IN THE HIGH COURT OF DELHI
CA No. 101/2009 in Company Petition No. 539/1998
Date of decision: 18th May, 2009
Jhalani Tools (India) Ltd.
In re : In the matter of
And in the matter of
Goldendreams Buildcon Pvt. Ltd. ...
Applicant in CA No. 101/2009 through Dr. A.M. Singhvi,
Sr. Adv. with Mr. Tejas Karia
and Mr. Jaiveer Shergil,
Advocates
VERSUS
Morgan Ventures Ltd. ....Respondent
through: Mr. Arvind Nigam, Sr. Adv.with Ms. Divya Kesar and Ms. Priya Bansal, Advocates for the auction purchaser Ms. Rajdeepa Behura, Adv. For the Official Liquidator CORAM:
HON'BLE MS. JUSTICE GITA MITTAL
1. Whether reporters of local papers may be allowed to see the Judgment? YES
2. To be referred to the Reporter or not? YES
3. Whether the judgment should be reported in the Digest? YES GITA MITTAL, J
1. By this judgment I propose to dispose of an application filed by Golden Dreams Buildcon Pvt. Ltd. claiming to be a nominee of the Morgan Ventures Ltd. also a nominee of M/s R.N. Marwaha & Co., the successful bidder in an auction of the immoveable properties owned by Jhalani Tools India Ltd. the company in 1 liquidation. The applicant seeks a stay against execution of the deed of conveyance by the official liquidator in favour of the Morgan Ventures Ltd. in respect of the properties described as E- 29, E-30 and open land in E-18, E-19, Chikalthana Industrial Area, Aurangabad.
2. A petition being C.P. No. 539/1998 under section 434 of the Companies Act, 1956 was filed by Tata iron & Steel Co. Ltd. seeking winding up of the Jhalani Tools India Ltd., a company incorporated under the provisions of the Companies Act, 1956.
3. While this petition was pending, a proposal for rehabilitation under the Sick Industrial Companies (Special provisions) Act before the Board of Industrial & Financial Reconstruction ('BIFR') by the Jhalani Tools Ltd. was not accepted and recommendations for winding up of the company under section 20(1) of the said Act were made by the BIFR to this court. These recommendations were registered as C.P. No. 18/2001.
4. In C.P. No. 539/1998, an order dated 18th March, 2003 was passed holding that M/s Jhalani Tools was unable to pay its debt and it was, therefore, directed to be wound up. The Official Liquidator was appointed as its provisional liquidator with a direction to take into possession all assets and books of accounts of the company. Publication of the citation was also directed.
5. The company was stated to be owning six immoveable properties on which units of the company were located. An 2 intention for revival was expressed by the ex-management in respect of one unit. Consequently on 2nd February, 2005, the court directed issuance of sale proclamations for the other five units including the subject property. It appears that the property was incorrectly described and by an order passed on 23rd February, 2005, the description of the property at Aurangabad was corrected to read as E-29 and E-30 Chikalthanu Indl. Area, Aurangabad, open land E-18 and E-19. The present application is concerned with these properties at Aurangabad, referred to as the 'subject property' hereafter.
6. After valuation of the properties in accordance with law and after due advertisement, in the bidding held on 11th August, 2005 it transpired that one M/s Balaji Associates raised its bid to Rs. 59,05,00,000/- while M/s R.N. Marwaha & Company made a bid for the properties of a sum of Rs.59 crores. As the bid of M/s Balaji Associates was the highest and was above the valuation fixed by the court, its bid for all the five properties was accepted. On 12 th September, 2005, Balaji Associates was permitted to deposit 25% of the bid amount by 16th September, 2005 and the balance amount within 60 days from 11th August, 2005. As M/s Balaji failed to deposit the amount within the time extended on 22nd September, 2005, its bid was cancelled by an order passed on 20th October, 2005 and the amount of Rs.43 lakhs, which had been deposited by it by that date, was directed to be forfeited. The second highest 3 bid of M/s R.N. Marwaha & Co. in the sum of Rs.59 crores for all the five properties was accepted. M/s R.N. Marwaha & Co. deposited the amount of the earnest money of Rs.43 lakhs by demand draft on the same date and a further amount of Rs.15 crores representing 25% of the balance amount by a cheque with the Official Liquidator in court. M/s R.N. Marwaha & Co. also informed the court that M/s Morgan Ventures Ltd. (respondent herein) was its nominee so far as the purchase of the properties was concerned . Thereafter the record shows several orders in favour of the respondent.
7. Before this court, there is no dispute that the entire bid amount stands deposited. On 14th December, 2005, the Official Liquidator was consequently directed to hand over possession of the units. A difficulty was expressed so far as the possession of the subject property was concerned. This was for the reason that the applicants in CA Nos. 1682 and 1686/2005 had stated that a labour court in the state of Maharashtra had passed an award in favour of the workers and that the property situated at Aurangabad has been auctioned by the state. This court directed that a copy of the award as well as copy of the orders confirming the sale be brought on record.
8. On 20th January, 2006, the court dismissed CA Nos. 1682 and 1686/2005 filed by three workers seeking a review of the order dated 2nd February, 2005 whereby the sale in auction of the subject 4 property was directed. The court recorded that these properties stood sold alongwith four other units on a consolidated bid of Rs.59 crores in an auction held in the court.
