Protecting Bona Fide Purchasers in Liquidation: Proxy Litigation by Ex-Directors Cannot Stall Investor Claims

1. Case Snapshot

• Case Name: Re-M/s. JVG Finance Ltd.

• Citation: 2026:DHC:5207

• High Court: High Court of Delhi

• Bench: Hon'ble Mr. Justice Anish Dayal

• Date of Judgment: July 1, 2026

• Area of Law: Company Law – Winding up, Fraudulent Preference, Bona Fide Purchaser Rights, Locus Standi in Liquidation Proceedings

2. Judgment in Brief

The Delhi High Court allowed applications filed by 14 investors seeking release of residential plots purchased in a housing scheme floated by JVG Finance Ltd., which had gone into liquidation. The applicants had booked plots in 1995-1997, paid full consideration, and obtained registered sale deeds prior to the winding-up order (June 5, 1998). The One-Man Committee had verified their claims between May-June 2011. The Court relied upon earlier orders (August 2, 2018 and October 12, 2018) directing release of plots to similarly placed 7 buyers, which had attained finality after the Division Bench dismissed the ex-director's appeal. The Official Liquidator expressly gave "no objection" to release. The Court dismissed the review petition filed by Ms. Aneeta Sharma (wife of ex-director Mr. V.K. Sharma) as a proxy litigation lacking locus standi, noting her repeated obstructive tactics. The Court held that sale deeds executed prior to winding-up were not fraudulent preference under Section 531 of the Companies Act, 1956, and that bona fide purchasers for value without knowledge of winding-up proceedings are entitled to protection.

3. Relevant Facts

• The Housing Scheme: JVG Finance Ltd. launched "JVG Housing Project" in May 1995 on 42 acres at Kondapur Village, Hyderabad, inviting public to purchase residential plots of 200, 300, and 500 sq. yards through a self-financing scheme. The scheme targeted low-income and service class investors.

• Booking and Payments: The 14 applicants booked plots between May 1995 and September 1997, making payments through installments spread over 3-7 years or outright purchase. Sale deeds were executed and registered between December 1997 and March 1998, prior to the winding-up order.

• Prohibition Order: RBI issued a prohibition order on October 10, 1997 under Section 45MB of the RBI Act, 1934 restraining the company from accepting fresh deposits. The company assured allottees this did not affect the housing project.

• Winding-up Proceedings: RBI filed CO.PET No.265/1998 on June 4, 1998 under Section 45MC of the RBI Act. Provisional Liquidator appointed on June 5, 1998. Final winding-up order passed on August 29, 2003. Official Liquidator took symbolic possession of 225 plots on October 10, 2003.

• One-Man Committee: By order dated July 22, 2004, the Court appointed a One-Man Committee to verify claims. Between May 3, 2011 and June 21, 2011, the OMC examined documents and accepted the claims of applicants, holding they were entitled to lawful possession.

• Earlier Orders: On August 2, 2018 and October 12, 2018, the Court directed release of 7 plots to similarly situated applicants. The ex-director Mr. V.K. Sharma's appeal (CA No.24/2018) was dismissed by Division Bench on November 16, 2018 for lack of locus standi.

• Review Petition: Ms. Aneeta Sharma (wife of Mr. V.K. Sharma) filed review petition (CA No.1374/2018) challenging the October 12, 2018 order, which was pending adjudication.

• Official Liquidator's Position: OLR No.36/2025 dated August 1, 2025 recorded that applicants stand on same footing as those covered by earlier orders, giving "no objection" to similar orders.

4. Issues for Determination

1. Whether the 14 applicants are entitled to release of their plots on the same footing as the 7 buyers whose applications were allowed by orders dated August 2, 2018 and October 12, 2018?

2. Whether the sale deeds executed prior to June 5, 1998 (winding-up order) are void und

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