2013 (9) TMI 317 - HC - Companies Law

Property Liable for Attachment or Not - Whether the suit property was subject to attachment and was under control of the Official Liquidator who in turn wished to put it to sale - Held that - The contentions of both appellants that the attachment order was not binding and was held to be meritless and was consequently rejected - The orders passed and the affidavits found and noticed to have been filed from time to time before the Special Court, the Special Court could not be either faulted for its conclusions or that the specific findings arrived at that the consent order taken together with the affidavit of undertaking covered within its fold the property of the appellant-company in question for being proceeded against in execution of the decree passed for recovering the amount due as declared in the consent order could not be said to be vitiated in any manner warranting our interference. Consequently, it would be permissible for the Custodian to proceed against the property comprised in Units 3 and 4 belonging to the appellant- company also by means of an appropriate execution application as and when he choose to do so. It was nothing but a self-serving attempt found to be made as a pure afterthought to wriggle out of the lawful commitments made and retrace the position in which the Directors of the company have allowed themselves to be landed in - On the other hand, the terms as well as the tenure of the above proceedings make clear the dominant intention and purpose of them to be merely an undertaking given by a third party to the proceedings to the Court to abide by a particular course of action if the judgment-debtor failed to satisfy the decree - the undertaking as well as the consent decree only enabled the Custodian to initiate execution proceedings against the properties in question of the appellant- company and it was only in the event of such sale, the question of coming into existence any document which would require compulsory registration under Section 17 of the Act would arise and not at this stage - In substance and effect what has been undertaken to the Court was to preserve the properties intact for being proceeded against in a given eventuality and deliver peaceful possession of the property in the event of such action becoming necessary.

Summary

Issues Involved:
1. Attachment and sale of property owned by a third party (DAL) in winding-up proceedings of GAL.
2. Validity of the statement and undertaking made by Mr. G.S. Suri on behalf of DAL.
3. Effect of subsequent agreements to sell and lease the property by DAL.
4. Authority of the Official Liquidator over the property of DAL.
5. Applicability of previous court orders and their interpretation.

Detailed Analysis:

1. Attachment and Sale of Property Owned by a Third Party (DAL) in Winding-Up Proceedings of GAL:
The core issue was whether the property owned by DAL could be attached and sold in the winding-up proceedings of GAL. The court held that the property at 1, Sikandra Road, New Delhi, was indeed subject to attachment and sale under the supervision of the court. This decision was based on the statement made by Mr. G.S. Suri on 02.02.1998, which was never successfully retracted or reviewed. The court emphasized that the attachment order made in 1998 continued to be in force, and subsequent agreements to sell or lease the property by DAL in 2002 and 2003 did not negate this attachment.

2. Validity of the Statement and Undertaking Made by Mr. G.S. Suri on Behalf of DAL:
The court found that Mr. G.S. Suri's statement on 02.02.1998, wherein he committed the property to liquidate GAL's liabilities, was binding. Despite Suri's attempt to withdraw his statement on 03.02.1998, the court did not relieve the undertaking. The court noted that DAL's efforts to review or appeal the order were unsuccessful, leading to the conclusion that the statement and undertaking remained valid and enforceable.

3. Effect of Subsequent Agreements to Sell and Lease the Property by DAL:
The appellants argued that the agreements to sell and lease the property, made in 2002 and 2003, should protect their interests. However, the court held that these agreements were subsequent to the attachment order of 1998 and thus did not affect the attachment. The court cited precedents to support the view that an attachment order made prior to any sale agreements prevails, making the appellants' reliance on later agreements ineffective.

4. Authority of the Official Liquidator Over the Property of DAL:
The appellants contended that the Official Liquidator had no authority over DAL's property as DAL was not a party to the winding-up proceedings of GAL. The court rejected this argument, stating that the sequence of events and court orders clearly established the attachment of the property. The court also referred to the Supreme Court's decision in Western Press, emphasizing that DAL could not disown the undertaking made by its director, Mr. Suri, especially when it had not been successfully challenged or set aside.

5. Applicability of Previous Court Orders and Their Interpretation:
The court meticulously analyzed the sequence of orders from 02.02.1998 to 18.08.1998, concluding that the attachment order was never vacated or modified. The orders indicated that the attachment was kept in abeyance conditionally, and upon GAL's failure to meet its obligations, the winding-up and attachment orders became operative. The court dismissed the appellants' interpretation that the attachment was stayed or invalid, affirming that the orders were clear and binding.

Conclusion:
The appeals were dismissed, and the court upheld the attachment and sale of the property at 1, Sikandra Road, New Delhi, under the supervision of the Official Liquidator. The court found that the attachment order made in 1998 was valid and enforceable, and subsequent agreements by DAL did not affect this attachment. All pending applications were disposed of, with no order on costs.