2014(4) ALL MR 308
IN THE HIGH COURT OF JUDICATURE AT BOMBAY

D.Y. CHANDRACHUD AND A.A. SAYED, JJ.

Sunita Vasudeo Warke Vs. Official Liquidator & Ors.

Appeal No.737 of 2012,Official Liquidator's Report No.145/11 in Company Petition No.827 of 2007,Company Petition No.327 of 1997,Company Petition No.870 of 1999

11th January, 2013

Petitioner Counsel: Mr. HIRALAL THACKER, Mr. S. MALIK, Mr. TANVIR SHAIKH, Mr. J.P. SEN
Respondent Counsel: Mr. PRASHANT CHAVAN, Mr. SUHAS PATIL

(A) Companies Act (1956), S.536(2) - Scope of S.536(2) - Where winding up proceeding is by or subject to supervision of court, any disposition of property of company which is made after commencement of winding up is void, unless court otherwise orders.

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. 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 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. In order that Section 536(2) of the Companies Act, 1956 can be invoked by the Court to "otherwise order", there has to be a disposition of property of the company; a disposition which has been made after the commencement of winding-up proceedings. [Para 10,11]

(B) Companies Act (1956), S.536(2) - Application for transfer - Maintainability - If transfer is not completed before an order of winding up has been passed, an application would not be maintainable before court for direction of Official Liquidator to complete transfer - Upon passing up, of an order of winding up, no new rights can be completed and no incompleted rights can be completed. AIR 1970 SC 1041 Foll. (Para 12)

(C) Transfer of Property Act (1882), S.53A - Part performance of contract - Essential condition for exercise of S.53A - In order to attract it, there must be a contract in writing and terms of transaction must be capable of being ascertained from language of written document. (Para 18)

Cases Cited:
Pankaj Mehra and another Vs. State of Maharashtra, (2002)2 SCC 756 [Para 10]
House of Lords in The Governor and Company of The Bank of Scotland Vs. Macleod and others, (1914) AC-311 [Para 11,12]
J.K. (Bombay) Private Limited Vs. M/s.New Kaiser-I-Hind Spinning and Weaving Co. Ltd. and others, AIR 1970 SC 1041 [Para 12]
Tulsidas Jasraj Parekh Vs. Industrial Bank of Western India, AIR 1931 BOMBAY 2 [Para 13]
AIR-1931-BOMBAY-17 [Para 13]
J. Sen Gupta (Private) Limited 1962-Com, Cases-Vol.XXXII-876 [Para 14]
Kanchan Kumar Dhar, Official Liquidator Vs. Dr.L.M.Visarat and others, (1986)60 Com.Cases 746 [Para 15]
Sarigam Containers Pvt. Ltd. (Petitioners) Vs. Magatul Industries Limited (Respondent) And Videocon International Limited (Applicant), 2008(5)-Bom.C.R. 112 [Para 15]
Laxman Yeshwant Prabhudesai and others Vs. NRC Limited and Others, 2011(Supp)-Bom.C.R. 243 [Para 15]
Rambhau Namdeo Gajre Vs. Narayan Bapuji Dhotra (Dead) through LRs, 2004(5) ALL MR 1189 (S.C.)=(2004)8 SCC 614 [Para 18]


JUDGMENT

JUDGMENT :- The judgment of the learned Company Judge impugned in the appeal arose from a report of the Official Liquidator seeking:

(i) A declaration that the sale of the immovable properties of the company in liquidation is null and void;

(ii) A direction permitting the Liquidator to take possession of the property.

While allowing the request of the Official Liquidator, the learned Company Judge has held that the Appellant had not made out a case under section 536(2) of the Companies Act, 1956 for validating the alleged transfer of property in question in favour of the Appellant by the company in liquidation.

2. Hindustan Transmission Products Limited, the company now in liquidation, obtained a lease on 7 September 1990 from Maharashtra Industrial Development Corporation ('MIDC') in respect of a plot of land bearing No.H-16, at Waluj Industrial Area, in the Taluka of Gangapur near Aurangabad. On 7 April 1997, a company petition for winding-up was presented before the Company Court Company Petition No.327 of 1997 (Ms.Jaipur Golden Transport Co. Ltd. Vs. M/s.Hindustan Transmission Products Limited).

