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of <h1>Court upholds land sale validity, clarifies director's authority</h1> <h3>Ashok Kumar Versus Shingal Land & Finance (P.) Ltd.</h3> Ashok Kumar Versus Shingal Land & Finance (P.) Ltd. - [1995] 4 SCL 145 (DELHI) Issues: Ownership of land in liquidation, Validity of sale deed, Authority of managing director, Interpretation of company's memorandum and articles, Application of Companies Act, 1956, Disposition of assets during winding up.Ownership of Land in Liquidation:The petitioners sought a declaration that a piece of land they purchased from the company in liquidation was not an asset of the company. The official liquidator contested, arguing that no valid sale deed existed, and the petitioners did not acquire ownership. However, it was established that the sale deed was executed by the managing director, and the correction regarding the director's name was allowed. The court noted that the sale consideration was not reflected in the company's account books, but if the managing director had the authority to sell on behalf of the company, the sale would be valid.Validity of Sale Deed and Authority of Managing Director:The court examined whether the managing director had the legal authority to sell the company's land. While the sale deed did not reference any specific resolution authorizing the sale, the company's memorandum and articles empowered the managing director to manage the company's affairs, including the sale of properties. The court held that the managing director had the power to sell the land for colonization purposes, even without a specific resolution from the board of directors.Interpretation of Company's Memorandum and Articles:The court analyzed the company's memorandum and articles, which outlined the managing director's authority to conduct the company's business. It was emphasized that the managing director could sell company properties for business purposes without explicit board resolutions, especially when the company's objective included colonization activities. The court concluded that the managing director had the power to dispose of the company's immovable property.Application of Companies Act, 1956 and Disposition of Assets during Winding Up:The court referred to Section 537 of the Companies Act, 1956, which deems sales of company properties without court approval during winding up as void. However, since the sale deed was executed before the winding up petition, the court did not need to exercise discretion in this matter. Citing precedents, the court highlighted that valid dispositions in the company's interest should not be challenged during winding up. Ultimately, the court declared the sale of land to the petitioners as valid and not part of the company's assets during liquidation, as the managing director had the authority to conduct such transactions.Conclusion:The court allowed the application, confirming the validity of the land sale to the petitioners and ruling that the land was not a company asset at the time of the winding up petition. The judgment clarified the authority of the managing director to sell company properties and emphasized the importance of company documents in determining such powers, ultimately resolving the ownership dispute over the land in question.
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