Winding-up court jurisdiction and lack of authority to execute transfer deed upheld in challenge to company assignment

In proceedings under section 171 of the Indian Companies Act, the winding-up court could examine the validity of an assignment affecting company property and was not confined to section 231 alone; section 229 imported the relevant insolvency rules protecting creditors, so the jurisdictional objection failed. The court also found that Balak Ram was not shown to have any valid power of attorney or lawful authority from the directors to execute the deed of transfer, and the suspicious circumstances were unsupported by reliable proof. The assignment was therefore invalid, and the refusal of leave was upheld.

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Issues: (i) Whether, in proceedings under section 171 of the Indian Companies Act, the winding-up court could determine the validity of the assignment and refuse leave on the ground that the transfer was voidable or fraudulent under the insolvency law; (ii) whether Balak Ram was competent and duly authorised to execute the deed of transfer on behalf of the company.

Issue (i): Whether, in proceedings under section 171 of the Indian Companies Act, the winding-up court could determine the validity of the assignment and refuse leave on the ground that the transfer was voidable or fraudulent under the insolvency law.

Analysis: The Court held that section 229 of the Indian Companies Act imported the relevant insolvency rules governing the rights of creditors, and that the winding-up court was not confined to section 231 alone. It accepted that the official liquidator could challenge a transfer affecting company property in the interests of creditors, and that the court could adjudicate the title question raised in the leave proceedings. The narrower construction urged on section 229 was rejected.

Conclusion: The court had jurisdiction to examine the validity of the transfer in the leave proceedings, and the objection based on want of jurisdiction failed.

Issue (ii): Whether Balak Ram was competent and duly authorised to execute the deed of transfer on behalf of the company.

Analysis: The evidence did not satisfactorily prove a valid power of attorney or any lawful authority from the directors. Balak Ram was only an accountant, the alleged authority was not established with reliable secondary evidence, and the surrounding circumstances made the transaction highly suspicious. The Court further found that the material on record did not show that any director with power to act had authorised the execution of the deed.

Conclusion: Balak Ram had no authority to execute the deed of transfer, so the assignment was invalid.

Final Conclusion: The challenge to the order failed and the refusal of leave was upheld, with the appeal ending in dismissal with costs.

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