court emphasized the importance of timely legal action in seeking specific performance.

5. The interpretation of agreements, possession rights, and lease agreements was crucial in determining the outcome of the case. The court analyzed the terms of the agreements, possession rights granted, and the failure of the applicant to fulfill obligations such as payment of statutory dues. The court concluded that the application failed due to various legal and factual reasons, leading to its dismissal.

This detailed analysis covers the key issues and legal aspects addressed in the judgment, providing a comprehensive understanding of the court's decision and reasoning.