In the domain of legal transactions of property and land, there is always intertwining with the law and order. This intertwining has always been associated with the land disputes because of the certain instances which happened in the realm of legal transactions of land and property and, created a havoc and chaos, consequently, leading to legal disputes. One of the legal implications of property disposition during company liquidation has been explored and came into light in the Hon’ble Madras High Court. In the case of Ebrahim Mohamed Kulam, Rafeeka Seyed Kulam, Mohamed Thamby Kulam, S.A. Noorul Ameena, Habeeb Syed Mohamed Mukrim, H.S. Ayesha Fathima, Habeeb Syed Sayeed Aslam Versus The Official Liquidator, High Court, Madras As Provisional Liquidator Of Maxworth Orchards (India) Limited, Ms. D. Nagasaila Suresh Administrator, Maxworth Orchards (India) Limited, stands as a testament to the importance of legal vigilance in land transactions during winding up proceedings. The case involved multiple parties seeking ownership of a piece of land and raised important questions regarding the validity of property transactions conducted after the commencement of winding up proceedings. In this article, we will explore the intricacies and different dimensions of the case and the court’s final verdict.

The heart of the matter revolves around a piece of land measuring 28.11 acres referred to as “Disputed Land” located in Nangaimozhi Village Tuticorin Registration District, Udankudi Sub-registration District, intertwining with a complex web of transactions, including General Power of Attorney (GPA) arrangements and sale deeds. In the case, multiple parties, including, Ebrahim Mohamed Kulam, Rafeeka Seyed Kulam, Mohamed Thamby Kulam, S.A. Noorul Ameena, Habeeb Syed Mohamed Mukrim, H.S. Ayesha Fathima, Habeeb Syed Sayeed Aslam sought ownership of this land. They claimed title to the land through sale deeds executed by Indian Integrated Energy Limited (IIEL) after 2003 and 2005.

On the other hand, the Official Liquidator of Maxworth Orchards (India) Limited (the company) and its Administrator, Ms D. Nagasaila Suresh, challenged the validity of these transactions, contending that they were conducted after the commencement of winding-up process and were not bona fide.

The dispute begins with the alleged fraudulent transactions of D. Sankaran. It was claimed that he had fraudulently sold or resold portions of the land, even land that had previously been sold to customers of the Company, under registered sale deeds. Understanding the gravity of a situation, an order of interim junction was issued against the GPA holders, including D. Sankaran, restraining them from alienating lands purchased by the company.

The applicants relied on sale deeds executed by IIEL, claiming that they had obtained absolute titles and rights over the property. However, the Official Liquidator and Administrator of the Company vehemently argued against the validity of these transactions based on several key points:

1. Restraining Order: The Company had obtained an interim order restraining the GPA holder (the individual who held the power of attorney for the land) and others from alienating the land in question. This order was in effect during the time of the property transactions.

2. Prior Sales: The Administrator argued that the GPA holder had previously sold the same land to customers of the Company, and these sales were conducted through registered sale deeds. This fact indicated that the GPA holder had already disposed of the land before the applicants’ transactions.

3. Due Diligence: The Administrator contended that the applicants could have discovered these prior transactions if they had exercised reasonable due diligence, as these transactions were part of the public record.

Meticulously looking at the facts, evidence and arguments presented by both parties, the Hon’ble Madras High Court ruled in the favour of Official Liquidator and Administrator. The court held that the transactions conducted by the applicants, though based on sale deeds, were void under Section 563 (2) of the Companies Act, 1956. This section renders any disposition of a company’s property made after the commencement of winding up proceedings void, unless otherwise ordered by the court.

The court reasoned that the applicants failed to conduct due diligence, did not take into account the restraining order in effect. Therefore, the sales executed in 2013 by IIEL to the applicants were detrimental to the interests of the company, and, consequently, were declared void.

The case serves as a compelling illustration of the critical importance of legal vigilance and due diligence in land transactions, particularly when a company is undergoing winding up proceedings. It highlights the consequences of failing to abide by court orders and the implications of transactions executed in contravention of law.

As well as, the case underscores the necessity of adhering to legal regulations of court directives to avoid costly legal entanglements; it stands as a reminder to individuals and business alike of the paramount significance of ensuring the legality and legitimacy of their actions in the realm of property transactions, especially during critical corporate events like winding up.

Author Bio

Qualification: CA in Practice
Company: Gupta Vijay K and Co
Location: New Delhi, Delhi, India
Member Since: 23 Jul 2020 | Total Posts: 20
With over 20 years of extensive experience in the field of Chartered Accountancy, I am the founder and co-partner of Gupta Vijay K. & Co. Currently; I hold the position of NICASA Chairman at NIRC-ICAI. My expertise lies in corporate law and taxation. I graduated with a B.Com (Hons.) from Delhi U View Full Profile

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