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IN THE HIGH COURT OF BOMBAY
Abhay Ahuja, J.
Shalaka Projects Private Limited - Appellant
Versus
The Official Assignee of Bombay & Anr. - Respondents
Notice of Motion (L) No. 9726 of 2022 in Insolvency Petition No.18 of 2017
Decided On : 02-05-2024
INSOLVENCY - PROPERTY TRANSFER - Presidency Towns Insolvency Act, 1909 - Section 55 - The court interpreted Section 55 of the Presidency Towns Insolvency Act, which allows the Official Assignee to void property transfers made within two years prior to an adjudication of insolvency unless made in good faith and for valuable consideration. The court found that the transfer of flats occurred more than two years before the adjudication of insolvency, thus Section 55 did not apply. The court emphasized the separate legal entity of the company involved, ruling that the insolvency of a director does not affect the property of the company. The court concluded that the Official Assignee's objections lacked substantiation and allowed the motion to vacate possession.
Fact of the Case:
Shalaka Projects Private Limited sought to vacate the Official Assignee's possession of two flats purchased from K.K.B. Properties Private Limited. The flats were bought on January 15, 2016, and the seller was later adjudged insolvent on April 17, 2018. The Official Assignee claimed the transfer was void under Section 55 of the Presidency Towns Insolvency Act due to the insolvency of a director of the seller company.
Finding of the Court:
The court found that the purchase of the flats occurred more than two years before the adjudication of insolvency, thus Section 55 did not apply. The court also ruled that the seller company was a separate legal entity, and the insolvency of a director did not affect the ownership of the property. Allegations of collusion were dismissed due to lack of evidence.
Issues: Whether the transfer of property was void under Section 55 of the Presidency Towns Insolvency Act due to the insolvency of a director of the seller company and whether there was any collusion in the transaction.
Ratio Decidendi: The court held that Section 55 of the Presidency Towns Insolvency Act does not apply as the transfer occurred more than two years prior to the adjudication of insolvency. It reaffirmed the principle that a company is a separate legal entity, and the insolvency of a director does not affect the company's property. The burden of proof lies with the Official Assignee to demonstrate any fraudulent intent or collusion, which was not established in this case.
Final Decision: The court allowed the Notice of Motion, directing the Official Assignee to vacate the formal possession of the flats within four weeks.
ORAL JUDGMENT
Abhay Ahuja, J. - This Notice of Motion has been filed by one Shalaka Projects Private Limited seeking directions of this Court to the Official Assignee to vacate the formal possession of Flats No. E-404 and E-408 (the 'said flats') situate in Kasturkunj Co-operative Housing Society, Shivaji Nagar, Pune.
2. It is the case of the Applicant that the Applicant-Company was incorporated on 20th June, 2018 and purchased the said flats from one K.K.B. Properties Private Limited on 15th January, 20216 for a consideration of Rs.1 crore 77 lakhs paid in the following manner:
Amount
Particulars
Rs.47,00,000/-
(Rupees Forty Seven Lacs Only) issued by the purchaser to the VENDOR by Chq. No.235234 dtd. 15/01/2016 drawn on IDBI Bank, F.C.Road Branch, Pune.
Rs.65,00,000/-
(Rupees Sixty Five Lacs Only) issued by the purchaser to the VENDOR by Chq. No. 235235 dtd. 15/01/2016 drawn on IDBI Bank, F.C.Road Branch, Pune.
Rs.63,23,000/-
(Rupees Sixty Three Lacs Twenty Three Thousand Only) issued by the purchaser to the VENDOR by Chq.No.235236 dtd. 15/01/2016 drawn on IDBI Bank, F.C.Road Branch, Pune.
Rs.1,77,000/-
(Rupees One Lacs Seventy Seven Thousand Only) deducted @ 1% of total consideration and to be paid to the Government in the name of Vendor u/s 194-IA of IT Act towards Tax Deduction at source on sell of property
Total Rs.1,77,00,000/-
Total in words : Rs. One Crore Seventy Seven Lacs Only/.
3. It is also not in a dispute that the seller K.K.B. Properties Private Limited was incorporated at Mumbai on 3rd May, 2006 with Mr. Atul Indrakumar Bora (who as will be seen was later on declared as Insolvent on 17th April 2018) and Aarushi Bora-his wife, as shareholders and Directors and on 16th August, 2006 the said company acquired the said Flats vide Agreement for Sale from City Development Corporation and as noted above, the said company has sold the said Flats to the Applicant on 15th January 2016.
4. Mr. Darshit Jain, learned counsel appearing for the Applicant would submit that after purchasing the said Flats, the Applicant on 21st January 2016 also mortgaged the said flats in favour of the Punjab National Bank for a loan with the personal guarantee of its Directors-Mr. Ravindra Lunawat with Swati Lunawat. That the order of adjudication of Mr.Atul Indra Kumar Bora, one of the shareholders and Directors of K.K.B. Properties Private Limited came to be passed on 17th April, 2018. Mr. Jain would submit that thereafter on 18th June, 2018 and on 21st September, 2018 a letter was addressed from the society in which the said Flats were situate giving documents including sale deed/agreements, share certificates, reflecting that the subject flats were sold by K.K.B. Properties Private Limited to and in the name of the Applicant-company. That thereafter on 12th September, 2018 and 12th November, 2020 letters were addressed by the Official Assignee to the society not to deal with the subject flats as formal possession was taken. Mr. Jain would submit that on 1st February, 2022 a letter was addressed form the Applicant to the Official Assignee requesting that the Official Assignee withdraw the letters written to the society. On 22nd February, 2022 loan recall notice from Punjab National Bank was addressed to the Applicant referring to the security created on the said flats after which on 21st March, 2022, the present notice of motion came to be been filed.
5. The Official Assignee has filed her reply as well as the additional reply in the matter seeking to justify the vesting and the formal possession of the said Flats on various grounds.
6. Mr. Jain, learned counsel for the Applicant would submit that since the purchase transaction to the Applicant is dated 15th January, 2016 and the order of adjudication is 17th April, 2018, Section 55 of the Presidency Towns Insolvency Act, 1909 (the 'said Act') would not apply. Secondly, learned counsel would submit that the seller is a Private Limited company which is a separate legal entity distinct from its s
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