Karnataka High Court
M/S Brunton Developers vs United Breweries (Holdings) Limited ... on 14 March, 2025
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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CA No. 242 of 2023
R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 14TH DAY OF MARCH, 2025
BEFORE
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
COMPANY APPLICATION NO. 242 OF 2023
BETWEEN:
M/S. BRUNTON DEVELOPERS,
A REGISTERED PARTNERSHIP FIRM,
HAVING ITS OFFICE AT
THE FALCON HOUSE,
NO.1, MAIN GUARD ROAD CROSS,
BENGALURU - 560001,
REPRESENTED BY ITS
PARTNER AND AUTHORIZED SIGNATORY,
MR. T.B. VENKATESH.
...APPLICANT
(BY SRI. C.K. NANDAKUMAR SENIOR COUNSEL FOR
SRI. RAGHURAM CADAMBI, ADVOCATE)
AND:
Digitally signed 1. UNITED BREWERIES (HOLDINGS) LIMITED
by SHWETHA (IN LIQUIDATION),
RAGHAVENDRA
REPRESENTED BY THE OFFICIAL LIQUIDATOR,
Location: HIGH
COURT OF NO.12, RAHEJA TOWERS, M.G. ROAD,
KARNATAKA BANGALORE - 560001.
2. BRUHAT BENGALURU MAHANAGARA PALIKE (BBMP),
HUDSON CIRCLE, N.R. SQUARE,
BANGALORE - 560002.
REPRESENTED BY COMMISSIONER.
3. THE ASSISTANT REVENUE OFFICER,
MUNICIPAL WARD NO.111,
BRUHAT BENGALURU MAHANAGARA PALIKE (BBMP),
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CA No. 242 of 2023
HUDSON CIRCLE, N.R. SQUARE,
BANGALORE - 560002.
...RESPONDENTS
(BY SRI. SHRISHAIL NAVALAGUND, ADVOCATE FOR R1;
SRI. B.L. SANJEEV, ADVOCATE FOR R2-R3)
THIS COMPANY APPLICATION IS FILED UNDER RULES 6 AND 9
OF THE COMPANY COURT RULES, 1959 PRAYING TO ALLOW THE
ACCOMPANYING APPLICATION AS PRAYED FOR AND GRANT SUCH
OTHER AND FURTHER RELIEFS AS ARE JUST.
THIS COMPANY APPLICATION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 21.01.2025, COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, THE COURT DELIVERED
THE FOLLOWING:
CORAM: HON'BLE MR JUSTICE SURAJ GOVINDARAJ
CAV JUDGMENT
1. The applicant is before this court seeking for the
following reliefs:
"WHEREFORE, to allow the accompanying
application as prayed for and grant such other and
further reliefs as are just."
2. The application is supported by an affidavit of one
Sri T.B. Venkatesh, partner and authorized signatory
of the applicant, who has deposed that the applicant
is a registered partnership firm involved in the real
estate business.
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Contentions in the Company Application
3. A sale deed dated 21.05.2012 was executed by
respondent No.1- United Breweries (Holdings) Ltd.
(in liquidation), conveying the undivided retail space
measuring 2316 sq. ft. of saleable super built-up
area out of 4210 sq. ft., forming a portion of Unit No.
202, (New No. 222) situate in Level/Floor-III of
'CANBERRA' Block in 'UB City', which is stated to be
inclusive of a proportionate share in all the common
areas such as passages, lobbies, lifts, staircase, and
other areas of common use with two basement car
parking spaces in the building, assigned with
Municipal No.24/4, Vittal Mallya Road, Ward No.76,
Shantinagar, Bangalore, together with exclusive right
to use open space of 1515.80 sq. ft., attached to the
retail space forming portion of Unit No.202, (New No.
222).
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4. It is contended that the company in liquidation
conveyed the above property under a duly stamped
and registered sale deed for a valuable consideration
of Rs.3,00,00,000/- paid by the applicant to the
company in liquidation who had a pay order (demand
draft) bearing No.146544, dated 19.05.2012 drawn
on the Royal Bank of Scotland, Bangalore Branch.
5. It is further contended that the same was a fair
market price and was over and above the guidance
value of the property fixed by the concerned
Government Department. It is further stated that
since valuable consideration being the fair market
value price was paid, there was no intention
whatsoever to defraud the creditors of the company
in liquidation and as such, it is contended that said
transaction must be held to be binding against the
company in liquidation.
6. Along with the said application, a valuation report of
one Sri Eswar Associates dated 19.08.2022 has been
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produced indicating that the value of the property is
Rs.2,69,50,000/- and therefore, it is contended that
the sale concentration paid is both above the
guidance value and the valuation submitted by a
valuer.
7. In the affidavit, it is also stated that in the annual
report of the company in liquidation for the year
2011-12, it has been clearly set out that the
company in liquidation intended to sell portions of
the building known as UB City, including the
properties sold to the applicant. It is on the basis of
the said sale deed and the above averments that it is
contended that the applicant became the absolute
owner of the properties. However, the Katha of the
property continued to remain with the company in
liquidation, though the applicant had been making
payment of the applicable property tax from the date
of sale.
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8. It is further stated that the applicant owns the
remaining portion of Unit No.202 (new No. 222) of
about 1895 sq. ft. covered area out of 4210 sq. ft. in
the name of M/s. Prestige Cuisine and due to the
liquidation of the company, the applicant was unable
to seek for transfer and bifurcation of the Katha
standing in the name of the company in liquidation,
to the name of the applicant and M/s Prestige
Cuisine.
9. It is stated that on 26.03.2012, winding-up
proceedings in Company Petition No.57 of 2012 was
instituted against the company in liquidation and
thereafter, various other company petitions were
filed. The sale deed was executed and registered in
favor of the applicant on 21.05.2012.
10. After the institution of the winding-up proceedings,
however, prior to the order dated 23.7.2013, in
O.S.A No.25 of 2013, by virtue of which, the
company in liquidation was restrained from making
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any transfers or alienation in respect of the
properties of the company till the disposal of the
company petition. It is stated that it is only on
07.02.2017 that the winding-up petitions were
allowed and the company in liquidation was ordered
to be wound up.
11. Subsequently, when the applicant approached the
Bruhat Bangaluru Mahanagara Palike(BBMP)-
Respondent No.2 and the Assistant Revenue Officer,
Municipal Ward No.111 of the Bruhat Bangaluru
Mahanagara Palike(BBMP)-Respondent No.3 seeking
for a no objection for the transfer and bifurcation of
Katha, the official liquidator indicated that it would
not be possible to provide such no objection without
a direction from this Court since the sale deed was
registered post the institution of the winding-up
proceedings against the company in liquidation.
12. It is further contended that the aforesaid M/s
Prestige Cuisine is also in the process of procuring a
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no objection certificate for the transfer of Katha from
its vendor and as such, if the official liquidator were
to issue a no objection for the transfer of Katha in
the name of the applicant, the entire process could
be completed and as such, the application has been
filed seeking cooperation of the official liquidator to
procure change of Katha from the name of the
company in liquidation to the name of the applicant
in relation to the 'B' and 'Complainant' schedule
property to the application by bifurcating the Katha.
Objections by the Official Liquidator
13. Objections came to be filed by the official liquidator
on 29.08.2023, contending that by virtue of section
536 of the Companies Act 1956, the sale having
occurred post the institution of the winding-up
proceedings is required to be considered to be a
fraudulent transaction and as such, the official
liquidator cannot cooperate with the applicant for
transfer of Katha.
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14. By relying on subsection (2) of Section 536 of the
Companies Act 1956, it is contended that any
transfer done after the commencement of winding-up
proceedings shall be considered to be void. It is
further contended that there is a violation of section
537 of the Companies Act, 1956 since the sale deed
was executed after the commencement of winding-
up proceedings without the leave of the Court and as
such, it is contended that the said sale deed is void
and it is required to be annulled, for the same being
executed in a mala-fida and illegal manner contrary
to the applicable laws indicated above.
15. Even as per the contentions of the applicant, the
request for cooperation of the official liquidator was
made after the winding-up order was passed without
seeking validation of this Court of the sale which is
supervising the winding-up proceedings and it is for
this Court to pass necessary orders.
