2013 (4) TMI 254 - HC - Companies Law

Negligence of official liquidator - The fact of the matter is that the land that was advertised, auctioned and purchased by the applicant - Society under orders of this Court is not available on the spot, to the extent of the measurement advertised as a substantial part of it had been allotted to IPCL (now Reliance Industries Limited) as far back as in 1988. The applicant has been given to believe that 13759 square mtrs of land was available whereas it now transpires from the Report of the Official Liquidator, and affidavits of the GIDC and the Collector, Vadodara, that 8000 square mtrs of the said land is in possession of Reliance Industries Limited, and was never a part of the parcel of land belonging to the Company in liquidation. No attempt appears to have been made by the office of the Official Liquidator to ascertain the factual position, make proper inspection and inquiry or measurements of the land in question. The explanation given by the Official Liquidator is that he was under a bona fide impression that measurements, as mentioned in the Valuation Report. First prayer made by the applicant regarding setting aside of the sale is concerned. - Held that - In view of the facts and circumstances as discussed hereinabove, and as the applicant cannot be made to suffer for lapses committed by the office of the Official Liquidator, the interest of justice would demand that the sale be set aside, and the amount that has been deposited by the applicant which has been invested in a Fixed Deposit, be refunded, with interest. Consequently, the sale, confirmed, is set aside. The Registry is directed to refund the amount deposited by the applicant, that has been invested in a Fixed Deposit, along with interest, upon the applicant making an application for this purpose. The second prayer made by the applicant is for initiation of an inquiry into the manner in which the office of the Official Liquidator has conducted itself by auctioning of the property in question without ascertaining the correct status of the land in question. - Held that - A copy of this order be handed over, learned Assistant Solicitor General of India, for communication to the Secretary, Ministry of Corporate Affairs, Government of India, for information and further necessary action, as considered appropriate.

Summary

Issues Involved:
1. Clarification and confirmation of land area and status.
2. Setting aside the sale and refund of the amount paid by the applicant.
3. Inquiry into the auction process conducted by the Official Liquidator.
4. Formulation of a proper procedure for future auctions.

Detailed Analysis:

1. Clarification and Confirmation of Land Area and Status:
The applicant, Indian Oil People's Cooperative Group Housing Limited, sought clarification regarding the land area (Lot No. VA) and the status of the land situated at Survey No. 295, Village Undera, GIDC, Vadodara. The applicant discovered discrepancies in the land area, as 8000 square meters of the advertised 13759 square meters were not available, being in possession of Reliance Industries Limited. The Official Liquidator and GIDC failed to provide accurate details, leading to confusion and misrepresentation in the auction process.

2. Setting Aside the Sale and Refund of the Amount Paid by the Applicant:
The applicant requested the court to set aside the sale confirmed on 18.07.2011 due to the unavailability of the entire land area as advertised. The court found that the Official Liquidator had not conducted proper verification and measurement of the land. Consequently, the sale was set aside, and the court directed the refund of the amount deposited by the applicant, along with interest, within fifteen days from the date of the order.

3. Inquiry into the Auction Process Conducted by the Official Liquidator:
The applicant sought an inquiry into the manner in which the Official Liquidator auctioned the property without ascertaining the correct status of the land. The court acknowledged the serious lapses and dereliction of duty by the Official Liquidator, who relied on the Valuation Report without conducting an independent verification. The court ordered that a copy of the judgment be communicated to the Secretary, Ministry of Corporate Affairs, Government of India, for further necessary action.

4. Formulation of a Proper Procedure for Future Auctions:
The applicant requested the formulation of a proper procedure to ensure that future auctions are conducted with accurate inquiries and investigations. The court referred to the detailed guidelines laid down in a previous order (18.01.2012 in the matter of Official Liquidator of Hamco Mining & Smelting Ltd.) and emphasized that these guidelines should be followed to prevent similar lapses.

Conclusion:
The court set aside the sale, ordered the refund of the amount with interest, directed an inquiry into the auction process, and emphasized adherence to established guidelines for future auctions. The judgment highlighted the need for accurate verification and responsible conduct by the Official Liquidator to avoid such issues.