Transition from Partnership to Private Limited: Madras High Court Affirms Right to Register Sale Certificate in New Entity’s Name

In a recent judgement, in the case of Dharani Geotech Engineers India Pvt. Ltd. v Cholamandalam Investment & Finance Pvt. Ltd. [W.P. No. 15927 of 2024], dated December 10, 2024, Dharani Geotech Engineers India Pvt. Ltd., formerly known as Dharani Geotech Engineers (the “Petitioner“), approached the Hon’ble High Court of Madras seeking a resolution to their dispute with Cholamandalam Investment & Finance Pvt. Ltd. (the “Respondent“). The case centered on the respondent’s refusal to register a sale certificate in favor of the petitioner following the latter’s transition from a partnership firm into a private limited company.

The dispute originated from recovery proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. SARFAESI Act, 2002, after a borrower, Mr. Kumaresan, defaulted on payments. The property in question was auctioned through an e-auction on July 25, 2023, in which the petitioner, then a partnership firm, participated and emerged as the successful bidder. Having paid the full sale consideration, the petitioner received the sale certificate in its original partnership firm’s name. However, after the firm’s transformation into a private limited company named “Dharani Geotech Engineers India Pvt. Ltd.,” the petitioner sought to register the sale certificate under its new name. Despite furnishing all necessary documentation to demonstrate the transformation of the firm into a private limited company, the respondent refused to comply, asserting that the sale certificate could only be registered in the name under which the bid form was submitted.

The Hon’ble High Court of Madras considered the materials on record and the chronology of events. It was evident that the partnership firm no longer existed, as its assets and liabilities had been assumed by the newly incorporated private company. The respondent’s stance, therefore, on registering the sale certificate in the name of a non-existent entity, was legally untenable. Accordingly, the court directed the respondent to execute and register the sale certificate in the name of “Dharani Geotech Engineers India Pvt. Ltd.”, the newly incorporated private company.