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16. It is further alleged that the transaction was not
bona-fide, not conducted in the usual course of
business and was not at arm's length.
17. In so far as the valuation report of Eswar Associates,
it is stated that though the report is dated
19.8.2022, the date of valuation is given as
21.05.2012 and as such, the same could not be
taken into consideration in respect to a sale deed
executed on 21.05.2012.
18. The valuation report is not contemporaneous with the
date of the sale nor is the valuation report
accompanied by any documents to evidence as to in
what manner a retrospective valuation has been
made. The valuation report is based on the guidance
value and not on the market value and the valuation
made at the rate of Rs.10,000/- per sq. ft. for the
super built-up area and at Rs.2,500/- per sq. ft. for
the open space measuring 1515.80 sq.ft is neither
explained nor justified.
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19. By referring to the sale deed, it is contended that a
reference in the sale deed is found as regards the
meeting of the Board of Directors held on
09.05.2012, approving the sale of the Schedule 'B'
and 'C' property at Rs.3,00,00,000/-.
20. The valuation report was not available as on that
date and the valuer happens to be a private valuer
appointed by the applicant without the leave of this
Court to justify a mala-fide transaction which is not
capable of being so done.
21. A tabulated statement has been produced indicating
that there is additional space given to the applicant
of 1937.8 sq. ft., which has not been properly
valued. On that basis, it is contended that the
property has been deliberately undervalued. The
applicant has received the property of a company in
liquidation, at a throw-away price.
22. It is in that background that the official liquidator
secured details of comparative properties and found
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that only the land has been valued at Rs.10,000/-
per sq.ft, in a reasonable developed/developing area
and as such, the valuation of Rs.10,000/- for the
super built-up area including the construction, is not
proper.
23. It is further contended, that the applicant having
approached this Court after 11 years from the date
of execution of the sale deed, only on account of a no
objection required from the official liquidator, the
same establishes the mala-fides on the part of the
applicant and as such, the official liquidator has
sought for the dismissal of the application in limine
directing the BBMP not to take any further steps
towards Katha transfer.
Rejoinder filed by the Applicant
24. A rejoinder came to be filed by the applicant on
07.09.2023, contending that the mere filing of
winding-up proceedings would not render the sale
void. If such a contention were to be accepted, it
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would paralyze the business of the company. Once a
petition for winding-up is presented, it is not a
necessary concomitant that the winding-up would
follow.
25. The company in liquidation being engaged in real
estate business, the sale of the subject property was
part of the regular business operation of the
company in liquidation in the ordinary course of
business. This not being the only unit sold, there
being several other units, those units forming part of
the business of the company in liquidation.
26. The sale deed was executed with a genuine intention
without any mala-fides and or to undermine the
objectives of Section 536 and 537 of the Companies
Act.
27. The entire sale consideration of Rs.3,00,00,000/-
having been paid by a demand draft on 19.05.2012,
the price being above the fair market price and the
guidance value, the registration being accepted by
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the Sub-Registrar without raising any dispute as
regards the valuation, there is no intention to
defraud the company in liquidation and or the
creditors of the company in liquidation.
28. The sale has occurred prior to the order of injunction
restraining the company in liquidation from
transferring any properties which were so passed on
23.07.2013. Therefore, as on 21.05.2012, there was
no embargo for the company in liquidation to
transfer the subject property.
29. Insofar as the valuation report is concerned, it is
contended that though the valuation report was
furnished only on 19.08.2022, the valuer has valued
the property as on the date of the sale deed taking
into account historical data such as sale records,
property assessment and market trends. The visit
made on 18.08.2022 was only to verify the property.
The valuation has been made as on the date of the
sale deed. The valuation report was obtained by the
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applicant in order to establish the bona-fide intention
of the applicant. There are no mala-fides in the
same. The Board of the company having resolved to
sell the property on 09.05.2012, there is no
requirement for a valuation report to be made
available for the Board to take such a decision, as
the board is engaged in the real estate business.
30. It is contending that the application is not barred by
limitation, an application for change of Katha has
been made. There being a sale deed in favor of the
applicant, there is no title issue. It is only a transfer
of Katha which has been sought for by the applicant
with the cooperation of the official liquidator.
31. It is denied that the transaction is not bona-fide and
or not carried out on an arm's length basis and on
that ground, it is contended that the relief sought for
in the application has to be granted by rejecting the
contention of the official liquidation.
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Court Proceedings on 07.02.2024, 29.02.2024,
14.03.2024
32. This Court while considering the matter on
07.02.2024, was of the opinion that a few more sale
deeds pertaining to some other properties in UB City,
preferably in the same floor where the property
under consideration is located, be produced and as
such, directed both the counsels to produce such sale
deeds.
33. When the matter was taken up on 29.02.2024,
learned counsel for the applicant sought for some
time to place on the record the agreement of sale
entered into by the applicant with the company in
liquidation and as also the details of payment prior to
the winding-up order.
34. On 14.03.2024, when no documents were produced,
this Court observed that if the necessary documents
were not produced by 21.03.2024, adverse inference
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would have to be drawn and the matter be
proceeded with.
Memo filed by official Liquidator
35. In the meanwhile, the official liquidator vide a memo
dated 28.02.2024, producing five sale deeds
executed between 11.3.2011 to 11.11.2011. Along
with the memo at para-2, a tabulated statement had
also been produced, which reads as under:
"2. That on perusal of the said Sale Deeds it is observed that
below mentioned sale deeds are relevant to this case and the details
are as under;
Sl. Date of Location and Extent in Registered Rate
No. deed/Documen Floor Sq.ft. Value per
t No. Sq.ft
1. 30.06.2011/657 Canberra Block, 9128 11,25,36,00 12,392
15th Floor,
2. 30.06.2011/656 UB Tower Block, 7775.61 9,75,07,320 12,540
Unit No.1001,
10th Floor
3. 11.11.2011/1522 Canberra Block, 1894.00 2,75,00,000 14,520
Unit No.202, 3rd
Floor
4. 01.03.2011/2100 UB Tower Block, 15551.82 19,62,21,84 12,617
assessed, 8th & 9th
floor.
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5. 11.11.2011/692 Canberra Block, 3831.80 3,00,00,000 7,829
Unit No.202, 3rd
Floor (2316 Sq. Ft
super built up
area & 1515.80
Sq Ft open space
area)
Copies of the above Sale deeds are enclosed herein and marked as
Annexure-"B", "C", "D", "E" & "F" respectively for kind perusal of this
Hon'ble Court."
36. On that basis, it was contended that the registration
value during the year 2011 in the same floor of
Canberra block as per one of the sale deed was
Rs.14,520/- per sq. ft., whereas the applicant has
got the property at a considerably low price of
Rs.7,829/- per sq.ft. and as such, it is contended
that there was an under valuation of the property.
Affidavit of Shri T B Venkatesh
37. On 18.04.2024, an affidavit of Sri T.B. Venkatesh, a
partner of the applicant, was filed. In the said
affidavit, it is contended that the sale includes the
open space area of 1515.80 sq. ft., which is attached
to the retail space forming a portion of Unit No.202
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(New No.222). In the said affidavit, it is categorically
stated that there is no written 'agreement to sell'
executed between the parties prior to the sale dated
12.05.2012 and that the parties decided to directly
execute a sale deed.
38. Insofar as Unit No.202 is concerned, the developer
owned 45% of the unit and the company in
liquidation owned the remaining 55%. A sister
concern of the applicant-Prestige Cuisine, has bought
the developer's share in the unit under a sale deed
dated 11.11.2011. The applicant acquired a 55%
share of the unit belonging to the company in
liquidation. In furtherance of which, the sale deed
came to be executed, consolidating the ownership of
the unit in order to optimize the utilization. It is
again reiterated that the property was conveyed in
the course of ordinary business.
39. It is further sought to be contended that the unit
totally measures 2,316 sq.ft which includes 1515 sq.
