9911796707
TMI Blog2009 (9) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... e the company is already under liquidation. Appeal allowed setting aside the sale with direction to the Official Liquidator to return the entire sale consideration along with accrued interest in the bank deposit, to the appellant purchaser, within a period of four weeks therefrom, in default, the sale consideration shall carry interest at the rate of 12 per cent therefrom. - ORIGINAL SIDE APPEAL NOS. 85 TO 88 OF 2009 AND M.P. NO. 1 OF 2009 - - - Dated:- 8-9-2009 - M. CHOCKALINGAM AND R. SUBBIAH, JJ. P.S. Raman for the Appellant. Arvind P. Datar for the Official Liquidator. R. Senthil Kumar for the Respondent. JUDGMENT M. Chockalingam, J. - All these appeals challenge a common order of the learned Single Judge of this Court dated 13-4-2009, made in C.A. Nos. 1953 to 1956 of 2008 in C.A. No. 1983 of 2007 in C.P. No. 526 of 2000. 2. Pending the winding up proceedings in the matter of M/s. Fidelity Industries Ltd. (In Liquidation) in C.P. No. 526 of 2000, the Official Liquidator, High Court, Madras, made C.A. No. 1983 of 2007 for the following reliefs : "( a )to open the valuation report and fix the reserve price for the vacant land at Sriper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, Kilai and Ulundai. The auction was conducted on 6-2-2008. The appellant/applicant, who was the highest bidder, purchased the land for a sum of Rs. 15.20 crores. The sale was also confirmed by the Court in favour of the applicant/appellant. When a direction was issued for the payment of difference of the earnest money deposit and the balance of sale consideration within 90 days in two instalments, after remitting the balance of earnest money deposit, the applicant/appellant made a request for furnishing the title deeds and the field map relating to the property. The Official Liquidator was also directed to collect the documents from the company under liquidation and furnish the same along with the field map and on 20-3-2008, the appellant/applicant remitted the first instalment of the sale consideration. When the matter came up for hearing on 24-3-2008, the appellant/applicant made a request to furnish copies of the documents and to order survey of lands. But, there was a direction to the appellant/applicant to remit the balance of sale consideration as per the schedule. The appellant/applicant paid the second and last instalment on 30-4-2008, though the due date for second in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company-in-liquidation is required to submit a statement or a preliminary report of the company under liquidation to the Court in and whereby the affairs, assets, etc., are required to be investigated and verified and, hence, the finding recorded by the learned Single Judge that it was not possible for the Official Liquidator to investigate into the title of the properties brought to auction was liable to be set aside since it is contrary to the provisions and the objects of the Companies Act; that the discrepancies as stated by the appellant in the affidavit dated 8-9-2008, were found by the appellant subsequent to the payment of the entire sale amount; that it is pertinent to note that the same goes to the root of the matter, amounting to misrepresentation thereby vitiating the same; that, therefore, the Court should have set aside the sale and directed the refund of the amount with interest, damages and costs to the appellant; that there was a positive assertion by way of annexure to the tender terms and conditions as regards the description of the immovable property and that the same was admittedly erroneous and on the basis of the same, an offer was made by the appellant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icial Liquidator could not investigate into the title of the property was factually incorrect and the dismissal of the applications is liable to be set aside on this ground; that in the valuation report prepared by ITCOT Consultancy and Services Ltd., they have categorically stated that the valuation of the said property was arrived at without any land documents and the ownership of the land was determined from the previous owners, which was suppressed by the Official Liquidator in the tender terms and conditions and, hence, the sale was vitiated; that the statement made by the Official Liquidator in the terms to tender were misleading and based on the same, the appellant had offered to purchase the property; that when admittedly the representations made by the Official Liquidator during negotiations which had led to the contract were not true, the sale was void; that the Official Liquidator was duty bound to disclose the interest of the company-in-liquidation to the properties brought for auction; that the statute imposes and casts an obligation on the part of the Official Liquidator to verify the title of the company-in-liquidation to the property brought for sale; that in the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a fiduciary position owing a duty to make full disclosure of all material facts known and available with him; that the fact that the non-availability of title deeds ought to have been incorporated in the statement made in the tender sale and, therefore, the sale was liable to be set aside; that the relief sought for in C.A. No. 1953 of 2008 was for tracing of the original title deeds, which was opposed and registered by the Official Liquidator; that the property is in the custody of the Court and that the Official Liquidator was bound to furnish all the documents to the purchaser; that in the absence of the same and the tender notification speaking contrary, the sale was liable to be set aside; that the learned Judge failed to note that by an order dated 13-3-2003, the company was ordered to be wound up and that as late as November, 2007, the application for sale was preferred; that, therefore, the Official Liqui-dator had ample time and should have investigated the title of the company-in-liquidation to the properties and prepared a report as to the properties belonging to the company-in-liquidation; that