2015 (1) TMI 321 - HC - Companies Law

Court upholds Mumbai property sale deeds registration for Bihar land, citing Registration Act, 1908 extraterritorial application.

GATI Cargo Management Service Versus SBL Industries Ltd.

The court upheld the registration of sale deeds in Mumbai for property in Bihar, citing the extraterritorial application of the Registration Act, 1908. ... Validity of order for cancellation of sale deeds registered with the Sub-Registrar, Mumbai whereas the property was situated at District Ranchi, Jharkhand – Cancellation of sale deeds on property belonging to the company in liquidation - Whether the order dated 30.11.2011 is required to be recalled as the order was passed in the absence of the applicants and without notice to them – Held that:- An opportunity of being heard before an adverse order is passed in judicial proceedings is an integral part of principles of natural justice and Article 14 of the Constitution of India - the order cancelling the subject sale deeds, which were executed in favour of the applicants and a direction for the applicants to be dispossessed of the property, is an order adverse to the applicants - the order could not be passed without due notice to them and without a fair opportunity of being heard - although, the Official Liquidator had sought orders adverse to the applicants, they were not made parties to the proceedings - this fundamental flaw in the procedure would vitiate the impugned order dated 30.11.2011 and the same is liable to be recalled on this ground alone. Validity of registration made - Whether registration of a sale deed relating to a property situated in Bihar, with the office of Sub-Registrar - Mumbai would be valid - Whether the registration of the subject sale deeds could be cancelled on account of the subject property being situated in Ranchi, which at the material time was a part of the State of Bihar, and the registration being effected by the Sub-Registrar, Mumbai – Held that:- The Registration Act, 1908 occupies the field falling under Entry 6 of the Concurrent List, thus, by virtue of Article 246(2) of the Constitution of India, the Parliament as well as the State Legislature would have the power to legislate in respect of the subject matter - the Registration Act, 1908 as amended by the Registration (Bihar Amendment) Act, 1991, would prevail over the existing law (i.e pre-constitutional legislation) as applicable to the State of Bihar - the same does not imply that the law as amended by the Bihar Legislature would have extraterritorial application - The last four words of Article 254(2) of the Constitution of India - 'prevail in that State' clearly restrict the applicability of the amendment to the state of Bihar - the Registration of the sale deeds by the registering authorities in Mumbai by virtue of Section 30(2) of the Act are not flawed. Whether by virtue of Section 30(2) of the Registration Act, 1908 an immovable property situated in Bihar could be registered by the Registrar of Assurances, Mumbai – Held that:- In the event a document was registered under Section 30(2) of the Act by a Registrar, a copy of same would be required to be forwarded to the Registrar in whose district the immovable property is situated - Section 66(1) of the Act mandates the Registrar to forward the memorandum of the document received by him to each Sub-Registrar subordinate to him in whose sub-district any part of the property is situated - In the event the legislative intent was to disregard any document that was registered by a Registrar of the district in which the erstwhile Presidency towns are located or by the Registrar of Delhi then the provisions of Section 67 of the Act would also have been omitted. In this regard it is relevant to note that the 'The Registration and Other Related Laws (Amendment) Act, 2001 enacted by the Parliament, which finally omitted section 30(2) of the Registration Act, 1908 also deleted section 67 - the Registration effected by the registering authority at Mumbai cannot be cancelled on account of the amendment brought about by the Registration (Bihar Amendment) Act, 1991. In the un-amended Section 28, even the Sub-Registrar within whose sub-district, a portion of the property was situated, was entitled to register the document - The amendment of Section 28 is not germane to the question, whether the Registrar of assurances of erstwhile Presidency towns and Delhi, by virtue of Section 30(2) of the Act, could register the document conveying immovable property in Bihar - an order cancelling the registration of the subject sale deeds only on the ground that the same were registered by the office of the Registrar in Mumbai, is not warranted – thus, the order is recalled and the matter is restored and the OL is permitted to file a fresh application to challenge the subject sale deeds and the transaction recorded therein on all grounds as available – Decided partly in favour of appellant. Issues Involved:1. Validity of the registration of sale deeds in Mumbai for property situated in Ranchi, Bihar.2. Adherence to principles of natural justice in passing the order dated 30.11.2011.3. Impact of amendments to the Registration Act, 1908 by the Bihar Legislature.4. Allegations of fraudulent registration and validity of the transaction.5. Application of Section 531A of the Companies Act, 1956 regarding the voiding of property transfer within one year before the winding-up petition.Issue-wise Detailed Analysis:1. Validity of the Registration of Sale Deeds in Mumbai:The principal question was whether the registration of a sale deed relating to property in Bihar, with the office of Sub-Registrar, Mumbai, was valid. The court noted that the Registration Act, 1908, as applicable to Maharashtra, included Section 30(2), which allowed the Registrar in Mumbai to register documents without regard to the property's location. The Bihar Amendment Act, 1991, which omitted Section 30(2) for Bihar, did not have extraterritorial application. Therefore, the registration by the Mumbai authorities was not flawed.2. Adherence to Principles of Natural Justice:The court emphasized that principles of natural justice require that no adverse order should be passed without giving an opportunity of being heard. The order dated 30.11.2011, which canceled the sale deeds and directed the dispossession of the applicants, was passed without notice to them. This procedural flaw vitiated the order, leading to its recall.3. Impact of Amendments to the Registration Act, 1908 by the Bihar Legislature:The Bihar Amendment Act, 1991, modified Section 28 and omitted Section 30(2) of the Registration Act, 1908, as applicable to Bihar. However, the court held that this amendment did not affect the registration authority in Mumbai. The Registration Act, 1908, as applicable to Maharashtra, retained Section 30(2), thus empowering the Mumbai Registrar to register documents for property situated in Bihar.4. Allegations of Fraudulent Registration and Validity of the Transaction:The court did not delve into the allegations of fraudulent registration or the validity of the transaction. It clarified that the Official Liquidator could challenge the sale deeds on grounds of fraud, subterfuge, or any other legal basis. The present judgment only addressed the procedural aspects and the validity of registration under the applicable law.5. Application of Section 531A of the Companies Act, 1956:Section 531A voids any transfer of property made by a company within one year before the presentation of a winding-up petition, unless it is in the ordinary course of business. The court noted that the transfer in question occurred within this one-year period and was not in the ordinary course of business. However, the court did not make a final determination on this issue, leaving it open for the Official Liquidator to raise this ground in future proceedings.Conclusion:The court recalled the order dated 30.11.2011 due to the lack of notice to the applicants, thereby restoring CA No. 1557/2011. The registration of the sale deeds in Mumbai was upheld, but the Official Liquidator was permitted to file a fresh application challenging the sale deeds on all available grounds, including fraud and violation of Section 531A of the Companies Act, 1956. The applicants were directed to maintain the status quo regarding the property.