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ft. of open space. The said open space is not in
addition to the super built-up area of 2316 sq. ft. and
as such, it is sought to be contended that the
contention of the official liquidator that the total
extent of the unit is 3831.80 sq. ft. is not correct. It
is reiterated that the valuation of the unit is proper
and or that there is no undervaluation as contended
by the official liquidator that the cost per sq. ft. was
Rs.12,953.367/- per sq.ft, which is in excess of the
market value prevalent. As such, the transaction is
genuine and bona-fide, the application is required to
be allowed.
Court Proceedings on 20.06.2024
40. When the matter was taken up on 20.06.2024, the
counsel for the official liquidator once again
reiterated that the valuation made is not proper and
it is again reiterated that the unit does not measure
only 2316 sq. ft. The 2316 sq. ft. is the superbuilt
area. Apart therefrom, there is an open space of
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1515.80 sq. ft. as regards which there is no
valuation.
41. It is on that basis that this Court was of the opinion
that the area of unit No.202 (new No.222) is
required to be inspected and as such, called upon the
applicant to place on record the plan sanction more
particularly in respect of floor No.3 as also a
certificate issued by the architect giving details of the
super built-up area, saleable area, retail space area
as also the open space area and whether the open
space area is a common area, limited common area
or exclusive area associated with unit No.202.
42. The official liquidator was also directed to appoint
one among the panel of valuers maintained by the
official liquidator to conduct a measurement of unit
No.202 (new No. 222) to give the carpet area as also
the open space area attached there too.
Court Proceedings on 23.07.2024
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43. On 23.07.2024, the counsel for the Official Liquidator
submits that the chartered valuers on the panel of
the official liquidator had expressed their inability to
carryout the measurement of the premises and
submit a report.
44. A joint memo came to be filed by both the counsels
stating that one of the person named therein could
be appointed as a Commissioner to carryout the
actions detailed in the order dated 20.06.2024. In
that view of the matter, S and V Engineering
Enterprises was appointed by this Court.
Report of S and V Engineers
45. S and V Engineers filed a report on 23.08.2024, a
copy having been served to the official liquidator as
also to the counsel for the applicant. The said report
indicated that a site visit was conducted on
12.08.2024 in the presence of the Assistant Office of
the official liquidator, Advocates for the official
liquidator and representatives of the applicant.
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46. The conclusions of the Commissioner are as under:
Sl. Particulars Carpet Area Built up area
in sq.ft. in sq.ft.
No. (without (including
external wall
wall thickness)
thickness)
1. Retail space (covered 2797.90 3271.10
space)
2. Open space AREA 2659.50 2858.90
Total 5457.40 6130.00
Sl.No. Particulars Area in sq.ft.
1 Lift 20.90
2. Lift lobby 96.30
3. Staircase area 236.10
Total 353.30
47. In terms of the above, it is clear that the covered
retail space was measuring 2797.90 sq. ft. carpet
area without external wall thickness and including
the wall thickness that is the built-up area is stated
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to be 3271.10 sq. ft. The open area is indicated to be
2659.50 sq. ft. of carpet area and the built-up area
of the open space is stated to be 2858.90 sq.ft.
Thus, the carpet area is indicated to be 5457.40 sq.
ft. and the built-up area is indicated to be 6130.00
sq. ft. Apart there from the lift lobby and staircase
area has been quantified to be 353.30.sq. ft. A plan
with measurements is also enclosed with the said
report of the Commissioner.
Court proceedings on 12.09.2024 and 26.09.2024
48. It is in that background that the counsel appearing
for the applicant sought for time on 12.09.2024 to go
through the report and make his submission. Again,
when the matter was taken up on 26.09.2024, both
the counsels sought for some time to place on record
the undivided interest in the land, the built-up area
and the super-built-up area calculated taking into
account the open space.
Reply statement of Official Liquidator
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49. The reply statement by the official liquidator came to
be filed on 04.09.2024 to the measurement carried
out by S and V Engineering Enterprises. The official
liquidator has tabulated the comparison between the
sale deed and the measurement by S and V
Engineering and appended it to para-1 of the said
reply statement, which is reproduced hereunder for
easy reference:
Sl. Particulars Measurement as Measure Difference
per present ment as in Sq.Ft.
No. Engineer per Sale
Deed
Carpet Built up dated
Area in area in 21.05.201
Sq.ft Sq.ft 2
1 Retail Space 2797.90 3271.10 2316 955.10
(covered)
2 Open Space 2659.50 2858.90 1515.80 1343.10
3 Undivided 353.30 683.22 -329.92
right
(Common
Area i.e.,
Lift, lobby &
staircase)
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50. The official liquidator further took up the contention
that the plan sanction for floor-III as directed vide
order dated 20.06.2024 had not been produced by
the applicant.
Objections of the Applicant to the Commissioner's
Report
51. The applicant filed a statement of objection to the
Commissioner's report on 11.09.2024 wherein it is
contended that some of the findings of S and V
Engineering are not proper. It is stated that the
measurement of the covered area did not account for
common areas, which are part and parcel of the
super built-up area.
52. It is further contended that the standard practice for
developers/owners to sell units in a building that
includes not only specific unit space but also a
proportional share of common areas within the
building known as super built-up area, the same not
being provided for in the Commissioner's report
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could lead to a misunderstanding of the value. The
report only mentions the carpet area and built-up
area, no reference is made to super built-up area
and as such, it is contended that the super built-up
area would be required to be considered. It is further
stated the difference of 585 sq. ft. approximately
corresponds to the common area that was sold to the
applicant and its sister concern as part of the super
built-up area. There being a 19% addition to the
built-up area to compute the super built-up area as
per the sharing agreement between the company in
liquidation and Prestige Estates Limited. It is further
contended that the open space area is 2756 sq. ft.
and not 2858 sq. ft. as indicated in the
Commissioner's report.
53. Out of which, 1515 sq. ft. is that which has been
allotted and sold to the applicant and the balance
1240 sq. ft. is allotted and sold to the applicant's
sister concern. Thereafter, it is contended that what
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was conveyed to the applicant was 2316 sq. ft.,
along with an exclusive right to use open space
measuring 1515 sq. ft. and what has been conveyed
to the sister concern is 1894 sq. ft., along with right
to use open space measuring 1240 sq. ft. In these
are taken into consideration, it is a 4210 sq. ft. which
has been sold to both the applicant and the sister
concern. A calculation statement is also annexed to
the said statement of objection, which is reproduced
hereunder for easy reference:
SALEABLE AREA STATEMENT FOR CANBERRA RETAIL
GROUND, FIRST, SECOND FLLOR LEVEL RETAIL SPACES
AREA STATEMENT
FLOOR(RETAIL BUILT UP SHARE OF SUPER
AREA COMMON BUILT UP
(Deducting AREA AREA PER
stairs, lifts, =19.00% FLOOR
lobbies, ducts
and office
s.core area)
GROUND 1867.01 Sqmt 354.73 Sqmt 2221.74 Sqmt
FIRST 1805.86 Sqmt 343.11 Sqmt 2148.97 Sqmt
SECOND 2214.67 Sqmt 420.82 Sqmt 2635.69 Sqmt
THIRD FLOOR 328.70 Sqmt 62.45 Sqmt 391.15 Sqmt
BETWEEN COMET
& CANBERRA
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TOTAL 6216.44 Sqmt 1181.12 Sqmt 7397.55 Sqmt
TOTAL SUPER BUILT UP AREA
7397.55 Sqmt
79627.00 Sqft
NOTE: IN THE BUILTUP AREAS OF GROUND, FIRST AND SECOND
FLOORS OFFICE SERVICE CORE AREA IS NOT INCLUDED.
PODIUM FLOOR OFFICE SERVICE CORE AREA=182.84 SQMT
PODIUM FLOOR OFFICE SERVICE CORE AREA=193.45 SQMT."
Memo Filed by Official Liquidator
54. A memo dated 18.10.2024 has been filed by the
Official liquidator enclosing a letter dated 23.09.2024
and minutes dated 7.10.2024 to contend that Shri V.
Shashikant is the son of Shri T. B. Venkatesh. The
said V. Shashikant is the ex-managing director of the
company in liquidation.
Memo Filed by Applicant
55. The applicant filed a memo on 12.11.2024 along with
documents once again reiterating the extent of land,
building and open space purchased and placing on
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record that the applicant met the official liquidator on
07.10.2024 when the official liquidator indicated that
the transaction was void.
