Fraudulent land sale representations can create debt claims and defeat limitation defences in winding-up proceedings.

False representations in sale deeds that a company owned land and could transfer encumbrance-free plots, when it in fact had no title and no genuine development or possession to convey, support purchasers' refund claims as debts with interest. A mere agreement to sell creates no interest in immovable property, and misstatements about possession and mutation reinforce the failure of title. Continuing assurances and repeated representations may also keep such claims from being treated as time-barred in winding-up proceedings where purchasers acted with due diligence and discovered the deception only later.

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Issues: (i) whether the amounts paid by the plot purchasers were recoverable as debts so as to sustain a winding-up petition against the company on the basis of fraudulent misrepresentation and failure of title; (ii) whether the claim was barred by limitation.

Issue (i): whether the amounts paid by the plot purchasers were recoverable as debts so as to sustain a winding-up petition against the company on the basis of fraudulent misrepresentation and failure of title

Analysis: The company had represented in the sale deeds that it was the absolute owner of the land and that the plots were free from encumbrances, yet it had no title to the land and had not obtained a sale deed in its own favour. A mere agreement to sell did not create any interest in the property, and the purported sale deeds also falsely recited delivery of possession and a duty on the purchasers to get mutation, although mutation in favour of the company itself did not exist. The record further showed that no real development existed and the company had collected substantial sums without reflecting them properly in its accounts. The failure of title, coupled with the false representations, entitled the purchasers to refund with interest as stipulated in the sale deeds.

Conclusion: The amounts paid were debts due to the petitioners, and the winding-up petition was maintainable in their favour.

Issue (ii): whether the claim was barred by limitation

Analysis: The company had kept the purchasers under continuing assurances and induced inaction by repeated promises and representations. On the material before the Court, petitioner No. 1 had been abroad for a substantial period and acted with due diligence thereafter, and the surrounding facts showed that the other petitioners learnt of the deception only shortly before filing the petition. In these circumstances, the claims could not be treated as time-barred for the purpose of resisting the winding-up petition.

Conclusion: The plea of limitation failed against the petitioners.

Final Conclusion: The company was held liable to be wound up, and the official liquidator was directed to take over its affairs, assets, and properties.

Ratio Decidendi: A company that obtains money by falsely representing title to immovable property, while in fact having no title and no real development or possession to transfer, cannot resist refund claims by treating the purchasers' payments as anything other than debts; continuing deception may also prevent the claim from being defeated on limitation in winding-up proceedings.

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