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TMI Blog2024 (4) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of the debt taken by the borrower in terms of Section 2(j) of the SARFAESI Act. Where a secured asset is an immovable property, sale by any method other than public auction or public tender may be effected on such terms as may be settled between the secured creditor and the proposed purchaser in writing. Although, in terms of sub-Section (2) to Section 13 of the SARFAESI Act, there was no specific declaration as to the account of the company in liquidation having become a Non-Performing Asset, such recourse was definitely on the cards. This court finds substance in the plea advanced by the learned counsel for Andhra Bank, that by virtue of the order dated 03.12.2012 passed by the CLB, whereby liberty was granted to the Bank to take action against the mortgaged property as per law, the sale of the property in question by way of a private treaty with the borrower and the purchaser was squarely included and envisaged. Whether the sale of the property in question on 30.01.2013 should be validated by this Court? - HELD THAT:- Unhesitatingly from the trail of correspondence viz., the letters/emails dated 20.12.2012, 22.12.2012, 27.12.2012, 28.12.20212 that preceded between the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gurgaon. FACTUAL BACKGROUND: 2. It would be expedient to consider the conspectus of facts out of which the present applications arise before adjudication of the respective applications. Briefly stated, the present company petition was preferred before this Court on 22.08.2012 and was first taken up on 17.09.2012 and notice was issued to the respondent company (in liquidation) vide order dated 09.10.2012. Thereafter, on 15.01.2013 the respondent company (in liquidation) entered appearance in the matter through its counsel. 3. It is stated that the Official Liquidator was appointed as a Provisional Liquidator to the company (in liquidation) vide order dated 15.07.2013 and was directed to take over the assets, books of accounts and the records of the company (in liquidation). However, in the interregnum, the company (in liquidation) executed a Sale Deed on 30.01.2013 with respect to the property bearing No. LGG-116, The Laburnum Condominium Complex, Block-A, Sushant Lok, Sector-28, Gurgaon in favour of Ms. Pranjali Khanna (Minor) through her mother Smt. Vandana Khanna, for a consideration of Rs. 7.75 crores. Said transaction was executed on behalf of the company (in liquidation) b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application: "The Applicant Bank moved an application to vacate the status quo order dated 13.07.2010 with respect to the mortgaged property LGG-116J Garden Greens, Laburnum Condominium Complex, Block-A, Sushant Lok; Sector-28, Gurgaon, as the property has been mortgaged with the bank by the company. To which the Applicant counsel has conceded that he has no grievance if the bank exercises right over the property as per law. In pursuance of the submissions of either side, CA 574/12 is hereby disposed of holding that bank is at liberty to take action against the mortgaged property as per law, but whereas the status quo order will remain as it is as to the other Respondents in this case." 6. With regard to the above noted order of the CLB and in view of the facts, it has been urged on behalf of the Official Liquidator as also the other applicants before this Court, that the status quo was relaxed only with respect to Andhra Bank and not towards the company (in liquidation) or its Directors. It is stated that the sale in contention was not permitted by any specific order and that Andhra Bank effectuated a private sale in collusion with Ms. Manju Kanwar, Ex-Director of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinary course of business and has resulted in loss to the workers and creditors of the company (in liquidation) thereby causing grave prejudice to their interests. In view of the same, the following prayers have been made in the application: "(i) Cancel the sale deed dated 30.01.2013; (ii) Cancel the current mutation in favour of Ms. Pranjali Khanna and direct R-3 to enter mutation in favour of the company (in prov. Liquidation); (iii) Direct SDM, Gurgaon to modify the revenue records & show the Company as the owner of property bearing No. LGG-116, The Laburnum Condominium Complex, Block - A, Sushant Lok, Sector 28, Gurgaon." 10. Reply to the aforesaid application has been filed by the respondent No. 2/Ms. Manju Kanwar. While opposing this application moved by the Official Liquidator, it is submitted that the sale of the property in question effected on 30.01.2013 was a genuine and bona fide sale, carried out by her on the behest of Andhra Bank. Reliance is placed on a series of long correspondence between her and Andhra Bank, whereby all efforts were made so as to ensure that the account of the company (in liquidation) with Andhra Bank does not become classified as a 'No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that although the market value of the property was Rs. 7,60,85,000/-, its distress value was Rs. 6,46,72,250/-. While the evaluators assessed the value of the property at Rs. 9,01,00,000/- as on 15.03.2010. However, due to recession in the market, it was eventually sold at the best available price of Rs. 7,75,00,000/-. CO. APPL. 1868/2013 14. This application has been moved on behalf of the applicant - Ms. Pranjali Khanna through her mother Smt. Vandana Khanna, who is stated to be the bona fide purchaser of the property in question. 