for the act of negligence and lethargy on the part of the Official Liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the sale was liable to be set aside; that at no point of time, the passing of high tension wire and construction of an overhead tank and T.V. room by the Government and the property has no access was ever brought to the knowledge of the appellant and hence, the sale was vitiated; that the land was vacant land without any boundaries and the Official Liquidator having engaged the services of an agency to finalise the description and ownership of the property and arrive at the valuation, ought to have disclosed the existence of high tension wire in the construction of overhead tank, TV room, etc., and, thus, the sale was vitiated by fraud, misrepresentation and mistake of facts and, therefore, void enabling the purchaser appellant to seek for refund of the purchase money and under such circumstances, all the appeals have got to be allowed. 11. Learned senior counsel appearing for the appellant took the Court to the different reports and the affidavits filed by the Official Liquidator before and after the sale in question. Learned senior counsel, in support of his contention relied on a decision of the Apex Court in Ahmedabad Municipal Corpn. v. Haji Abdulgafur Haji H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds of the company under liquidation and seeking an order of sale of the property; that it is also not in the case of the appellant that an attempt to deceive was made by the Official Liquidator; that the Official Liquidator is not the person, who is making the sale of the property; that he was only an instrument in the hands of the Court; that there was no relationship, much less, fiduciary relationship between the Official Liquidator and the auction purchaser and that even if the statements made fall under the category of negligence, that would not be sufficient to set aside the sale. 14. Added further learned senior counsel that under section 460(6) of the Companies Act, any such conduct of the Official Liquidator can be the subject-matter of the decision by the Court, if the party aggrieved approaches the Court and that when an auction sale is conducted by the Official Liquidator though pursuant to the orders of the court, the execution proceedings, as envisaged under Order 21 of the Civil Procedure Code, have no application. Placing reliance on a decision of Haji Abdulgafur Haji Hussenbhai s case ( supra ), learned senior counsel would further add that, in the instant ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Official Liquidator has no personal knowledge to the property at all; that only after passing of the order of winding up, he got the control of the property and that in many of the cases, the erstwhile directors do not co-operate and they do not place all the material records for perusal, inspection and for further proceedings. 16. Added further learned senior counsel that it is true, certain discrepancies were pointed out by the appellant; but they did not carry any merit for setting aside the sale; that even the averments in the affidavit filed by the appellant would clearly indicate that they have taken possession of the property; that no person shall purchase the property without making inspection of the same; that the appellant has complained about the overhead tank, TV room, etc.; that on inspection, the appellant should have noticed the same and insofar as the entry point is concerned, it was originally a poramboke and the same was being used by the company-in-liquidation for its passage and the same state of affairs continues; that so far as the land to an extent of 2.16 acres is concerned, according to the appellant, it was classified as "Cherry Natham"; tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel appearing for the third respondent put forth his submissions in his sincere attempt of sustaining the order under challenge. He has also relied on the following decisions : Karamchand Appliances (P.) Ltd. v. Bharat Carpets Ltd. [2001] 103 Comp. Cas. 552 1 (Delhi); International Coach Builders Ltd. v. Karnataka State Financial Corpn. [2003] 114 Comp. Cas. 614 2 (SC); Divya Mfg. Co. (P.) Ltd. v. Union Bank of India [2000] 102 Comp. Cas. 66 3 (SC); and I.T.C. Ltd. v. George Joseph Fernandes [1989] 2 SCC 1. 18. The Court has paid its anxious consideration on the submissions made by learned senior counsel on either side and made a scrutiny of all the materials available. 19. An order dated 14-6-2001, was made by this Court in Company Petition No. 526 of 2000, whereby M/s. Escorts Finance Ltd., Chennai, was ordered to be wound up and the Official Liquidator attached to this Court has become the Official Liquidator of the company. A direction was also issued to take charge of all the properties and effects of the company. The Official Liquidator filed his report on 20-6-2007, which reads as follows : "3. In compliance of the abovesaid order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 375 II. Boundaries of the property : North : Wet land South : Village road leading to Kilai village East : Mango trees West : Munivardhan Naidu land III. Type of road available at present Village road leading to Kilai village IV. Extent of land considered for valuation : 41.12 acres Out of the extent of 41.12 acres of land purchased by the company from the open market, 13.28 acres of land is coming under Ulundai village and 27.84 acres of land is coming under Kilai village. 22. A perusal of the rough sketch attached to the report in page 6 of the paper book, would indicate that the entire land of 41.12 acres, which was under valuation, was shown as one piece of land. It was also stated therein that the individual survey numbers and the extent of land in each village were shown in the annexure. As the title deeds of the property was not provided to ITCOT, it relied upon the documents made available with the previous owners of the land to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tender forms were issued, as found at pages 12 to 15 of the paper book. A perusal of the terms and conditions found in the tender form shows that the property has been described as vacant land to the extent of 41.12 acres, annexing the very same survey numbers and extent of lands, which were originally attached to the valuation report, that is, all wrong and misleading statements regarding the survey numbers along with the extent of properties, were actually found in the description of property annexed to the terms and conditions. 