The Bombay High Court has held that promoter-family consent terms cannot determine title against the company, and corroborated asset records establish ownership on a preponderance of probabilities. The Court clarified that Sections 446(2)(b) and 446(2)(d), read with Section 456 of the Companies Act, 1956, empower the Company Court to adjudicate ownership of property claimed for the liquidation estate. Sheetal’s jurisdictional challenge had already been concluded against her and was not disturbed in appeal.
The High Court went on to hold that Clause 7(b) of the consent terms concerned the 35 paintings involved in the earlier criminal complaint, not all 44 seized paintings. The settlement resolved disputes within the family but neither bound the company nor determined title against it. Despite repeated opportunities, Sheetal withdrew her defective evidence affidavit and declined to enter the witness box. The Court thus held that her claim rested on no evidence and drew an adverse inference from her refusal to subject it to trial.
The asset register, purchase vouchers and seizure list, supported by police affidavits and Synergy Art Foundation’s confirmation, established ownership on a preponderance of probabilities. The Court did not apply the criminal standard of proof beyond reasonable doubt. Lastly, the Court appointed art expert Sonal Singh Naharwar to assist the sale process through an art auction house. Ownership of the remaining 39 paintings was left undecided, and Sheetal and Gayatri were each directed to deposit Rs. 15 lakhs within four weeks of upload for their preservation, without acquiring any equities.
Briefly, Mafatlal Dyes and Chemicals Ltd. was ordered to be wound up on July 19, 2010, for its inability to pay its debts. The proceedings concerned 44 paintings seized by the Mumbai Police during criminal investigations arising from disputes within the Mafatlal promoter family. The Official Liquidator sought to sell five paintings identified as belonging to the company. Sheetal Mafatlal claimed all 44 paintings, relying principally on family consent terms, while Gayatri Jhaveri claimed the remaining 39 and accepted the company’s ownership of the five identified paintings. Yasmin Valibhoy sought to intervene and cross-examine Sheetal, without claiming ownership herself.
A Single Judge Bench of Justice Somasekhar Sundaresan observed that noted that Sheetal had repeatedly been given opportunities to prove her claim but ultimately withdrew her evidence affidavit and declined to enter the witness box. Her refusal to subject her claim to cross-examination justified an adverse inference that she could not prove title. The Court also found that Clause 7(b) of the family consent terms concerned possession and enjoyment of the 35 paintings involved in the earlier criminal complaint, but it neither established ownership against the company nor bound the Official Liquidator.
The Court separately examined the company’s evidence rather than treating Sheetal’s failure as sufficient proof of ownership. The asset register, purchase vouchers and seizure list, supported by police affidavits and gallery confirmation, provided a reliable basis for identifying the five paintings as company assets. Where the records did not permit a clear match, ownership was not attributed to the company. The Court expressly left title to the remaining 39 paintings undecided.