9. By a further order passed on 2nd February, 2006 (on CA No. 1679/2006) it was recorded that the Tehsildar, Aurangabad had confirmed that the collector at Aurangabad had not sold any unit or any part of the property of the company in liquidation. It was also recorded that the highest bidder had paid the entire bid amount.
10. As such on 2nd February, 2006 the court directed the Official Liquidator to hand over the Aurangabad unit of the Company in liquidation to the Morgan Ventures Ltd. Police assistance, if required, was directed to be made available at the time of delivery of the possession. It is an admitted position that possession of the property was handed over to the respondent on 25th July, 2006.
11. So far as completion of the sale was concerned, on 5 th December, 2006, it was directed that the Dena Bank shall deposit the original title deeds of the property in the court and that the Official Liquidator would execute the sale deed in favour of the auction purchaser.
12. On 29th January, 2007, the court noticed that the Dena Bank had deposited the original title deeds in court and had given the photocopies of the originals thereof to the auction purchaser. It was finally directed that the original title deeds be given to the Official Liquidator and the sale deed was directed to be executed 5 by the Official Liquidator before 22nd February, 2007.
13. In the meantime, CA No. 491/2007 was filed on 3rd May, 2007 by one Sh. Ram Kishan Goel seeking permission to deposit a sum of Rs.70 crores and challenging the confirmation of the sale of six units in favour of M/s R.N. Marwaha & Co.
14. A second application being CA No. 710/2007 was filed on 17th July, 2007 by one M/s Sidharth Clutches Pvt. Ltd. for setting aside of the sale in favour of Morgan Ventures Ltd., nominee of M/s R.N. Marwaha & Co.
15. Yet another application being CA No. 1092/2007 was thereafter filed on 9th October, 2007 by Sidharth Clutches Auto Pvt. Ltd. praying for prohibitting Morgan Ventures Ltd. from dealing with the properties of the company pending disposal of the other applications filed before the court.
16. Dr. A.M. Singhvi, learned senior counsel appearing for the applicant has painstakingly pointed out that it was in this background that the Morgan Ventures Ltd. (respondent herein nominee of the auction purchaser) entered into an agreement to sell dated the 23rd of August, 2007 with the Golden Dreams Buildcon Pvt. Ltd. (applicant herein) in respect of the subject property alongwith all plant, machinery and equipment lying thereon for a total consideration of Rs.18,18,18,189/- Learned senior counsel has pointed out that the recitals in the agreement extensively set out the full details of the winding up proceedings in 6 the C.P.No. 539/1998 and make a reference to the order dated 2nd May, 2005; the proceedings of auction conducted by this court; acceptance of the bid on 11th August, 2005; the order dated 20th October, 2005 directing cancellation of the bid of the highest bidder and accepting the bid of the second highest bidder. . The recitals in this agreement also set out the aforenoticed orders dated 14 th February, 2005 and 29th January, 2007. It is specifically noted that the Morgan Ventures Ltd. has taken possession of the subject premises.
17. By virtue of this agreement to sell, the Morgan Ventures Ltd. had agreed to nominate M/s Golden Dreams Buildcon Pvt. Ltd. as its nominee company for the purposes of transferring its rights in the subject property and thereupon executing and registering the final sale deed in its favour. The plant, machineries and equipments on the unit stood sold to third parties by the respondent herein. It was further covenanted by the parties that the Morgan Ventures Ltd. would inform and intimate the Official Liquidator of the appointment of the applicant as the nominee for the execution and registration of the sale deed and shall cause the Official Liquidator to execute and register the sale deed in respect of the subject property directly in favour of the applicant.
Counsels on both sides have relied on the clauses of the agreement extensively.
18. It is urged by Dr. Singhvi on behalf of the applicant that the 7 full consideration in terms of the agreement stands paid. Learned senior counsel has urged that it was the respondent's stand itself that the agreement to sell had come into existence purely on account of the confirmation of the sale in its favour. It is pointed out in clause 3(a) of the agreement to sell, Morgan Ventures Ltd., as the vendee, had agreed, to directly or through the Official Liquidator, obtain an appropriate order from this court, if required, taking extension of time to execute and register the sale deed in favour of the vendee with regard to the demised property.
My attention is drawn to clause 5 of the agreement to sell whereby it was agreed between the parties that in the event any instalment of the balance sale consideration of Rs.13,68,18,189/- is not paid by the applicant to it by the appointed date, the entire earnest money paid by the Golden Dreams Buildcon Pvt. Ltd. to Morgan Ventures Ltd. shall stand forfeited and the agreement would stand terminated automatically.
It is argued that the applicant had first defaulted in making the deposit in September, 2007. However Morgan Ventures ltd. accepted payments by the applicant in March and May, 2008. The submission is that the respondent accepted payments beyond the stipulated dates and did not treat the agreement as terminated. Placing reliance on the pronouncement of the Apex Court in (2008) 4 SCC 464, Balasaheb Dayandeo Naik (Dead) through LRs, and Ors. v. Appasaheb Dattatraya Pawar, it is urged that time was not of the 8 essence of the contract and for this reason, the agreement between the applicant and the respondent continues to subsist.
