2013 (4) TMI 893 - HC - Companies Law

Application dismissed due to limitation, applicant not bona fide transferee. Mortgage upheld, auction sale set aside for non-payment.

The court dismissed the application as it was barred by limitation under Article 137 of the Limitation Act, 1963. The applicant was found not to be a bona ... - Issues Involved:1. Limitation under section 536(2) of the Companies Act, 1956.2. Bona fide nature of the transaction.3. Validity of the mortgage in favor of the State Bank of India.4. Discrepancies in the description of the property.5. Non-payment of bid amount by the successful bidder within the stipulated time.Summary:Issue of Limitation:The court examined whether the application under section 536(2) is barred by limitation. The Companies Act does not prescribe a specific period of limitation for such applications. However, Article 137 of the Limitation Act, 1963, which provides a three-year period for applications for which no period is prescribed, applies. The applicant was aware of the winding-up proceedings by July 2000 or January 2001 but filed the application only in January 2011. Therefore, the application is barred by limitation.Issue of Bona Fide Nature of the Transaction:The court considered whether the applicant was a bona fide transferee. The applicant obtained leasehold rights from the company in liquidation during the pendency of winding-up proceedings. The court found several discrepancies and suspicious circumstances, such as the retrospective effect of the lease and the payment of Rs. 30 lakhs by Henkel Spic India Ltd., not the applicant. The court concluded that the applicant is not a bona fide purchaser.Issue of Validity of the Mortgage in Favor of the State Bank of India:The applicant contended that the mortgage was invalid as the original title deeds were not deposited with the bank. The court found that the applicant is not competent to raise this objection and that the bank's claim of losing the original documents due to handling by various persons does not invalidate the mortgage. The mortgage was created and registered with the Registrar of Companies, confirming its validity.Issue of Discrepancies in the Description of the Property:The applicant argued that there were discrepancies in the description of the property, particularly the built-up area. The court found that the applicant had obtained additional leasehold rights from the original owner, which explained the increase in the built-up area. The court concluded that the applicant cannot take advantage of any alleged discrepancy.Issue of Non-payment of Bid Amount by the Successful Bidder within the Stipulated Time:The auction purchaser failed to pay the balance amount within the stipulated 15 days, violating condition No. 3 of the auction notice and Rule 57(2) of the Second Schedule to the Income-tax Act, 1961. The court held that the auction sale is liable to be set aside. The fourth respondent (auction purchaser) is given liberty to apply for a refund of the deposited amount, subject to the deduction of auction expenses.Conclusion:The court dismissed the application, rejecting the prayer for ratification of the transfer of leasehold rights and holding the applicant not to be a bona fide transferee. The auction in favor of the fourth respondent is set aside due to non-compliance with payment terms. The mortgage in favor of the State Bank of India is upheld. The Recovery Officer is permitted to bring the property to sale again.