Bombay HC Rejects Mantri Realty Promoters’ Children’s Bid to Validate Undated Flat Deals Amid Unreconciled, Mostly Post-Petition Payments

The applicants, the daughter and son of the Company’s promoters and former directors, sought validation under Section 536(2) of the Companies Act, 1956, of purported unregistered sale and construction agreements for flats in the Company’s Bangalore project, and directions requiring the Official Liquidator (OL) to execute and register the agreements.

The winding-up petition was presented on 22 January 2014; the OL was appointed provisional liquidator on 4 February 2015, and the Company was subsequently ordered to be wound up.

The applicants relied on agreements whose execution dates, the authority of the Company signatory, payment records and identification of the flats were disputed; most of the claimed payments were made after presentation of the winding-up petition.

The applications were heard together, with CA 9 treated as the lead application.

Under Section 441(2) of the Companies Act, 1956, winding up by the Court is deemed to commence on presentation of the petition; under Section 536(2), a disposition of company property made after that date is void unless the Court otherwise orders.

The discretion under Section 536(2) is equitable, and the applicant must plead and prove that the transaction was in the ordinary course of business and for the benefit of the company in liquidation; the OL need not prove fraud (Arambhan Hospitality Services Ltd. v. Official Liquidator of GOL Offshore Ltd.).

Hindustan Transmission Products Ltd. and Bhairav Industries, as endorsed in Sunita Vasudeo Warke, were relied on for the principle that an incomplete transfer cannot be completed after winding up so as to create or perfect rights against the liquidation estate.

Sections 17(1)(b) and 17(1-A) and Section 49 of the Registration Act, 1908, govern registration and limit the effect of unregistered instruments; in particular, an unregistered contract within Section 17(1-A) has no effect for Section 53-A purposes.

Section 53-A of the Transfer of Property Act requires, among other things, possession in part performance, while Suraj Lamp and Industries Pvt. Ltd. v. State of Haryana confirms that an agreement for sale does not itself convey title.

The Court found that the agreements were undated or inconsistently dated, unregistered, unsupported by proof of the signatory’s authority, and accompanied by inconsistent payment records and flat particulars.

Only Rs. 5,50,000 was shown as paid before the winding-up petition; the balance claimed was paid afterwards, including payments after appointment of the provisional liquidator.

Given the applicants’ relationship to the Company’s promoters, the absence of reliable evidence of an arm’s-length transaction, the unclear source and allocation of funds, and the lack of evidence that the transactions benefited the Company, the Court held that the applicants had not established grounds for equitable validation under Section 536(2).

The agreements provided for possession only after execution and registration of the final sale deed; possession had not passed, and the agreements were unregistered.

Section 53-A therefore did not assist the applicants, and the agreements could not be equated with the registered agreement considered in the cited Mantri Serene order.

It held that the applicants had not reliably established the agreements’ execution, authority, payment allocation or entitlement to the flats, and that Section 53-A did not apply in the absence of registration and transfer of possession.

Company Applications Nos. 9 and 10 of 2025 were dismissed.