56. The applicant has further stated that the open space
is generally valued at 1/3rd of the covered space and
without prejudice to the rights and contentions of the
applicant, the applicant is willing to pay an additional
amount towards the open space relatable to the sale
deed dated 21.05.2012 and as such, provided a
calculation for the amounts willing to be paid by the
applicant in terms of para 11 thereof, which is
reproduced hereunder for easy reference:
"11. Without prejudice to rights and contentions of the
Applicant and in an effort to amicably resolve the matter,
given that no other party has access to the open space,
Applicant submits as follows:
a. The super total built-up area relating to the
property that is subject matter of the application is
2,316 square feet.
b. The market rate for the built-up area in 2012 was
Rs.11,000/Sq. Ft.
c. The total sale consideration paid under the sale
deed dated 21.05.2012 is Rs.3,00,00,000/-.
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d. The total open space attached to the unit
(relatable to this sale deed) is 1,515.80 sq. ft.
e. Thus, the market value of the open space attached
to the unit (relatable to this sale deed) is one third
of 1,515.80 square feet. i. e., 505 sq. ft.
f. The prevailing market rate for the built-up area is
Rs.30,564/Sq. Ft.
g. The market rate for 505 square feet, as on today
is Rs.1,54,34,820/-.
h. Thus, without prejudice to the rights and
contentions of the Applicant and with a view to
resolve this impasse, Applicant is willing to pay a
sum of Rs.1,54,34,820/-towards the open space.
WHEREFORE, the Applicant prays that this Hon'ble Court
be pleased to take this memo along with the
accompanying documents on record in the interest of
justice and equity."
Court Proceedings on 22.11.2024
57. When the matter was taken up for consideration on
22.11.2024, the Counsel for the official liquidator
submitted that on further examination of the
documents, it is found that there are various other
discrepancies and sought for two weeks' time to file
additional statement of objections.
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Additional Statement of Objections filed by Official
Liquidator
58. The said additional statement of objections came to
be filed on 13.12.2024. The official liquidator in the
said additional statement of objections has
contended that the ex-management of the company
in liquidation had entered into a deed of sale on
21.05.2012 with the applicant. There is no prayer
which has been made by the applicant to validate the
sale as required under sections 536 and 537 of the
Companies Act, 1956. The sale deed dated
21.05.2012 having been executed subsequent to the
filing of the petition for winding-up, the official
liquidator on reviewing Section 536 and 537 of the
Companies Act was of the opinion that there was no
reason to refrain from seeking the invalidation of the
said sale deed since it prima-facie contravenes the
law.
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59. A reference to the judgment of the Hon'ble High
Court of Bombay in Sunita Vasudeo Warke v.
Official Liquidator and Others1,more particularly
at para no.10 thereof has been made, which is
reproduced hereunder for easy reference:
"10. The effect of Section 536(2) is that where a
winding-up proceeding is by or subject to the
supervision of the Court, any disposition of the
property of the company which is made after the
commencement of the winding-up is void, unless
the Court otherwise orders. Under section 441(2),
a winding-up of a company by the 11 of 21
APP.737.2012 Court is deemed to have
commenced at the time of the presentation of a
petition for winding-up. Sub-section 2 of Section
536 confers an enabling power on the Court to
direct that a disposition of the property of a
company shall not be void, though it was effected
after the commencement of winding-up
proceedings. Since an enabling power is conferred
upon the Court, to order otherwise, a disposition
after the commencement of a winding-up
proceeding is not, in law, regarded as void ab-initio
or a nullity in all situations. Parliament has used
the words "unless the Court otherwise orders" to
dilute the rigour of the word "void" by conferring a
power on the Court to protect a bona fide
transaction. This principle is incorporated to
protect bona fide transactions carried out and
completed in the ordinary course of the current
business of a company. The presentation of a
petition for winding-up does not by itself disable a
company from carrying on its business. Companies
in the ordinary course of business have to carry
out transactions involving a disposition of
1 2013 SCC OnLine Bom 59
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properties as an incident of their business
activities. These transactions are not foreclosed,
for to hold otherwise would bring the business to a
grinding halt. The law would not permit such a
consequence by disabling a company from
attending to business in the ordinary course
merely because a petition for winding-up is
instituted. The law recognizes this position and the
practical necessity for a company against which a
petition for winding-up has been presented to
continue its business. Consequently, in the
decision of the Supreme Court in Pankaj Mehra and
another Vs. State of Maharashtra 2, it was held
that the mere presentation of a petition for
winding-up would not enable a company to escape
a penal liability for the dishonour of a cheque
under section 2 (2002)2-SCC-756 12 of 21
APP.737.2012 138 of the Negotiable Instruments
Act, 1881 by putting forth the ground that the
payment of a cheque would amount to a
disposition of the property of the company and
would hence be void under section 536(2). The
Supreme Court adopted a less rigorous
construction of the expression "void" in the context
of Section 536(2), noting that the Court has the
power to direct otherwise. The Supreme Court
observed thus:
"14. ... ... ... ... the word "void" need not
automatically indicate that any disposition
should be ab initio void. The legal
implication of the word "void" need not
necessarily be a stage of nullity in all
contingencies. Black's Law Dictionary gives
the meaning of the word "void" as having
different nuances in different connotations.
One of them is of course "null, or having no
legal force or binding effect." And the other
is "unable in law, to support the purpose for
which it was intended." ... ... .. ..."
15. For discerning the legislative idea in
employing the word "void" in the context set
out in Section 536(2) of the Companies Act
the second aspect to be noticed is that the
provision itself shows that the word void is
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not employed peremptorily since the court
has power to order otherwise. The words
"unless the court otherwise orders" are
capable of diluting the rigour of the word
"void" and to choose the alternative
meaning attached to that word."
60. By referring to Sunita Vasudeo Warke's case, the
Official liquidator has contended that under
subsection 2 of Section 536 of Companies Act, a
company Court is granted powers to allow the
disposition of the property post winding up
depending on the circumstances of the case. In the
absence of any order from the winding-up Court, any
disposition would be void ab-initio or a nullity in all
situations.
61. Reference is also made to a decision of the Hon'ble
Calcutta High Court in the case of J. Sen Gupta
Private Limited (In Liquidation)2 more
particularly para no. 12 thereof, which is reproduced
hereunder for easy reference:
2 AIR 1962 Culcutta 405
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"12. It seems to me, therefore, upon
considering various authorities on this subject
that the following principles are doubtless
applicable to Sub-section (2) of Section 536 of
the Companies Act, 1956:
1. The Court has an absolute discretion to
validate a transaction.
2. This discretion is controlled only by the
general principles which apply to every kind of
judicial discretion.
3. The Court must have regard to all the
surrounding circumstances and if from all the
surrounding circumstances it comes to the
conclusion that the transaction should not be
void, it is within the power of the court,
under Section 536(2) to say that the transaction
is not void.
4. If it be found that the transaction was for the
benefit of and in the interests of the company or
for keeping the company going or keeping
things going generally, it ought to be
confirmed."
62. On the basis of J. Sen Gupta's case, it was
submitted that the discretion to validate a
transaction is solely of that of the Court. It is further
contended that the application filed is barred by
limitation. Though Sections 536 and 537 of the
Companies Act do not specify any specific limitation
period, it is contended that Article 113 of the
Limitation Act, 1963 would apply and the time
commencing from 21.05.2012 ended three years
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thereafter on 21.05.2015, the application filed in the
year 2023 was hopelessly barred by a limitation.
63. The contention is also that the sale of commercial
spaces is not in the usual or regular business of the
company. In fact it is contended that no commercial
space has been sold belonging to the company in
liquidation. All the areas have been leased or rented
out and the only sale which has happened is of the
subject property. As such, it is contended that the
transaction is a peculiar one and there are no bona-
fides in the same.
64. Official liquidator had written to the Sub-Registrar,
Shivajinagar and on the basis of the reply, it is
contended that the property was sold to Prestige
Cuisine measuring 1,894 sq. ft. for a sale
consideration of Rs.2.75,00,000/- which translates to
Rs.14,519.53 per sq ft. It is further stated that no
open space has been sold to Prestige Cuisine. Both
Prestige Cuisine and the applicant being sister
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concerns, malicious intent is established by the
applicant and his sister concern in the transactions
carried out.