19. Learned senior counsel for the applicant has contended that in terms of clause 14 of the agreement, all expenses of the sale deed which include stamp duty, registration charges etc. are required to be borne and paid by the vendee M/s Golden Dreams Buildcon Pvt. Ltd. The submission is that the parties have specifically covenanted that even if the sale deed is required to be registered by the Official Liquidator in its own favour or a nominee other than the vendee, the vendee shall bear the stamp duty charges etc incurred by the vendor Morgan Ventures Ltd. for registration of the sale deed and in case such payment was not made, it is required to be considered as a default in making the payment as part of the sale consideration. It is urged that Morgan Ventures Ltd. has also reserved the right to set off this amount out of the balance sale consideration. The contention is that the stand of the respondent in this application is dishonest as well as unfair and that grave financial consequences enure to the applicant if relief is not granted.
20. In the meantime, by a detailed judgment dated 6th January, 2009, this court dismissed CA Nos. 491/2007, 710/2007 and 1092/2007. The challenge to the auction conducted by the court and the sale of the property thereby stood finally rejected.
21. It appears that disputes with regard to the agreement dated 9 23rd of August, 2007 between the parties arose. As a result, the applicant is stated to have invoked its remedy under the Arbitration & Conciliation Act, 1996 on 28th June, 2008 and filed a petition under section 9 being no. M.A.R.J.I. No. 250/2008 before the Principal District & Sessions Judge, Aurangabad praying for interim orders. An order dated 11th July, 2008 was passed against the respondent which reads as follows :
"Respondent is restrained from creating any third party interest in the immovable property bearing plot no. E-18, E-19, E-29 and E-30 situated at Chikalthana Industrial Area, Aurangabad by any mode of transfer till filing say by the respondent."
These proceedings are admittedly pending. It has been orally informed that the parties have taken further steps towards arbitration also in the matter.
No prayer seeking status quo with regard to title of the property by the respondent was sought in these proceedings under the Arbitration & Conciliation Act, 1996.
22. The present application has been filed thereafter seeking the following prayers :-
"a. Direct the Official Liquidator not to execute the Deed of conveyance in respect of the Property situated at Plot No. E-18, E-19, E-29 and E-30 at MIDC, Chikalthana, Aurangabad until the dispute with respect to the Agreement for Sale agreeing for direct sale in favour of the Applicant by the Official Liquidator is finally adjudicated and/or resolved."
23. I have heard learned senior counsel for the parties as well as learned counsel for the Official Liquidator at length. 10
24. The factual narration with regard to the auction and confirmation of bid is undisputed.
25. Dr. A.M. Singhvi, learned senior counsel for the applicant has submitted that the property remains in custodia legis and that title of the property would pass only on execution of the sale deed in favour of the purchaser. It is urged that for this reason, the applicant is justified in approaching this court for the relief which has been sought. It is further urged that the provisions of Order 21 of the Code of Civil Procedure have no application in the instant case in as much as only the principles of the Code are applicable to the proceedings before the Company Court and not the complete statutory provisions.
26. Mr. Arvind Nigam, learned senior counsel for the respondent on the other hand has placed reliance on rule 6 of the Companies (Court) Rules, 1959 which provides that the practice and procedure of the court and the provisions of the Code of Civil Procedure, so far as applicable, shall apply to all proceedings under the Act and these rules. It is urged that as a result the provisions of the Code of Civil Procedure would apply to the proceedings for sale of the assets of the companies in liquidation as well.
27. So far as the jurisdiction of this court in the winding up proceedings is concerned, the same is circumscribed by the specific provisions of Part VII of the Companies Act, 1956. The company court proceeds towards sale of properties in liquidation in 11 accordance with the provisions of Rules 272 and 273 of the Companies (Court) Rules, 1959 which read as follows :-
"272. Sale to be subject to sanction and to confirmation by court- Unless the Court otherwise orders, no property belonging to a company which is being would up by the Court shall be sold by the Official Liquidator without the previous sanction of the Court, and every sale shall be subject to confirmation by the Court.
273. Procedure at sale - Every sale shall be held by the Official Liquidator, or, if the Judge shall so direct, by an agent or an auctioneer approved by the court, and subject to such terms and conditions, if any, as may be approved by the Court. All sales shall be made by public action or by inviting sealed tenders or in such manner as the judge may direct."
28. So far as construction of Rule 273 of the Companies (Court) Rules, 1959 and the rights of an auction purchaser in respect of a property of a company under liquidation are concerned, the principles on the subject are extremely well settled. The sanction of the court required under the Companies Act, 1956 has to be exercised with judicial discretion having regard to the interest of the company and its creditors as well. Confirmation of the sale is a valuable safeguard against the property of the company being sold at an inadequate price.
29. It is undisputed that other than rule 272 and 273, of the Companies Court Rules, 1959, there is no statutory provision governing the sale of immoveable property in liquidation proceedings. There is no dispute that so far as the act of confirmation of the sale is concerned, there is no statutory 12 provision or any rule in existence which guides the same.
30. Rule 6 of the Companies (Court) Rules, 1959 reads as follows:-
"6. Practice and procedure of the Court and provisions of the Code to apply - Same as provided by the Act or by these Rules, the practice and procedure of the court and the provisions of the Code of Civil Procedure so far as applicable shall apply to all proceedings under the Act and these rules. The Registrar may decline to accept any document which is presented otherwise than in accordance with these Rules or the practice and procedure of the Court."
31. An examination of the Code of Civil Procedure, 1908 would show that so far as forced sale of properties is concerned, the Code of Civil Procedure, 1908 has extensively provided for the same in Part II Sections 36 to 74 and Order 21 in relation to execution of decrees. Rule 64 onwards deal with sales of the immoveable properties in execution of decrees.