3. The Appellant claims to have paid an aggregate sum of Rs.30.00 lakhs to the company for the acquisition of the lease hold rights of the plot of land between 14 May 2007 and 26 September 2007. Admittedly, no document by way of an agreement for sale or a transfer deed was executed between the company and the Appellant. The Income Tax returns filed by the Appellant for the period up to 31 March 2008 and thereafter reflected the amount as an investment. MIDC received two letters, one dated 31 December 2007 from the company and the second dated 26 March 2008 of the Appellant. By those letters, the consent of MIDC was sought for effecting a transfer in favour of the Appellant as a chief promoter of a proposed industrial co-operative society. That is the capacity in which the Appellant also sought the consent of MIDC.

4. On 27 March 2008, an order of winding up was passed by the Company Judge. That order of the Company Court came to be passed in three petitions including a reference made by the B.I.F.R. under the Sick Industrial Companies (Special Provisions) Act, 1985 recording that the net loss of the company had exceeded the net worth and that it would not be possible to revive the company in a reasonable period. On 10 April 2008, MIDC informed the company that it was rejecting its request for a no objection certificate to transfer the plot of land. Upon MIDC declining to grant its consent for the transfer of the plot, the Appellant states that the transaction was carried out in her original name. Though the proposed disposition originally envisaged a transfer of the lease hold rights to the Appellant as a chief promoter of a proposed industrial co-operative society, the basis of the proposal was altered after the passing of the order of winding-up, so as to provide that the lease hold rights would be transferred to the Appellant in her individual capacity. The reply filed by the Appellant to the report of the Official Liquidator states that the company had executed a special irrevocable power of attorney dated 12 October 2007 in favour of the spouse of the Appellant. The company is alleged to have resolved in a meeting of its Board of Directors dated 12 September 2007 to sell the plot to the proposed industrial cooperative society. The special irrevocable power of attorney which is executed by Rattan Kumar Dhalia acting as a Director of the company in favour of spouse of the Appellant, inter alia, contains the following recital :

"1. I, the undersigned Mr.Rattan Kumar Thalia, Director of M/s.Hindustan Transmission Products Ltd. have been authorized by our Company (viz.Hindustan Transmission Products Ltd.) under a Board Resolution dated 12/09/2007 to identify a buyer, negotiate and finalize the sale transaction with purchaser and also to sign all necessary papers and documents for the sale transaction in respect of our company's Industrial Plot bearing No.H-16 from MIDC Waluj Industrial Area which was allotted to our company. Presently I am engrossed in some other matter, which are of more importance for me. I have full confidence in Mr.Vasudeo Jayaram Warke being my friend. I have decided to appoint him as my true and lawful attorney for dealing with all documentary compliance including registration or notorization of all the requisite documents relating to the transfer of said Industrial Plot No.H-16 from MIDC Waluj Industrial Area, Aurangabad, which is held by our company named M/s.Hindustan Transmission Products Ltd."

5. The Official Liquidator moved his report before the learned Company Judge initially invoking sections 531(1) and 531(A). Subsequently, during the course of the proceedings, the Liquidator submitted that since the sale of the property was after the presentation of the company petition for winding-up, the transaction is void under sections 536(2) and 537(1)(b) of the Companies Act. Accepting the contention of the Official Liquidator, the learned Single Judge has held that :

(i) Admittedly no document was executed between the Appellant and the company transferring the lease hold rights. According to the Appellant, the entire consideration was paid between 14 May 2007 and 26 September 2007. If this was so, the alleged sale would have been finalized on or before 14 May 2007, but this is belied by the circumstance that the power of attorney which was executed on 12 October 2007 in favour of the spouse of the Appellant authorized him to identify a buyer, negotiate and finalize the transaction;

(ii) The transaction in question was not completed in favour of the Appellant prior to the passing of the order of winding-up and hence could not be validated under section 536(2) having regard to the legal position that no rights can be created after a winding-up order is passed and no incomplete rights can be completed;

(iii) The Appellant had failed to plead and prove that the transfer was bona fide or that it was in the interest of the company. No material had been produced before the Company Court to demonstrate that the consideration was at the prevailing market price; and

(iv) The Appellant was not entitled to the benefit of the provisions of Section 53A of the Transfer of Property Act, 1882 having regard to the fact that the admitted position is that there was neither any written agreement between the parties nor was there any document evidencing the terms of transaction.

