2020 (5) TMI 246 - HC - Companies Law

Transfer of leasehold rights - rejection of application on the ground that the alleged transfer is not a bonafide transfer and not entered into in the interest of the company and its creditors - Section 536(2) of the Companies Act, 1956 - According to the Appellants, Lakshmi Narayana Choudhary (deceased) did not have knowledge about the pendency of winding up petition filed against STEPL, at the time of entering into the deed of transfer of leasehold rights dated 30.01.1997 - HELD THAT - The effect of section 536(2) of the Companies Act is that where a winding up proceeding is by or subject to the supervision of the Court, any disposition of the property of the company which is made after the commencement of the winding-up is void, unless the Court otherwise orders - Under Section 441 (2) of the Companies Act, 1956, a winding up of a company by the Court is deemed to have commenced at the time of presentation of the petition for winding up. Sub section 2 of Section 536 confers an enabling power on the Court to direct that a disposition of the property of a company shall not be void, though it was effected after the commencement of the winding up proceedings. This principle is incorporated to protect bonafide transactions carried out and completed in the ordinary course of the current business of a company. Whether the learned Single Judge was right in coming to the conclusion that the applicant was not a bonafide transferee and the application is also barred by law of limitation? - HELD THAT - Unless and until, the applicant (Lakshmi Narayana Choudhary) established that he is a bonafide transferee under the Deed of transfer of leasehold rights dated 30.01.1997, he cannot be permitted to file a suit against the company in liquidation. The applicant (Lakshmi Narayana Choudhary) has sought leave to institute a suit for recovery of money as well as for mandatory permanent injunction against the company in liquidation. The learned Single Judge has rightly dismissed the leave application in C.A.No.1010 of 2015 filed under Section 446 (1) of the Companies Act, 1956 - the applicant (Lakshmi Narayana Choudhary) is not a bonafide transferee and therefore, he cannot be permitted to file a suit against the company in liquidation. Appeal dismissed.

Summary

Issues Involved:
1. Validation of the Deed of transfer of leasehold rights under Section 536(2) of the Companies Act, 1956.
2. Leave to institute a suit against the company under liquidation under Section 446(1) of the Companies Act, 1956.

Issue-Wise Detailed Analysis:

1. Validation of the Deed of transfer of leasehold rights under Section 536(2) of the Companies Act, 1956:

The primary issue was whether the learned Single Judge was correct in rejecting the application filed by the deceased applicant for validation of the Deed of transfer of leasehold rights dated 30.01.1997. The appellants argued that the deceased was a bonafide transferee who paid ?30,00,000 to the respondent bank, benefiting the company and its creditors. However, the respondents contended that the deceased was not a bonafide transferee and had knowledge of the winding-up proceedings. The learned Single Judge dismissed the application on the grounds that the transfer was not bonafide, the applicant was not competent to question the mortgage's validity, and the application was barred by the law of limitation.

The judgment emphasized that under Section 536(2), the court has discretion to validate transactions if they are in the interest of the company or its creditors. However, the court found inconsistencies in the appellants' claims, such as the payment of ?30,00,000 by Henkel Spic India Limited without evidence that it was on the deceased's instructions. The Deed of transfer's consideration was only ?2,68,080.21, making the payment of ?30,00,000 highly improbable. The court also noted that the transfer was executed after the winding-up petition was filed and an injunction was in place, suggesting an attempt to circumvent the court's order. The application was filed 14 years after the transfer, making it barred by limitation.

2. Leave to institute a suit against the company under liquidation under Section 446(1) of the Companies Act, 1956:

The second issue was whether the learned Single Judge was correct in dismissing the application for leave to institute a suit against the company under liquidation. The appellants sought to recover ?40,13,169.21 and a permanent injunction regarding their entitlement to certain property. The court held that the appellants needed to establish the deceased's bonafide transferee status under the Deed of transfer dated 30.01.1997 before seeking leave to file a suit. Since the deceased was not a bonafide transferee, the court dismissed the leave application.

The judgment highlighted that the mortgage created by the company in favor of the respondent bank was disclosed in a suit filed in 1995, and the application for validation of the transfer was filed in 2011, making it barred by limitation. The court also noted that discrepancies in the mortgaged property's extent could not be raised by the appellants as they were not bonafide transferees. The property, if not mortgaged, would benefit the unsecured creditors, not the appellants.

Conclusion:

The court dismissed both appeals, affirming the learned Single Judge's decisions. The Deed of transfer of leasehold rights dated 30.01.1997 was not validated, and the application for leave to institute a suit against the company under liquidation was denied. The court emphasized the importance of bonafide transactions and adherence to the law of limitation in such cases.