32. An application to set aside a sale can be made under rule 90 of order 21 for reasons on grounds of irregularity or fraud in publishing or conducting the sale under rule 91 an application for setting aside the sale can be made on the ground that the judgment debtor has no saleable interest therein. Rule 89 requires a person seeking setting aside of the sale to deposit a sum equal to 5% of the purchase money and adjustment of any amount which the purchaser may have received since the date of proclamation of the sale. The court is empowered to release the judgment debtor from liability in respect of costs and interest not covered by the 13 publication.
33. It is noteworthy that rule 86 has even envisaged a situation where a purchaser of property in execution proceedings commits default of payment within the period mentioned. In such eventuality the deposit made by him would stand forfeited to the Government and the property is required to be resold.
34. For the purposes of the present case, reliance is placed on Section 65 and rule 92 of order 21 which mandates that upon dismissal of an application under rule 89, 90 or 91 where the application is made or where no such application is made, the court shall make an order confirming the sale and thereupon the sale shall become absolute.
35. So far as the liquidation proceedings are concerned, sale of properties of the company is effected to realise and consolidate assets of the companies in order to ensure the interest of creditors of the company in liquidation and meet its liabilities . The same entails protection of its properties and the liquidator cannot be called upon to endlessly hold on to the properties. Despite safeguards there are several instances where properties of the company gets trespassed upon. Prolonged and protracted proceedings are necessary before the same can be secured and restored to the custody of the Official Liquidator. There can be no manner of doubt that it is essential to complete all steps towards realisation from the assets of the company at the earliest and to 14 effect disbursements from the amounts realised to the creditors at the earliest.
36. It is trite that the provisions of special law prevail wheresoever applicable. The Companies Act, 1956 is undoubtedly special Act so far as the affairs of the companies are concerned. In matters on which they are silent, the provisions of the Code of Civil Procedure would apply.
37. The aforesaid Rule 6 makes applicable all provisions of Code of Civil Procedure to proceedings under the Companies Act, 1956 so far as such provisions are not consistent with the provisions of the Companies Act, 1956.
38. A challenge to an auction sale under the provisions of the State Financial Corporation Act, 1951 ('SFC Act' hereafter for brevity) was raised before the Apex Court in the pronouncement reported at (1974) 2 SCC 213 Kayjay Industries (P) Ltd. vs. Asnew Drums (P) Ltd. & Ors. The court had occasion to examine the applicability of the Code of Civil Procedure thereto. It was observed that Section 32(8) of the SFC Act attracts the Code of Civil Procedure, "as far as applicable", in the realisation of the dues of the corporation and so it may be right to apply the provisions of Rule 90 of Order 21 of the Code of Civil Procedure. Reiterating the principles laid down in Navalkha & Sons. v. Sri Ramanya Das & Ors. (1969) 3 SCC 537 (supra) with regard to the principles governing confirmation of sales, in para 9 of this pronouncement, 15 the court held that it be by a 'receiver, commissioner, liquidator or court', the principles of the Code of Civil Procedure must govern. Sub-section 8 of Section 32 of the SFC Act states that an order of attachment of sale of property under that section shall be carried into effect as far as applicable in the manner provided under the Code of Civil Procedure for the attachment of sale of property at the execution of a decree.
Rule 6 of the Companies (Court) Rules is certainly wider than the provisions of sub-section 8 of Section 32 of the SFC Act.
39. In AIR 2006 SC 3672 Ramesh B. Desai & Ors. vs. Bipin Vadilal Mehta & Ors., it was held by the Supreme Court that in view of the provisions of Rule 6 of the Companies (Court) Rules, 1959, the provisions of the Code of Civil Procedure would apply to proceedings under the Companies Act, 1956. Reliance in this behalf was placed by the Apex Court on an earlier pronouncement reported at AIR 2005 SC 809 Sangramsinh P. Gaekwad & Ors. vs. Shantadevi P. Gaekwad (Dead) & Ors.
40. Reference can usefully be made to a pronouncement of the Apex Court reported at (2002) 5 SCC 510 ITI Limited v. Siemens Public Communications Network Limited wherein the court observed that in the Arbitration & Conciliation Act, 1996, application of the Code of Civil Procedure was not specifically provided for. However, for the reason that there was no expressed prohibition against the application of the Code to a proceeding 16 arising out of the said Arbitration Act before a Civil Court by inference, it could not be held that the Code was not applicable.
41. There is nothing inconsistent between the provisions of section 65 and rule 92 of order 21 of the Code of Civil Procedure with any provision of the Companies Act, 1956 or the rules framed thereunder.
In view of the principles noticed above, it has to be held that the provisions of the Code of Civil Procedure relating to auction sale by the court of properties would govern auction sales of properties in liquidation by the company court.
42. The provisions of the Code relevant for the purposes of the present adjudication include Section 65 and rules 92 and 93 of the Order 21 which deserves to be considered in extenso and read thus:-
"65. Purchaser's title - Where immovable property is sold in execution of a decree and such sale has become absolute, the property shall be deemed to have vested in the purchaser from the time when the property is sold and not from the time when the sale becomes absolute.
Order 21, rule 92. Sale when to become absolute or be set aside.- (1) Where no application is made under rule 89, rule 90 or rule 91, or where such application is made and disallowed, the Court shall make an order confirming the sale, and thereupon the sale shall become absolute. (2) Where such application is made and allowed, and where, in the case of an application under rule 89, the deposit required by that rule is made within (sixty days) from the date of sale, (or in cases where the amount deposited under rule 89 is found to be deficient owing to any clerical or arithmetical mistake on the part of the depositor and such deficiency has 17 been made good with such time as may be fixed by the Court, the Court shall make an order setting aside the sale);
(3) No suit to set aside an order made under this rule shall be brought by any person against whom such order is made.