6. The learned Senior Counsel appearing on behalf of the Appellant submits that :

(i) An order of winding-up was passed on 27 March 2008 by the learned Company Judge in three company petitions including one that was moved on the basis of the recommendation of B.I.F.R. that the company deserves to be would-up. Once the petition filed at the behest of the B.I.F.R. was allowed and an order of winding-up was passed on the B.I.F.R. petition of 2007, no further orders were necessary on two earlier company petitions of 1997 and 1999. Consequently, the winding-up proceedings would relate back to 2007 and not to 1997 when the first petition was instituted and the disposition prior to 9 October 2007 would be valid;

(ii) Assuming that the winding-up proceedings were instituted in 1997 with the first company petition, the Court has an absolute discretion under section 536(2) of the Companies Act and if a transaction is bona fide, there is no question of the Court not exercising its discretion;

(iii) The payment of an amount of Rs.30.00 lakhs was in the interests of the company. The learned Company Judge has erred in placing the burden of establishing that the disposition was in the interest of the company on the Appellant. There is no evidence to the effect that the market price of the property was in excess of Rs.30.00 lakhs nor was there any evidence to indicate that the disposition was not in the best interest of the company;

(iv) The disposition has taken place in pursuance of an oral agreement with the company for the transfer of the immovable property for a consideration of Rs.30.00 lakhs in addition to which transfer charges (Rs.27.00 lakhs) and service charges (Rs.7.00 lakhs) were payable to MIDC. Payments were made between 14 May 2007 and 26 September 2007. Possession was handed over on 14 November 2007;

(v) Any disposition after the commencement of winding-up proceedings is not absolutely void since Section 536(2) enables the Court to grant its sanction. Though no new rights can be created or completed after an order of winding-up, the transaction could not be completed because of an attachment levied by IDBI Bank which was raised by the Recovery Officer of the Debt Recovery Tribunal. The learned Company Judge has not considered the provisions of Section 536(2);

(vi) In the present case, the possession of the Appellant is liable to be protected under section 53(A) of the Transfer of Property Act, 1882.

7. On the other hand, the learned counsel appearing on behalf of the Official Liquidator submits that :

(i) The question of validating a transaction under section 536(2) can arise only when the transfer is complete. In the present case, there is no completed transaction in favour of the Appellant which is capable of validation;

(ii) For a transfer to be validated under section 536(2), an applicant must plead and prove not only that the transfer is bona fide but also that the transfer was in the interest of the company. The applicant has made no attempt to demonstrate this;

(iii) Admittedly there is no agreement in writing (or for that matter otherwise) by which the terms of sale, including consideration are recorded;

(iv) The record discloses two letters, one by the company and the second by the Appellant to MIDC seeking its no objection for transfer to the Appellant as the chief promoter of a proposed industrial co-operative society. That is not the bargain for which the consent of the Court is sought. MIDC rejected the original proposal after the order of winding-up. Thereafter the Appellant has sought to acquire the property in her personal capacity. Once an order of winding-up has intervened and the Liquidator has been appointed, such a transaction would be unlawful. Besides, the fact that the terms of the bargain are vague, the proposed transfer is on the basis of an agreement with the company after the date of an order of winding-up and is, hence, contrary to law;

(v) A clear distinction must be made between a case where : (a) a transfer has been effected before passing of an order of winding up; and (b) a transfer has not been completed on the date of an order of winding-up. The second case is incapable of validation;