25. It cannot be denied that the appellant/auction purchaser, when he came forward to purchase the property in auction, should have relied on the particulars regarding the extent, survey numbers, etc., of the properties in question. Needless to say, the particulars regarding the extent and measurement were material particulars. The Court ordered sale. At the time of confirmation of sale, the first EMD deposit was made on 6-2-2008, while the balance was paid on 12-2-2008. Out of the total sale consideration of Rs. 15.20 crores, the first instalment was paid on 20-3-2008 and the second instalment was due on 5-5-2008, but the same was made on 30-4-2008. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sildar, Sriperumbudur and Tiruvallur to give a certified copy of the field sketch of the survey numbers of the property, to permit the purchaser to survey the land and submit a detailed report. 27. On this memo, an order came to be passed by the Court on 30-4-2008, which reads as follows : ". . . Thus, he made the final payment totalling in all to a sum of Rs. 15,20,00,000. In the circumstances, the Official Liquidator is directed to hand over possession of the property of an extent of 41.12 acres situated at Kilai (Sriperumbudur Taluk) and Ulundai (Tiruvallur Taluk). At this juncture, it is pertinent to point out that even this date, all documents pertaining to the property have not been handed over by the Official Liquidator to the appellant." 28. Much reliance was placed to a letter addressed by the appellant on 20-6-2008, to the Official Liquidator stating to the effect that the appellant has taken possession of the entire property and all documents in the hands of the Official Liquidator were handed over. The said letter dated 20-6-2008, reads as follows : "In compliance to the order dated April 30, 2008, you have handed over the possession of the property and 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were noticed. ( a ) Insofar as the piece of land at Ulundai village is concerned : ( i )It is a fact that a big pylon carrying high tension wires (40,000 volt.) was erected in S. No. 375/11 and high tension wire going through S. Nos. 375/10 and 375/9 and the total land involved was 0.59 acres. The same came in one corner of the land as per the survey and the field map; ( ii )As per the revenue records, the land of 0.09 acres in S. No. 353/9 was not demarcated when the State Government allotted some lands to local individuals, a water tank and TV room (community) was also constructed. This vacant land was coming at one end of the land virtually projecting out of the land of the company, as could be seen from the field map produced; ( iii )An extent of 0.13.5 acres in S. No. 369/2 stood in the name of individuals which was in the middle of the impugned land. The purchaser can verify the revenue records thoroughly and if it was in the name of an individual he might negotiate with the concerned individuals for purchase; ( iv )The purchaser also brought to the notice of the Official Liquidator the discrepancies found in the revenue records vis-a-vis documents furnished to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Company of India Ltd., the secured creditor who is having exclusive charge on the land may be served notice of this application as well as the Official Liquidator s report seeking detailed response as to how they lent money on the strength of this impugned land. So far their role in confirmed to demand the money from the Official Liquidator." 33. The very reading of the above report filed by the Official Liquidator, who moved the initial report stating that he has taken possession of the property and pursuant to which it was sold to the appellant, makes it evident that there was a high tension wire going through the survey fields in question, covering 0.59 acres in Ulundai village and 0.09 acres was demarcated for a water tank and TV room, which was also constructed, 0.13.5 acres of land was in the name of the individuals ; that insofar as the return of documents in respect of 20 acres, the Official Liquidator could not secure the documents and, hence, he could not hand over possession to the purchaser and insofar as the land at Kilai village was concerned, 2.16 acres, a part of the land in question, was classified as "Cherry Natham" and for the purposes of re-classification, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mptor (let the purchaser beware) applies to such purchaser. The case of the judgment-debtor having no saleable interest at all in the property sold such as is contemplated by Order 21, rule 91 of the CPC is, however, different and is not covered by this doctrine." (p. 759) 36. Placing reliance on a judgment rendered by the Apex Court in United Bank of India s case ( supra ) and also making emphasis on "as is where is and whatever there is basis", learned senior counsel for the first respondent would submit that the sale by the Official Liquidator did not mean that he held out any warranty or guarantee in respect thereof and, hence, it was distinguishable from the sale effected by the individuals selling immovable properties. It would be more apt and appropriate to reproduce the following part of the judgment of the Apex Court : "13. In our view, the complete answer to Triputi s allegation in regard to the failure of the Official Liquidator to hand over to it possession of certain properties which were sold to it, which, according to it, the company-in-liquidation did not even own, is contained in clause 2 of the terms and conditions of sale upon the basis of which the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause in the said judgment would indicate that based on the terms