15. It has been stated in the application that subsequent to the passing of the winding up order, the Official Liquidator visited the various properties of the company (in liquidation) as reflected in the Balance Sheet. As regards the factory premises of the company (in liquidation) situated at A-13, Sector 57, Noida, the same was sealed. However, the other factory premises of the company (in liquidation) which was situated A-137, Sector 63, Noida was not sealed by the Official Liquidator as the same was occupied by one Mr. Manohar Lal, who was able to provide sufficient documentation to show ownership of the said premises, and it was seen fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handed over to the applicant. CO. APPL. 1540/2016 21. Briefly stated, this application has been moved on behalf of the applicant - Mr. Prageet Sharma, who is an Ex-Director of the company (in liquidation). The applicant herein was appointed as an Additional Director of the company (in liquidation) on 07.04.2010, pursuant to allotment of shares worth Rs. 5 lacs, which was done in lieu of a debt owed by the company (in liquidation) to the applicant. 22. It is stated that apart from the property in question and other assets of the company (in liquidation), the applicant had mortgaged his personal property (certain agricultural village land in Gautam Buddha Nagar, Uttar Pradesh) to Andhra Bank as collateral security, and on 18.01.2010, the Bank increased the Packing Credit Limit of the respondent company from Rs. 7.2 crores to Rs. 9.24 crores. 23. It is brought forth that a Notice dated 19.07.2013 was served upon the applicant by Andhra Bank, under Section 13(2) of the SARFAESI Act, calling upon him to repay a sum of Rs. 85,96,743/-, failing which the Bank would be constrained to undertake measures under the SARFAESI Act against the mortgaged asset of the applicant. Said liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u Kanwar to M/s. VNS Accessories Pvt. Ltd. and VK International, while the remaining amount appears to have been retained by Ms. Manju Kanwar. 27. In this regard it is stated that since the sale of the property in question as also the transfer of Rs. 1.25 crores to third parties was done at the behest of Ms. Manju Kanwar during the pendency of the present winding up petition, it is but evident that the entire transaction was a preferential/fraudulent transaction. Further, that the amount has been taken out of the company and paid to certain third parties in preference over the creditors of the company (in liquidation). 28. In light of these facts being brought out, it is prayed on behalf of the applicant that the beneficiaries who have received the sum Rs. 1.25 crores, namely M/s. VNS Accessories Pvt. Ltd, M/s. VK International and Ms. Manju Kanwar, be directed to return the said amount and deposit the same along with due interest. CO.APPL. 706/2023 29. This too is an application moved on behalf of Mr. Prageet Sharma, Ex-Director, seeking to place on record the following additional documents: (i) The Final order dt. 28.10.2022 in the Review Application bearing RA No. 03/2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsels for the rival parties at the Bar. I have also perused the relevant record of the case including the documents placed on the record by the respective parties. No case law has been cited at the Bar as such. 34. First things first, the issues that have been racked up by the applicant Mr. Prageet Sharma are ex facie beyond the purview and scope of inquiry or proceedings before this Court. Quite apparently, the applicant Mr. Prageet Sharma is making an attempt to wriggle out of the financial mess created by the company (in liquidation) while he was one of the Ex-Directors. His main plea that the resolution by the Board of Directors dated 15.01.2013, authorizing Ms. Manju Kanwar to execute the sale deed in favour of the buyer was not consented by him and that his signatures were forged, is belied from the fact that consequent to the sale of the property in question, when notice dated 19.07.2013 was issued to him by the Andhra Bank for payment of Rs. 85,96,743/-, the applicant in his letter addressed to the Bank dated 07.09.2013 did not even raise a whisper of protest that the Board Resolution dated 15.01.2013 was forged in any manner. His only contention was that since Rs. 6.50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidator." 37. A careful perusal of the aforesaid provision would show that transfer of an immovable property made by a company, which is not made in the ordinary course of its business and not done in good faith and lacking an element of not being made for valuable consideration, within a period of one year before the presentation of a petition for winding up, may be held to be void against the Liquidator. As regards the disposition of any property/assets of the company in liquidation, after commencement of a winding up petition, the following provisions have to be considered: "Section 536. Avoidance of transfers, etc., after commencement of winding up (1) In the case of a voluntary winding up, any transfer of shares in the company, not being a transfer made to or with the sanction of the liquidator, and any alteration in the status of the members of the company, made after the commencement of the winding up, shall be void. (2) In the case of a winding up by 1[the Tribunal], any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... things going generally, it ought to be confirmed." 