Void transfer agreement over company assets cannot be specifically enforced when it breaches court restraint and liquidation rules.

An agreement to transfer a company's mill unit was treated as unenforceable because it was made in breach of a subsisting Supreme Court restraint, contrary to the undertaking given to preserve assets for creditors, and inconsistent with the winding-up regime. The corporate resolution approving the sale was also defective because the explanatory statement omitted material facts required for shareholder disclosure. As the underlying bargain was void and opposed to public policy, no right arose to compel execution of the conveyance deed or to seek specific performance. The status quo protection over the unit was therefore lifted, and the official liquidator was left free to proceed with the assets under the winding-up order.

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Issues: (i) whether the agreement for sale of the mill unit was enforceable despite the Supreme Court's injunction, the undertaking given to the Supreme Court, and the statutory requirements governing corporate disposition of undertaking assets; and (ii) whether the applicant was entitled either to compel execution of the conveyance deed or, alternatively, to be permitted to sue for specific performance.

Issue (i): whether the agreement for sale of the mill unit was enforceable despite the Supreme Court's injunction, the undertaking given to the Supreme Court, and the statutory requirements governing corporate disposition of undertaking assets.

Analysis: The agreement was entered into after the Supreme Court had restrained the company from charging, encumbering or alienating its immovable assets except with leave of court, and the company had undertaken to keep its assets available for meeting ONGC's dues. The explanatory statement placed before shareholders omitted these material facts, rendering the corporate resolution defective under the mandatory disclosure regime. The agreement also conflicted with the winding-up process, the Supreme Court's later direction that ONGC's dues be paid first out of the company's assets, and the rule that a disposition after commencement of winding up is void unless validated by the court. On these facts, the agreement could not be treated as a lawful or enforceable bargain.

Conclusion: The agreement was held unenforceable and void against law and public policy.

Issue (ii): whether the applicant was entitled either to compel execution of the conveyance deed or, alternatively, to be permitted to sue for specific performance.

Analysis: The applicant had not performed the essential reciprocal obligations under the agreement, including payment of the substantial consideration attributable to the debenture liabilities. Since the underlying agreement was unlawful, opposed to public policy, inconsistent with the Supreme Court's orders, and void in the context of liquidation, no right to conveyance or specific performance could arise. A suit for specific performance would necessarily rest on an agreement that could not be lawfully enforced.

Conclusion: The claim for execution of conveyance and the alternative request for permission to sue for specific performance were rejected.

Final Conclusion: The application failed in entirety, the status quo protection over the unit was lifted, and the official liquidator was left free to proceed with the assets in accordance with the winding-up order.

Ratio Decidendi: An agreement for transfer of company assets entered in violation of a subsisting Supreme Court restraint, concealed from the shareholders in the mandatory explanatory statement, and inconsistent with the winding-up regime is void and cannot be specifically enforced.

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