(vi) Transactions during the pendency of winding-up proceedings, which have been entered into in the ordinary course of business of a company, would normally have to be respected. However, transactions, such as in the present case, which are not carried out in the ordinary course of business, are subject to strict scrutiny and the transferee has the burden of showing that a particular transaction was in the interest of the company as well as that the price payable represents the true market value. The Power of Attorney executed in favour of the spouse of the Appellant would in fact indicate that the transaction is not bona fide;

(vii) Section 53(A) of the Transfer of Property Act, 1882 requires existence of a written agreement from which the terms of a transaction can be ascertained. In the present case, Section 53(A) is not attracted since neither was there a written agreement nor are the terms of the transaction ascertained;

(viii) The order of winding-up in the present case was passed by the learned Company Judge of this court on 27 March 2008 on three petitions for winding-up, which were registered respectively in 1997, 1999 and 2007. All the three petitions were considered together when the ultimate order of winding-up was passed. The institution of the proceedings for winding-up would, hence, relate back to the filing of the first petition in 1997 and any disposition of assets made after that date would be unlawful. In any event, this submission has not been urged before the learned Single Judge and has been sought to be canvassed for the first time in appeal.

8. The rival submissions now fall for consideration.

9. Section 536 of the Companies Act, 1956 provides as follows :

"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 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 otherwise orders, be void."

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 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 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 (2002)2-SCC-756, 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 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 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."

11. In order that Section 536(2) of the Companies Act, 1956 can be invoked by the Court to "otherwise order", there has to be a disposition of property of the company; a disposition which has been made after the commencement of winding-up proceedings. In the judgment of the House of Lords in The Governor and Company of The Bank of Scotland Vs. Macleod and others (1914) AC-311, Lord Kinnear observed that the rights of competing creditors in liquidation are to be governed by the same rules as regulate the rights of creditors in a sequestrated estate under the Bankruptcy Acts. The House of Lords held that "rights in security which have been effectually completed before the liquidation must still receive the effect which the law gives to them. But the company and its liquidators are just as completely disabled by the winding-up from granting new or completing imperfect rights in security as the individual bankrupt is by his bankruptcy." Pages 317 and 318 of the Judgment in (1914)AC-311. The Law Lord noted that this indeed was the necessary effect of the Companies Act under which the estate has to be distributed amongst the creditors pari passu and every creditor has an equal share unless anyone has already a part of the estate in his hands, by virtue of an effectual legal right.

12. This principle was followed in the judgment of the Supreme Court in J.K. (Bombay) Private Limited Vs. M/s.New Kaiser-I-Hind Spinning and Weaving Co. Ltd. and others AIR-1970-SC-1041. The Supreme Court after adverting to the judgment in the Bank of Scotland (supra), held as follows :

"39. It is thus well established that once a winding-up order is passed the undertaking and the assets of the company pass under the control of the liquidator whose statutory duty is to realize them and to pay from out of the sale proceeds its creditors. Such creditors acquire on such order being passed the right to have the assets realized and distributed among them pari passu. No new rights can thereafter be created and no uncompleted rights can be completed, for doing so would be contrary to the creditors' right to have the proceeds of the assets distributed among them pari passu. ... ... ..."

In view of the judgment of the Supreme Court it is now a settled principle of law that if a transfer is not completed before an order of winding-up has been passed, an application would not be maintainable before the Court for a direction to the Official Liquidator to complete the transfer. This principle necessarily follows the settled legal position that upon the passing of an order of windingup, no new rights can be completed and no uncompleted rights can be completed.

13. The second aspect of the matter which needs emphasis in a case such as the present, relates to the circumstances on the basis of which the Court exercises discretion, even assuming that there was a completed transfer of the property after the initiation of winding-up proceedings, to direct that a disposition will not be void. The exercise of discretion by the Court to "otherwise direct" arises where the disposition has in fact been completed after the commencement of winding-up proceedings for it is then for the Court to decide whether the disposition was of such a nature or in circumstances where it would necessitate the exercise of discretion to protect the disposition. In an early decision of a Division of this Court in Tulsidas Jasraj Parekh Vs. Industrial Bank of Western India AIR-1931-BOMBAY-2, Marten, C.J. speaking for a Division Bench of this Court took the view that it was appropriate for the Court to steer a middle path of avoiding an extreme position where every disposition would be void or on the other hand that practically every disposition would be permissible. A transaction effected bona fide in the ordinary course of the current business of a company would, in the view of the Division Bench be sanctioned by the Court. The Division Bench held as follows :