[(4) Where a third party challenges the judgment- debtor's title by filing a suit against the auction- purchaser, the decree-holder and the judgment- debtor shall be necessary parties to the suit. (5) If the suit referred to in sub-rule (4) is decreed, the Court shall direct the decree-holder to refund the money to the auction-purchaser, and where such an order is passed the execution proceedings in which the sale had been held shall, unless the Court otherwise directs, be revived at the stage at which the sale was ordered.] rule 93. Return of purchase-money in certain cases - Where a sale of immovable property is set aside under rule 92, the purchaser shall be entitled to an order for repayment of his purchase-money, with or without interest as the Court may direct, against any person to whom it has been paid."
43. Section 65 of the Code of Civil Procedure mandates that where immoveable property is sold in execution of a decree and such sale has become absolute, the property shall be deemed to have vested in the purchaser from the time when the property is sold and not from the time when the sale become absolute. Sales in execution are distress sale effected when the judgment debtor is not in a position to pay its debts. Compulsory winding up proceedings similarly arise from an inability of the company to pay its debts. Court sales of the company in liquidation are effected to consolidate the assets of the company and maximise the realisation therefrom so as to meet the liabilities of the company.
44. So far as completion of an auction sale and rights of the 18 auction purchaser are concerned, in the case reported at (1969) 3 SCC 537 Navalkha & Sons. v. Sri Ramanya Das & Ors., it was clearly laid down that the mere acceptance of a bid does not create any vested rights in the property of the bidder/offerer so that he may demand automatic confirmation of his offer. In para 6, the court held as follows :-
"The principles which would govern confirmation of sales are well established. Where the acceptance of the offer by the commissioners is subject to confirmation of the court the offerer does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The condition of confirmation by the court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case, it is the duty of the court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the court is satisfied about the adequacy of the price, the act of confirmation of sale would not be proper or justiciable".
45. The procedure adopted by the company courts would show that it is only after receipt of the full sale consideration, that possession of the premises is directed to be handed over to the purchaser of the property.
46. Every sale of the property of a company in liquidation is subject to its confirmation by the court. Full consideration having been received and possession having been handed over, the company court proceeds to confirm the sale of the property.
47. The entire procedure for a sale in auction of the properties of 19 a company in liquidation by a company court which has been accepted as a fair and reasonable procedure in judicial precedents is found statutorily incorporated by the legislature in the provisions from rule 66 to rule 95 of order 21 of the Code of Civil Procedure, 1908. There can be no manner of doubt that the requirement of registration of the sale deed is consequential upon the order of confirmation of the sale by the court.
48. In the instant case, the bidding was held before the company court and not before the Official Liquidator. The sale was confirmed after receipt of the full consideration.
49. Mr. Nigam has contended that the sale having been confirmed in favour of the applicant, it has become absolute and no relief can be granted to the applicant in the present application. Based thereon, it is further submitted that after confirmation, execution of the sale deed is merely a procedural act and failure or delay to do so would make no difference if the rights of the respondents in the subject property are concerned. Reliance is placed on the principles laid down by the Apex Court in AIR 1991 SC 1825 Sagar Mahila Vidyalaya v. Pandit Sadashiv Rao Harshe & Ors. and (1996) 5 SCC 48 Pattam Khader Khan vs. Pattam Sardar Khan & Anr.
50. So far as the legal effect of an order of confirmation of sale is concerned, it would be useful to consider the observations of the Apex Court in AIR 1991 SC 1825 Sagar Mahila Vidyalaya vs. 20 Pandit Sadashiv Rao Harshe & Ors. on this issue. In this case, the court was concerned with a suit filed by a person claiming to be the successor in interest of the judgment debtor who prayed for setting aside of a distress sale effected by the court. The challenge by the heirs of the erstwhile owner namely Sh. Govind Ram Harshe was laid after confirmation of the sale of his property in favour of the purchaser and possession having been handed over. Only a sale certificate remained to be issued. In this background the court held as follows:-
"It may be noted that once an order was made under Order XXI Rule 92 confirming the sale, the title of the auction purchaser related back to the date of sale as provided under Section 65 CPC The title in the property thereafter vests in the auction purchaser and not in the judgment debtor. The issue of sale certificate under Order XXI Rule 94 CPC in favour of the auction purchaser though mandatory but the granting of certificate is a ministerial act and not judicial. Thus looking into the matter from this angle also it is clear that no right or title remained with Govind Rao Harshe after confirmation of sale in favour of Gopal Rao Mutatkar which related back to the date of sale i.e. 20th August, 1942. Thus there is no question of holding that it was a case of a void sale which could be ignored by a true owner and it did not affect his title."
