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2011 (8) TMI 970

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..... gopalan and D. Ravichander for the Appellant. AR. L. Sundaresan, S.R. Sundar, R. Krishna Kumar, Parthasarathi and T. Nithyanandam for the Respondent. JUDGMENT Mrs. R. Banumathi, J .- Being aggrieved by the order passed by the learned single judge in C. A. No. 2729 of 2007 in C. P. No. 174 of 2001 dated January 25, 2008, the appellant/third party has preferred this appeal. 2. The brief facts, which led to the filing of this appeal are as follows : M/s. Union Motors Services Ltd., was ordered to be wound up by the order of this court dated September 21, 2004, made in C. P. No. 174 of 2001. The official liquidator was appointed as a liquidator of the said company with a direction to take charge of all assets and effects of the company in liquidation. Pursuant to the aforesaid directions, the official liquidator has taken possession of the assets of the company situated at (i) No. 32 and 46 Thiru. Vi. Ka Industrial Estate, Ekattuthangal, Chennai-32, (ii) 3 branch offices situated at No. 4, Pattulos Road, Chennai-2 and (iii) another branch office situated at 118 Manapet, Bathoore Commune Panchayat, Union Territory of Pondicherry and at No. 104, bridge Station Road, Se .....

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..... recognition from NCTE for running the teachers' training institution in the said premises and if the appellant is directed to vacate the premises it will have the effect of closing the institution itself and therefore prays for setting aside the said order dated January 25, 2008. Further contention of the appellant is that the appellant, being a lawful tenant, is entitled to protect his possession and cannot be evicted under the guise of auction sale in favour of the ninth respondent or in any manner except under due process of law. 6. Learned senior counsel for the official liquidator Mr. AR. L. Sundaresan would further contend that the appellant-trust is aware of the sale proceedings and the appellant-trust itself participated in the auction and being the second highest bidder and also lessee in the property of the company in liquidation, cannot stall the sale of the assets of the company in liquidation. Drawing our attention to the terms of the lease deed, learned senior counsel further contended that the lease rent fixed is a very low amount and the terms are heavily tilted in favour of the lessee which raises serious doubts about the deed. 7. Mr. AR. L. Sundaresan, le .....

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..... uilt up area. The terms of lease deed are heavily loaded in favour of the lessee. We fail to understand as to how such large extent of property with a spacious building has been rented out for a meagre sum of Rs. 5,000 per month with marginal increase once in 5 years. 10. Even though the lease deed is stated to be for thirty years, the lease agreement was not registered. The winding up petition was filed on June 29, 2001. The lease granted under the first lease deed (dated January 22, 2000) expired on December 21, 2000. The next lease deed is dated December 22, 2000. As per section 531A of the Companies Act, 1956, any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration "if made within a period of one year" before the presentation of a petition for winding up, or the passing of a resolution for voluntary winding up of the company shall be void against the liquidator. The said lease deed dated December 22, 2000, is within a period of one year prior to filing of a winding up petiti .....

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..... nt. Any amount collected by the official liquidator from the appellant could only be towards damages for use and occupation of the property. Mere fact that the appellant is paying the amount to the official liquidator would not in any manner confer any right upon the appellant-trust. The lease agreement between the appellant and the erstwhile company in liquidation would not have any bearing upon the liquidation proceedings, more so in view of section 531A. 14. It is pertinent to bear in mind that the lease deeds (January 22, 2000 and December 22, 2000) have been executed for a meagre lease rent of Rs. 5,000 per month. The second lease deed dated December 22, 2010, is for a long period of 30 years and large extent of property, i.e., 8,400 sq.ft of building along with land of about 5.33 acres located between Cuddalore and Pondicherry was leased out at a meagre rent of Rs. 5,000 per month with increase at 20 per cent. for every five years. The lease is not free from doubt. We need to consider the bona fides of the transaction in the light of the following : ( i ) The lease was within a period of one year prior to filing of winding up petition ; ( ii ) Lease deed (dated Dec .....

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..... luable consideration. As to whether the transaction is made in good faith or for valuable consideration will depend on the facts of a given case. If there is no consideration or the consideration is woefully inadequate, there may arise a presumption of want of good faith. Again, even if there is adequate consideration, the official liquidator may attempt to establish that a valuable asset of the company was sought to be shielded against the claims of the company's creditors. The official liquidator's challenge would not pass muster if he cannot establish lack of bona fides on the part of the transferee. In either case, whether under section 531 or under section 531A of the Act, for the rigours thereunder to apply and the transfer to be declared void, it must be evident that the company or the controlling mind thereof was aware of the imminent winding up of the company, took out a valuable asset of the company from the general pool to be ultimately available to creditors and dealt with such asset by the impugned transaction. The test that has to be applied in either case has to be one that would hold good for the earliest date of the period covered by either section." 17. We a .....