65. It is further alleged that the sale deed had been
executed between the ex-management of the
company in liquidation and the applicant. Mr.
Shashikant, the son of the partner of the applicant,
who was the ex-managing director of the company in
liquidation from 21.08.2013 to 17.04.2014. He was
in charge of UB Global, a division of the company in
liquidation. He is one of the respondents in the
misfeasance application filed in CA No.146 of 2024
under Section 543, for recovery of approximately
12,500 Crores. He is also a respondent in Company
Application No.346 of 2022, filed by the official
liquidator in Section 468 for not handing over the
books and records of the company in liquidation. It is
on that basis that it is contended that the sale had
breached the laws concerning to related party
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transaction and the basic concept of arm's length
principle were not adhered to. The valuation of the
property is substantially lower than the prevailing
market value and as such, the sale deed needs to be
voided since it has been executed with the mala-fide
intention of evading public money owed to the
creditors and workmen of the company in liquidation.
66. A detailed calculation has been made as regards the
undervaluation of the property and it is contended
that the price of the property, subject matter of the
sale, is a unit having super built-up area of 2316 sq.
ft. and an open space of 1515.80 sq. ft. totaling to
3831.8 sq. ft. The sale consideration of which is
Rs.3,00,00,000/-, which works out to Rs.7,829.20
per sq. ft. Comparing the sale in favour of Prestige
Cuisine, it is contended that, that sale was for an
amount of Rs. 14,519.53 per sq. ft. and the sale in
favour of the applicant is at Rs.7,829.20 per sq. ft. It
is further contended that despite several
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adjournments having been obtained, the applicant
has not placed on record the plan sanction or a
certificate issued by the architect.
67. It is also contended that the applicant is seeking to
mislead this Court as regards the open space and in
the background of all the above, it is contended that
the above application is required to be dismissed
affirming that the sale date dated 21.05.2012 in
favour of the applicant is void ab initio by operation
of law and consequently, affirm that the company in
liquidation continues to be the owner of the said unit.
Rejoinder of the Applicant to the Additional
Statement of Objections filed by Official Liquidator
68. A statement of rejoinder has been filed by the
applicant on 10.01.2025 denying the contentions
raised by the official liquidator herein above. It is
again reiterated that the company in liquidation was
involved in real estate business. The sale of the
subject property was in the usual ordinary course of
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business. It is not known to the knowledge of the
applicant if any other retail unit had been sold or not,
the applicant has purchased the same in a bona-fide
manner.
69. It is contended that the sale by the developer in
favour of Prestige Cuisine under the sale deed dated
11.11.2011, cannot be compared with the
transaction of the applicant since there are additional
factors, which influenced the said sale including the
allocation of open space. The total open space of
2858.90 sq.ft. was divided in the same ratio as a
developer and the company in liquidation's
entitlement and as such, 1515 sq. ft. fell to the share
of the company in liquidation, and 1343 sq. ft. was
allocated to the developer. As such, the valuation has
taken this into account.
70. Insofar as Mr. V. Shashikant is concerned, it is
submitted that he has nothing to do with the
business of the applicant. The applicant functions
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independently and is no way connected to the
professional role or standing of Mr. V. Shashikanth in
the company in liquidation. Merely because he is son
of the partner of the applicant, does not in any
manner compromise or invalidate the transaction,
the property has been purchased in a bona-fide
manner, there was never any intention to undermine
the rights of the creditors or workmen of the
company in liquidation. The properties in a building
are conveyed at different rates, at different points of
time depending on the prevailing market value. The
minor difference between the sale in favour of
Prestige Cuisine and that in favour of the applicant,
cannot be a ground to question the valuation.
71. Insofar as limitation is concerned, it is contended
that it is only when objections were raised by the
official liquidator for the transfer of Katha that the
above application was filed and as such, there is no
delay let alone the same being barred by limitation.
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72. It is in the background of the above that the above
matter was taken up for hearing on several earlier
dates and concluded with the hearing on 21.01.2025.
Arguments Advanced:
73. Sri C. K. Nandakumar, learned Senior Counsel
appearing for the applicant reiterated most of the
above pleadings and contended finally that the
applicant is willing to make payment of any amount,
which may be fixed by this Court with a further
submission that the subject property in issue will not
enure to anyone's benefit in as much as the unit in
No.202 (new No.222) has been split into two on
account of the arrangement between the developer
and the company in liquidation unless the unit is
taken as a whole, the same would not benefit
anyone.
74. The applicant willing to make payments of any
reasonable amount fixed by this Court, the sale
would be required to be validated and direction be
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issued to the official liquidator to cooperate as
regards the transfer of Khata.
75. Sri Shrishail Navalgund, learned counsel appearing
for the official liquidator would also reiterate the
statements made in the pleadings adverted to herein
above and submits that no permission having been
taken from this Court within a reasonable period of
time after the company was ordered to be liquidated
establish the mala-fides. Further, he submits that the
valuation being improper as indicated above, the
rights of the general public and creditors as also the
workmen of the company being adversely affected.
The transaction not fetching the correct and proper
value, this Court ought to invalidate the sale deed
and permit the official liquidator to carry out a fresh
sale by dismissing the above application.
76. Heard Sri C.K. Nandakumar, learned Senior counsel
appearing for the applicant, and Sri. Shrishail
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Navalgund, learned counsel appearing for the official
liquidator.
77. The points that would arise for the consideration of
this Court are:
1) Whether the sale of the property by the
company in liquidation after the
commencement of winding-up proceedings
is void in terms of Sections 536 and 537 of
the Companies Act, 1956 and whether the
sale should be validated by this court
despite being executed post the initiation
of winding-up?
2) Whether the sale was conducted in the
ordinary course of business in a bona fide
manner without the intention to defraud
creditors?
3) Whether the sale price was fair and above
the market value at the time of the sale
and the valuation reports submitted by the
applicant are credible and
contemporaneous or was the transaction
structured in a way that benefited related
parties to the detriment of creditors?
4) Whether the application is barred by
limitation under Article 113 of the
Limitation Act, 1963 and or the principles
of delay and laches would be applicable in
the event of Limitation Act not being
applicable?.
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5) Whether the transaction was an arm's-
length transaction or a related-party
transaction requiring additional scrutiny?
6) Whether the property sold included
additional space not properly accounted
for in the valuation and was an additional
benefit given to the applicant?
7) Whether the applicant's offer to pay an
additional amount for the open space is a
genuine attempt to resolve the dispute or
an admission of undervaluation?
8) What order?
78. I answer the above points as under:
79. Answer to Point No.1: - Whether the sale of the
property by the company in liquidation after the
commencement of winding-up proceedings is
void in terms of Sections 536 and 537 of the
Companies Act, 1956 and whether the sale
should be validated by this court despite being
executed post the initiation of winding-up?
79.1. The facts are per se not in dispute. On
26.3.2012, winding up proceedings in Company
Petition No.57/2012 was instituted against the
Company in liquidation. The sale deed was
executed and registered in favour of the
applicant on 21.5.2012. On 23.7.2013, in OSA
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No.25/2013, the Company in liquidation was
restrained from making any transfers or
alienation in respect of the properties of the
Company till the disposal of the Company
Petition. On 7.2.2017, the winding up petitions
were allowed and the Company in liquidation
was ordered to be wound up.
79.2. Section 536 of the Companies Act, 1956 is
reproduced hereunder for easy reference:
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 [the Tribunal], any
disposition of the property (including actionable
claims) of the company, and any transfer of shares in
the company or alteration in the status of its
members, made after the commencement of the
winding up, shall, unless the [Tribunal] otherwise
orders, be void.
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79.3. In terms of Section 536 of the Companies Act,
1956 (for short 'Act of 1956'), in case of
winding up by the Court, any disposition of the
property, including actionable claims of the
Company and any transfer of shares in the
Company or alteration in the status of its
members made after the commencement of the
winding up shall, unless the Court or Tribunal
otherwise orders, be void.