51. In (1991) 1 SCC 633 : AIR 1991 SC 401 Municipal Corporation of Delhi vs. Pramod Kumar Gupta, a question arose before the court as to whether duty is payable under section 147 of the Delhi Municipal Corporation Act, 1957 on a sale certificate issued by the civil court under Order 21 Rule 94 of the 21 Code of Civil Procedure. The property in question was sold in an auction sale in execution of a decree by a civil court and was purchased on 4th August, 1986 by the respondent. The sale stood confirmed on 6th November, 1986 when the high court directed issuance of the sale certificate under Order 21 Rule 94 of the Code of Civil Procedure. It was contended by the respondent that the sale certificate was not covered under the definition of instrument of sale of immoveable property and hence not covered under Section 147 of the Delhi Municipal Corporation Act. The reasoning given by the Apex Court squarely applies to the issue raised before this court. It was held that the title to the property put on auction sale under Order 21 of the CPC passes under the law when the sale is held. The owners and certain other interested persons are afforded opportunity in the court for setting aside a sale on enumerated grounds and, after all such matters are disposed of without disturbing the sale, the sale is confirmed under Rule 92. The stage for issuing the certificate of sale arises only thereafter. The Apex Court held that "it is manifest that the title passes under the auction sale by force of law and the transfer becomes final when an order under Rule 92 confirming it is made. By the certificate issued under Rule 94, the court is normally declaring the effect of the same and is not distinguishing or creating title. The object of issuance of such a certificate is to avoid any controversy with respect to the identity of the property sold, and of the 22 purchaser thereof is also the date when the sale becomes absolute."
52. In (1996) 5 SCC 48 Pattam Khader Khan vs. Pattam Sardar Khan & Anr., the Apex Court held that a court sale is a compulsory sale conducted by or under orders of the court and execution of a sale certificate under section 95 does not by itself create any title but is evidence of the title. It was held that upon confirmation of the sale, the sale becomes absolute and it is obligatory on the court to issue the certificate. In case of any delay of the court or inaction of the purchaser in completing the legal requirements and formalities would be irrelevant so far as the title of the auction purchaser in the subject property was concerned. The court further held that the title of the court auction-purchaser becomes complete on the confirmation of the sale under, Rule 92 of Order 21, and by virtue of the thrust of Section 65 CPC, the "property vests in the purchaser from the date of sale; the certificate of sale, by itself, not creating any title but merely evidence thereof. The sale certificate rather is a formal acknowledgment of a fact already accomplished, stating as to what stood sold. Such act of the court is pristinely a ministerial one not judicial. It is in the nature of a formalization of the obvious."
53. Valuable light is shed on the issue raised by pronouncements on sales by auction under some other statutes. Rules 90 and 92 of the Displaced Persons (Compensation & Rehabilitation) Rules, 1955 23 refer to different stages in the auction sale of the properties in the compensation pool. Absence of a statutory provision similar to Section 65 or rule 92 of order 21 of the CPC in the Displaced Persons (Compensation & Rehabitation) Rules in respect of auction of property fell for consideration in several cases. These rules also did not contain any provision akin to rule 6 of the Companies (Court) Rules, 1959. The Supreme Court was of the view that the general principles of the Code of Civil Procedure would apply.
54. This issue arose before the Apex Court in the pronouncement reported at AIR 1965 SC 1994 Bishan Paul vs. Mothu Ram rendered in the context of an auction sale of evacuee property. In this case, property in possession of a tenant was auctioned because the original landlord became an evacuee and the respondent whose bid was highest, had paid the full price before the sale in his favour was confirmed. The sale certificate though issued later mentioned the date of confirmation of the sale in his favour. The tenant was asked to attorn to the purchaser from the date of confirmation of sale and thus possession was also delivered on that date.
55. The matter was considered by the court on general principles and it was held that passing of title was not in abeyance till the certificate was issued, but passed on the confirmation of the sale. The court held that the intention behind the rules appeared to be that title shall pass when the full price is realised irrespective of the 24 date mentioned on the sale certificate.
56. The court observed that the tenant was liable to attorn from the date of confirmation of the sale because nothing remained to be done thereafter 'except the ministerial acts of issuing the certificate and getting it registered'.
It was held that so far as the title to the property was concerned, it must be deemed to have passed on the date of confirmation of sale and was not in abeyance till the date of issue of the certificate and the certificate then issued must relate back to the date when the sale become absolute.
57. A similar question arose before this court in the pronouncement reported at 2004 (75) DRJ 724 (DB) S. Sohan Singh v. UOI & Ors. In this case, the petitioner had purchased the subject property in an auction of evecue property. The sale price stood deposited by the purchaser before the date of a notification under section 4 of the Land Acquisition Act, 1894. The court noted that Rule 90 of the Displaced Persons (Compensation & Rehabilitation) Rules does not contain the expression 'confirmation of sale'. Reliance was placed on the aforenoticed pronouncements of the Apex Court and it was held that title to the property passed on the bid being approved and payment of the full price being made irrespective of whether the sale certificate was issued or not in the petitioner's favour.
58. In Hans Raj Bafna v. Ram Chandra Aggarwal (2005) 4 25 SCC 572 the Supreme Court again reiterated the earlier view expressed in Bishan Paul v. Mothu Ram (supra) and observed that:-
"...The view taken by the High Court is against the law laid down by this Court in Bishan Paul v. Mothu Ram MANU/SC/0382/1965 and also against the principles of jurisprudence as it is an established fact that a valid sale confirmed by the authorities confers title as well as ownership rights in the purchaser. Valid sale of property and ownership are inseparable and the moment the price is paid and sale is confirmed the purchaser becomes the owner...."
The position under the Companies Act, 1956 is similar.
