Incomplete winding-up transaction cannot be validated when registration, permissions and contractual obligations remain unfulfilled.

A sale agreement executed after commencement of winding up proceedings, but before the winding up order, was treated as incomplete and inchoate because stamp duty, registration and required permissions remained unfulfilled, so it could not be validated under Section 536(2) of the Companies Act, 1956. The transaction was also found not bona fide or fair, as the consideration was below the valuation material and earlier bank correspondence. No charge arose under Section 55(6)(b) of the Transfer of Property Act, 1882, because the purchaser had not performed the contractual obligations. Section 53A protection was unavailable because the contract was unregistered under Section 17(1A) of the Registration Act, 1908.

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Issues: (i) whether the sale agreement executed after commencement of winding up proceedings, but before the winding up order, was an incomplete and inchoate transaction incapable of validation under Section 536(2) of the Companies Act, 1956; (ii) whether the transaction was bona fide, fair and in the interest of the company in liquidation and its creditors; (iii) whether the purchaser could claim a charge over the property under Section 55(6)(b) of the Transfer of Property Act, 1882; and (iv) whether the purchaser could rely on Section 53A of the Transfer of Property Act, 1882 despite the document remaining unregistered.

Issue (i): whether the sale agreement executed after commencement of winding up proceedings, but before the winding up order, was an incomplete and inchoate transaction incapable of validation under Section 536(2) of the Companies Act, 1956.

Analysis: The agreement itself recorded that stamp duty and registration charges were to be borne by the transferee and that registration was deferred because of deficiency of documents and pending MIDC permissions. The agreed stamp duty and registration were not completed, the document remained unregistered, and the required permissions continued to be absent. In winding up, no new rights can be created and uncompleted rights cannot be completed so as to prejudice the pari passu claims of creditors.

Conclusion: The agreement was held to be incomplete and inchoate and therefore incapable of validation under Section 536(2) of the Companies Act, 1956.

Issue (ii): whether the transaction was bona fide, fair and in the interest of the company in liquidation and its creditors.

Analysis: The consideration under the agreement was lower than the values indicated in the valuation material and the earlier bank correspondence. The Court treated the undervaluation, coupled with the incomplete status of the agreement, as inconsistent with a bona fide and fair transaction warranting validation. The fact that payments were routed to the secured creditor did not cure the deficiencies in the transaction.

Conclusion: The transaction was not accepted as bona fide or fair, and this contention was rejected.

Issue (iii): whether the purchaser could claim a charge over the property under Section 55(6)(b) of the Transfer of Property Act, 1882.

Analysis: The statutory charge under Section 55(6)(b) operates in aid of a valid and completed transaction and is lost where the purchaser is in default. Here, the purchaser had not fulfilled the contractual obligations relating to stamp duty, registration, and MIDC permissions, so the transaction could not support a charge in its favour.

Conclusion: No charge under Section 55(6)(b) of the Transfer of Property Act, 1882 was held to arise in favour of the purchaser.

Issue (iv): whether the purchaser could rely on Section 53A of the Transfer of Property Act, 1882 despite the document remaining unregistered.

Analysis: Section 17(1A) of the Registration Act, 1908 requires registration of contracts to transfer immovable property if they are to be relied upon for Section 53A protection. An unregistered contract executed after the amendment has no effect for the purposes of Section 53A.

Conclusion: Section 53A protection was unavailable to the purchaser because the document was not registered.

Final Conclusion: The purchaser's request for validation failed, the official liquidator's objection succeeded, and possession of the property was directed to be restored to the official liquidator.

Ratio Decidendi: A transaction executed during the winding up interregnum cannot be validated if it remains incomplete in law, unregistered and dependent on unfulfilled permissions, since such a transaction cannot defeat the pari passu rights of creditors.

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