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2021 (12) TMI 346 - HC - Companies LawSeeking cancellation of specific sale transactions pertaining to the immovable properties of the company in liquidation - Sections 536 and 537 of the Companies Act, 1956 - whether the Dispositions are liable to be validated in terms of Section 536(2) of CA 1956? - HELD THAT:- From a plain reading of Section 536(2), it is evident that any disposition of the property of the company or a transfer of shares in the company or alteration in the status of its members, if done after the commencement of winding up, is void unless the court orders otherwise. In terms of Section 441(2) of CA 1956, as regards companies which are ordered to be wound-up, the winding up of the company is deemed to commence at the time of presentation of the petition for winding up. Consequently, the winding-up of the Company would relate back and commence from the date of presentation of C.P.No.153 of 2002. As a corollary, the winding-up in the present case commenced some time in the year 2002. The Dispositions should be tested by raising the other questions. For such purpose, the question on valuation is salient. The admitted position is that no valuation report pertaining to the relevant assets are on record. The management of the Company, if acting in the best interest of the Company, should have obtained a valuation report from a credible valuer before undertaking the sale of such a large extent of property. A second aspect to be noticed that the agreement of sale was executed on 18.06.1997, and the reference to the BIFR was made on 30.07.1997, which is less than 45 days thereafter - It is also pertinent to point out that many of the endorsements pertain to the period subsequent to the commencement of winding-up and even to the winding-up order. The report dated 06.10.2021 of the Deputy Official Liquidator indicates that only 2% of the admitted claims of about ₹ 23.81 crore could be discharged from the sale proceeds in course of liquidation. Thus, the Dispositions did not enable the discharge of liabilities to creditors such as SIPCOT and TIIC or even to meet workmen's dues. Section 536(2) cannot be construed in isolation, as if it operates in a silo. Once a winding-up order is passed, in terms of Section 456(2) of CA 1956, all the property and effects of the company concerned shall be deemed to be in the custody of the court, and the Official Liquidator is required to take into his custody all the property and actionable claims of the company in terms of Section 456(1) thereof. It is also beyond doubt that the relevant board of directors stands superseded upon a winding up order being issued and, therefore, such directors lose the authority to act on behalf of the company in liquidation. As adverted to earlier, the seven sale deeds were executed on various dates between April 2009 and August 2010. These documents were executed by S.Khaja Mohideen pursuant to a purported power of attorney bearing Document No.1759/2008 dated 26.08.2008. Section 537 (2) of CA 1956 is relevant in this context and provides that any sale, without the leave of the court, of the properties of a company which is being wound-up is void. This Court in INDIAN BANK VERSUS VGP. FINANCE LTD. [2008 (9) TMI 550 - HIGH COURT OF MADRAS] formulated a significant test to decide whether a transaction is liable to be validated. The said test is whether the Court would have approved of such transaction had its permission been sought at the time when the transaction was entered into. If the said question were to be posed in relation to the Dispositions, the unequivocal answer would be that such Dispositions would not have been permitted. Therefore, the ex-director has failed to make out a case to validate the Dispositions. On the contrary, the Official Liquidator has established that the Dispositions are liable to be declared void. Application disposed off.
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