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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NC: 2025:KHC:10766
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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NC: 2025:KHC:10766
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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023
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 -5- NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023
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 -7- NC: 2025:KHC:10766 CA No. 242 of 2023 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 -8- NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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
Unit No.1501, 0
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
Unit separately 0
assessed, 8th & 9th
floor.
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NC: 2025:KHC:10766
CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023 (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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023
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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NC: 2025:KHC:10766
CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 "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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766
CA No. 242 of 2023
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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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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NC: 2025:KHC:10766 CA No. 242 of 2023 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 List No.: 4 Sl No.: 1