Company Not Owner Of Property Merely Because It’s Shown In Balance Sheet; Registered Sale Deed Necessary: Allahabad High Court
The Allahabad High Court observed that merely because the persons are Directors of a company, it doesn't deprive them of their right to protect interest in a property owned by them.
The Allahabad High Court held that a company cannot become the owner of a property merely because the same is shown in the balance sheet and hence, the registered Sale Deed is necessary.
The Lucknow Bench held thus in Writ Petitions filed against the Orders of the Additional Civil Judge in an execution case.
A Single Bench of Justice Pankaj Bhatia observed, “… in the balance sheets the Land property sold has not been described as being owned by the company and secondly because merely by the property being shown in the balance sheets as that of the company, the company cannot become the owner of the immovable property which can devolve on the company only by way of a registered sale deed as has been held by me in the foregoing paragraphs. There being no material to suggest that there was any registered sale deed in favour of the company, only on account of the property being presumed to be shown in the balance sheets, the company would not be the owner of the property.”
The Bench said that merely because the persons are the Directors of the company, it does not deprive them of their right to protect the interest in a property which is owned by them in their personal capacity.
Senior Advocate Sudeep Seth appeared for the Petitioners while Advocate Pranav Agarwal appeared for the Respondents.
Facts of the Case
A Suit was filed before the Additional District Judge for recovery of arrears of profit share, rent, and damages against a company. The said Suit was decreed ex-parte in favour of the Plaintiff Trust i.e., the Respondent, however, it was specifically provided that the Suit is being decreed only against the company and not the Defendant. Pursuantly, an Execution Case was filed in the District Court for execution of the decree against the company only, seeking attachment of the movable and immovable property of the company. An Application was filed by the Respondent trust under Order 21 Rule 43 of the Civil Procedure Code, 1908 (CPC), seeking attachment of the bank account and a house building.
The aforesaid Application was allowed and the Execution Court put the property on auction. The Petitioners claiming to be the owners of the property, moved an Application under Order 21 Rule 29 CPC, stating that the property was owned by them and not by the company. However, it was rejected and resultantly, a Civil Revision was preferred which also got dismissed. Thereafter, an auction notice was issued by the Court and the Petitioners moved an Application under Order 21 Rule 90 CPC to set aside the auction sale but it got rejected. Hence, the case was before the High Court.
Reasoning
The High Court in the above regard, noted, “… a property owned by a person cannot be held to be transferred except by a registered sale deed which is clearly absent in the present case—the common exception to the property of a person being treated to be that of any other person is known only through the concept of ‘blending’ when the property of a coparcener can be held to be that of a HUF. Even the said concept is limited to claim of partition amongst the coparceners and in any case, does not treat the HUF as the owner in rem as against the third party.”
The Court reiterated that the doctrine of blending is alien for deeming of ownership of property by a company which cannot happen except by a registered conveyance deed as prescribed under the Transfer of Property Act, 1882 (TPA).
“In view of the said, I have no hesitation in holding that the Land in question was owned by Shri Ashok Kumar Srivastava as non agriculture property and after his death devolved on the petitioner nos.1, 2 & 3 who are the daughters and petitioner no.4 who is the wife of Late Ashok Kumar Srivastava. It never was under the ownership of the company which was the judgment debtor”, it held.
The Court also held that the entire proceeding of executing the decree against the property owned by the Petitioners for satisfying the decree only against by the company was clearly illegal and contrary to the statutory provisions of Order XXI.
“The other submission that the writ petitions were not maintainable at the instance of the petitioners under Art. 227 of the Constitution also needs to be repelled, as a remedy under Art. 227 of the Constitution is available to the petitioners on account of serious infractions in the attachment and sale of the property owned by them, as noticed in the foregoing paragraphs”, it observed.
Furthermore, the Court said that the Supreme Court never held in any of its Judgments that a Judgment declaring ownership of a property in between the parties to the lis can be treated to be a judgment in ‘rem’.
“As the result would still remain the same, I deem it appropriate to impose a cost of Rs.50,000/- on petitioner no.4 in having failed to disclose the material facts. The costs shall be deposited with the Oudh Bar Association within one month failing which the District Magistrate Lucknow shall recover the same as arrears of land revenue and shall remit the same to Oudh Bar Association”, it directed.
Accordingly, the High Court allowed the Writ Petitions and quashed the impugned Orders.
Cause Title- Gazan Srivastava And 2 Others v. Dhajaram Charitable Trust, New Delhi Thru. Its Chairman Captain Dilavar Singh Sanghwan (Rtd.) And Anr. (Neutral Citation: 2025:AHC-LKO:8448)
Appearance:
Petitioners: Senior Advocate Sudeep Seth, Advocates Ashok Kumar Singh, Jitendra Saksena, and Sridhar Awasthi.
Respondents: Advocates Pranav Agarwal, Nisha Verma, and Deviyani Dwivedi.
