2011 (3) TMI 1454 - HC - Companies Law

Winding up Whether auction purchaser was liable to pay outstanding dues of respondent No. 2 as per terms and conditions of tender document, it being purchaser of property-in-question was liable to pay any dues of pre-liquidation period.

Summary

Issues:
- Liability of the applicant for outstanding dues of respondent No. 2
- Removal of charge in revenue records
- Priority of dues in liquidation process

Liability of the Applicant for Outstanding Dues:
The applicant sought a declaration that they are not liable to pay the outstanding dues of respondent No. 2 for assets purchased from a company in liquidation. The applicant, as the auction purchaser, had deposited the full purchase amount and received possession of the assets. The applicant argued that as per the tender document, they were not responsible for pre-liquidation dues, which should be settled by the Official Liquidator under specific sections of the Companies Act, 1956. Legal precedents were cited to support the applicant's position, emphasizing that the auction purchaser should not bear liabilities from the pre-liquidation period. The Official Liquidator also supported the applicant's stance, stating that respondent No. 2's claims would be handled according to the Companies Act.

Removal of Charge in Revenue Records:
The applicant highlighted that respondent No. 2 had created a charge on the purchased properties, affecting their ownership rights. Despite the applicant's request to the Official Liquidator to remove this charge, no action was taken. The Court acknowledged the applicant's concerns and directed the removal of any attachments, charges, or liens related to pre-liquidation dues from the revenue records. Furthermore, the Court instructed the recording of the applicant's name in the revenue records for the purchased properties.

Priority of Dues in Liquidation Process:
The Court analyzed the terms of the tender document and relevant provisions of the Companies Act, particularly section 530, to determine the priority of dues in the liquidation process. It was established that the auction purchaser, in this case, the applicant, should not be held liable for pre-liquidation debts. Citing previous judgments, the Court affirmed that the auction purchaser is not obligated to settle such dues and that respondent No. 2 could not claim priority for their outstanding amounts. Consequently, the Court ordered the removal of any encumbrances on the assets sold to the auction purchaser, emphasizing the applicant's exemption from pre-liquidation liabilities.

In conclusion, the Court allowed the Company Application, ruling in favor of the applicant and directing the removal of charges and liens from the revenue records, affirming the applicant's non-liability for pre-liquidation dues, and ensuring the applicant's ownership rights over the purchased assets.