2009 (3) TMI 580 - HC - Companies Law

Whether the auction purchaser is entitled to get possession of the subject property and a direction is to be issued to the official liquidator to remove the security guards and hand over the possession of the property? Held that - The auction purchaser has made out a case for getting possession of the subject property as the sale has already become final as the sale was already confirmed by the Recovery Officer and therefore the auction purchaser is entitled to take possession of the property and accordingly the official liquidator is directed to remove the security guards and hand over the possession of the subject property to the applicant in C. A. No. 1811 of 2005 within four weeks from the date of receipt of a copy of this order.

Issues Involved:
1. Maintainability of the application filed by the official liquidator to set aside the sale confirmed by the Debts Recovery Tribunal (DRT).
2. Transfer of proceedings from the DRT to the company court.
3. Entitlement of the auction purchaser to take possession of the property.
4. Compliance with the legal requirements for the sale of the property of a company in liquidation.

Detailed Analysis:

1. Maintainability of the Application Filed by the Official Liquidator:
The official liquidator filed C.A. No. 854 of 2006 to set aside the sale confirmed by the DRT and to permit the official liquidator to sell the assets afresh. The court held that the official liquidator, being a party before the DRT, should have challenged the sale as per the provisions of the RDB Act. The DRT has exclusive jurisdiction over such matters, and the RDB Act prevails over the Companies Act. Therefore, the application filed by the official liquidator before the company court was not maintainable and was dismissed.

2. Transfer of Proceedings from the DRT to the Company Court:
Applications C.A. Nos. 2740 to 2742 of 2007 were filed by an ex-director to transfer the proceedings from the DRT to the company court and to set aside the sale. The court reiterated that the DRT has exclusive jurisdiction and such proceedings cannot be transferred to the company court. The applications were dismissed as the applicants should seek remedy within the DRT framework.

3. Entitlement of the Auction Purchaser to Take Possession of the Property:
The auction purchaser filed C.A. No. 1811 of 2005 seeking possession of the property. The court noted that the auction was conducted on August 11, 2005, and the sale was confirmed on September 12, 2005. No appeal was filed against the auction, making the sale final. The court referred to the Division Bench judgment in K. Chidambara Manickam v. Shakeena, which held that the sale becomes absolute upon confirmation and issuance of a sale certificate, and it does not require registration. Therefore, the auction purchaser was entitled to take possession, and the official liquidator was directed to hand over the property.

4. Compliance with Legal Requirements for the Sale of the Property of a Company in Liquidation:
The court examined whether the sale complied with the legal requirements. It was established that the official liquidator was a party to the DRT proceedings and was notified. The DRT acted within its jurisdiction, and the sale was conducted following the legal framework. The court emphasized that the secured creditor need not seek leave from the company court to proceed with the sale. The official liquidator's objections were considered and rejected by the DRT, fulfilling the legal requirements.

Conclusion:
The court dismissed the applications filed by the official liquidator and the ex-director, affirming the exclusive jurisdiction of the DRT. The auction purchaser's application was allowed, directing the official liquidator to hand over possession of the property. The judgment reinforced the precedence of the RDB Act over the Companies Act in matters of debt recovery and sale of assets of companies in liquidation.

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