"10. Now here as regards S.227(2) the Court has to steer a middle course between two extremes. On the one hand the words of the section are wide enough to include any sale or payment that a company may make after the date of the winding-up petition. On that basis any business would practically have to be stopped if a petition was presented, because it would be unsafe to dispose of any of the company's assets. For instance, a mill company might not be able to buy a ton of coal for the use of its furnaces, or, on the other hand, it might not be able to sell any of its goods in the ordinary course of business. Consequently the Court has very properly laid down that, speaking generally, any bona fide transaction carried out and completed in ordinary course of current business can be sanctioned by the Court under S.227(2). On the other hand it will not allow the assets to be disposed of at the mere pleasure of the company, and thus because the fundamental principle of equality amongst creditors to be violated. To that also would in effect be to add to the preferential debts enumerated in S.230 a further category of all debts which the company might choose to pay wholly or in part. ... ... ... ..."

In a concurring judgment Patkar, J. held that one principle which is to be deduced from the decided cases is that the Court will not permit transactions bona fide entered into in the ordinary course of trade and completed before the date of the winding-up order to be annuled. The discretion confided to the Court, it was held, "cannot be crystallized in rules of law in view of the varying circumstances "that may arise" Pages 20 and 21 of the Judgment in AIR-1931-BOMBAY-17.

14. In a subsequent judgment of a learned Single Judge of the Calcutta High Court in J. Sen Gupta (Private) Limited 1962-COMPANY CASES-Vol.XXXII-876, the underlying principles for the exercise of discretion by the Court have been summarized as follows :

"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."

15. In a judgment of a learned Single Judge of this Court in Kanchan Kumar Dhar, Official Liquidator Vs. Dr.L.M.Visarat and others (1986)60-Com.Cases-746, it has been held that the test is whether the transaction in question is in the interest of the business of the company or in the interest of the company (now in liquidation) or its creditors.

In Sarigam Containers Pvt. Ltd. (Petitioners) Vs. Magatul Industries Limited (Respondent) And Videocon International Limited (Applicant) 2008(5)-Bom.C.R.-112 - Paragraph 23, a learned Single of this Court has reiterated that if a transaction is for the benefit of and in the interest of the company or for keeping the company going or keeping the things going generally, it ought to be confirmed, being bona fide. However ruled the Court, "this is a factual aspect to be pleaded and proved". In a judgment of the Division Bench of this Court in Laxman Yeshwant Prabhudesai and others Vs. NRC Limited and Others 2011(Supp)-Bom.C.R.-243 - Paragraph 20, the principle has been enunciated in the following terms :

"Thus, the principles that can be deduced are that the transactions which have been undertaken under compulsion of circumstances in order to save or protect the property of the company could be saved provided, evidence is produced about such compulsion. The assets of the company cannot be disposed of at the mere pleasure of the company. If the business is going to be paralyzed, then, the Court in appropriate cases can, for the benefit and interest of the company, save the transaction. It is for enabling the company to continue as a going concern and to protect the interest of shareholders and creditors that such a power is conferred and must be exercised."

