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TMI Blog2013 (10) TMI 1593X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, in respect to possession and title in respect to the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Application is filed for regularization of the transaction of purchase of both plots ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so 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 Authority of the Board which is generally granted by Resolution of the Board of Directors. It is submitted that for ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 company and 'books of accounts' are not made available, any relief(s) as prayed for can be granted. The answer is 'no'. In the result, this appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment, 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 for the applicant, relied on the common order dated 16.3.2006 passed by the Court in Company Application No.313 of 2003 and allied matters and submitted that in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate 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 accordance with law and, even now, when after inordinate delay of 20 years, the application is preferred, any explanation as regards such long and inordinate delay of almost 20 years is not mentioned. 11. Actually, in such case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice 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 of the liquidator, and any alteration in the status of the members of the company, made after the commencement of the winding up, shall be void. (2) In the case of a winding up by or subject to the supervision of the Court, any disposition of the property (inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pending). 14.7 Even otherwise, according to the provisions under the Act (i.e. Section 441 of the Act), the proceedings would relate back to the date on which the petition seeking order of winding-up under Section 433 and Section 434 of the Act is submitted in the Court. 14.8 Thus, it is beyond doubt that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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 placed on record, (e) any material to satisfy the Court that the transactions are not made by way of preferential or fraudulent transfer and that the buyer is not "preferred buyer", (f) there is nothing on record to establish that any resolution to authorize Mr. Deboo and/or to sell the said two plots (or any property of the company) and any resolution approving the price and au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and considering comparative offers and without ascertaining market value. The Court would also require the decision (in form of resolution) taken by the company during its Annual General Meeting or by the Board of Directors (if so provided in the Articles and Memorandum of Association) resolving to sell the property in question for such amount as found fair, just and proper in light of market value of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 person is to be authorized for completing the process, then appropriate resolution conferring/delegating such authority in his favour should be passed and any person - even one of the Directors - cannot act on his own without such delegation of authority by way of proper resolution. Thus, in absence of proper resolution (by the company/Board of Directors) resolving to sell the land and resolving to delegate the work to a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;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 passed by the company/Board of Directors. 18.7 In absence of proper resolution resolving to confer/delegate necessary authority in favour of Mr. Deboo and in absence of resolution appointing him as Constituted Attorney with requisite authority, the said person did not derive/acquire authority to act in name of and on behalf of the company and to enter into/execute the deed in name of and on behalf of the company. 18.8 There is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cash. However, no particulars are given by any of the applicants how the payment for consideration was made. It is also required to be noted that the payment of more than Rs.10,000/- by cash is not permissible under the law. Under the circumstances, the applicants have miserably failed to satisfy this Court that they have purchased the plots in question for value. It is also required to be noted that the Official Liquidator has specifically denied that the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 no justification to accept and grant the applicant's request which is hit by inordinate delay of 20 years. Having regard to the facts of this case and on overall consideration of the aspects and details discussed hereinabove earlier and for the foregoing reasons, the Court is not inclined to accept present application and the Court is also not inclined to grant the request and the declaration prayed for in present application, i.e. regularize the Sale Transaction of two plots of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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