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TMI Blog2011 (10) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... d to permit the Official Liquidator to take possession of the movable and immoveable assets mentioned therein into his possession; 2] It is stated by the Official Liquidator that notice of hearing of this report along with a copy thereof is served on the exdirectors of the petitioner, secured creditors, President of T.Maneklal Employees Union, General Secretary of Gujarat Kamgar Panchayat, Gen.Secretary of Gujarat Rajya Shramajeevi Karmachari Union, Mr.Yusuf Rarmar, Deven Patel and M/s.Tex Raj Realty Pvt. Ltd. (Purchaser). 3] Mr. J.P. Sen, learned Counsel appearing for the Official Liquidator has contended that the report proceeds on the basis that an order recommending winding up of the company in liquidation was passed on 23rd November 2000 by the Board for Industrial and Financial Reconstruction (BIFR for short). This recommendation came to be numbered and registered as a Company Petition for winding up. That was treated as being filed on 29th April 2003. It was admitted on 11th June 2004. The Official Liquidator came to be appointed as provisional liquidator on 14th March 2007 and, thereafter, on 26th July 2010 this Court passed an order winding up the company in liquida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raj Reality Pvt.Ltd has acquired non agricultural land bearing Survey No.323 admeasuring about 6273 sq.mtrs situated at Moje Vinzol, Taluka Daseroi, Ahmedabad 5, (Narol), were sold in favour of Texraj Reality Pvt. Ltd on 4th June 2007 for a total consideration of ₹ 44,48,888/-; 4. By a sale deed dated 4th June 2007 between Texraj Reality Pvt Ltd and M/s.SLM Maneklal Industries Ltd whereby Texraj Reality Pvt Ltd has acquired non agricultural land bearing Survey No.321/1 to 321/12 admeasuring about 31971 sq.mtrs situated at Moje Vinzol, Taluka Deseroi, Ahmedabad 5 (Narol) had been sold in favour of Texraj Reality Pvt Ltd on 4th June 2007 for a total consideration of ₹ 2,26,72,038/-; 5. By a sale deed dated 4th June 2007 between Texraj Reality Pvt Ltd and M/s.SLM Maneklal Industries Ltd whereby Texraj Reality Pvt Ltd has acquired all that piece or parcel of non agricultural land bearing Survey No.320 Paiki admeasuring about 4047 sq.mtrs as per revenue record. Actual land area at site is 4309 sq.mtrs along with construction stranding thereon admeasuring about 800 sq.mtrs situate, lying and being at Moje Vinzol, Taluka Dascroi, in the registration district of Ahmedab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s adjudicated the dues of the workers of the company and has directed the company to deposit further amount an ₹ 27 lacs approximately. I say that as aforesaid the company has already deposited the sum of ₹ 1 crore with the Provident Fund Department towards the dues of the workers. I say that after the disbursement of the amount of ₹ 27 lacs the company is entitled to the refund of ₹ 73 lacs from the Provident Fund Department; I say that the said company arrived at a One Time Settlement (OTS) with four of its secured creditors i.e Bank of Baroda, Bank of India, Dena Bank and Banque Nationale De Paris, Consortium Partners (hereinafter referred to as the said Banks). I repeat that the company has received and paid over to the Banks, labour and statutory creditors the entire total amount of ₹ 19,22,53,098/-. Out of that amount paid to the Banks is ₹ 10,59,43,855/- plus other dues cleared like:-Ahmedabad Municipal Corporation = ₹ 1,99,99,411/-, to Land Revenue Taxes = ₹ 30,19,033.65 + Bank of Baroda Debenture Holders = ₹ 80,00,000/- + Torrent Power Limited = ₹ 24,00,000/- + PF Department = ₹ 1,10,04,799/- + other credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne 2001. That Original Application bearing No.652 of 2001 was allowed by DRT on 25th November 2005. There was a recovery certificate issued in furtherance of the judgement and order on 29th December 2005. A Receiver was appointed by the DRT on 28th November 2006. It is stated that in execution of this recovery certificate an application was made seeking clearance for sale of the property. The sale proclamation was drawn on 9th January 2007. The receiver issued a letter to the Liquidator on 10th January 2007 that physical possession may be taken on 16th January 2007. Prior thereto, an application was made for postponement of sale on 13th January 2007 and reliance is placed on Rule 66 of Schedule II of The Recovery of Debts due to Banks and Financial Institution Rules (Rules for short). It was stated that the applicant had found out a buyer and, therefore, enabling postponement of sale by virtue of Rule 66 that it came to be postponed. 10] Reliance is then placed on several proposals which came to be forwarded by the Company in liquidation. In that regard, what has been stated in the affidavit dated 30th June 2011 of M/s.Tex Raj is that an application was made on behalf of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is by DRT. Once the request was made to the Recovery Officer to postpone the sale by and the relief that was sought is traceable to Rule 66, then, the powers under section 536(2) of the Companies Act, 1956 be exercised to confirm the sale and the transaction in favour of M/s.Tex Raj. More so, when M/s.Tex Raj has disbursed the amounts towards the claims of the workmen, State Bank of India and all banks have released the properties and assets from their charge and mortgage. Further, the statutory dues have also been paid. Reliance is placed upon an order passed by the Recovery Officer, a copy of which is at Exh.C to the affidavit of M/s.Tex Raj dated 30th June 2011. That order records thus:- 1 As per the compromised settlement among the Bankers, Defendant No.1 has to pay an amount of ₹ 