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TMI Blog2014 (6) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... and determined in the event of the lessee being declared insolvent or going into liquidation. In the absence of any such clause and in the absence of further act on the part of the KIADB to terminate the lease, the lease transaction was in limbo. In that, the only obligation that was outstanding was in terms of clauses 7 and 8 of the lease deed, which required the lessee to execute the sale deed if all other obligations on the part of the lessee had been completed. Apparently, since there is no indication that there was any default in the payment of the lease rent by the lessee, the only obligation that was outstanding on the part of the KIADB was the execution of the sale deed. And the lease hold rights, which were capable of being transferred as on the date of the order, was on a misrepresentation made by the KIADB and this court has overlooked the obvious that the lease deed was not current as on the date of the order and there were no lease hold rights that could be taken over, except the position that had continued with the company in liquidation as on the date of the order and further right to obtain a sale deed pursuant to the lease cum sale agreement. Therefore, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.45.90 crore. It was accepted by this court by order dated 8.2.2012 and the applicant was directed to deposit the sale consideration within 30 days from 8.2.2012. In compliance of which, the applicant had deposited the entire bid amount of Rs.45.90 crore. It is at that juncture, Company Application No.152/2012 and Company Application No.431/2012 were filed by one K.R. Bhadraswamy Gupta and M/s India Sugars and Refineries Limited, respectively, seeking that the bid of the applicant be rejected, contending that the value of the assets of the company was worth more than Rs.100 crore and therefore, the bid of Rs.35.00 crore made by the applicant was inadequate corresponding to the value of the assets. The applications were heard and dismissed by order dated 2.4.2012. The application in OLR 106/2012 was granted and accordingly, the sale of land measuring 283 acres in favour of the applicant was confirmed and the Official Liquidator was directed to hand over the auctioned property. 3. In terms of the order, confirming the sale in favour of the applicant, possession of the land, building, plant and machinery had been delivered on 16.4.2012 under a possession certificate. The Officia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the concerned Assistant Secretary after receipt of payment and letter to the Jurisdictional Sub-Registrar would be issued to register the lease deed in favour of the successful bidder. Under section 88 of the Registration Act, 1908 the personal appearance of the Assistant Secretary of KIADB is exempted. 13. The successful bidder would also have to bear the stamp duty and registration charges payable as per Karnataka Stamp Act, 1957 and Table of Registration Fee. The Successful Bidder has to get the information regarding the stamp duty and registration payable by him from the jurisdictional Sub-Registrar. 14. That as on the date of the winding up order, the company in liquidation was not entitled to the execution of the absolute sale deed without payment of the final price. Even if by operation of law, the said plots came to the custody of the Official Liquidator or the secured creditor or anyone claiming through or under them, step into the shoes of allottee and are bound by the terms and conditions contained in the agreement. Therefore, the position of the auction purchaser would be no better than the position of the allottee and is bound to answer satisfy the KIAD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his proposition of law is amply made clear in Rule 6 of the Second Schedule to Income Tax Act, 1961. Therefore, the successful bidder steps into the shoes of the company in liquidation. He/she/it would be bound by the covenants contained in the lease cum sale agreement. Under clauses 7 and 9 it is only upon the successful compliance of the terms and conditions and determination of the final price that the sale deed would be executed in favour of the lessee. 