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TMI Blog2013 (4) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... also to ensure the sale be conducted in accordance with law and when the Division Bench has found fault with the procedure, there would be joint responsibility. However, in the instant case, the undisputed position is that the dismantled steel structures and other materials which was available in the property due to the work of dismantling carried out by the applicant, which would in a normal circumstance have ensured to the benefit of the applicant has been subsequently sold for by the KSFC. The said amount is available with the KSFC. Further, when the property is re-auctioned, it would fetch a higher value and the liability of the KSFC in any event would be recoverable. The said amount with accrued interest will cover the major portion of the amount which is held as payable to the applicant. The application is allowed in part. The respondents 1 and 2 are held liable to pay the sum of, Rs.29,55,010/- to the applicant. - CO. APPLICATION NO. 778 of 2009 & CO. PETITION NO. 131 OF 1988 - - - Dated:- 13-6-2012 - A.S. BOPANNA, J. Ajoy Kumar Patil for the Applicant. K.S. Mahadevan, V. Jayaram and Gururaj Joshi for the Respondent. ORDER 1. The applicant was former ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 12.03.2007 and executed the lease-cum-sale agreement on 10.04.2007. 4. When this was the position, one of the erstwhile Directors of the Company-in-liquidation called in question the confirmation of sale made in C.A.No.1719/2006 by filing an appeal in O.S.A.No.6/2007. The said appeal came to be ultimately allowed on 19.12.2008 setting aside the sale in favour of the applicant. With regard to the amount of Rs. 700 lakhs which had been deposited as the auction sale price, the same has been refunded to the applicant. The issue in the instant application is however with regard to the amount which had been incurred by the applicant for taking possession and that was invested for improvement of the said property for its utilisation and also to protect the property. Since the respondents had not considered the request of the applicant, the applicant is before this Court seeking for a direction to the respondent Nos. 1 and 2 herein to refund the amount of Rs. 40,61,095/-. The claim against BESCOM does not survive as it has already been refunded by them. 5. The respondents have filed their objection statement. The fact relating to the applicant having been the successful bidd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion raised on behalf of the second-respondent-KSFC is that the POA holder representing the applicant-company is not properly authorised and as such, the application filed by him based on fabricated POA, without power is not maintainable. It is contended that the POA dated 16.07.2009 produced along with the application admits of discrepancies and the same refers to the Resolution of the Board of Directors of Reliance Prolific Traders Private Limited on 31.03.2009 while the fresh certificate of incorporation states that the said name was assumed only on 23.4.2009. Reference is made to the cross-examination of P.W.1 and it is contended that when these aspects were put to the said witness, he has produced the original of a totally different POA (Ex-P1) which is dated 08.06.2010 wherein the Resolution dated 14.04.2010 is referred. The said observations raised by the learned counsel for the KSFC has been satisfactorily explained by the learned counsel for the applicant. In that regard, even though the name of M/s Himadri Enterprises Private Limited was changed to the present name as indicated in the application with effect from 23.04.2009, the reference to the Resolution of Reliance Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whether the applicant would be justified in seeking for payment of the expenses incurred? Only on considering this aspect, the quantum of claim and the manner of recovery would arise for consideration. 12. The learned counsel for the second respondent-KSFC would vehemently contend that the applicant cannot be considered as the bona fide purchaser without notice. In that regard, he contends that the application for confirmation of the sale came up for consideration in CA No.1719/2006. In the said proceedings, the erstwhile Director of the Company-in- liquidation had filed an application to implead himself and he opposed the confirmation of sale. Though his objection was rejected by the Company Judge and the sale was confirmed on 29.01.2007, he had thereafter filed an appeal in OSANo.6/2007 wherein notice was ordered on 17.04.2007. Thus the applicant had notice of the proceedings. Hence, if the applicant chose to proceed further in developing the property, it was at their risk. In any event, an order of status quo was granted in the appeal on 07.08.2007 and from that date no further work should have been undertaken by the applicant. The purchase is made knowing the risk involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmation of sale, the auction purchaser will be party to the proceedings The decision relied upon by the learned counsel for the applicant m the case of Haryana Financial Corpn. v. Rajesh Gupta [2010] 1 SCC 655) will however not throw any light inasmuch as in the said case, the issue was with regard to forfeiture of earnest money deposited by the auction purchaser, which was ordered to be refused. 