2012 (11) TMI 486 - HC - Companies Law

Revival of company - application filled major shareholders - two applications by Deccan and Sylvan praying for sale of assets of the company in liquidation - Held that - Sylvan and Deccan both prayed for distribution of the sale proceeds that would not be possible at this stage. Deecan s right to claim money out of the sale proceeds is a subject matter of suit. Sylvan would have to protect it in accordance with law & that such stage has not come. Even if appeals arising out of order dated April 20, 2011 allowed the situation would not change. The fact, the Apex Court passed orders including the one dated September 26, 2000 where the Apex Court directed the Official Liquidator to sell the assets at the best possible price keeping interest of all creditors cannot be ignored. The said order was passed at the instance of Allahabad Bank. The next order was passed on October 18, 2010 when the Apex Court adjourned the Special Leave Petition filed by ARC (major shareholder) which was ultimately dismissed by the Apex Court. As of date, the attempt of ARC to revive the company failed at all stages. As after the order dismissal of SLP ARC filed another scheme in June, 2011, that was, awaiting disposal before the learned Company Judge. Initially the Court directed the property to be sold as a going concern. Subsequently, it was directed to be sold as is where is basis. Accordingly, assets were sold, thus no scope to interference arises. ARC was represented before His Lordship when Deccan and Sylvan were heard on their applications. Thus the learned Judge should have given a hearing to ARC. In any event, such defect is cured by us by giving a full-fledged hearing to ARC on merits. Gourinandan participated in the sale and became the successful bidder. They are supposed to pay the purchase price. On such payment being made Official Liquidator would transfer the right, title and interest. It would then be open for Gourinandan to set up industry with the concurrence of the State by resolution of dispute, if any, they would be having with the State pertaining to the land in question. Official liquidator would not be in any way responsible for the same. The learned Junior Standing Counsel rightly contended, the land revenue issue would be strictly within the domain of Land Tribunal or any other appropriate forum dealing with such situation. Neither the Company Court nor the Court of Appeal in extension of the company jurisdiction, would be competent to deal with the same. The learned Judge rightly declined to interfere.

Issues Involved:
1. Assignment of debt by Allahabad Bank.
2. Authority of the learned Company Judge to conduct the sale.
3. Pending application for the scheme of revival by ARC.
4. Clarification on the status of land sold on 'as is where is' basis.
5. Rights and obligations of the Official Liquidator.
6. Validity of the sale to Gourinandan Real Estate Private Limited.
7. Claims by Sylvan Commercial Private Limited and Deccan Traders Private Limited.
8. Intervention by Manmohan Garoria.

Issue-wise Detailed Analysis:

1. Assignment of Debt by Allahabad Bank:
Mr. Ratnanko Banerjee contended that Allahabad Bank could not have assigned its debt to Deccan Traders and Calcutta Securities after entering into an MOU with ARC. The assignment was challenged in a pending suit, and the court noted that the legality of this assignment would be determined in the pending suit filed by ARC.

2. Authority of the Learned Company Judge to Conduct the Sale:
ARC argued that the sale of assets should only be conducted by the learned Company Judge in his administrative capacity. The court acknowledged that the learned Judge should have directed the Official Liquidator to take routine directions for sale from the regular Company Court. However, the sale process, although irregular, was not deemed illegal, and the court refrained from setting it aside to avoid complications and delays in the winding-up process.

3. Pending Application for the Scheme of Revival by ARC:
ARC's appeals included grievances about the denial of opportunities to revive the company. The court noted that ARC's previous attempts to revive the company had failed, and the company was still in liquidation. The sale of assets was necessary for beneficial winding up to pay off creditors. The court allowed ARC to participate in the beneficial winding-up process but did not interfere with the sale.

4. Clarification on the Status of Land Sold on 'as is where is' Basis:
Gourinandan sought clarification on the status of the land, arguing that proceedings under the Estate Acquisition Act required clarification. The court held that the property was sold on 'as is where is' basis, and Gourinandan was deemed to have satisfied itself about the land's status. The Official Liquidator was not responsible for any title defects, and any disputes with the State regarding land use should be resolved separately.

5. Rights and Obligations of the Official Liquidator:
The Official Liquidator opposed Gourinandan's appeal, asserting that the property was sold on 'as is where is' basis and that the purchaser should have been aware of any legal implications. The court supported the Official Liquidator's stance and dismissed Gourinandan's appeal.

6. Validity of the Sale to Gourinandan Real Estate Private Limited:
Gourinandan's appeal against the dismissal of its application for clarification was rejected. The court emphasized that Gourinandan participated in the sale with full knowledge of the terms and conditions and was required to pay the purchase price. The Official Liquidator would transfer the right, title, and interest upon payment.

7. Claims by Sylvan Commercial Private Limited and Deccan Traders Private Limited:
Sylvan and Deccan's applications for sale of assets were addressed. Sylvan, not being a creditor, was directed to approach the Official Liquidator in accordance with the law. Deccan's claim to the sale proceeds was subject to the outcome of the pending suit challenging the debt assignment. The court observed that the stage for distribution of sale proceeds had not yet arrived.

8. Intervention by Manmohan Garoria:
Manmohan Garoria's application for intervention, based on a pending suit for specific performance against Gourinandan, was acknowledged. The court noted that the suit was pending before a civil court, and Garoria's interest in the property would be determined there.

Conclusion:
The appeals by ARC were dismissed, with the court allowing ARC to participate in the beneficial winding-up process. Gourinandan's appeal was also dismissed, and the sale was upheld. The court emphasized the need for the Official Liquidator to follow proper procedures in future sales and clarified that any disputes regarding land use should be resolved separately.

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