7. The advertisement itself indicated that the terms and conditions of sale are to be had from the office of the Official Liquidator. The applicant being a purchaser at a public auction, it was his responsibility to make enquiries and to ascertain his right over the property. It is pointed out that the plot was an industrial land and was to be used for industrial purpose only and it was to ensure that a vast extent of land, namely, 283 acres, was not to be put to any unauthorised use and traded for any speculative purpose, this court had found it appropriate to specifically incorporate the terms and conditions mentioned at Paras 12 to 18 and since the advertisement was issued by the Official Liquidator without incorporating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred were only lease hold rights, which the company in liquidation possessed and it is in this regard that the several terms and conditions were imposed to prevent the land being put to any unauthorised use. This could not have been overlooked and the question of executing a sale deed in favour of the applicant will not arise as the ownership had never been transferred in favour of the company in liquidation and therefore, the Official Liquidator was not enabled to deal with the property as if it was the property belonging to the company in liquidation and the company in liquidation was only a lessee as on the date of the purported auction sale. The contract would be void on account of the mistake, as the transaction has proceeded on the footing that the company in liquidation possessed the land in question and that the same could be brought to sale. 11. The learned Senior Advocate would place reliance on a decision of this court in Power Control Equipments v. Official Liquidator Co. [Application No.808 of 2006, dated 6.7.2007], wherein in identical circumstances, the subject matter of the application, which was the property that was held by the company in liquidation as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty was subject matter of a lease cum sale agreement. No clue was given that it was not an outright sale of the property, which may have been subject matter of lease cum sale agreement. The advertisement therefore is reproduced for ready reference: 'GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS OFFICE OF THE OFFICIAL LIQUIDATOR High Court of Karnataka, Corporate Bhavan , Nos.26-27, Raheja Towers, 12th Floor, M.G. Road, Bangalore - 560 001. Tel No:080-2559 8671/2/3 NOTICE OF INVITING SEALED TENDERS Sealed tenders are invited for sale of Land, Building and Plant and Machinery of M/s. GANGAVATHI SUGAR MILLS LIMITED, (IN LIQUIDATION), situated at Marali, Hobli Marali, Taluk Gangavathi, Koppal District, Karnataka. The details of assets is as follows: I. LAND: situated at Sy.Nos.5/1A, 5/1B, 5/1C, 8/1, 8/2, 9/1H, 9/2H, 10, 11/1H, 11/2H, 11/3H, 12/H4, 12/H5, 12/H6, 12/H2, 13/H1, 13/H2, 13/H3, 13/H4, 14, 15 (part), 16,17,18/1, 18/2, 21/1,21/2A, 22, 23, 69/1, 154/1, 154/2, 12/H3 (Land admeasuring 283 acres) in the industrial Area within the village limts of Marali, Hobli Marali, Taluk Gangavathi, Koppal District. The land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sit us at: www.companyliquidator.gov.in/www.mca.gov.in. Tender Forms can be purchased from the office of the undersigned at the address given above on payment of ₹ 1,000/- by way of cash or Demand Draft on any working day between 11.00 a.m. and 5.00 p.m. Sd/- (S. RAMAKANTHA) OFFICIAL LIQUIDATOR, HIGH COURT OF KARNATAKA.' 17. It is pursuant to this advertisement that the applicant had participated at the auction and was a successful bidder. The condition as to the payment of Rs.9,76,517/- as on 12.7.2010 was as follows: Sl. No. Particulars Amount 1 Principal Rs. 70,089=00 2 Interest Rs. 1,47,399=00 3 Penal Interest Rs. 3,13,601=00 4 Enhanced Compensation Rs. 4,45,428=00 Total Rs. 9,76,517=00 18. However, as on the date of deposit by the purchaser, the outstanding dues became Rs.10,23,871/- after adding the interest for the subsequent perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the lease cum sale was faulty and was incomplete and therefore, void. This would result in the KIADB to reprobate and approbate. It is also not tenable in law in the above circumstances. 20. Insofar as the reliance sought to be placed on a decision of this court in C.A.808/2006 is concerned, that was a situation where after the bid was accepted at an auction sale in respect of the property which was the subject matter of lease cum sale, this court had refused to confirm the sale since it was noticed that the company in liquidation was not holding the property as the owner thereof as on the date of the proposed sale and the same having been denied was also a possible situation, which this court could have exercised at the appropriate time and permission was sought for sale of the property. Therefore, the said order would not be tenable in the present circumstances. 21. Insofar as the division bench judgment in Kirit Morzaria (supra), is concerned, there again, the property which had been given on lease cum sale to the company in liquidation, was sought to be brought to sale by another financial corporation, which this court has held was not permissible and incid ..... 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