59. Dr. A.M. Singhvi, learned counsel for the applicant has placed reliance on a pronouncement of the Allahabad High Court reported at (2005) 128 Com.Cases 452 (All) Vishwa Nath Agarwal v. State of U.P. & Ors. wherein it was held by the court that title to the property of the company being sold could pass to the purchaser only on execution of the sale deed by the liquidator and not by the order of the court confirming the sale.
60. In this case court has held that confirmation of the sale is part of the sanction required before the sale of the property. Having regard to the several pronouncements of the Apex Court noticed herein, I am in respectful disagreement with the view taken inasmuch as the court grants the sanction to sell the property when it accepts a valuation, appoints a reserved price, directs issuance of the sale proclamation etc towards holding of the auction. Confirmation of the sale is effected after receipt of the full bid amount.
26
I also find that the submission made before this court based on the applicability of the Code of Civil Procedure in view of rule 6 of the Companies (Court) Rules was not made before the Allahabad High Court in this judgment. It has been held in Bishan Paul vs. Mothu Ram (supra) by the Supreme Court that the issuance of the sale certificate and registration of the sale deed is a ministerial act. This pronouncement was also not brought to the notice of the Allahabad High Court and has not been considered in this judgment. For these reasons the same would not guide the present adjudication.
61. In 1970 RCR 410 Globe Financiers Pvt. Ltd. (in liquidation) vs. H.P. Sharma the issue which arose for consideration was as to whether the company in liquidation can sell or otherwise transfer its tenancy rights without consent of the landlord and claim or receive payment in consideration or assignment of the tenancy. The court held that the liquidator assumes or functions on behalf of the directors of the company in accordance with the prescription of the statutes and his acts are acts of the company. When he assigns the tenancy or other assets, it is assignment by the company. For this reason, the Official Liquidator cannot receive any price for assignment of the tenancy in view of section 5 of the Delhi Rent Control Act for the reason that the restriction imposed by sub-section 3 of section 16 of the Companies Act, 1956 binds the Official Liquidator as much as it 27 binds the company.
No such issue arises in the instant case.
62. The record shows that on 2nd February, 2006, this court has noted that the entire bid amount has been paid and possession of the Aurangabad unit remains to be handed over to the highest bidder namely Morgan Ventures Ltd. The Official Liquidator was specifically directed to hand over the Aurangabad unit of the company in liquidation to the highest bidder.
Possession of the subject property stands handed over to the Morgan Ventures Ltd. a nominee of the auction purchaser upon receipt of the full bid amount and the sale stands finally confirmed by the order passed on 25th July, 2006. So far as the company court was concerned, all steps towards the sale of the property as stipulated under the statutory rule 272 of the Companies (Court) Rules, 1959 stood taken.
It is noteworthy that on 21st November, 2006, the court has directed execution of the sale deed in favour of Morgan Ventures Ltd. or its nominee.
63. There is therefore substance in the submissions of learned senior counsel for the respondent that once the sale has been confirmed, the title of the auction purchaser relates back to such date and it has to be held that no right, title or interest would remain with the company in liquidation after confirmation of the same in favour of the highest bidder.
28
In this background, there would be no justification for not treating the execution of the sale deed as merely a ministerial act which remains to be performed.
64. The other question which arises for consideration by this court is with regard to the maintainability of the prayers made in the present application before this court. The application is not premised on a challenge to the confirmation of the sale by the court. There is no grievance made that the same deserves to be voided on any grounds whatsoever. On the contrary, both the parties rest their right, title and interest on the confirmation of sale in favour of M/s Morgan Ventures Ltd., respondent herein.
65. The prayer made by the applicant has to be considered in this factual and legal background. The same also rests on the legal effect of the order of confirmation of the sale by the company court.
66. Dr. A.M. Singhvi, learned senior counsel appearing for the applicant has submitted that the company court's jurisdiction is not ousted even after passing of an order of confirmation of sale. In this behalf, reliance has been placed on the pronouncements of the Apex Court reported at (2000) 6 SCC 69 (para 16 at page 79) Divya Manufacturing Company Ltd. v. Union Bank of India; (1999) 4 SCC 383 Allahabad Bank vs. Bengal Paper Mills Co. Ltd. & Ors. (para 25 at page 394); (2008) 10 SCC 440 (para 37 page 449) F.C.S. Software Solutions Ltd. vs. LaMedical 29 Devices Pvt. Ltd.; a pronouncement of this court reported at 2009 1 AD (Delhi) 397 Saraf Paper Mills (in liquidation) through Official Liquidator vs. Respondent and the pronouncement of the Punjab & Haryana High Court reported at 2006 129 Com.Cases 41 P&H Windsor Yarn Ltd. vs. Punjab Yarns Ltd. (in liquidation).
67. These judgments lay down the principle that the interest of the company is paramount and has to be secured at all costs. In (2000) 5 SCC 274 Union Bank of India v. The Official Liquidator, it was held as follows :-
"10. .......that in proceedings for winding up of the Company under liquidator, the Court acts as a custodian for the interest of the company and the creditors. Therefore, before sanctioning the sale of its assets, the Court is required to exercise judicial discretion to see that properties are sold at a reasonable price. For deciding what would be reasonable price, valuation report of an expert is must. Not only that, it is the duty of the Court to disclose the said valuation report to the secured creditors and other interested persons including the offerors. Further, it is the duty of the Court to apply its mind to the valuation report for verifying whether the report indicates reasonable market value of the property to be auctioned even if objections are not raised."
