TaxTMI 
TaxTMI 
2013 (10) TMI 1593
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....the Companies Act, 1956, and having it's Registered Office at Park View, Lunsikui, Navsari, 396445 vide a Registered Sale Deed bearing 1491/93 and 1492/93 respectively, which were executed between the parties on 24/12/1993 before the Sub Registrar of Daman. (B) Your Honour may be pleased to restrain the Respondent - O.L. of Vitta Mazda Ltd., from putting two plots of Non Agricultural Land bearing Survey No.: 78/127 (private plot no.: 11 in Sector No.:3) & 78/128 admeasuring 4,231.86 Sq. Feet i.e. 393.14 Sq. Mtrs. & 78/128 (private plot no.: 12 in sector no.:3) of Village Kathriya, Nani Daman, now in boundary of Municipal Council of Daman, with rights of ways, trees, easements and appurtenances whatsoever, from M/s/ Vitta Mazda Limited a Company incorporated under the Companies Act, 1956, and having it's Registered Office at Park View, Lunsikui, Navsari, 396445. A Registered Sale Deed bearing 1491/93 and 1492/93 respectively, which were executed between the parties on 24/12/1993 before the Sub Registrar of Daman, till final disposal of this Application. (C) Your Honour may be pleased to direct the Respondent - O.L. of Vitta Mazda Ltd., to observe status quo....
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....tegory (B) of the order .... As the Applicants are residing at USA hence they could not came before the Hon. High Court for filing application for regularization of transaction. Therefore, this present Application is filed for regularization of the transaction of purchase of both plots by the Applicants. As the Applicant No.: 1 is residing at USA, he has executed Power of Attorney on 11/01/2013 at Navsari, when he came for short visit in India., in favour of two power of attorney holders namely (i) Mukesh Kantilal Kansara resident of 401, Janta Apartments, Station Road, Navsari. 396445.. and (ii) Sanjay Ramesh Kansara residing at Patwa Sheri, Navsari. 386445. (9) The Applicant No.: 2 has expired at USA on 23/07/1998 at residence : 9129,-19 ½, Avenue Lemoore, CA, 93245. USA. A Certificate of Death of the Applicant No.: 2 Renuka Kishore Balsara is issued on 30/07/1998 by County of Fresno, Health Services Agency, Freshno, California. Therefore, being legal representative, husband and heir of the deceased - Second Applicant, the First Applicant has come forward in her place through his power of attorney. (10) The Applicant approached present advocate for advice....
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....pplication were rejected preferred O.J.Appeal which are pending for final hearing. Several other persons also preferred Application for regularization of Sale which were granted by the Hon'ble Court. The Official Liquidator has preferred O.J. Appeals which are pending. 5. The Official Liquidator invited bid for sale of Plot in the year 2003 and advertisement were also issued and published in daily News Paper for sale of the Plots. The Official Liquidator received bids and preferred O.L.R. Praying for sale confirmation in favour of highest bidder. The Hon'ble Court vide its Order dated 18th December 2004 did not confirm the sale. .... Application is preferred after 10 years from the date sale confirmation was rejected. On this ground alone application is liable to be rejected. 6. Perusal of the Sale Deed dated 24th December 1993 reveals that it is executed by so called Authorized Director Mr. Dara K. Deboo. It is submitted that Company acts through authority of its Board of Directors. Limited Companies are governed by the provisions of Companies Act 1956. If act is required to be done or document is required to be executed by a Company it must be through an....
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.... by the Hon'ble Court in para 18 of its Judgement and Order dated 6th September 2002 in Company App0lication No.213 of 2000 (Mr. Aspri F. Langrana Vs. O.L. of Vitta Mazda Ltd) Said Para 18 is reproduced hereunder: "18. The certificate produced by the Chartered Accountant at page 63 depicts that amount of Rs.70,000=00 each, totaling to Rs. 1,40,000=00, was paid in cash. The Court is not going into the aspect of validity of such transaction which may be held to be invalid on the ground of the amount being paid in cash, for the present, the Court is not to pronounce on the validity of that transaction. The Court is only considering as to whether on assumption that the transaction is true, the Court should grant reliefs as prayed for by the petitioners. In view of the fact that the transaction is subsequent in point of time to the service of notice as stated by Smt. N.J. Patel, Tax Recovery Officer, Valsad, in her affidavit, paragraph 2, and in view of the fact that an order under Section 281(1) is already passed, which is not challenged by filing an appropriate proceeding, and in view of the fact that 'statement of affairs' is not filed by Ex.Directors of the comp....