16. Now it is in this background that one must assess the facets of the appeal. First and foremost, it needs to be analyzed whether the disposition was completed before the order of winding-up was passed. On this issue several circumstances must weigh in the balance. The entire case of the Appellant, even as submitted before this Court, is that the alleged disposition rests on an oral agreement. The terms of the agreement have not been disclosed before the Court. The Appellant seeks to rely upon two letters addressed to MIDC by the company and by the proposed industrial co-operative society, which the Appellant claims to represent, dated 31 December 2007 and 26 March 2008. Neither of the two letters sets out the terms of the transaction or the agreed consideration. The case of the Appellant before the Court is that there was an oral agreement under which the property was to be sold to the Appellant for Rs.30.00 lakhs. There is admittedly no written document evidencing the transaction which is alleged. Significantly, the original proposal which the Appellant submitted, was in her capacity as the chief promoter of a proposed industrial co-operative society. MIDC declined to grant its no objection after the order of winding-up was passed. The Appellant alleges that thereafter there was an agreement under which she sought to acquire the property in her personal capacity. This agreement is set up by the Appellant in paragraph 16 of the reply that was filed before the Company Judge to the report of the Official Liquidator. The case of the Appellant now is that she was persuaded to enter into a transaction of purchase; that the company executed a special irrevocable power of attorney in favour of her spouse on 12 October 2007; that the company had in its meeting of the Board of Directors on 12 September 2007 recorded the sale of the plot to the proposed industrial co-operative society, but that since the MIDC had reservations to the proposal, the transaction was sought to be effected in favour of the Appellant in her personal capacity. The sale was sought to be effected in favour of the Appellant in her personal capacity after the order of winding-up was passed, even according to the case of the Appellant before the Court.

17. These facts have a bearing on both the points which the Court is required to consider. First and foremost, it is evident that there was no disposition of the property before the order of winding-up was passed on 27 March 2008. Secondly, even assuming that there was such a disposition before the order of winding-up came to be passed, it is evident that there is no foundation or basis on which the Court could have arrived at the conclusion that the transaction was in the best interest of the company. Admittedly, the transaction involving the sale of the property of the company, was not in the ordinary course of business. The fact that such a transaction is in the interest of the company has to be pleaded and proved. There is a complete failure to make a disclosure of the essential terms of the transaction both before the learned Company Judge and in appeal before this Court. As stated earlier, there is no written document evidencing the terms of the transaction. All that the Appellant states is that an amount of Rs.30.00 lakhs was paid to the company between May 2007 and September 2007. There is neither any pleading nor any proof on the record before the Company Judge that the transaction was arrived at on the basis of the prevailing market value. On these facts and on the basis of the principles set out in the consistent line of judicial precedent on the subject, it would be impossible to come to the conclusion that the transaction was in the interests of the company. Property belonging to a company does not lie at the pleasure of the company or its Board of Directors. A disposition made after the commencement of proceedings for winding-up has to be justified as being in the ordinary course of business or, if it is not in the ordinary course of business, by a proper disclosure of the underlying rationale and the basis and terms of the transaction. Nothing of the kind has been attempted to be explained before the Company Judge or before this Court in appeal. The discretion under section 536(2) cannot hence be exercised to protect or save such a transaction.

18. The protection which has been sought under section 53A of the Transfer of Property Act, 1882 is clearly unavailable. In order to attract Section 53A, there must be a contract in writing and the terms of the transaction must be capable of being ascertained from the language of the written document. The law on this aspect is enunciated by the Supreme Court in Rambhau Namdeo Gajre Vs. Narayan Bapuji Dhotra (Dead) through LRs (2004)8-SCC-614 : [2004(5) ALL MR 1189 (S.C.)]. There is no written document in the present case. The terms of the transaction cannot be ascertained with even a reasonable degree of certainty.

19. For these reasons, we are of the view that the learned Single Judge was not in error in declining to order that the alleged disposition in favour of the Appellant would not be void. Clearly the disposition is unlawful and void for the reasons indicated above. There is no merit in the submission that the learned Single Judge has not considered the provisions of Section 536(2) since it is evident that the learned Single Judge has had due regard to the statutory provisions in question and to the underlying principles which guide the exercise of discretion by the Court. Hence, and for the aforesaid reasons , there is no merit in the appeal. The appeal shall accordingly stand dismissed.

20. On the conclusion of the judgment, the learned counsel appearing on behalf of MIDC states that the file containing original documents pertaining to the subject plot came to be deposited with the registry of this Court on the directions of the learned Company Judge. He seeks return of the original documents. The Official Liquidator has no objection to the return of the documents to the MIDC since they form part of the records of MIDC. We accordingly direct the registry to return the file containing original documents to the competent authority of MIDC from whom the documents were obtained.

Ordered accordingly.