79.4. Section 537 of the Companies Act is reproduced
hereunder for easy reference:
537. AVOIDANCE OF CERTAIN ATTACHMENTS,
EXECUTIONS, ETC., IN WINDING UP BY
TRIBUNAL (1) Where any company is being wound
up by the Tribunal -
(a) any attachment, distress or execution put in force,
without leave of the Tribunal against the estate or
effects of the company, after the commencement of
the winding up ; or
(b) any sale held, without leave of the Tribunal of any
of the properties or effects of the company after such
commencement ; shall be void.
(2) Nothing in this section applies to any proceedings
for the recovery of any tax or impost or any dues
payable to the Government.]
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79.5. In terms of Section 537 of the Act, 1956, where
any Company is being wound up, any
attachment, distress or execution put in force
without leave of the Tribunal or Court against
the estate or effects of the Company after the
commencement of winding up, any sale held
without leave of the Tribunal of any properties
or effects of the Company after such
commencement shall be void. On coming into
force of the Companies Act 2013, it is Section
334 which has replaced Section 536 of the Act
of 1956.
79.6. Section 334 of the Companies Act, 2013 reads
as under:-
334. Transfers, etc., after commencement of
winding up to be void.--
(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 Company 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 the Tribunal, any
disposition of the property, including actionable claims,
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of the company, and any transfer of shares in the
company or alteration in the status of its members,
made after the commencement of the winding up,
shall, unless the Tribunal otherwise orders, be void.
79.7. Subsection (2) of Section 334 of the Act of
2013 is quite similar, if not identical, to
Subsection (2) of Section 536 of the Act of
1956 and provides for winding up, provides for
any disposition of the property, including
actionable claims, of the Company and any
transfer of shares in the Company or alteration
in the status of its members, made after the
commencement of the winding up shall, unless
the Tribunal otherwise orders, be void.
79.8. Section 537 of the Act of 1956 is replaced by
Section 335 of the Act of 2013 which again
provides for any sale held, without leave of the
Tribunal of any of the properties or effects of
the Company, after such commencement, shall
be void. Thus, Section 536 of the Act of 1956
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having been replaced by Section 334 of the Act
of 2013, Section 537 of the Act of 1956 having
been replaced by Section 335 of the Act of
2013 provide for the very same aspect of a
property of the Company being sold after the
commencement of the winding up to be void.
Of course, discretion is provided to the Tribunal
to hold otherwise and/or confirm the sale.
79.9. Insofar as the application under Section 536 of
the Act of 1956, Section 334 of the Act of 2013,
537 of the Act of 1956, Section 335 of the Act
of 2013 is concerned, it is clear that the sale in
the present matter has occurred on
21.05.2012, the winding up petition in
Company Petition No.57/2012 having been filed
on 26.03.2012, the sale is subsequent to the
institution of the winding-up proceedings. Be
that as it may, what would also have to be
considered by this Court is that the sale is more
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or less contemporaneous with the initiation of
the winding-up proceedings, that is, the sale
has occurred within two months of the initiation
of winding-up proceedings. The winding-up
order, having been, passed only on 7.2.2015,
and an order of injunction restraining the
Company from alienating the property, having
been passed on 23.7.2013. The submission of
Sri.C.K.Nandakumar, learned Senior Counsel
for the applicant, is that the sale deed being
contemporaneous with the filing of the winding-
up petition, there is no mala fide which can be
attributed to the Company. The transaction
has been carried out in a bona fide manner and
as such, there cannot be any fault found
therewith. This Court can validate the said
transaction by exercising its powers under
Section 537 of the Act of 1956 and now Section
335 of the Act of 2013. His submission is also
that merely because the winding-up
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proceedings were filed would not result in the
Company being wound up, and as such, only on
the winding-up proceedings being filed, the
entire business of the Company cannot be
brought to a standstill, more so, in relating to
the present Company in liquidation being
involved in the real estate business. The
Company could not be prevented from dealing
with their real estate assets as done by the
Company in liquidation. In the present matter,
the sale having been carried out bona fide,
there being no mala fide intention to undermine
the requirement of Section 536 or 537 of the
Act of 1956. The Company in liquidation bona
fide was under the belief that no winding up
order would be passed. The applicant therefore
being the purchaser of the property, also being
under the bona fide impression that no winding
up order would be passed, the applicant cannot
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be deprived of the benefits of such bona fide
transaction.
79.10. The submission of Sri.Shrishail Navalgund,
learned Senior counsel for the Official Liquidator
is that:
79.11. The sale admittedly having been executed post
the institution of the winding up proceedings,
the provision of subsection (2) of Section 536
of the Act of 1956 would automatically be
invoked, rendering the said transaction to be
void. The applicant not having come forward
to seek permission of this Court to validate the
transaction and having continued to take the
benefits of the transaction without even a post-
facto permission from this Court would
establish that the transaction is mala fide. His
other submissions are that the sale has been
carried out between related parties, arm's
length approach has not been followed, and the
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valuation also has not been proper. These
contentions would be dealt with in the separate
points which have been raised in relation
thereto. The submission also is that even in
the present proceedings there being no prayer
to validate the transaction and only relief which
had been sought for was for the purpose of a
direction to the Official Liquidator to cooperate
with the applicant for transfer of katha, the
applicant has presupposed that the transaction
is valid when it is in violation of Section 536
and 537 of the Act of 1956. Such presumptuous
conduct cannot be accepted is the submission.
79.12. No permission has been taken from the Court
within a reasonable period of time after the
Company was ordered to be wound up and in
fact, even after the winding up of the Company
being ordered, no permission has been sought
for. The only relief which has been sought for
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is for cooperation of the Official Liquidator in
respect of transfer of katha. Lastly, he submits
that in spite of all these aspects being brought
to the notice of the applicant, no relief has been
sought for as regards the validation of the sale
deed and thus, he submits that the sale of the
property subject matter of the above petition
being in violation of Section 536 of the Act of
1956, bringing into force, the rigor of Section
537 of the Act of 1956, the relief which had
been sought for cannot be granted.
79.13. The above being the facts, the sale having
occurred subsequent to the initiation of the
winding up proceedings; even till date, there
being no application filed by the applicant for
validation of the sale, I am of the considered
opinion that the rigor of Section 536 and 537 of
the Act of 1956 would be applicable and as
rightly contended by Sri.Shrishail Navalgund,
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learned counsel for Official Liquidator, the
transaction having been declared to be void by
the operation of statute, no indulgence of this
Court having been sought for by seeking for
validation of the sale, there is no question of
validation of such a sale. It is only an oral
request made by the applicant, and the same
cannot be considered.
79.14. Thus, I answer Point No.1 by holding that the
sale of the property by the Company in
liquidation, having occurred post the
commencement of the winding up proceedings,
is statutorily void in terms of Section 536 and
537 of the Act of 1956, 334 and 335 of the Act
of 2013, and as such, the same cannot be
validated by this Court, more so, when there is
no relief which has been sought for in respect
thereto.
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80. Answer to Point No.2: Whether the sale was
conducted in the ordinary course of business in
a bona fide manner without the intention to
defraud creditors?
80.1. The submission of Sri.Nandakumar, learned
Senior counsel appearing for the applicant is
that the transaction is bona fide inasmuch as
the sale has occurred under a duly stamped,
duly registered sale for a valuable consideration
of Rs.3,00,00,000/-. The Sub-Registrar has not
raised any dispute, as regards the valuation.
The valuation report, submitted by Eswar
Associates, on 19.8.2022, indicates that the
value of the property as on the date of the sale
was Rs.2,69,50,000/-. Thus, the sale
consideration being higher than the valuation,
there is no loss which has been caused to the
Company in liquidation. The Company in
liquidation was in the process of selling its real
estate assets. The building known as 'UB City'
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had been built under a Joint Development
Agreement. The built-up area which came to
the share of the Company in liquidation had
been sold by the Company in liquidation. This
sale also being one in furtherance of the normal
business is proper and correct.
