TaxTMI 
TaxTMI 
2025 (12) TMI 244
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....ether and are being disposed of by this common order. 2. The issue for consideration in both captioned proceedings is the validity of a Deed of Assignment dated 16th May 2019 ("the Deed of Assignment"), which assigned to the Applicants, a plot of land identified as - Lot No. 45, Old Survey No. 113 (Part), New Survey No. 165, measuring approximately 1,497 square metres, located in Tarapur Industrial Area, Boisar, Palghar ("the said land"), along with a building on it ("the said building"). The said land and building are collectively referred to as "the said property". It is not in dispute that the said property belonged to a company known as Navinon Limited ("Navinon"). 3. The OLR seeks cancellation of the Deed of Assignment, while the Interim Application seeks its ratification. 4. However, before adverting to the rival contentions, it is necessary for context to set out the following facts: i. On 3rd November 2001, Company Petition No. 1176 of 2001 was presented in this Court for the winding up of Navinon under the provisions of Sections 433 and 434 of the Companies Act, 1956 ("Companies Act"). ii. It is the Applicants' case that on 14th February 2005, on....
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....nsfer/assignment in favour of the Applicants be processed. x. The Deed of Assignment was then executed on 16th May 2019 by Ravindra Palkar on behalf of Navinon as its constituted attorney. xi. It is the case of the Official Liquidator that on 14th October 2022, the Official Liquidator received a letter from one Mansi Ghagh claiming that some unknown persons had entered the said land and had commenced demolition of the existing structures. xii. Accordingly, on 13th January 2023, the Official Liquidator deputed representatives to conduct a spot inspection of the said property, during which the Applicants informed the Official Liquidator of the Deed of Assignment. xiii. As already noted above, the Official Liquidator then filed the captioned OLR on 15th February 2023 to declare the Deed of Assignment dated 16th May 2019 as being void and for a direction to the Applicants to hand over possession to the Official Liquidator. The Applicants thereafter, on 29th August 2024, filed the captioned Interim Application seeking ratification of the said Deed of Assignment. SUBMISSIONS ON BEHALF OF THE OFFICIAL LIQUIDATOR 5. Mr. Khan, Learned Counsel appear....
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....its creditors and does not deplete or prejudice the company's assets. 8. Mr. Khan then placed reliance upon the decision of this Court in Sarigam Containers Pvt. Ltd. v. Magatul Industries Ltd. 2008 SCC OnLine Bom 490, to submit that although the Court possesses wide discretionary power under Section 536(2) to validate a post-commencement transaction, the burden of seeking such validation rests squarely on the party claiming under the impugned transfer. He submitted that Sarigam Containers clearly lays down that the Applicant seeking ratification must specifically plead and affirmatively establish that the transaction was bona fide, duly authorised, effected in the ordinary course of the company's business, and demonstrably beneficial to the company or its creditors. He submitted that unless these foundational facts were distinctly pleaded and supported by cogent evidence, the Court cannot be invited to exercise its discretion under Section 536(2). In the absence of such material, he submitted, the transaction must ordinarily be treated as void, and the question of seeking validation does not arise at all. 9. Mr. Khan then took pains to point out that, in the present case, th....
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.... valid. He submitted that it was to overcome this patent illegality that the second power of attorney was executed and registered even assuming Manohar Sankhe could have delegated his powers to Ravindra Palkar. 12. Mr. Khan then submitted that neither delay nor inaction on the part of the Official Liquidator could form the basis for seeking validation of a transaction that is otherwise void under Section 536(2), as held by this Court in Laxman Yeshwant Prabhudesai v. NRC Ltd. He submitted that if alienations made post commencement of winding up were to be validated on such grounds, the same would effectively amount to rewarding the misconduct or irregularities of the erstwhile directors of a company that has already been ordered to be wound up. He also placed reliance on the judgement of this Court in BIFR v. Hindustan Transmission Products Ltd. 2012 SCC OnLine 1294, to point out that neither the honesty or good faith of the transferee nor the absence of any direct involvement in impropriety is, by itself, sufficient to justify ratification. He pointed out that this Court in that case emphasised that validation under Section 536(2) can be granted only when the transaction demons....
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....rder had been passed against Navinon. He pointed out that though the winding-up order was passed in the year 2005, there was no indication that the said property was in the possession of the Official Liquidator or that the said property did not belong to Navinon. In support of his contention he submitted that (i) there were no security guards deployed to safeguard the said property nor was there any signage or notice displayed at the said property to indicate that the same was in the possession of the liquidator or that Navinon was in liquidation; (ii) that the said property came to be transferred to the name of Navinon only on 5th April 2019 until which time it stood in the name of Indian Dyestuff, i.e. Navinon's former name; (iii) no response was received by the Applicants to the public notice issued by them on 16th November 2017; (iv) CIDCO continued to accept payments made by the Applicants towards service charges and water charges; (v) CIDCO also issued an NOC for assignment in favour of the Applicants; (vi) on 29th April 2022, MIDC granted the Applicants' permission for demolition of the existing building; (vi....
