Bombay HC Finds 5 Paintings Belong To Mafatlal Firm, Rejects Sheetal’s Claim After She Declines To Lead Evidence, Directs Expert-Led Auction

Mafatlal Dyes & Chemicals Ltd. was ordered to be wound up in 2010.

Forty-four paintings seized by the police in 2014 were placed in the deemed custody of the Company Court.

The Official Liquidator relied on the Company’s asset register, purchase vouchers, the seizure list and police investigation to identify five paintings as Company assets.

Sheetal Mafatlal claimed all 44 paintings, relying principally on family consent terms, but, despite repeated opportunities, ultimately declined to lead evidence.

Gayatri Jhaveri claimed the remaining 39 paintings; she excluded the five identified paintings from her claim.

The Court considered the three OLRs and related interim applications, including the proposed sale of the five identified paintings.

Whether the Company Court had jurisdiction in the winding-up proceedings to determine whether the identified paintings belonged to the Company.

Whether the five identified paintings formed part of the Company’s liquidation estate, notwithstanding Sheetal’s claim under the family consent terms.

Whether the Court should approve a process for sale of the five identified paintings and make directions concerning preservation of the remaining paintings.

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

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

The Court assessed ownership on the civil standard of a preponderance of probabilities, not the criminal standard of proof beyond reasonable doubt.

Family consent terms may settle disputes between their signatories but do not, without more, establish title against the Company or bind the liquidator.

The Court found that the asset register’s entries corresponded with the seizure list and purchase vouchers for the five identified paintings, with the Jogen Chowdhury painting additionally corroborated by the gallery’s confirmation.

The police affidavits described the identification process and its limits, including the decision not to attribute paintings where the match was uncertain.

Against this evidence, Sheetal produced no evidence of title and withdrew the only affidavit she had filed; the Court drew an adverse inference from her refusal to submit her claim to examination.

The consent terms addressed possession and enjoyment of art in an inter se family settlement, not ownership as against the Company, and in any event related to 35 paintings rather than all 44.

On the total record, the Court held that the five identified paintings belonged to the liquidation estate. It made no final determination of title to the other 39 paintings.

It rejected Sheetal’s opposition and allowed the sale process to proceed, directing the Official Liquidator, the appointed art expert and counsel assisting the process to devise an appropriate art-auction mechanism and terms of sale.

OLR 457 and OLR 380 were finally disposed of, and OLR 93 was disposed of on those terms.

Sheetal and Gayatri were each directed to deposit ₹15 lakh within four weeks toward the upkeep of the remaining paintings; title to those paintings was left open.