16. On the other hand, in order to appreciate in its correct perspective the aspect as to whether such claim can be made or not, it would be useful to refer to the case which was considered by the Hon'ble Supreme Court in Allahabad Bank v. Bengal Paper Mills Co. Ltd. [1999] 20 SCL 309. In the said proceedings, the property belonging to Bengal Paper Mills Co. Ltd., which was in liquidation was sold by the Official Liquidator. The second respondent in that case viz., M/s. Eastern Minerals and Trading Agency (Paper Division) purchased the property to revive the company. Accordingly the company was being run by the auction purchaser. After nearly 10 years, the sale came to be set aside by the Hon'ble Supreme Court in the above noticed proceedings itself. At that stage, when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en or the principle of restitution, the claim of the applicant may not succeed. This is not a case where the applicant was deprived of both his money and the property purchased by him. There was, therefore, no failure of consideration. By the subsequent order of court, the sale was set aside; but during the interregnum, the applicant had the benefit of the assets he had purchased. The other contracting party, the Company-in-liquidation, was deprived of the use of its assets. The creditors who held the properties as security were deprived of their right to deal with the security or to enjoy the benefits of the security during the interregnum. In fact, the securities available to the creditors were utilised by the auction-purchaser, the applicant. In that situation, the applicant might have the obligation to account for the profits. Certainly, while rendering the main judgment, this Court was conscious of all these aspects while ordering refund only of the purchase price deposited without providing for payment of interest to the purchaser but at the same time leaving it open to the purchaser to work out its claim for the expenses incurred by it before the Company Court. 13. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctioned. The applicant has not derived anything in return as a benefit. Therefore, the exercise of determining the expenses incurred by the applicant would have to be undertaken by examining each of the claims and admitting such of those expenses which would add to the benefit of the Company-in-liquidation and the secured creditor. 20. In order to establish the expenses involved, the applicant has relied on the documents which are marked as exhibits and the same needs to be noticed at the outset. Ex.P13 is the receipt dated 07.06.2007 issued by the KIADB for the payment of Rs. 20,000/- towards the permission for drilling two borewells. The document at Ex.P14 dated 26.05.2007 is the cash bill for Rs. 6,000/- of the water diviner for locating six spots for the borewells. Ex P15 dated 18.06.2007 is the running bill amounting to Rs. 6,59,992.81ps for undertaking the civil work, the details of which are indicated in the Annexure. The demand draft dated 25.06.2007 towards payment of the same is Ex.P16. Ex.P17 dated 29.08.2010 also relates to the ground water investigation done by SPG Technologies amounting to Rs.33,708/-. The demand draft dated 12.09.2007 relating to the payment is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,27,740/- is marked as Ex.P56(a) and (b). 21. In view of the contention raised by the learned, counsel for the second respondent during the course of cross-examination that certain expenses were incurred after the grant of interim order of status quo, the documents at Exhs.P57 and P58 dated 25.06.2007 are marked to indicate that permission was obtained from KIADB earlier and the order, supply as well as commissioning of the submersible pumps and pipes were made earlier. Ex.P60 is also to the same effect. The letter dated 05.08.2009 of KSFC has been marked as Ex.P59 to indicate the fact that security personnel had been engaged by the applicant stands established as they were requested by the KSFC to continue them till 31.08.2009 even after the possession of the plot was returned to the KSFC. The details of the valuation of the scrap structural steel as carried out under Ex.P55 is sought to be established by marking the document at Ex.P61. 22. The tenor of the cross-examination and the contentions put forth on behalf of the second respondent would disclose that the resistance towards the claim made under the above noticed documents are that the expenses should not have been i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vantage of selling the dismantled structures so to as earn an amount of Rs. 21,00,000/- as a result of the work performed by the applicant-company, the expenses incurred by the applicant-company to develop the property and the payments made on behalf of the applicant-company to the contractors and vendors cannot be totally ruled out based only on technical plea raised by KSFC at this juncture. That apart, except for suggesting in the cross-examination that quotations were not called before assigning the work, there is no suggestion nor has it been established that the same work could have been got done by incurring lesser expenses. However, the extent to which the claim made should be accepted would still have to be considered by looking to the nature of the expenses incurred which adds to the value of the property and also incurred for protecting the property. The sinking of the borewell would be advantageous to the land and it could be an added factor when the property is once again put to auction. Similarly the fencing, cleaning and recharging the water sources and the other civil works carried out on the land would be in the same position. In fact, the applicant would have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also for securing approval of the plans from foe KIADB is not admissible. The applicant being a company could have secured the said work through its employees. On the other hand, for the said purpose, if the applicant has chosen to engage intermediaries, the luxury of incurring such expenses cannot be passed on to the Company-in-liquidation or the secured creditors on the sale being set aside. The amount claimed under Ex.P55 for assessment of the structural steel was got done subsequent to the sale being set aside. Hence the same is disallowed. The legal expenses claimed in Ex.P56 (a) and (b) would indicate that the professional charges of the learned counsel is claimed towards appearance in CA No.1719/2006 and OSA No.6/2007. In the said proceedings, there is no order as to costs. In both the said proceedings, the confirmation or otherwise of the sale was based on the action which was taken by the KSFC in association with the Official Liquidator. In such proceedings, if the applicant have also played their part to sustain the sale, the expenses incurred thereto in their own interest will have to be borne by them only and the respondents herein would not be liable. 26. In that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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