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.... of Plots are treated as void by the Income Tax Department. In view of the aforesaid position of Law and since the Property were under attachment of Income Tax Department, hence the Transaction is void and illegal." 6. Ms. Joshi, learned advocate, for Mr. Desai, learned advocate for applicant, has appeared for the applicant and she has relied on the details mentioned in the affidavit in support of the summons as well as the sale deed dated 24.12.2013 (Annexure-A Page 19 to 30). Ms. Joshi, learned advocate for the applicant, submitted that the applicant is bonafide purchaser of the lands in question and the sale of the lands in question is effected by way of registered sale deed and thereafter, appropriate entries in the revenue record have also been made. Learned counsel for the applicant submitted that the applicant purchased the land in question bonafide and without any ulterior intention. However, it is pertinent that at the time of hearing, learned advocate for the applicant could not and did not offer any explanation (except the details mentioned in the affidavit) as regards the inordinate delay caused in preferring present application. 6.1 Ms. Joshi, learned advocate fo....
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....ect, but also depicts complete disregard to the provision of law- particularly the prohibition and restrictions prescribed by law; (e) any explanation - much less satisfactory explanation as regards inordinate delay is not offered; (f) there is no authorization in favour of the person who executed the disputed sale-transaction; Re: Delay. This application is preferred after inordinate delay of almost 20 years since the date of disputed sale - transaction. 9.1 It is pertinent that the disputed sale - transaction was executed in December, 1993 whereas this application is taken- out in April, 2013. However, any explanation as regards such inordinate delay and cause thereof is not offered. 10. The applicant, by this application, seeks that the disputed transaction - which was executed before almost 20 years (i.e. in 1993) and which, according to Section 536(2), is void ab-initio, may be validated after delay of 20 years. 10.1 Moreover, despite the fact that the transaction was executed in face of and in complete disregard to the provision under Section 536(2) of the Act, the applicant did not take any action for almost 20 years to get it validated in ac....
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....e the Court to condone such long delay. 12.5 Even if only that part of delay which is caused from the date of the Notice is considered (and prior delay is not taken into account), then also delay of almost 10 years (after the said public notice was issued in July, 2003) is caused and any explanation as regards such inordinate delay of 10 years is not offered and any case to condone the delay is not made out. 12.6 Under the circumstances, the application, in view of this Court, must fail and it accordingly fails on this ground and for this reason. 13. Moreover, the applicant has failed to make out any case on merits also. Re- Ab-initio void transaction. 14. So as to consider and appreciate the rival submissions made by the applicant and the Official Liquidator and the request made in present application, it is relevant and necessary to take into account the provisions under Section 536 and Section 441 of the Companies Act, 1956, which read thus:- "Sec 536 - Avoidance of transfers, etc., after commencement of winding up. (1) In the case of a voluntary winding up, any transfer of shares in the company, not being a transfer made to or with the sanction ....
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....ings for winding-up commences (is deemed to have commenced) from the date of presentation of the petition in the Court. 14.5 In this context, it is necessary to note that the Company Petition No.126 of 1990 appears to have been filed on or around 14.8.1990 and it is not in dispute that the winding up order came to be passed on 27.8.1998 and in that very order, it is observed that the order will relate back to and will take effect from 14.8.1990. The relevant part of the said order dated 27.8.1998 reads thus:- "13. Accordingly Vitta Mazda Ltd. is ordered to be wound up under the provisions of Section 433 and 434 of the Companies Act, 1956. In view of the provisions of Section 441(2) of the Companies Act, 1956, it is clarified that this order shall relate back to 14.8.1990 when Company Petition No.126 of 1990 was presented before this Court." 14.6 Thus, in view of the said order, the order of winding up is deemed to have been passed w.e.f. 14.8.1990. Hence, the winding-up proceedings, in present case, commenced w.e.f. 14.8.1990 and at the material point of time (i.e. when the transaction was executed), the winding-up petition/proceedings was pending (and it is still pe....
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....such transfer shall be void against the claim for tax unless it falls under the exception mentioned in the proviso. In present case, the assets of the company were under attachment of the tax authority/department and that therefore, the property and its possession could not have been parted. However, it may be contended that in this proceedings provisions of other Act cannot be considered. Even if the provision under Section 281 of the Income Tax Act and its effect on the disputed transaction are not brought in picture and is not taken into account, then also below mentioned facts stare in the face of the petitioner:- (a) actually, in view of provision under Section 536(2) of the Act, the sale is statutorily void ab-initio, (b) besides this, there is inordinate delay of 20 years - since the date of sale or 10 years' delay since the order by the Court rejecting request to approve auction sale, (c) moreover, there is complete absence of explanation as regards the delay / cause for delay and any ground which may make out sufficient cause, (d) any material to establish that the disputed transaction was entered into and executed bonafide is not pl....
