Bombay HC Rejects Mantri Realty Promoters’ Children’s Bid To Validate Unregistered Flat Agreements, Citing Uncertain Dates And Mostly Post-Petition Payments

Mantri Realty Limited was ordered to be wound up after a winding-up petition was presented on 22 January 2014.

Rhutu Mantri and Siddhant Mantri, children of the Company’s promoters and former directors, each claimed a flat in the Company’s Bangalore project under purported unregistered agreements for sale and to build.

They sought orders under Section 536(2) of the Companies Act, 1956, validating the transactions and directing the Official Liquidator to execute and register the relevant documents.

Rhutu’s documents were undated or inconsistently dated; the Company’s authority to execute them was disputed; and the pleaded payments, bank records, receipts and flat particulars did not reconcile.

Most of the payments attributed to Rhutu’s flat were made after the winding-up petition was presented.

The Official Liquidator opposed the applications. The parties accepted that the decision in Rhutu’s application would determine Siddhant’s application as well.

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

The applicant seeking relief under Section 536(2) bears the burden of establishing grounds for the Court to exercise that discretion; Arambhan Hospitality Services Ltd. v. Official Liquidator of GOL Offshore Ltd. states that 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.

Sections 17(1-A) and 49 of the Registration Act, 1908, limit the effect of unregistered instruments required to be registered; Section 53-A of the Transfer of Property Act requires, among other things, possession in part performance, and Section 17(1-A) requires registration for an agreement to have effect for that purpose.

Board of Industrial and Financial Reconstruction v. Hindustan Transmission Products Ltd., affirmed in Sunita Vasudeo Warke v. Official Liquidator, and M/s Bhairav Industries v. Official Liquidator of Shri Ghanshyam Parts Pvt. Ltd. support the principle that incomplete rights cannot be completed after winding up.

Under Suraj Lamp and Industries Pvt. Ltd. v. State of Haryana, an agreement for sale does not itself convey title to immovable property; conveyance requires a registered deed.

The Court found that the applicants had not established reliable dates or valid corporate authority for the agreements. In Rhutu’s case, the agreements were unregistered, one was undated, the stated dates conflicted, no Board resolution authorising execution was produced, and the payment evidence did not consistently identify the amounts or flats concerned.

The Court also treated Rhutu’s relationship to the Company’s promoters, the absence of proof of an arm’s-length transaction, and the substantial payments made after presentation of the winding-up petition as reasons not to validate the transaction.

The agreements contemplated transfer of possession only after execution and registration of a final sale deed; accordingly, possession had not passed and Section 53-A did not assist the applicants.

If the agreements predated the petition, the transactions remained incomplete; if later, they fell within the period governed by Section 536(2).

The Court distinguished the Mantri Serene order because it concerned a dated, registered agreement, and held that approval of other purchasers’ transactions did not establish an entitlement to equivalent relief for these applicants.

Both Company Application No. 9 of 2025 and Company Application No. 10 of 2025 were dismissed.