and conditions of sale, the property and assets of the company-in-liquidation were sold and that the sale would be as per the inventory list on "as is where is basis" and subject to the confirmation of the Hon ble Supreme Court of India. The clause also made it clear that the Official Liquidator should not provide any guarantee or warranty in respect of the immovable properties and as to the quality, quantity or specification of the movable assets and it also made clear in the terms that the intending purchaser must satisfy themselves in all respect as regards the movable and immovable assets, as to their title, encumbrances, area, boundary, description, quality, quantity and volume, etc., and the purchaser would be deemed to offer with full knowledge as to the description, area, etc., of the properties and defects thereof, if any. But in the instant case, the collateral terms and conditions issued by the Official Liquidator in the present case read as follows : "12. All the prospective buyers desirous of submitting tender for purchase of the assets are to satisfy themselves about the condition of the assets." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the strength of its report, the upset price was fixed. The report of ITCOT would clearly indicate that the sale deeds were not produced by the Official Liquidator and on inspection and verification of the property, the report was prepared on the basis of the enquiry made with the previous owners. Even the rough sketch produced shows that the property did not have the frontage. It was the contentions put forth by the respondents side that in the sale notice it was made clear that the property was sold "as is where is and whatever there is basis" and, hence, whatever be the discrepancies found, the appellant purchaser should not complain but take the property as it is. No doubt, the sale notice contained the clause "as is where is and whatever there is basis". But, the Official Liquidator should not be permitted to take shelter under the clause in a case where the company under liquidation had no title to sell in respect of the part of the property and there were lot of mis-descriptions in respect of the property and the survey numbers were found to be different. Even the Official Liquidator has candidly admitted that an extent of 2.33 acres of land in S. No. 330/7 was classified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of possession of the property which was one of the essential ingredients of the sale. It is not a case where the parties were disputing as to the value of the property. The mistake noticed was a common one to both the parties entertained as to the possession of the entire property and a part of the property, as pointed out above, was actually in the hands of the Government and also with third parties. It is true that a sale has been made in respect of 41.12 acres of land in respect of the notified survey number and extent thereon. But it is certain that the Official Liquidator cannot execute any sale certificate in respect of the survey numbers and extents which were not originally sold. 41. An identical situation arose before the High Court of Bombay in Jaikisandas Balchand Pamnani v. Municipal Corporation of Greater Bombay AIR 1991 Bom. 341, in which case the auction sale made by the Official Liquidator was sought to be set aside under Order 21, rule 90 of the CPC, on the basis of the mis-description of the property in the sale proclamation and the sale was set aside on that ground. Order 21, rule 90 of the CPC reads as follows : "Order 21 : Execution of decrees and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequent to the acceptance of the bid and payment of initial earnest money deposit, the appellant has filed a memo seeking for verification of the title deeds, but it was the Official Liquidator, who opposed the same that the purchaser could be permitted only after the remittance of the entire sale consideration. Contrarily, after payment of the entire sale consideration by the appellant, the Official Liquidator has taken a different stand that only 26 documents were available in respect of the property and the sale was made only "as is where is and whatever there is basis" and, hence, the purchaser could not make any complaint thereof. The contention put forth by the respondents that in view of the voluminous work, the Official Liquidator could not investigate into the title of the properties, cannot be accepted even for a moment for the simple reason, in the instant case, he has engaged the services of ITCOT Consultancy and Services Ltd., with whom the valuation of the property was entrusted and the agency has also been paid for that purpose. While there is a statutory obligation on the part of the Official Liquidator to verify the title of the properties of the company-in-liqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Liquidator is not able to hand over all the documents and locate the lands by surveying within a period of two weeks, we seek this Hon ble Court to nullify the sale and refund of sale consideration with interest . . . ." From the said averments made in the affidavit, it will be quite clear that the appellant has pleaded material irregularity and also the substantial injury caused to him. The said averments would stand a good proof for the same. Under such circumstances, the respondents cannot be permitted to say that necessary requisites for setting aside the sale were not pleaded and proved. 44. The contention put forth by the respondents side that the value of the property has fallen and under such circumstances, the applications were a device by the appellant in order to wriggle out of the contract, cannot be accepted for the two reasons. Firstly, even before making payment of the balance of earnest money deposit, the request for handing over possession and for making survey and also for delivery of documents was made by the appellant; but at that juncture, it was resisted by the Official Liquidator that it could be done only after the payment of the entire sale consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
