2016 (1) TMI 760 - HC - Companies Law

Petition praying the official liquidator be restrained from taking possession of the said plot - bona-fide purchaser of plot - it was stated that the applicant has paid consideration and purchased the lease rights (not purchased the plot of land) as a bona-fide purchaser without notice. - Held that - In this case, in addition to the fact that I cannot accept that it was a bona-fide transaction, as on 20.03.2012 when the Company was ordered to be wound up and the official liquidator was appointed, the parties had only entered into an agreement for assignment of lease and actually assignment happened on 24.12.2012, i.e., 9 months after the Company was ordered to be wound up. The settled position is upon passing of the order of winding up, no new rights can be completed and no incomplete rights can be completed. - the alleged assignment cannot be validated under Section 536(2) of the said Act. The application, therefore, stands dismissed. At this stage, the counsel for the applicant requested for a stay of eight weeks of this order. When I have found that the transaction itself is not bona-fide and in view of the settled legal position that a transaction not completed before the order of winding up has been passed, cannot be completed after the winding up order is passed I cannot grant any stay. Hence, stay is rejected.

Summary

Issues:
1. Validity of the applicant's claim as a bona-fide purchaser of a plot in a liquidation case.
2. Interpretation of key dates and events in relation to the applicant's claim.
3. Consideration of the Deed of Assignment and its validity post liquidation order.
4. Application of Section 536(2) of the Companies Act, 1956 for validating transfers.
5. Determining the best interest of the Company in asset transactions during liquidation.
6. Precedents set by previous judgments regarding incomplete transactions post liquidation orders.

Analysis:

1. The applicant claimed to be a bona-fide purchaser of a plot without notice of liquidation proceedings, seeking to restrain the official liquidator from taking possession. However, the court found discrepancies in the applicant's claim, especially regarding the Deed of Assignment and the timing of transactions post liquidation order.

2. The court analyzed crucial dates and events, highlighting the winding-up order on 20.03.2012, the official liquidator's visit on 29.05.2012, and the execution of the Deed of Assignment on 24.12.2012, emphasizing the timeline's impact on the validity of the applicant's claim.

3. The Deed of Assignment, signed after the liquidation order, was deemed void as it was akin to transacting with a defunct entity. The court scrutinized the consideration amount, payments made, and the applicant's actions post liquidation, concluding that the applicant was not a bona-fide purchaser without notice.

4. Section 536(2) of the Companies Act, 1956 was invoked to assess the transfer's validity, emphasizing the need for bona-fide transactions in the Company's interest. The court highlighted the requirement to prove both bona-fide intent and the transaction's benefit to the Company.

5. The court stressed that Company assets cannot be disposed of arbitrarily post liquidation admission, emphasizing the need to protect stakeholders' interests. The lack of evidence supporting the transaction's benefit to the Company further weakened the applicant's case.

6. Precedents from previous judgments, such as the Board of Industrial and Financial Reconstruction case and Sunita Vasudeo Warke case, were cited to reinforce the principle that incomplete transactions post liquidation orders cannot be validated. The court dismissed the applicant's claim, citing the settled legal position on incomplete rights post liquidation.

In conclusion, the court dismissed the application, highlighting the lack of bona-fide intent, the incomplete nature of the transaction post liquidation, and the absence of evidence supporting the transaction's benefit to the Company. The court's decision was based on legal principles, precedents, and the specific timeline of events in the case.