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2015 (12) TMI 1772 - HC - Companies LawPowers of liquidator - title to the paintings - Held that - As subject property are very valuable and here is a person who claims the paintings belong to her whereas according to the Liquidator it belongs to/appears to belong to the company (in liquidation). It is necessary for the ends of justice that the practice and procedure of the court and provisions of the Code of Civil Procedure are applied. This would also be beneficial to Sheetal Mafatlal who will get an opportunity to prove that the paintings rightfully belong to her and not the company (in liquidation). Sheetal Mafatlal to file an affidavit in evidence together with compilation of documents to prove that the 44 paintings lawfully/legally belong to her, that she is entitled thereto and she has title to those paintings and serve a copy thereof upon the Official Liquidator not later than 11th January, 2016. Ofcourse, the Official Liquidator will be entitled to cross examine and file further evidence as well to prove otherwise. As the paintings are of high value and the petition has been pending since 1996, it is necessary that the issue of title to the paintings is decided quickly. It is made clear that no further time will be granted to Sheetal Mafatlal to file her evidence and compilation of documents. As regards prayer clauses (b), (c) and (d) in the Official Liquidator s Report, to the extent it relates to the paintings, the Official Liquidator may file further report after the issue of title to the paintings claimed by Sheetal Mafatlal is determined. As regards the other articles contained in prayer clauses - (c) and (d), the Official Liquidator may list those articles and file further reports as necessary. As regards prayer clause (a) in the Official Liquidator s Report, the ex-directors of the company (in liquidation) are directed to file within four weeks, the Statements of Affairs to the extent not submitted, as required under section 454 of the Companies Act, 1956 and handover the books of account/record of the company (in liquidation) to the Official Liquidator to enable the Liquidator to further in winding up proceedings. Mr. Atulya Mafatlal, an ex-director of the company is directed to (a) file an affidavit in order to indicate his stand, with the necessary material, as to (i) original ownership of paintings; (ii) Fixed Asset Inventory; (iii) explain as to how the statutory auditor could have examined all records such as cash book, bank book, sale register, purchaser register, expense vouchers, sales invoice, purchase invoice, general ledger, stock register, minute book and list of fixed assets (containing location of fixed assets) if the account of records were lost in the floods of 26th July, 2005 and (b) produce the records mentioned in para 4(iii) that were perused by the Statutory Auditors for preparing Balance Sheets for the period between 11th January, 2006 to 31st March, 2007. This affidavit to be filed and copy served on the Official Liquidator on or before 5th January, 2016. The Official Liquidator s representative is directed to take inventory and/or inspection and/or physical possession of the records from the factory premises at Bhiwandi, if not done already.
Issues Involved
1. Whether the court has jurisdiction under the Companies Act to adjudicate upon questions of title in dispute between a Liquidator and third parties. 2. The ownership and custody of 44 paintings claimed by Sheetal Mafatlal. 3. Compliance by ex-directors with the requirements under Section 454 of the Companies Act, 1956. 4. Directions to the Official Liquidator for further actions regarding the paintings and other assets. Issue-wise Detailed Analysis Jurisdiction to Adjudicate Title Disputes The primary issue was whether the Companies Act grants the court jurisdiction to adjudicate title disputes between a Liquidator and third parties. The court referred to Sections 446 and 456 of the Companies Act, 1956, which confer broad powers on the court handling winding-up proceedings. Section 446(2) specifically allows the court to entertain any suit or proceeding by or against the company, any claim made by or against the company, and any question of priorities or other questions related to the winding-up process. The judgment cited the Supreme Court's interpretation in Sudarsan Chits (I) Ltd. vs. O. Sukumaran Pillai, emphasizing that the provision aims to expedite winding-up proceedings and avoid protracted litigation in various forums. The court concluded that it has jurisdiction to adjudicate title disputes even involving third parties, thereby answering the issue affirmatively. Ownership and Custody of 44 Paintings The court examined the conflicting claims over 44 paintings. The Official Liquidator asserted that these paintings belonged to the company in liquidation, supported by an ex-director's statement and police investigations. Sheetal Mafatlal, however, claimed ownership based on a family agreement but failed to provide documentary evidence. The court noted that the paintings were in the deemed custody of the Liquidator and emphasized the need for Sheetal Mafatlal to prove her title through evidence. The court directed her to file an affidavit with supporting documents to substantiate her claim, and allowed the Liquidator to cross-examine and present further evidence. Compliance with Section 454 of the Companies Act, 1956 The court directed the ex-directors of the company to comply with Section 454 of the Companies Act, 1956, which mandates filing Statements of Affairs and handing over the company's books of account to the Official Liquidator. This compliance is essential for the Liquidator to proceed with the winding-up process. The court provided a four-week deadline for the ex-directors to fulfill these requirements. Directions to the Official Liquidator The court addressed various prayers made by the Official Liquidator: - Prayer (a): Directed ex-directors to file Statements of Affairs and hand over records as required. - Prayer (b) and (c): Deferred further actions regarding the paintings until the title issue is resolved. - Prayer (d): Allowed the Official Liquidator to file further reports on other articles after determining the title of the paintings. The court also instructed Mr. Atulya Mafatlal, an ex-director, to file an affidavit detailing the original ownership of the paintings, the fixed asset inventory, and explaining the statutory auditor's access to records allegedly lost in floods. The Official Liquidator was directed to take inventory and physical possession of the records from the company's factory premises. Conclusion The court affirmed its jurisdiction to adjudicate title disputes under the Companies Act, 1956, and outlined the steps for resolving the ownership of the 44 paintings. It mandated compliance by ex-directors with statutory requirements and provided directions for the Official Liquidator's further actions. The matter was scheduled for further proceedings on January 15, 2016.
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