After Sheetal Mafatlal Declined to Testify, Bombay HC Finds 5 Paintings Belong to Liquidated Company, Clears Art-Auction Process

Mafatlal Dyes and Chemicals Ltd. was ordered to be wound up on 19 July 2010.

Forty-four paintings seized by the police in 2014 were held at the Sir J. J. School of Art.

The Official Liquidator (OL) claimed that five paintings—the “Identified Paintings”—belonged to the Company, relying principally on the Company’s asset register, purchase vouchers, the seizure list and police affidavits.

Sheetal Mafatlal claimed all forty-four paintings under family consent terms, but, despite repeated opportunities, did not lead evidence to establish her title and ultimately withdrew her evidence affidavit.

Gayatri Jhaveri claimed the remaining thirty-nine paintings; she accepted that the five Identified Paintings belonged to the Company.

The OL sought approval to sell the five Identified Paintings, while the competing claims to the remaining paintings were also before the Court.

Whether the Company Court had jurisdiction to determine whether the Identified Paintings formed part of the Company’s liquidation estate.

Whether, on the evidence and applicable standard of proof, the five Identified Paintings belonged to the Company.

Whether Sheetal’s claim to the paintings was established by the family consent terms or other evidence, and whether the remaining paintings’ ownership could be determined in these proceedings.

Under Sections 446(2)(b) and 446(2)(d) of the Companies Act, 1956, the Company Court may adjudicate questions arising in winding-up proceedings, including questions of title; Section 456 requires the OL to take into custody property to which the company “is or appears to be entitled,” and deems company property to be in the Court’s custody from the winding-up order.

Section 477 provides machinery to examine persons suspected of holding company property.

The Court applied the civil standard of proof—preponderance of probabilities—not the criminal standard of proof beyond reasonable doubt.

Family consent terms can settle disputes among their signatories but do not determine title against the Company or bind the OL, which was not a party to them.

The Court held that the prior order recognising jurisdiction to determine title had not been stayed or disturbed on appeal.

The asset register, purchase vouchers and seizure list corresponded in a sufficiently specific and corroborated manner to identify five paintings as Company assets; the police affidavits and a gallery’s confirmation further supported that conclusion.

The Court drew an adverse inference from Sheetal’s failure to adduce evidence despite repeated opportunities and rejected her reliance on consent terms that neither covered all forty-four paintings nor established title against the Company.

It made no conclusive finding on the remaining paintings because their title was not determined on the record before it.

OLR Nos. 457 of 2014 and 380 of 2016 were finally disposed of.

The OL was directed to arrange the sale of the five paintings through an art auction process, with an appointed art expert and the OL’s counsel assisting in formulating the mechanism and terms.

No finding was made on title to the remaining thirty-nine paintings; Sheetal and Gayatri were each directed to deposit Rs. 15 lakhs with the OL within four weeks toward their upkeep.