39. In the above-noted judgment of this Court, reference was also invited to a decision by the Gujarat High Court in the matter of the Sidhpur Mills Company Limited, (1987) 1 Comp. L.J. 71 (Guj.) wherein it was held as under:- "12. It is trite position in law that the commencement of winding-up proceedings relates back to the presentation of the petition (see: section 441 of Companies Act, 1956). It should be recalled that the winding-up petition in which the order was made was company petition No. 9 of 1979 which was presented on 22.2.1979. The winding-up order was made by this Court on October 18, 1979. In the circumstances, therefore, any transfer of shares of Siddhpur Mills Co. Ltd. made after the presentation of the winding-up would be void unless as otherwise directed by the Court. The Court has an absolute discretion as to validating the transaction after presentation of the winding-up petition. The discretion is to be exercised on recognized principles which guide the exercise of judicial discretion generally with particular attention to the interest of the company. The Court can validate such impugned transaction in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Companies Act, 1956 and is not a nullity. It is further argued that the appellant had paid the then prevalent market price for the flat. The appellant in this regard has also filed an additional affidavit along with documents being the sale deeds of the other flats and valuation reports with respect to the property. 10. The purported transfer of the flat aforesaid in the present case is admittedly after the order of winding up and appointment of provisional liquidator. Upon such happening the ex-management of the company which is alleged to have transferred the flat, lost any right to act on behalf of the company or to transact any of the properties of the company. The transfer thus claimed by the appellant has not been affected by any person authorised to do so. Section 531A of the Companies Act deals with transfers within a period of one year before the presentation of a petition for winding up and has no application to the facts of the present case. Section 536(2) declares transfers of the property of the company after the commencement of winding up as "void" unless otherwise ordered. 11. The question which thus arises is as to in what cases the court should order the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entered into the transaction. (iv) Knowledge of the presentation of the winding up is immaterial." 42. In light of the aforesaid proposition of law, reverting back to the instant matter, the first and foremost issue that arises in the present matter is whether Andhra Bank, which had the first charge over the property in question and is evidently a secured creditor, could have effected a sale of the property in question by way of a private treaty. In consideration of the same, this Court has gone through the relevant provisions of the SARFAESI Act, 2002 as also the Companies Act of 1956. There is no gain saying that the company (in liquidation) was a borrower in terms of Section 2(f)1 of the SARFAESI Act and the debt was taken and in existence against the property in question, which was recoverable by the Bank. Further, the property in question was a financial asset of the Bank in terms of Section 2(l)2 and there also arose a default in so far that there was apparently non-payment of the debt taken by the borrower in terms of Section 2(j)3 of the SARFAESI Act. 43. It is pertinent to appreciate that Andhra Bank being a secured creditor by virtue of Section 2(zd)4, had a securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A.] (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-- (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; [(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset: Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests. [(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,-- (i) the secured assets shall not be transferred by way of lease assignment or sale by the secured creditor; and (ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.] (9) [Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, in the case of] financing of a financial asset by more than one sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor. (10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower. (11) Without prejudice to the rights conferred on the secured creditor under or by this section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measured specifies in clauses (a) to (d) of sub-section (4) in relation to the secured assets under this Act. (12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed. (13) No borrower shall, after receipt of notice referred to in sub-section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:- (a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or (b) by inviting tenders from the public; (c) [ by holding public auction including through e-auction mode; or] [Substituted by Notification No. G.S.R. 1046 (E), dated 3.11.2016 (w.e.f. 20.9.2002).] (d) by private treaty. (6) the authorized officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): [Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in the Form given in Appendix IV-A to be published in two leading newspapers including one in vernacular language having wide circulation in the locality.] [Substituted by Notification No. G.S.R. 1040(E), dated 17.10.2018 (w.e.f. 20.