10,57,86,320/- inclusive of earned interest and interest of ₹ 1,57,535/-. The break-up of this amount is given below: Bank of Baroda Rs.5,72,31,124/- Bank of India Rs.2,28,29,131/- BNP Paribas ₹ 65,87,065/- Dena Bank Rs.1,91,39,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest of creditors. However, the workers list at page 113 of the affidavit of M/s.Tex Raj affirmed on 3rd September 2011 would show that the same is conclusive and none of the persons enlisted therein have come forward nor raised any grievance with regard to the dues that have been paid and received. The entire chain of circumstances must be seen. There is no malice which can be attributed to anybody inasmuch as when the sale took place, there was no provisional liquidator also. When the applications were made before the DRT, there was no order passed by this Court appointing Official Liquidator as provisional Liquidator, far from winding up the affairs of the company under liquidation. Therefore, there is no attempt to over-reach the Company Court nor perpetrate any fraud on parties or on the Court. All Unions have accepted the amount. They have now filed false affidavits and their whole version is false. The Official Liquidator does not allege fraud, malice with regard to the one time settlement with the Bank or other creditors but only brings to the notice of the Court certain provisions of Companies Act, 1956. There is no allegation in the report that the sale is not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 2011 alleges that the third party purchaser is not a bonafide purchaser. The third party purchaser has not acquired or purchased the property under a sale by the Recovery Officer of DRT Mumbai. There is no sale under the supervision and control of the Recovery Officer. It is stated that the Company in liquidation filed an Company Application No.116 of 2007 seeking to set aside the order of appointment of provisional Liquidator. The submission and averments of the company in liquidation in that affidavit are identical to that of M/s.Tex Raj in the present case. The issue of so called payment to the workers by way of settlement has been raised even earlier. However, once the parties viz., the company in liquidation and M/s.Tex Raj avoided public auction and the sale also not protecting the rights of the employees, then, this Court should not uphold the same. Further, the rights of the workers in terms of section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act (for short RDB Act) has not been protected and rather defeated by the sale. There is no rateable distribution in terms of statutory provisions. For all these reasons, this company application be dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on which the subject company petition has been registered and entertained. Therefore, they ought to have referred to the said proceedings in the sale deed. But, there is no reference to these proceedings nor does the sale deed recite that the sale was under the aegis, direction and supervision of the DRT. Therefore, this is a collusive and fraudulent act in order to avoid payment to creditors and workers and to defraud the shareholders of the company. 18] Mr.Bharadwaj was at pains to clarify that these 353 workers are not part of the said 1300 and more workers, who have consented to the sale. The said 353 workers and 14 office staff members have not settled their claims with the company nor have they taken any amount from the company. Most of these workers belong to Sarvodaya Labour Union, who left the union after their leaders unauthorisedly signed the settlement agreement with the company. This agreement cannot be said to be a settlement in accordance with the I.D.Act, 1947 and the Rules framed thereunder. For all these reasons and since the workers have a definite stake in the matter, their objections be accepted and the sale be declared void. 19] There is another obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear that the purchaser cannot argue that the GIIC's claim is bad in law. It is clear from the affidavit of GIIC filed in this Court on 30th June 2011 and 5th August 2011 that GIIC's claim has not been settled and its dues are still outstanding. The sale is on as is where is basis . Therefore, the purchaser has taken the property with full knowledge of the claim of GIIC. Even the deed recites that the no dues certificate from GIIC is necessary. Therefore, in the event, the sale is not set aside, then, the purchaser should be directed to clear all the liabilities of GIIC. Mr.Dhond, has invited my attention to two affidavits filed on behalf of GIIC and a copy of the plaint filed in the civil suit in the Court of Principal Civil Judge, Ahmadabad (Rural) at Mirzapur against the company in liquidation, the official liquidator and the auction purchaser, so also the purchasers of plant and machinery. He submits that the claim of GIIC in the civil suit is crystalised and, therefore, no order adjudicating the claim be passed. 22] Mr.Oza, learned Senior Counsel appearing on behalf of M/s.Tex Raj sought to repeal each of the above objections by contending that the parties have woke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder his signature on the basis of the order of the Tribunal to the Recovery Officer for recovery of amounts debts specified in the certificate. That is preceded by the order that the Tribunal can make and that is provided by section 19(20). Section 19(23) provides for execution of the recovery certificates by sending the same to such other Tribunals where the property is situated. Then comes Chapter IV, which is entitled Recovery of debt determined by the Tribunal . The modes of recovery are by attachment and sale of immovable or immovable property of the defendant, by arrest of defendant and his detention in prison and by appointing Receiver for management of the immovable property or movable properties of the defendants. In this Chapter section 28 appears which provides for other modes of recovery. Section 29 of the RDB Act is relevant and reads as under:- 29. Application of certain provisions of Income Tax Act.