2014 (1) TMI 474 - SC - Companies Law

Winding up of company - Plot allotment - Non fulfillment of agreement - Forfeiture of amount paid and possession of property - Official liquidator wanted to sale property to satisfy debts - High Court held that Appellant has no ownership of subject property - Held that - ownership right in respect of the plot in question has not been transferred to the Company. It is an admitted fact that the Company, which is now in liquidation, had not paid the entire amount of the consideration and therefore, the ownership right in respect of the plot had not been transferred to the Company. According to the terms and conditions on which the plot was to be sold to the Company, the amount which had been paid by the Company had already been forfeited and the Company had no right of whatsoever type in the plot in question - High Court was not justified in giving any right in respect of the plot in question to the official liquidator or the Company. It is pertinent to note that the ownership of the plot in question had not been transferred to the Company and a permissive possession given by the appellant to the Company for some limited purpose would not create any interest or right in favour of the Company. The plot would remain the property of the appellant-Corporation as the conditions on which the transfer was to take place had not been fulfilled - Decided in favour of appellant.

Summary

Issues:
- Interpretation of ownership rights in a plot of land allotted by a Government Corporation.
- Rights of an official liquidator in a plot of land belonging to a Company in liquidation.
- Validity of High Court's decision regarding ownership of the plot and rights of the official liquidator.

Interpretation of Ownership Rights:
The case involved an appeal by a Government Corporation against the High Court's judgment canceling a plot allotment due to non-payment by the Company. The Corporation had allotted a plot to the Company under specific conditions, including a payment deadline. When the Company failed to make full payment within the stipulated time, the Corporation forfeited the amount paid and canceled the allotment. Despite subsequent attempts to offer alternative plots, the Company's financial difficulties led to non-compliance with the conditions. The Company was eventually ordered to be wound up, and the official liquidator sought to take possession of the plot for sale to settle the Company's dues. The Corporation contended that since the ownership right had not been transferred to the Company due to non-payment, the official liquidator had no authority to deal with the plot.

Rights of Official Liquidator:
The official liquidator argued that as the Company had paid a substantial amount towards the plot's purchase price and was under liquidation, he had the right to dispose of the plot as it belonged to the Company. The High Court upheld the official liquidator's position, allowing him to sell the plot. However, the Supreme Court found that the ownership right had not been transferred to the Company due to non-payment of the full consideration. The Court emphasized that the Company's permissive possession of the plot did not grant it any ownership rights. Therefore, the plot remained the property of the Corporation, and the official liquidator had no authority to deal with or dispose of it.

Validity of High Court Decision:
The Supreme Court held that the High Court erred in granting rights to the official liquidator over the plot, as the ownership had not been transferred to the Company. The Court quashed the High Court's judgment and the order allowing the official liquidator to deal with the plot. It affirmed that the plot did not belong to the Company in liquidation, and the Corporation had the discretion to handle or allot the plot as per its policies. Consequently, the appeal was allowed, and the Corporation was granted the authority to manage the plot without any costs imposed.