2015 (7) TMI 415 - HC - Companies Law

Liquidation of company - bonafide purchaser - the applicant seeks declaration that transaction of transfer of ownership rights of the company under liquidation be validated. By the Official Liquidator s Reports, Official Liquidator seeks possession of the property. - Held that - The Applicant has taken search through Advocate and obtained title certificate. In the revenue record, there is no entry that the property was of the company under liquidation. The applicant had purchased the property from the person who had in turn purchased from the Company under liquidation. No collusion between the applicant and hte directors of the respondent company is established. In the circumstances the fact that the applicant was not aware that the property was initially belonging to the company under liquidation is probable. Apart from this position the applicant has offered to pay to the Official Liquidator the valuation property as on the date of the transfer. The valuation is ₹ 139 lacs. The Official Liquidator has no serious objection for receipt of the money in lieu of the possession of the property. - interest of justice will be served if the applicant deposits an amount of ₹ 139 lacs with the Official Liquidator within a period of six weeks from today. Accordingly the company application is allowed in terms prayer clauses (a) and (b).

Summary

Issues involved:
Validation of transfer of ownership rights of a company under liquidation, consideration of applicant's due diligence before purchasing the property, determination of whether the sale in favor of the applicant should be treated as void, examination of the applicant's offer to compensate the Official Liquidator, evaluation of the valuation of the property, consideration of prejudice to the applicant if possession is taken by the Official Liquidator, assessment of collusion between the applicant and the respondent company, application of Section 536(2) of the Companies Act, 1956.

Detailed Analysis:

1. The applicant sought validation of the transaction involving the transfer of ownership rights of a company under liquidation. The applicant purchased the property after the winding-up order was passed, claiming to have conducted due diligence before the purchase, including verifying the title and obtaining necessary documents.

2. The applicant alleged that the previous owner misrepresented ownership details and suppressed information about the company's liquidation status. The applicant invested significantly in developing the property for a chemical factory, starting production and obtaining all required licenses and registrations.

3. The applicant, through its counsel, argued that it acted as a bona fide purchaser, unaware of the company's liquidation status at the time of purchase. The applicant offered to compensate the Official Liquidator for the property's valuation to regularize the sale.

4. The Official Liquidator contended that the sale during the liquidation period was questionable, raising suspicions about the initial sale to the previous owner. However, the Official Liquidator acknowledged the applicant's substantial investment and proposed accepting the valuation amount in lieu of possession.

5. The Court deliberated on whether to permit the Official Liquidator to take possession under Section 536 of the Companies Act, 1956, or exercise discretion to validate the sale. The Court considered the steps taken by the applicant, absence of collusion, and the offer to pay the property's valuation to the Official Liquidator.

6. After assessing the circumstances, the Court determined that justice would be served by directing the applicant to deposit the valuation amount with the Official Liquidator within six weeks. The Court allowed the application, subject to the deposit, and clarified that failure to pay would lead to the Official Liquidator taking possession of the property.

7. The Court deferred a decision on the Official Liquidator's report, setting a future date for further consideration. The judgment emphasized the importance of the applicant fulfilling the payment obligation within the specified timeframe to avoid possession being taken by the Official Liquidator.

This comprehensive analysis covers the key issues addressed in the judgment, detailing the arguments presented by the parties involved and the Court's decision based on the legal provisions and factual circumstances presented during the proceedings.