Bombay HC Sale of Paintings – company Assets Vs Inter Se Family Settlement

Judgment of the High  Court of Bombay in Company Petition No.900 of 2026 of Mafatlal Dyes and Chemicals Limited with connected matters.

Family Settlement Cannot Decide Ownership of a Company’s Assets in Liquidation; Bombay HC Clears Sale of Five Mafatlal Paintings as Company Assets

Sale of Paintings – Assets of Company under Liquidation & Family Settlement

Mafatlal Dyes and Chemicals Ltd. (“Company”) was ordered to be wound up by the Company Court on July 19, 2010 in the captioned Company Petition No. 900 of 2005, presented by Vinyl Chemicals (India) Ltd. due to its inability to pay its debts, attracting the jurisdiction of the Official Liquidator (“OL”).

The captioned three Official Liquidator Reports (“OLRs”) fall for consideration along with the respective Interim Applications taken out in them. They are all filed at different stages of the same line of enquiry – relating to 44 paintings of reputed Indian artists (“Subject Paintings”). The Subject Paintings were seized by the Crime Branch under a panchanama dated January 18, 2014 in the course of criminal proceedings that flowed from inter se complaints by members of the family of the Late Mr. Yogindra Mafatlal, which is the promoter family of the Company.

The Company’s promoters have been engaged in a three-way fight amongst Mr. Atulya Mafatlal (“Atulya”), the son of the Late Mr. Yogindra Mafatlal, his brother Mr. Ajay Mafatlal (“Ajay”, originally, Ms. Aparna Mafatlal, before gender reassignment) and Ms. Sheetal Mafatlal (“Sheetal”), who was married to Atulya. Another sibling, Gayatri Jhaveri (“Gayatri”), who claims through Ajay and through her parents is also in the fray in the proceedings before the Company Court.

Whether the Identified Paintings are assets of the Company, available for disposal, with proceeds b. Summary of Conclusions and Directions: 93. My findings may be summarised thus:

A] The Company Court has jurisdiction under Section 446(2)(b) and Section 446(2)(d) read with Section 456 of the Act to adjudicate title to the Subject Paintings. The challenge to jurisdiction stands concluded against Sheetal by the December 2015 Order, which was never stayed and was not disturbed in appeal;

B] Sheetal, on whom the onus lies, particularly after the OL filed the Additional Affidavit in compliance with the modified directions of the Learned Division Bench has led no evidence at all. She filed no affidavit in lieu of examination-in-chief within any of the six opportunities granted to her by multiple benches. She withdrew the only affidavit she did file in defect, and declined to enter the witness box. Her claim to the Subject Paintings rests on no evidence whatsoever;

C] Clause 7(b) of the Consent Terms is confined to the art that was the subject matter of MECR 11, being 35 paintings, and cannot in any event found a claim to the 44 Subject Paintings. In any case, the Consent Terms settle disputes inter se the Mafatlal Family and neither bind the Company nor determine title as against it;

D] The Asset Register, read with the Purchase Vouchers and the Seizure List, corroborated by the confirmation of Synergy Art Foundation and by Police Affidavit I and Police Affidavit II, establishes on a preponderance of probabilities that the Identified Paintings form part of the Liquidation Estate of the Company;

E] OLR 93 is accordingly liable to be allowed in respect of the Identified Paintings, and the opposition of Sheetal to OLR 457 and OLR 380, including IA 11880, is liable to be rejected; No finding is rendered on title to the Remaining Paintings, which is left open to be adjudicated. 94.

Therefore, the following directions are passed: A] OLR 457 is finally disposed of since the prayers sought in it have either been granted, refused or overtaken, with even consequential action having been taken, with implications for non-compliance such as Atulya not providing books and records resulting in the consequences set out in this judgement. As such, with subsequent OLRs having been filed, nothing survives to keep OLR 457 pending; B] As regards OLR 380, while its prayers revolve around all the 44 Subject Paintings, the matter has now progressed and transformed into dealing with the five Identified Paintings, and more so with the filing of OLR 93. However, prayer clause (d) in OLR 380 is worthy of being granted. The asset class involved, namely, works of art, are not amenable to the routine manner of auction on an auction platform that is typically used to sell land, machinery, inventory and other industrial assets. In my opinion, for value maximisation and improved price discovery, it would be necessary to engage the services of an expert who can oversee the entire process of sale and disposal of the Identified Paintings; C] Towards this end, I hereby appoint Ms. Sonal Singh Naharwar (“the Expert”), a highly reputed expert in the field of art with a robust experience of two decades in the field of auctioning art. In my view, the Expert, having worked on valuation and sales of some of the most important South Asian works of art at auction, would be well suited to subserve the best interests of the sale process and the interests of the Liquidation Estate of the Company. Mr. Ranjeev Carvalho, Learned Advocate is also requested to actively assist in the process along with the Expert. Liberty to the Official Liquidator to seek such directions from the Company Court should there be a need to deal with any difficulties. In the aforesaid premises, OLR 380 is also finally disposed of; D] The conventional approach of the sale notice and standard terms and conditions for sale of land, machinery and other industrial assets would not be routinely adopted for the forthcoming disposal. Instead, the Official Liquidator along with the Expert and Mr. Carvalho shall formulate the mechanism for conduct of an auction by such art auction house as is finalised by them. The terms and conditions for the auction shall be formulated by them taking care to adopt the principles underlying the conventional terms and conditions as far as practicable. Liberty to mention the matter for any clarifications and directions. OLR 93 is therefore disposed of in the terms set out in this judgement;eing used for the benefit of its creditors and other stakeholders, or whether they are the private property of one or other members of the Mafatlal Family, falls for consideration.

Sale Company Assets of Paintings – Family Settlement