Case Note & Summary
The judgment concerns two applications filed by S.V. Srinivasulu (the applicant) seeking to set aside an auction sale of properties belonging to Maxworth Orchards (India) Private Ltd. (the company), which was in winding up proceedings. The company was engaged in acquiring lands for fruit orchards, and one of its projects was the Maxworth-Karandapalli project. The company acquired about 91.65 acres of land in Karandapalli village and executed general powers of attorney in favour of its employee B. Karthikeyan, who then executed sale deeds in favour of 52 customers between 1996 and 1997. The company faced financial difficulties, and a winding up petition was presented by a creditor on 24.02.1998. The Official Liquidator was appointed as provisional liquidator. Subsequently, the Official Liquidator conducted an auction sale of the company's properties on 20.11.2020, which was confirmed by the High Court on 18.01.2021 in Comp.A.No.58/2020 in favour of the third respondent, M/s. Thanishq Grande Hotels and Resorts Pvt. Ltd. The sale deed was registered as Document No.8051/2021. The applicant filed Comp.A.No.349/2021 to set aside the sale and Comp.A.No.350/2021 for an interim injunction restraining the third respondent from interfering with his possession. The applicant claimed that he had purchased the property from the company under an unregistered agreement and was in possession. The respondents, including the Official Liquidator, the administrator, and the auction purchaser, opposed the applications. The court examined the issues of locus standi, the finality of court-confirmed sales, and the validity of the auction. The court found that the applicant had no locus standi because his claim was based on an unregistered agreement that was not proved, and he was not a party to the winding up proceedings. The court also held that once a sale is confirmed by the court and the sale deed is registered, the sale becomes final and cannot be reopened, especially when the applicant failed to object at the appropriate stage. The court dismissed both applications, upholding the auction sale and confirming the rights of the auction purchaser.
Headnote
A) Company Law - Winding Up - Auction Sale - Setting Aside - Section 460(6) of the Companies Act, 1956 - The applicant sought to set aside an auction sale of company properties conducted by the Official Liquidator and confirmed by the court, claiming rights through an unregistered agreement with the company. The court held that once a sale is confirmed by the court and the sale deed is registered, the sale becomes final and cannot be reopened, especially when the applicant's claim is based on an unregistered document and the applicant failed to object at the appropriate stage. (Paras 1-24) B) Company Law - Winding Up - Locus Standi - Unregistered Agreement - The applicant claimed to be a purchaser of property from the company under an unregistered agreement, but the court found that the applicant had no locus standi to challenge the auction sale because the applicant was not a party to the winding up proceedings and the alleged agreement was not proved. The court emphasized that only persons with a legal right or interest in the property can seek to set aside a court-confirmed sale. (Paras 10-20) C) Company Law - Winding Up - Official Liquidator - Sale of Assets - The Official Liquidator conducted an auction sale of the company's properties, which was confirmed by the court. The court held that the Official Liquidator acted within his powers and the sale was conducted in a transparent manner. The applicant's allegations of fraud or collusion were not substantiated. (Paras 5-15)
Issue of Consideration
Whether the auction sale of company properties conducted by the Official Liquidator and confirmed by the court can be set aside at the instance of a person claiming rights through an unregistered agreement with the company, after the sale deed has been registered in favour of the auction purchaser.
Final Decision
Both Company Application Nos.349 and 350 of 2021 were dismissed. The court upheld the auction sale and confirmed the rights of the auction purchaser.
Law Points
- Auction sale confirmed by court cannot be set aside after registration of sale deed
- Section 460(6) of Companies Act
- 1956
- Order XIV Rule 8 of Madras High Court Original Side Rules
- Rule 9 and 11(B) of Companies Court Rules
- 1959
- Principle of finality of court-confirmed sales
- Locus standi of applicant claiming through unregistered agreement
