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TMI Blog2020 (5) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.1997 executed in his favour by Sethuram Thiyagarajan Engineers Pvt. Limited (in short, 'STEPL'), the company under Liquidation 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. (b) whether the learned Single Judge was right in dismissing the application filed by Lakshmi Narayana Choudhary (deceased) under Section 446 (1) of the Companies Act, 1956 seeking leave of the Court to institute a suit against STEPL, the company under liquidation for (i) recovery of a sum of Rs. 40,13,169.21 and (b)permanent injunction restraining the defendants 2 and 3 in the proposed suit from any manner attempting to deal with his entitlement to 167 sq. ft of site area and builtup area admeasuring 3962.59 sq. ft - 1279 sq. ft inclusive of common area in the 5th floor, "Temple Tower:, 672/476, Anna Salai, Nandanam, Chennai - 600 035. 2. The entire case revolves upon the Deed of transfer of leasehold rights dated 30.01.1997 executed by Sethuram Thiyagarajan Engineers Pvt. Limited, the company under liquidation in favour of Lakshmi Narayana Choudhary (deceased). The Appellants herein are the legal representa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30.01.1997 by STEPL in favour of Lakshmi Narayana Choudhary (deceased) is not a bonafide transfer. (b) Lakshmi Narayana Choudhary (deceased) is not competent to question the validity of the mortgage with State Bank of India as he is not a bonafide transferee. If the mortgage in favour of the bank fails, the property will go to the common kitty of the Official liquidator and will enure to the benefit of the large body of unsecured creditors and not to Lakshmi Narayana Choudhary (deceased). (c) It is not open to Lakshmi Narayana Choudhary (deceased) to raise objections with regard to discrepencies in the description of the mortgaged property, since he is not a bonafide transferee. 5. Aggrieved by the dismissal of CA.No.125 of 2011 on 29.04.2013, O.S.A.No.222 of 2013 has been filed. 6. The learned Single Judge by a separate order dated 19.07.2016 in C.A.No.1010 of 2015 dismissed the application filed by the Appellants who are the legal representatives of Lakshmi Narayana Choudhary (deceased) under Section 446(1) of the Companies Act, 1956 seeking leave to institute a suit against the company in liquidation on the ground that the Appellants will have to establish that Lakshmi Nar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited with the respondent bank by the company in liquidation. According to him, the learned Single Judge has erroneously rejected the contention of the Appellants and held that the mortgage through deposit of title deeds can be created even through Xerox copies. 13. Learned counsel for the Appellants also submitted that there are discrepencies with regard to the extent of built up area which is the subject matter of mortgage with the respondent bank. According to him, as per form 66 filed by the respondent bank before the official liquidator only an extent of 1279 sq. ft. was disclosed but the property auctioned by the respondent discloses 2967 sq ft. as the built up area. According to the learned counsel for the Appellants, the learned Single Judge misappreciated these facts and has come to a wrong conclusion. 14. Learned counsel for the Appellants also drew the attention of this Court to the findings given by the learned Single Judge with regard to limitation and submitted that the finding that the application filed under Section 536(2) of the Companes Act, 1956 is barred by law of limitation, is an erroneous one as according to him, Limitation Act is not applicable for an appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submit that mortgage of title deeds relating to leasehold rights was created by the company in liquidation on 30.01.1991. Even in the suit C.S.No.2117 of 1995 filed by the respondent Bank against the company in liquidation, the mortgage created by company was disclosed. Further he would submit that the application filed by Lakshmi Narayana Choudhary before the learned Single Judge under Section 536 (2) of the Companies Act, 1956 to validate the transfer is hopelessly barred by law of limitation as the mortgage was created on 30.01.1991, whereas the application was filed only in the year 2011. According to him, the contentions raised by the applicants have been duly considered by the learned Single Judge in the impugned order. Further he would submit that due to the pendency of this appeal, the respondent bank is unable to exercise its power to sell the property and adjust the sale proceeds towards its mortgage dues. Discussion: 19. Section 536 of the Companies Act, 1956 reads as follows: "536. Avoidance of transfers, etc., after commencement of winding up. (1) In the case of a voluntary winding up, any transfer of shares in the company being a transfer made to or with the san ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd only then, the transaction can be validated under section 536(2) of the Companies Act, 1956. 