- The provisions of the Second and Third Schedules to the Income Tax Act, 1961 (43 of 1961) and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecovery Officer. 29] In the submission of Mr.Oza, the Tax Recovery Officer may direct that any immovable property which has been attached or such portion thereof as may be necessary to satisfy the certificate may not be sold and order postponement of sale, to enable the defaulter to raise the amount due under the certificate. In the submission of Mr.Oza, the application made by the defaulter is under Rule 66 and, therefore, an order made thereon would necessarily mean that the sale conducted in this case in favour of M/s.Tex Raj, although private, is under the RDB Act and, therefore, the Official Liquidator need not be informed nor his consent is necessary before effecting the sale in terms of this rule. 30] It is not possible to accept this contention of Mr.Oza for more than one reason. The documents produced on record would go to show that the company in liquidation made an application on 16th March 2007 in which what it has stated that a recovery certificate has already been granted; recovery proceedings have commenced bearing No.1 of 2006. During the pendency of this O.A., itself certain financial institutions and banks were approached by the company in liquidation with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, GIIC, GIDC, excise, P.F. Etc. The company in liquidation stated that it has agreed to sell the property situate at village Watava, in Ahemdabad District in the State of Gujarat belonging to it to Tex Raj on the terms and conditions set out in a deed, a copy of which was annexed to this application. The deed also recites that subject to the payment of claim of the banks as well as the claim of GIIC, the property is agreed to be purchased by M/s.Tex Raj on as is where is and as is whatever there is basis. By itself, the execution of this deed in favour of Tex Raj would not prove that the sale, which was a private one was under the aegis of DRT or under the control, supervision and monitoring of DRT/ its Recovery Officers. 32] Then, Mr.Oza made a reference to another document, Annexure C to the affidavit of the purchasers dated 30th June 2011 and contended that Recovery Petition No.1 of 2006 and 411 of 2004 stand fully satisfied to the extent of claims of Bank of Baroda and Bank of India and these proceedings will be continued against the remaining defendant Nos. 17 to 19 in accordance with the terms and conditions as per the Recovery Certificate dated 29th December 2005. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the company is ready and willing to sell its property to this entity, nonetheless, there was no request to postpone the sale in order to give an opportunity to the defaulter to raise money by a private sale. Further, the Recovery Officer is required to make, on an application seeking postponement of sale, an order postponing the sale on such terms and conditions, for such period as he thinks proper to enable the defaulter to raise the amount. There is no such order of the Recovery Officer nor are the affidavits placed on record indicating that such an order came to be passed. Rule 66 must be read in its entirety namely, with the sub-Rule and provisos, and if so read and perused, it would be clear that the Recovery Officer is not only required to make an order postponing the sale but is required to grant certificate to defaulter authorising him within a period mentioned in the certificate and notwithstanding anything contained in the schedule, to make the proposed mortgage, lease or sale. Then, there are two provisos which require that all monies payable under the arrangement viz., mortgage, lease or sale, is required to be paid not to the defaulter but to the Recovery Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be no interference by the Company Court under section 442 read with section 537 or 446 of the Companies Act, 1956. The position holds good during the pendency of the winding up petition against debtor company and also after winding up order is passed. Hence, no permission of the Company court is necessary for initiating or continuing the proceedings under the RDB Act. This observation would have assisted the purchaser Tex Raj in this case provided on facts it was proved that the sale was under the RDB Act and during the course of execution of the recovery certificate. The facts necessary to prove a private sale in terms of Rule 66 of the Second Schedule to the Income Tax Act, 1961 are not placed on record. By relying upon certain applications made by the Company in liquidation to the Recovery Officer and based on certain statements therein, it is not possible to hold that the private sale was one recognised by Rule 66 and was in terms thereof. Therefore, the decision in the case of Allahabad Bank (supra) reported in (2000) 4 SCC 406 is of no assistance to the purchaser. 33] Once this is the position, then, the judgement of the Supreme Court in the case of Rajasthan State F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale by the Company in liquidation is dishonest but there is no allegation that M/s.Tex Raj had knowledge or was a party to this dishonesty or fraud. What the Court has before it is the Official Liquidator's report and some allegations of the Unions but not individual workman. 