2009 (9) TMI 582 - HC - Companies Law

Winding up - Exercise and control of liquidator s powers - sale affected by Official Liquidator - Held that - In view of the material irregularities noticed, which would go to the root of the sale effected by the Official Liquidator and the appellant, who believed the sale tender notice and the report of the valuer, which were with mis-descriptions, suppression of necessary material particulars and suggestive of things, which were not available, made the offer to purchase and despite the memos and orders of Court neither the title deeds pertaining to the property were given nor he was put in actual possession and, thus, he has incurred substantial injury. Hence, the auction sale made by the Official Liquidator on 6-2-2008, is set aside and subsequently confirmed by the Court is also set aside and the Official Liquidator is directed to return the sale consideration to the appellant. The Court is of the considered opinion that it is not a fit case, the Court could order interest on the sale consideration till the time of passing of the order, since the company is already under liquidation. Appeal allowed setting aside the sale with direction to the Official Liquidator to return the entire sale consideration along with accrued interest in the bank deposit, to the appellant purchaser, within a period of four weeks therefrom, in default, the sale consideration shall carry interest at the rate of 12 per cent therefrom.

Summary

Issues Involved:
1. Fixing the reserve price and selling the properties.
2. Tracing original documents and handing over possession.
3. Surveying lands and fixing boundaries.
4. Non-disbursement of sale proceeds until compliance.
5. Returning sale consideration with interest if non-compliance.

Detailed Analysis:

1. Fixing the Reserve Price and Selling the Properties:
The Official Liquidator sought to fix the reserve price and sell the properties of M/s. Fidelity Industries Ltd. (In Liquidation). The appellant, M/s. TCI Distribution Centres Ltd., was the highest bidder at Rs. 15.20 crores. The sale was confirmed by the Court, and the appellant paid the full consideration. However, discrepancies were found in the property descriptions and survey numbers, leading to issues in identifying the correct location and extent of the lands.

2. Tracing Original Documents and Handing Over Possession:
The appellant requested the Official Liquidator to trace and hand over the original documents. Despite the Court's directions, only 26 documents were handed over, covering 20 acres, leaving the documents for the remaining land unaccounted for. The Official Liquidator admitted that some documents were with third parties, and the land included government poramboke and "Cherry Natham" classified land, which were not disclosed earlier.

3. Surveying Lands and Fixing Boundaries:
The appellant sought the Court's intervention to survey the lands and fix boundaries. The Official Liquidator's report confirmed discrepancies, including high tension wires, government constructions, and misclassified lands. The Court found that the Official Liquidator failed to verify the title and possession of the properties, relying on erroneous valuation reports from ITCOT.

4. Non-Disbursement of Sale Proceeds Until Compliance:
The appellant requested that the sale proceeds not be disbursed to creditors until the issues were resolved. The Court noted that the Official Liquidator opposed this request and failed to comply with the Court's earlier orders to provide necessary documents and survey reports.

5. Returning Sale Consideration with Interest if Non-Compliance:
The appellant sought the return of the sale consideration with interest due to non-compliance. The Court found material irregularities and substantial injury to the appellant, who relied on misleading information. The Court set aside the sale and directed the Official Liquidator to return the sale consideration along with accrued interest, emphasizing the need for the Official Liquidator to disclose all material facts and verify the title and possession of the properties before sale.

Conclusion:
The Court allowed the appellant's appeal, setting aside the auction sale due to material irregularities and substantial injury caused by the Official Liquidator's failure to provide accurate information and documents. The Official Liquidator was directed to return the sale consideration with accrued interest, highlighting the importance of transparency and due diligence in liquidation proceedings.