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter finalizing the deal by execution of a registered sale deed. 47. Having said that, the issue that begs a question - whether the sale of the property in question on 30.01.2013 should be validated by this Court? Indeed, the sale of the property, completed on 30.01.2013, was effected after the commencement and issuance of notice to Ms. Manju Kanwar for 15.01.2013. However, unhesitatingly from the trail of correspondence viz., the letters/emails dated 20.12.2012, 22.12.2012, 27.12.2012, 28.12.20212 that preceded between the principal borrower i.e. the company (in liquidation) through Ms. Manju Kanwar and Andhra Bank before the sale was effected, does go to show that all efforts were being made to set the company (in liquidation) on course to recovery and revive it, and further to ensure that its account with the Bank does not become an NPA. If the said letters dated 20.12.2012, 22.12.2012, 27.12.2012 and 28.12.20212, emanating from the company (in liquidation) are to be believed, the company was going through a poor commercial phase due to a world-wide recession which greatly impacted Europe and United Kingdom in particular. 48. Although, much has been argued about the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial assistance granted by any bank or financial institution 2[and includes a person who, or a pooled investment vehicle which,] becomes borrower of a 3[asset reconstruction company] consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance 4[or who has raised funds through issue of debt securities]; 2. (l) "financial asset" means debt or receivables and includes-- (i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or (ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or (iii) a mortgage, charge, hypothecation or pledge of movable property; or (iv) any right or interest in the security, whether full or part underlying such debt or receivables; or (v) any beneficial interest in property, whether movable or immovable, or in such debt, receivables, whether such interest is existing, future, accruing, conditional or contingent; or [(va) any beneficial right, title or interest in any tangible asset given on hire or financial lease or conditional sale or under any other contract which secures the obligation to pay any u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under any other contract which secures the obligation to pay any unpaid portion of the purchase price of the asset or an obligation incurred or credit provided to enable the borrower to acquire the tangible asset; or (ii) such right, title or interest in any intangible asset or assignment or licence of such intangible asset which secures the obligation to pay any unpaid portion of the purchase price of the intangible asset or the obligation incurred or any credit provided to enable the borrower to acquire the intangible asset or licence of intangible asset;] 6. 69. Power of sale when valid.-- (1) A mortgagee, or any person acting on his behalf, shall, subject to the provisions of this section have power to sell or concur in selling the mortgaged property or any part thereof, in default of payment of the mortgage-money, without the intervention of the court, in the following cases and in no others, namely:-- (a) where the mortgage is an English mortgage, and neither the mortgagor nor the mortgagee is a Hindu, Muhammadan or Buddhist or a member of any other race, sect, tribe or class from time to time specified in this behalf by the State Government, in the Official Gazette; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to exercise a power of sale under section 69 shall, subject to the provisions of sub-section (2), be entitled to appoint, by writing signed by him or on his behalf, a receiver of the income of the mortgaged property or any part thereof. (2) Any person who has been named in the mortgage-deed and is willing and able to act as receiver may be appointed by the mortgagee. If no person has been so named, or if all persons named are unable or unwilling to act, or are dead, the mortgagee may appoint any person to whose appointment the mortgagor agrees; failing such agreement, the mortgagee shall be entitled to apply to the Court for the appointment of a receiver, and any person appointed by the Court shall be deemed to have been duly appointed by the mortgagee. A receiver may at any time be removed by writing signed by or on behalf of the mortgagee and the mortgagor, or by the court on application made by either party and on due cause shown. A vacancy in the office of receiver may be filled in accordance with the provisions of this sub-section. (3) A receiver appointed under the powers conferred by this section shall be deemed to be the agent of the mortgagor; and the mortgagor sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o directed in writing by the mortgagee, and shall pay the residue, of any, of the money received by him to the person who, but for the possession of the receiver, would have been entitled to receive the income of which he is appointed receiver, or who is otherwise entitled to the mortgaged property. (9) The provisions of sub-section (1) apply only if and as far as a contrary intention is not expressed in the mortgage-deed; and the provisions of sub-sections (3) to (8) inclusive may be varied or extended by the mortgage-deed; and, as so varied or extended, shall, as far as may be, operate in like manner and with all the like incidents, effects and consequences, as if such variations or extensions were contained in the said sub-sections. (10) Application may be made, without the institution of a suit, to the court for its opinion, advice or direction on any present question respecting the management or administration of the mortgaged property, other than questions of difficulty or importance not proper in the opinion of the court for summary disposal. A copy of such application shall be served upon, and the hearing thereof may be attended by, such of the persons interested in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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