23. We will now examine 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. 24. In order to find the answer to the issue on hand, it is first necessary to take note of the few relevant dates: (a) On 16.08.1993, the petition for winding up was presented before the Company jurisdiction of this Court; (b) On 08.01.1995, State Bank of India filed the suit against the company in liquidation for recovery, claiming that there was a mortgage of the property; (c) On 30.01.1997, the applicant got a Deed of transfer executed and also got it registered on 17.04.1997; (d) The order of winding up of the company was passed on 10.12.1999; (e) The applicant claims to have made payment of Rs. 30.00 Lakhs to the State Bank of India on 17.04.1997, towards the discharge of the mortgage dues. This claim on the part of the applicant shows that he was aware of the mortgage. Therefore, it is clear that he purchased the leasehold rights with the full knowledge of the mortgage an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, Henkel Spic India Limited paid Rs. 30,00,000/- to the bank is not supported by any iota of evidence. Excepting for the bald averments in the affidavit filed in support of the application under section 536(2) of the companies Act, no evidence whatsoever has been placed before the learned Single Judge in support of the applicant's contentions that the said sum of Rs. 30,00,000/- belongs to Lakshmi Narayana Choudhary (deceased) and was paid by Henkel Spic India Limited on his instructions to the respondent bank towards discharge of the loan availed by the company in liquidation. The company petition for winding up of STEPL was presented before this Court on 18.08.1993 and the said Company petition was admitted by the learned Single Judge of this Court on 03.09.1993 and notices were directed to be issued to the company as well as the Registrar of Companies. On 23.04.1996, the learned Single Judge of this Court passed an order in the Company petition directing the company in liquidation not to sell its assets without the permissions of the Court. Subsequently, on 10.12.1999, the company STEPL was ordered to be wound up. Lakshmi Narayana Choudhary (deceased) has sought for val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and Conciliation Act, the very same applicant represented the very same M/s.R.K.Investments before me in different proceedings. Therefore, in the course of hearing of the above application, I questioned as to how the applicant, who represents M/s. R.K.Investments, could have entered into a Builder's Agreement with M/s.R.K.Investments in 1997. From the answer provided by the learned counsel on record for the applicant, it appears that the applicant's father was a partner of M/s.R.K.Investments. Therefore, it appears that the company in liquidation had entered into some kind of an arrangement with the appilcant as well as M/s.R.K.Investments, for the purpose of violating the order of injunction and defrauding the creditors." 28. The consideration for lease as seen from clause (1) of the Deed of transfer dated 30.01.1997 discloses that the sum was paid on the date of execution of the Deed, whereas the lease has come into effect from 01.04.1996 itself. Any bonafide transferor would not have agreed for transfer of leasehold rights, even before the receipt of the consideration. As observed earlier, the Deed of transfer also does not disclose the reasons for giving effect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the Official Liquidator and can enure only to the benefit of the large body of unsecured creditors and cannot enure to the benefit of the applicant (Lakshmi Narayana Choudhary) alone. We are in agreement with the said observation. 32. The learned Single Judge has also considered the issue of limitation. Admittedly, the mortgage was created by the company under liquidation in favour of the respondent Bank on 30.01.1991 and the Deed of transfer of leasehold rights in favour of the applicant (Lakshmi Narayana Choudhary) was executed on 30.01.1997, whereas the application for validation of transfer has been filed only in the year 2011 after a lapse of long period of time. The learned Single Judge has held that the application is hopelessly barred by law of limitation. Whenever, the Act does not provide for any specific limitation period, Article 137 of the Limitation Act comes into play. The Companies Act, 1956 also does not bar the applicability of the Limitation Act. Therefore, the appilcation under Section 536 (2) of the Companies Act, 1956 seeking validation of transfer will have to be filed within three years from the date of the alleged transfer. In the case on hand, the ap ..... 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