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....oceeding is pending) is void ab-initio because it was entered into and executed after initiation of winding-up proceedings and during pendency of winding-up petition and the said transaction shall continue to be void and shall always remain void unless and until it is expressly approved and validated by Court by a separate and specific order. 16.1 The Court, in such cases, cannot and would not pass such order / declaration validating the transaction lightly and readily or mechanically and casually. 16.2 Ordinarily, while considering such request, i.e. the request to validate the sale which is statutorily void ab-initio, the Court would inquire about the circumstances which were considered by the company (if at all considered and recorded in the minutes of the meetings) for selling any property i.e. the circumstances which compelled or persuaded the company to sell its property and the factors the company considered while resolving to sell the property and while selecting particular buyer/person, and the criteria applied for determining (i.e. selecting) the buyer and for examining the comparative prices and whether the property was sold abruptly to one person without inviting ....
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.... sell the company's assets. Any material to convince the Court that there is no fraudulent preference/transfer and that the purchaser is not a preferred buyer and/or any material to satisfy the Court that the property was not sold at price lower than the market value is also not placed on record. Differently put, there is nothing on record to persuade the Court that this is a fit case to exercise the discretion and validate the transaction. Re : Absence of proper authorization:- 18. Besides the above mentioned aspects, it is also relevant to mention that even Board of Directors cannot sell and dispose off company's assets and properties without consent of the company which can be granted/obtained by way of company's resolution in its General Meeting. In the event, the Articles and Memorandum of Association duly confers requisite authority and power to the Board, then in that event also, the properties and assets of the company cannot be sold off without passing appropriate resolution resolving to sell identified property and recording the reasons to dispose off the property, more so, when winding-up proceedings/petition is pending. Moreover, if any particular pers....
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....t is claimed that the person who executed the (so-called) sale deed is company's Constituted Attorney, any resolution by the company resolving to appoint said Mr. Deboo as Constituted Attorney of the company for the said purpose and resolving to confer/delegate requisite authority in favour of said Mr. Deboo is not placed on record and there is no material to establish that said Mr. Deboo was properly appointed as company's Constituted Attorney for the said purpose. 18.5 It is also pertinent that even said Mr. Deboo has not come forward and has not placed any resolution (passed by the company) on record to establish the said aspect. However, what is more important and relevant is the fact that any resolution resolving to put up the said plots or any other plot(s) for sale and any resolution nominating/appointing said Mr. Deboo as constituted attorney and authorizing him to decide the price and/or to sell the said plots or company's any property and/or any resolution approving the price for sale and/or approving the sale of the two plots viz. Survey Nos.78/127 and 78/128 is not placed on record. 18.6 Actually, it is not even claimed that any resolution was ever pas....
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....nt from the facts in the cited decision i.e. in case of Company Application No.313 of 2003 and allied cases, particularly with regard to the payment of sale-consideration. The said decision and the aforesaid distinguishing aspect was considered in a subsequent common decision dated 27.9.2006 in Company Application No.345 of 2003 wherein the Court observed that:- "18. In backdrop of above legal position, this Court is required to consider, whether the applicants have been able to satisfy this Court with regard to genuineness of the sale transactions and that whether they have purchased the same for value. It is to be noted that none of the applicants have produced any evidence to show how the payment for sale transaction was made to the company. On considering the sale deed, nowhere it is mentioned how the sale consideration is paid. In some of the sale deeds, in last paragraph, it is stated and acknowledged that the amount has been received, however, no particulars are given how the payment is made. Even in some of the sale deeds, such an acknowledgment is also not there. It is the contention on behalf of the applicants that they might have paid the sale consideration by c....
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....ly received by the company in its account. 20.2 Furthermore, in this case, the application is hit by the vice of laches and inordinate delay. Besides this, the defect regarding the authorization was not raised and considered in the said case. Here in present case, it has emerged that the disputed transaction was executed without proper authorization and any material to prove otherwise is not placed on record. On examination of the said order, it emerges that the facts of that case and facts of present case are different and that therefore, the said decision does not help the case of the applicant. Moreover, learned counsel for the Official Liquidator has submitted that the said order is under challenge before this Court and the OJ Appeal challenging the said order is pending. 21. In absence of requisite resolution and proper authorization, the impugned transaction and the sale-deed cannot be enforced against the company and the official liquidator and the impugned transaction would not bind the official liquidator. Besides this, any justification to approve and validate the impugned transaction is not made out. 22. The applicant has failed to make out any case. There is....