The main legal point established in the judgment is the validity of property sales in the context of winding up orders and the discretionary power of the winding up court to approve sales under Section 536 of the Companies Act, 1956.

( 1 ) CA No. 7/2005 is filed by Brig. (Retd.) Inder Raj Sehgal for release of the property being Khata No. 31, Plot Nos. 1590 and 1591, Village Mehragaoun Patti, Pachmi Chakat, Nainital. The applicant states that in this application that this property was purchased by him in a public auction held by the court of Civil Judge (SD), Vth Fast Track Court, Nainital in CE No. 36/2001. It appears that one Khadak Singh Rawat had filed a suit against Crystal Credit Corporation Limited which is in liquidation (hereinafter referred to as `the company ) and obtained a decree against the company. Thereafter, he filed execution application for recovery of the amount in the said court. This application was filed sometime in the year 2001 which would be clear from the number of the petition viz. 36/2001. In those proceedings the property in question belonging to the company was attached and order dated 29th October, 2002 was passed for sale of the property at public auction. This auction was held on 3rd December, 2002. Many bidders participated in the auction and bid of the applicant for Rs. 6,05,000/-, being the highest bid, was accepted. Before putting the property to the auction, it was got evaluated and valuer assessed the property at Rs. 5,96,325/ -. These facts are gathered from the auction report filed by the Advocate Commissioner, Nainital who was appointed as such by the court for the purpose of auction of the property and this auction report is annexed by the applicant along with the application.

( 2 ) THE applicant on the basis of aforesaid facts, submits that he is the bona fide purchaser who purchased the property in an auction held by the competent court of law. He submits that before the property was put to auction winding up orders were passed by this court on 20th November, 2002 but the citation was published only on 11th February, 2003 and much before that the applicant had deposited the sale consideration in the court and even sale certificate was issued in his favour on 11th February, 2003 and he was put in possession. Prayer made in this application is that this court may confirm the said sale.

( 3 ) THE undisputed position in law can be summarized as follows: After the winding up orders are passed and the liquidator is appointed, it is he alone who has the power to take charge of the assets of the company. Further, such assets can be sold only by the OL under the supervision of the Company Court. Any transfer/sale of the assets by any other person is void. This legal position is stated in Section 536 of the Companies Act, 1956 (for short the Act ) which reads as under:

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], an 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.

( 4 ) SUB-SECTION (2) of Section 536, however, empowers the winding up court to order otherwise which includes power to give its approval to such sales if in a particular case the circumstances so justify. It is because of this provision contained in Sub-section (2) of Section 536 that prayer made is by the applicant for approving the sale by this court.

( 5 ) OBVIOUSLY, the purpose behind sub-section (2) of Section 536 is to prevent improper disposition or dissipation of property so as to affect the assets otherwise available for distribution among the creditors of a company in winding up. But the court is, however, given the discretion to uphold all proper transactions which otherwise appea