36] It must be at once noticed that the official liquidator's report in this case recites that information in the form of affidavit dated 31st August 2010 was received from one Mukeshbhai Parmar giving details of the properties sold by the company in liquidation. There is another affidavit dated 9th September 2010 affirmed by Mr.Bipin J. Patel, President of the T. Maneklal Employees Union along with copies of sale deeds and other documents, relating to the sale of assets of the company in liquidation and there is affidavit of Ramubhai Patel, General Secretary dated 9th September 2010 containing detailed information of Company's properties along with copies of sale deeds and documents. It is from these affidavits that the Official Liquidator states that the movable properties of the company in liquidation have been sold in favour of Mr.Yusufbhai I. Parmar and Mr.Deven Rameshbhai Patel in Janua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt should pass appropriate orders but not declare the sale as void. M/s.Tex Raj has placed on record the details of the proceedings before the DRT. 39] In the further report of the Official Liquidator dated 4th August 2011, all that is referred to is a communication/ complaint received about on going construction at site. There is certain information and reference to spot inspection in this report. Some photographs are also attached. M/s.Tex Raj has filed number of affidavits and in reply to the affidavit of Gujarat Kamgar Panchayat dated 25th July 2011, what has been stated by Tex Raj in its affidavit dated 3rd September 2011 is this:- (4) I say that purchasers have purchased the property under the proceedings of Recovery of Debt Due to Banks and Financial Institutions Act, 1995 initiated by banks before Debt Recovery Tribunal-I, Mumbai, who have remained outside the winding up proceedings. I say that the sale of immovable properties under the RDB Act is a statutory sale which came to be purchased by purchasers under the proceedings of DRT-I, Mumbai. I say that the purchaser is a bona fide purchaser of the immovable properties who has paid entire consideration before the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties under section 2(p) of the Industrial Disputes Act, 1947. I say that under these facts and circumstances the averments made in Union affidavit dated 25.7.2011 are false therefore denied. 40] Thus, it is stated that the dues of all secured creditors and more than 1300 workers have been settled after entering into a settlement with them, which is also binding on the company and worker's union. As far as the affidavit filed by Gujarat Shramajeevi Union is concerned, M/s.Tex Raj replied to the same and referred to the settlement with this Union. It is stated that no inspection was given by the Union of the documents which have been relied upon. In fact it is stated that the statements made in the affidavits are false inasmuch as the workmen have been paid the amounts by way of account payee cheques and each one of them has accepted the same. The Union is party No.4 to the agreement, a copy of which is annexed as Exh.A to this affidavit. 41] As far as the reply to the affidavit filed by the President of Gujarat Kamgar Panchayat Union, dated 3rd August 2011, it is stated that the company has produced the statement before the labour court Ahmadabad in Recovery appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances the statement made on oath by Mr.Bipin Joitaram Patel before this Hon'ble Court is false to his knowledge and he is aware of the fact that the statement is wrong despite that willfully and purposefully with oblique motive has made the false statement before this Hon'ble Court. I say that the workman has now adopted arm twisting modality with a view to obtain illegal advantage from M/s.Texraj Reality Pvt Ltd. 7) I further say and submit that over and above the affidavit and resignation filed by Mr.Bipin J. Patel, he has also suppressed material facts to the effect that he had also represented T. Maneklal Employees Union in the proceedings before Regional PF Commissioner and Regional PF Commissioner passed an order dated 26.3.2008 after hearing him representing the Union. 42] It is stated that the deponent Bipin Patel has suppressed material facts to the effect that he represents the employee of the Union in the proceedings before the Regional Provident Fund Commissioner and he passed an order on 26th March 2008 after hearing him. The purchaser M/s.Tex Raj has annexed to all these affidavits necessary documents evidencing receipt of diverse amounts by the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 1300 in number as per the terms of statutory settlement. A copy of list of 1310 workmen along with translated copies of affidavits filed by individual workmen is attached as Annexure D to this affidavit. 43] Mr.Bharadwaj and Mr.Ganguli appearing for Unions argued that company's properties worth more than ₹ 250 Crores have been sold at a throw away price in favour of M/s.Tex Raj and that itself indicates the under hand dealing and dishonesty so also fraud of the company in liquidation. Even Mr.Sen appearing for Official Liquidator sought to argue that it is not a case of private sale under Rule 66. Once it is not so and the procedure was unfair and unjust, there were no bids invited, no valuation made, no safeguards as in the case of public auction or open bid, then, the sale will be void unless ordered otherwise is the submission of the Official Liquidator. The emphasis of arguments of all parties opposing M/s.Tex Raj was that this is not a statutory sale or a sale in terms of Rule 66. I have already dealt with that aspect of the matter. All that is then argued is that 353 workmen have not accepted any payment, they are not party to any settlement and today there is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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