80.2. Unit No.202 which is subject matter of the
present proceedings is a peculiar property
inasmuch as 45% of the said unit is owned by
the developer and the remaining 55% is owned
by the Company in liquidation and it is for that
reason that the developer has sold its share in
favour of the sister concern of the applicant and
the Company in liquidation has sold its share to
the applicant. Thus, this Court would have to
look into this aspect, taking into account the
peculiarity of the facts and circumstances. It is
further contended that the allegations made by
the Official Liquidator as regards one Sri
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V.Shashikant, being the Managing Director of
the Company in liquidation, has nothing to do
with the current transaction which has been
entered into with the applicant of which the
father of V. Shashikant is a partner. There is
no business transaction between V. Shashikant
and the Managing Partner of the firm.
Therefore, it is contended that the transaction
being bona fide has been conducted in the
ordinary course of business and not to defraud
any of the creditors.
80.3. These being the submission of Sri.Nandakumar,
learned Senior counsel, the same would have to
be tested on the basis of the documents on
record and the facts. From the facts, as also
from the annual report which has been
produced, would indicate that in terms of joint
development, there are two different
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developments, one for residential properties
and the other for commercial properties.
80.4. Insofar as residential properties are concerned,
the Company in liquidation has sold those
residential properties. But insofar as the
commercial properties are concerned, those
have only been leased by the Company in
liquidation.
80.5. In fact, there are many matters which have
come up before this Court seeking for
permission to extend the lease for eviction, for
renegotiation of the lease rentals, etc., in which
this Court has been passing necessary orders.
The applicant has not placed details of any
other property which have been sold by the
Company in liquidation in the commercial
development. All the references made in the
balance sheet are related to the residential
development. The submission of the counsel
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for the official liquidator is categorical that no
commercial space belonging to the Company in
liquidation has been sold by the Company in
liquidation.
80.6. In that view of the matter and in view of the
specific averments which have been made, it is
clear that the present property is the only
commercial property which has been sold after
the filing of the winding up proceedings.
Insofar as the peculiarity of the property in
question is concerned that 45% of it fell to the
share of the developer and 55% fell to the
share of the Company in liquidation. That
peculiarity would not in any manner take away
the fact that the sale has occurred post the
filing of the winding up proceedings and no
relief for validation of the said sale has been
sought for. The sale of commercial properties
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not being done in the ordinary course of
business,
80.7. I answer point No.2 by holding that the present
sale of the subject property in favour of the
applicant is not in the ordinary course of
business and the same has not been done in a
bona fide manner.
81. Answer to Point No.3: Whether the sale price
was fair and above the market value at the time
of the sale and the valuation reports submitted
by the applicant are credible and
contemporaneous or was the transaction
structured in a way that benefited related
parties to the detriment of creditors?
81.1. Irrespective of the above findings on the above
two points, the contention of Sri.Nandakumar,
learned Senior Counsel is that the sale price
was fair and above the market value, the sale
consideration is more than the value furnished
by the valuer and as such, the transaction
needs to be protected. This aspect would have
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to be looked into taking into consideration the
various factors affecting the sale.
81.2. As observed supra, the Company winding up
proceedings was filed on 26.03.2012. The sale
deed was executed on 21.05.2012. The sale
consideration being a sum of Rs.3,00,00,000/-.
The valuation report of Eswar Associates,
though dated 19.08.2012, the date of valuation
is given as 21.05.2012. Thus, there is no
valuation report which has been placed on
record, which is contemporaneous to the sale
deed executed in the matter. In terms of the
valuation report, the value is stated to be
Rs.10,000/- per square foot for the super-built-
up area and Rs.2,500/- per square foot for the
open space. The official liquidator has placed
on record five other sale deeds which deal only
with the super-built-up area. There is no open
space subject matter of those sale deeds.
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81.3. In terms of sale deed dated 30.6.2011, the sale
consideration is stated to be Rs.12,392/- per
square foot. In terms of sale deed dated
30.6.2011, the sale consideration is stated to
be Rs.12,540/- per square foot. As per the sale
deed dated 11.11.2011, the sale consideration
is stated to be Rs.14,520/-. In terms of sale
deed dated 1.3.2011, the sale consideration is
stated to be Rs.12,617/-. Thus, from these
sale deeds, it is clear that the first sale deed
produced dated 1.3.2011 indicates the value to
be Rs.12,617/-. The last sale deed dated
11.11.2011 indicates that the value as
Rs.14,520/-. In between, there are two other
sale deeds, there is an increase in the value of
the properties. Of course, the value of the
property and the sale consideration payable
would depend on the negotiation between the
parties and there could always be a slight
variation in the price depending on the
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negotiation, capabilities of the parties. Be that
as it may, the sale deeds which have been
placed on record, which were executed prior to
the winding up, indicate that the value of the
property sold were much more than that sold
under the present sale deed.
81.4. This would also have to be taken into
consideration in respect of the sale by the
developer of the 45% interest, which is the sale
deed which has been produced dated
11.11.2011, where 1,894 sq. ft. belonging to
the developer was sold for a consideration of
Rs.2,75,00,000/- amounting to Rs.14,520/- per
square foot, whereas on the same date, the
property subject matter of the present
application has been sold to the applicant,
measures 3831 square feet, sold for
Rs.3,00,00,000/- making the consideration to
be Rs.7,829/- per square foot.
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81.5. Of course, the submission made in this regard
by Sri.C.K.Nandakumar, learned Senior
Counsel, is that the entire extent of 3821
cannot be taken into consideration, inasmuch
as the super built-up area which has been sold
under the sale deed is 2316 square feet. The
balance 1500 square feet is an open area.
Therefore, it is one-third of the value which has
to be taken into consideration is 1515 square
feet of open space. Even if this aspect were to
be taken into consideration, and only one-third
value for the open space were taken into
consideration, even then, as per the calculation
furnished by the Official Liquidator is that it is
much less than the sum of Rs.14,520/- under
which the developer sold his portion of the
property to the sister concern of the applicant.
81.6. Apart therefrom, the applicant himself has filed
an affidavit stating that without prejudice to the
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rights of the applicant, the applicant is willing to
make payment of the differential value and
insofar as 505 square feet of differential value
is considered, the applicant is ready to make
payment of a sum of Rs.1,54,34,820/-.
81.7. Without adverting to or considering this
statement to be an admission on part of the
applicant, what can be seen is that the value of
the property sold to the applicant on
11.11.2012 is much lesser than the value of the
property of the same unit sold to the sister
concern by the developer on the same day.
81.8. A valuer having been appointed by this Court to
carry out a measurement of the property, a
report has been submitted by the valuer stating
that the retail space of the present unit
measures 2797.90 square feet carpet area and
has a built-up area of 3271.10 square feet.
The measurement in the sale deed is stated to
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be 2316 square feet, there being a difference of
955.10 square feet. Insofar as the open space
is concerned, it is indicated that there is an
open space of 2659.50 square feet, whereas in
terms of sale deed, it is indicated to be 1515.80
square feet.
81.9. Thus, even as per the actual measurements
which have been carried out, the measurement
of the property in possession of the applicant is
much more than that which has been shown in
the sale deed and sold to the applicant. This
report, at this stage, would indicate that even
the measurements shown in the sale deed are
much lesser than what is available in
possession of the applicant. Thus, it is clear
that the valuation of the property made in the
sale deed at Rs.3,00,00,000/- for the retail
space and the open space is not as per the
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valuation report submitted, is not in tune with
the contemporaneous sale deed executed.
81.10. As regards the remaining portion of Unit
No.202, the transaction having been entered
into by the Company in liquidation of which the
Managing Director was the son of the partner of
the applicant herein would also indicate that the
transaction is between related parties. The
transaction having been entered into
immediately after the winding up proceedings
had been filed, in my considered opinion, is also
so entered into and structured in a manner as
to cause detriment to the creditors who are
large in number.
81.11. I answer Point No.3 by holding that the sale
price at which the subject property has been
sold to the applicant is not the market value at
the time of the sale. The valuation is much less
than the value at which the developer sold his
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share of the same unit under a
contemporaneous document. The
measurements indicated also being completely
different, the transaction is not bona fide and
has been structured in a way to benefit a
related party to the Managing Director of the
Company in liquidation.