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....rabhudesai v. NRC Ltd., or Sarigam Containers Pvt. Ltd. v. Magatul Industries Ltd., were only illustrative in nature. 19. Mr. Shah then, in the alternative, submitted that the transfer in favour of the Applicants was effected by Ravindra Palkar who, on the face of the record, appeared to possess full authority to deal with the property and thus an ostensible owner. In support of this contention he placed reliance upon (i) the Board Resolution of Navinon dated 14th February 2005; (ii) the Power of Attorney dated 17th February 2005 executed in favour of both Manohar Sankhe and Ravindra Palkar; and (iii) the registered Power of Attorney dated 26th September 2017, by which Manohar Sankhe delegated his powers exclusively to Ravindra Palkar. He submitted that the Applicants having exercised due diligence, acted in good faith and having paid a consideration of Rupees One crore which, was utilised for the benefit of Navinon were entitled to invoke the protection afforded by Section 41 of the Transfer of Properties Act, 1882. In support of his contention he placed reliance upon the decision of the Hon'ble Supreme Court in Duni Chand v. Vikram Singh & Ors. 2024 SCC OnLine SC 1702, to poin....
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....y of consideration or discharge of statutory dues of Navinon since Navinon and its creditors had derived benefit from those payments. 22. Mr. Shah then placed reliance upon the decision of this Court in Helbon Engineers Pvt. Ltd. v. Ferral Anant Machinery Manufacturers Pvt. Ltd. & Anr. 2024 SCC OnLine Bom 2134 to point out that this Court has, in appropriate circumstances, has exercised its discretionary jurisdiction under Section 536(2) to validate a transfer of a company's property executed after the commencement of winding-up. He submitted that in Helbon Engineers, this Court had recognised that the object of Section 536(2) was not to invalidate all post-commencement transactions mechanically but to prevent prejudice to the company and its creditors. He pointed out in the case of Helbon Engineers the Court found that the impugned transfer had been effected bona fide, for fair value, and in a manner that did not jeopardise the interests of the company in liquidation and that the transferee therein and accordingly ratified the transfer notwithstanding that it took place after the winding-up order. Mr. Shah submitted that the ratio of Helbon Engineers clearly illustrates that Se....
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....ides or on the requirement of demonstrating that the impugned transaction was in the interest of the company or its creditors. He therefore submitted that, on the facts of the present matter, this Court ought not to invoke its discretionary power under Section 536(2) to ratify the transaction in question. 25. Mr. Khan submitted that the Applicants' reliance on Section 41 of the Transfer of Property Act, 1882, was also entirely misconceived. He pointed out that the Interim Application did not contain a single averment with respect to Section 41, nor were any of the foundational facts necessary for invoking Section 41 of the Transfer of Property Act, 1882, set out in the Interim Application. Mr. Khan placed reliance upon the decision of Hon'ble Supreme Court in the case of Duni Chand, to point out that the Hon'ble Supreme Court had held that for Section 41 to apply, the transferee must specifically plead and prove that the transferee had taken reasonable care to ascertain the transferor's authority to transfer the property in question. He submitted that Section 41 operates only where the real owner consents to such transfer and thus creates an estoppel. In the facts of the present....
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....e that benefits received under a void agreement must be restored was not in dispute, he contended that this principle had no application in the present context since the Companies Act was a self-contained and special statute that prescribed a specific mechanism for prioritising and adjudicating all claims made against a company in liquidation. He thus submitted that the general principles for restitution cannot be invoked to bypass or dilute the statutory scheme embodied in the Companies Act. FINDINGS AND REASONS 28. After hearing Learned Counsel for the parties and the caselaw which have been relied upon, I am satisfied that the question of ratifying the Deed of Assignment does not arise, for the following reasons: A. Section 441(2) of the Companies Act, 1956, makes clear that the winding up of a company is deemed to have commenced from the date of presentation of a winding-up petition, which in the facts of the present case was admittedly on 3rd November 2001. The Deed of Assignment was executed on 16th May 2019, which is nearly eighteen years after the commencement of winding up. B. Section 536(2) of the Companies Act unequivocally provides that any dispo....
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....eed of Assignment is patently fraudulent and entirely lacking in bona fides. The transaction was effected eighteen years after commencement of winding-up, on the strength of powers of attorney that were themselves legally ineffectual. The 2005 Power of Attorney relied upon was unregistered and therefore incapable of authorising any transfer of immovable property, and the subsequent 2017 Power of Attorney purportedly executed by Manohar Sankhe in favour of Ravindra Palkar was equally invalid, since the foundation of Manohar Sankhe's authority was the 2005 Power of Attorney, even assuming Manohar Sankhe could delegate his authority to Ravindra Palkar without any ratification from Navinon. Notably, Ravindra Palkar executed the Deed of Assignment on behalf of Navinon by representing, falsely, that the property was not subject to liquidation. No consideration was paid to Navinon, instead, the amounts were diverted to third parties and to Ravindra Palkar personally. Thus, the transaction conferred no benefit whatsoever on Navinon or its creditors and was plainly a fraudulent attempt to misappropriate its assets. E. The Applicants' reliance on Section 41 of the Transfer of Proper....
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....s, or the winding-up process and, infact, facilitated the company's affairs without jeopardising liquidation. 29. For all these reasons, the transaction embodied in the Deed of Assignment dated 16 May 2019 is void under Section 536(2) and is not a fit case for validation. The Applicants have neither established any statutory ground for ratification nor shown that the transaction promoted the interests of the Company or its creditors. 30. The Applicants' remedy, if any, lies in filing a claim before the Official Liquidator, which shall be adjudicated in accordance with law and the priorities prescribed under the Companies Act. 31. Accordingly, the OLR is liable to be allowed, and the Interim Application seeking ratification of the impugned Deed of Assignment is liable to be dismissed. ORDER 32. In view of the foregoing discussion and for the reasons recorded hereinabove, the following order is passed: (i) The Official Liquidator's Report dated 15 February 2023 is allowed in terms of prayer clauses (a) and (b) which read thus: "a) In view of para (12), above, whether this Hon'ble Court may be pleased to declare the purported transfer of the immovale p....