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..... el Mr. T.R. Rajagopalan is leading the appellant in this matter and requested time for further submissions. 21. Again, we listed the matter on August 9, 2011 "for pronouncing orders". Learned counsel for the appellant Mr. D. Ravichander submitted that the property in occupation of the appellant might fetch between Rs.25,000-Rs. 50,000 and that he would persuade the appellant to pay reasonable rent and learned counsel has only submitted that since the appellant is running an educational institution, the appellant wants reasonable time to vacate and hand over vacant possession. Learned counsel for the appellant then submitted that he would file an affidavit of undertaking of the appellant to deliver vacant possession of the property and also undertaking to pay reasonable amount for use and occupation. Having regard to the submission, we have again posted the matter on August 11, 2011, under the caption "for pronouncing orders". 22. On August 11, 2011, when the matter was listed, the appellant was represented by senior counsel Mr. T. R. Rajagopalan along with Mr. D. Ravichander. On August 11, 2011, the affidavit of the appellant was filed stating that the appellant may be perm .....

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..... obligation to undo the wrong done to a party by the act of the court. Thus, any undeserved or unfair advantage gained by a party invoking the jurisdiction of the court must be neutralised, as the institution of litigation cannot be permitted to confer any advantage on a suitor from delayed action by the act of the court (vide Shiv Shankar v. U. P. SRTC [1995] (Supp) 2 SCC 726, GTC Industries Ltd. v. Union of India [1998] 3 SCC 376 and Jaipur Municipal Corpn. v. C.L. Mishra [2005] 8 SCC 423)... 20. In South Eastern Coalfields Ltd . v. State of M. P . [2003] 8 SCC 648, this court examined this issue in detail and held that no one shall suffer by an act of the court. The factor attracting applicability of restitution is not the act of the court being wrongful or a mistake or error committed by the court ; the test is whether on account of an act of the party persuading the court to pass an order held at the end as not sustainable, has resulted in one party gaining an advantage it would not have otherwise earned, or the other party has suffered an impoverishment which it would not have suffered but for the order of the court and the act of such party. There is nothing .....

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..... d to disapprove the conduct of the appellant. Having taken number of adjournments for filing necessary affidavit of undertaking, the appellant is not justified in filing the affidavit seeking permission to withdraw the appeal. Notwithstanding the affidavit seeking for permission to withdraw the appeal, in the interest of the secured creditors and the claims of the employees of the company in liquidation, we direct the appellant to pay Rs. 25,000 per month from July, 2008 to September, 2011. The appellant is granted time for vacating and handing over vacant possession of the building and vacant land till September 30, 2011, as per the affidavit of undertaking filed by the appellant. 27. Coming to the sale of the assets for auction of the properties consisting of land to an extent of 5.33 acres in R. S. No. 115/3 along with building thereon by fixing the price on January 25, 2008, the ninth respondent - S. Dorai was the highest bidder for a sum of Rs. 1,85,00,000 and the same was confirmed in his favour. The ninth respondent has remitted only earnest money deposit of Rs. 18,50,000. As per the terms and conditions of the tender-cum-auction, 50 per cent. of the sale consideration h .....

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..... 34 Comp. Cas. 396/[2007] 75 SCL 280 (Mad.), a Division Bench of this court has set aside the very sale confirmed in favour of the highest bidder at the instance of a third party, who preferred the appeal. In that case, though no appeal was filed by either of the contesting parties, when it was brought to the notice of this court by a third party regarding the procedural irregularities in conducting sale, this court set aside the auction sale. The Division Bench set aside the sale on two grounds, namely (i) opportunity was not given to third parties, and (ii) the successful bidder in the auction, in whose name the sale was confirmed, has not paid even the first instalment due as per the directions of the company court. It is an identical situation as the case in hand, in that case, the successful bidder was directed to deposit 10 per cent. of the balance amount namely Rs. 13.37 crores on or before December 8, 2004, but he has not paid the same. The successful bidder took a stand that the original side appeal filed by the third party was pending and stay was also granted and therefore he could not proceed further. Subsequently, a clarification petition was also filed and the Division .....

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