82. Answer to Point No.4: Whether the application
is barred by limitation under Article 113 of the
Limitation Act, 1963 and/or the principles of
delay and laches would be applicable in the
event of Limitation Act not being applicable?
82.1. Again, as indicated above, the dates are not in
dispute. The sale in favour of the applicant had
occurred on 21.05.2012. The winding up
petition had been filed on 26.03.2012. The
present application has been filed on
30.6.2023, only seeking for a direction to the
official liquidator to execute necessary
application and to provide all cooperation
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necessary to the applicant for change of katha
of the property and a direction to the Bangalore
Mahanagar Palike to effect change in the katha.
82.2. In terms thereof, as observed above, there is
no validation of the sale deed which has been
sought for even in the present proceeding.
Despite the official liquidator having raised this
issue, the sale having occurred on 21.05.2012,
the present application has been filed on
30.06.2023.
82.3. Article 113 of the Limitation Act reads as under:
Description of suit Period of Time from which period
Limitation beings to run
Any suit for which no Three years When the right to sue
period of limitation is accrues
provided elsewhere in
this Schedule
82.4. In terms of the aforesaid article, any application
would have to be moved before a Court within
three years of the said time. In this case, if not
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within three years from 21.05.2012, at least
from the date of winding up, that is
05.07.2017. Since by that time, it had been
clear to the applicant that the Company has
been ordered to be wound up and that the sale
which has occurred post the filing up of winding
up proceedings is in violation and comes under
the mischief of Section 536 and 537 of the
Companies Act 1956, 334 and 335 of the
Companies Act 2013.
82.5. Till date, no such relief has been sought for.
Without seeking such a relief, the question of a
direction to the official liquidator to sign such
papers and to cooperate with the applicant
cannot be granted. Ex facie, the winding up
petition having been filed on 26.03.2012, the
sale having occurred on 21.05.2012, winding
up order having been passed on 7.2.2017, the
present application having been filed on
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30.6.2023, is clearly and ex facie barred by
limitation in terms of Article 113 of the
Limitation Act 1963. This again, not taking into
account that the applicant has not sought for
validation of the sale deed.
83. Answer to Point No.5: Whether the transaction
was an arm's-length transaction or a related-
party transaction requiring additional scrutiny?
83.1. This aspect has been dealt with briefly in
answer to Point No.3. It being clear that the
partner of the applicant is the father of the
Managing Director of the Company in
liquidation, the transaction having occurred
post the initiation of the winding up
proceedings. This relationship between the
parties has not been indicated when the above
Company application was filed, but was brought
to the notice of this Court only by the official
liquidator much subsequently, which the official
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liquidator also got to know when a meeting was
conducted during the pendency of the above
proceedings. Thus, this important fact has been
suppressed by the applicant, while filing the
application, per contra, the applicant has
always been contending that the transaction is
a bona fide transaction for valuable
consideration conducted in a manner in
accordance with law on a resolution, having
been, passed by the Company in liquidation.
83.2. It was expected of the applicant to have come
clean and explained the relationship between
the partner of the applicant and the Managing
Director of the Company in liquidation. The
same not having been done, no explanation
thereafter can be acceptable. Even the
explanation which has been submitted is that
the role of the Managing Director of the
Company in liquidation is independent of the
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transaction by his father as partner of the
applicant with the Company in liquidation.
83.3. Such a general defence to a related party
transaction cannot be accepted by this Court,
more so, when I have also come to a conclusion
that the valuation made is not proper, the
property has been undervalued and sold for the
benefit of the applicant as also to the detriment
of the creditors.
83.4. In that way of the matter, I answer Point No.5
by holding that the transaction is not an arm's
length transaction, but is a transaction between
related parties which cannot be accepted by
this Court.
84. Answer to Point No.6: Whether the property
sold included additional space not properly
accounted for in the valuation and was an
additional benefit given to the applicant?
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84.1. As observed in my answer to Point No.3, the
property which has been sold under the sale
deed, to the applicant is 2316 square feet,
whereas as per the actual measurement carried
out, by the Commissioner appointed by this
Court, it is 3271.10 square feet. There being
an excess of 955.10 square feet.
84.2. Insofar as the open space, as per the sale deed,
the measurement is 1515.80 square feet
whereas as per the measurement carried out by
the Commissioner, it is 2858.90 square feet.
There being a difference of 1343.10 square
feet. Correspondingly, there is a difference in
the undivided right in the common areas.
Though there is an attempt made by
Sri.C.K.Nandakumar, to contend that some of
these excess area is that belonging to the other
portion of the Unit No.202 sold to the sister
concern of the applicant, from the sale deed
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executed in favour of the sister concern of the
applicant, it is seen that what is sold is 1894
square feet of super built up area and no open
space has been sold. Insofar as the built-up
area itself is concerned, there is a difference of
955.10 square feet. In the present matter, the
super built-up area differential would be much
larger. Thus, this contention also cannot be
accepted by this Court. The same not being in
consonance with the documents and the
Commissioner's report which has been
furnished, thus, I am of the considered opinion
that the property sold by the Company in
liquidation is much lesser than what is currently
in possession of the applicant, thereby the
applicant has derived benefit of an area larger
than what has been sold for a consideration
lesser than even the value for the property
which has been sold.
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84.3. Thus, I answer Point No.6 by holding that
the property sold included additional space
not properly accounted for in the valuation
and was an additional benefit given to the
applicant.
85. Answer to Point No.7: Whether the applicant's
offer to pay an additional amount for the open
space is a genuine attempt to resolve the
dispute or an admission of undervaluation?
85.1. An attempt has been made by the applicant by
filing an affidavit to contend that without
prejudice to the contentions of the applicant
that the sale has been conducted properly. The
applicant with an intention to amicably resolve
the matter is willing to make payment of a sum
of Rs.1,54,34,820/-. This offer of the applicant
could have been considered by this Court, if
there had been bona fides in the transaction
and the applicant had come forward with clean
hands, seeking for the validation of the sale
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deed with an offer to make payment of the
differential amount.
85.2. It is only after all the mistakes and the
suppressions were pointed out, by the official
liquidator that the applicant has come forward
to make the above payment. This Court being
vested with a duty and obligation to protect the
creditors of the Company in liquidation would
have to ensure that the best value for the
property of the Company in liquidation is
secured either by way of sale or lease, in this
case by way of sale. The applicant cannot,
after having made all the submissions
suppressing the actual facts, be thereafter
permitted to make payment of the so-called
differential as arrived at by the applicant to
amicably resolve the matter. I am of the
considered opinion that instead of accepting the
said offer of the applicant, the property in
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question can be brought for sale by way of
auction, which would probably fetch a better
price and better take care of the interest of the
creditors of the Company in liquidation who are
required to be paid from and out of the assets
of the Company in liquidation.
85.3. In that view of the matter, I answer Point No.7
by rejecting the applicant's offer to pay
additional amount for the open space since the
same is not a genuine attempt to resolve the
dispute. No such amicable resolution can
happen when the matter relates to a company
in liquidation as regards which this Court is
exercising its powers in a supervisory
jurisdiction requiring to address all the claims of
the creditors of the Company in liquidation.
86. Answer to Point No.8:- What order?
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86.1. In view of all my findings above, the application
stands dismissed.
86.2. The sale deed dated 21.05.2012 executed by
the Company in liquidation in favour of the
applicant being void in terms of Section 536
and 537 of the Companies Act 1956 and
Section 334 and 335 of the Companies Act
2013 are formally declared to be void.
86.3. The jurisdictional Sub-Registrar is directed to
cause entries in his books about the said sale
deed being void and cancel the entries relating
thereto in his register.
86.4. The official liquidator is directed to take
possession of the property bearing Unit No.202
(New No.222) situate in Level/Floor-III of
'CANBERRA' Block in UB City along with the
open space attached thereto.
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86.5. If the applicant were not to hand over
possession thereof, the official liquidator is
directed to take possession of the said above
premises in accordance with law.
86.6. On taking possession of the said premises, the
official liquidator is directed to bring the said
property for auction after taking necessary
permission from this Court and complete the
auction process in accordance with law by
obtaining such orders from this Court as and
when are necessary.
Sd/-
(SURAJ GOVINDARAJ)
JUDGE
PRS