It was not open to dispose of the assets of the company without disclosing the valuation report to the creditors and without fixing its reserve price. The properties so auctioned and confirmation of the sale for inadequate consideration could set at naught the interest of the shareholders; secured and unsecured creditors and employees of the company.
30
The Apex Court held that "this approach is unjustifiable by any judicial standard and is against the normal procedure for auctioning the immovable property of the Company which is to be wound up."
68. Learned senior counsel for the applicant has placed reliance on the pronouncement in (2000) 6 SCC 69 Divya Manufacturing Co. Pvt. Ltd.v. Union Bank of India in support of the proposition that this court is not functus officio in respect of the property even after the confirmation of the sale. This submission fails to take into consideration the specific caution drawn by the court in this pronouncement so far as exercise of jurisdiction with regard to the sale of a property after its confirmation is concerned. In this case the Apex Court found that the offer made by the auction purchaser was totally inadequate in comparison to the higher offer which was received and that the interest of the company and its creditors therefore lay in setting aside the sale, even though the sale was not the consequence of any irregularity or fraud in its conduct. The court held that a meaningful intervention by the court may prevent, to some extent, underbidding at the time of auction by the court. It was in these facts that the court approved review of the exercise of judicial discretion. It was consequently held that the court would be empowered to set aside a sale even though it is confirmed if it is for the interest of creditors, contributories and all concerned and/or 31 public interest.
69. Before me, it is urged on behalf of the applicant that the 'public interest' noticed by the Apex Court takes into its fold such interest as that of the applicant. It is an admitted position that the present case does not involve any dispute involving interest of creditors, contributories or the company in liquidation.
70. Liquidation proceedings relates to all affairs of the company. The liquidator takes over all assets and the records of the company and attempts firstly to identify and secure them, determine the liabilities of the company; pay them off from the available funds of the company; pursue claims against debtors etc. More often than not issues of state revenue owed by the company in liquidation; interest of the workmen and secured creditors which often includes statutory financial institutions and nationalised banks; the interest of members and others who are not represented before the court in liquidation proceedings. Sales in auction are conducted to secure all these interests.
71. The submission made on behalf of the applicant also does not consider the public interest involved in securing the interest of a company which contributes to the economy of the place where it is located.
Therefore, the expression "public interest" takes into its ambit the welfare and interest of persons other than those having a private interest in the matter. Thus, the reference to "public 32 interest" in the context of the properties of companies in liquidation to all these concerns. It refers to something beyond and other than the interest of any individual as the applicant in the instant case.
72. Public interest cannot be construed on the narrow view of the expression 'public' to deem a reference to third parties who have no concern of any kind even with the company in liquidation as is being propounded before this court. For this reason, the pronouncement in Divya Manufacturing Co. Pvt. Ltd. has no application to the facts of the instant case. It certainly does not support the proposition being advanced in the present application.
73. In (1974) 2 SCC 213 Kayjay Industries (P) Ltd. vs. Asnew Drums (P) Ltd. & Ors., the court placed reliance on the earlier pronouncement in (1969) 3 SCC 537 Navalkha & Sons. v. Sri Ramanya Das & Ors. (supra) and stated that in all public sales the authority must protect interests of the parties keeping in view the fact that "a court sale is a forced sale and not, notwithstanding the competitive element of a public auction, the best price is not often forthcoming".
74. The pronouncement of the Apex Court reported at (1999) 4 SCC 383 Allahabad Bank & Ors. vs. Bengal Paper Mills Co. Ltd. & Ors. is to the same effect. It may be noted that in the case before the Supreme Court the terms of auction contained the stipulation that the sale could be set aside after confirmation. The sale was set aside inter alia for the reason that no reserve price of 33 the property was fixed ; that the sale was insufficiently advertised; that the offer of the highest bidder was not in accordance with the terms and conditions of the sale; that the valuation report was based on incomplete parameters; consequential directions were made in haste without considering various aspects of the matter and the best possible price had not been endeavoured to be realised in the interest of the creditors. In para 25, the court had clearly laid down that the interest of the creditors of the company are paramount as is the obligation of the court to them.
Before me, as already held, the applicant is not a creditor of the company and has no legal status at all so far as the company in liquidation is concerned.
75. In (2008) 10 SCC 440 F.C.S. Software Solutions Ltd. vs. LaMedical Devices Pvt. Ltd., a sale by the company court was set aside on the ground that certain necessary facts relating to the valuation of movable and immoveable assets fixed by reserve price, inventory of plants and machinery etc were not set out in the proclamation of sale nor were disclosed at the time of the sale notice. Consequently, the same was held to be illegal.
It is not so in the instant case.
76. The judgment rendered by this court reported at 2009 (1) AD Delhi 397 Saraf Paper Mills (in liquidation) through Official Liquidator has followed the aforenoticed well settled principles laid down by the Apex Court. This pronouncement also 34 related to a challenge to an auction sale of the property of a company in liquidation inter alia on the ground of inadequacy of the consideration.
77. The reliance placed by the applicant on the pronouncement of the Punjab & Haryana High Court reported at 2006 (129) Com.Cases 41 P&H Winsome Yarns Ltd. vs. Punjab Wireless Systems Ltd. (in liquidation) & Ors. is misconceived. In this case, the court held that inadequacy of the price alone can be the ground for setting aside a confirmed sale which factor is to be examined by the company court having regard to the facts of each and every case. The court reiterated the well settled principles that there cannot be any hard and fast rule or strait jacket formula to say that a confirmed sale cannot be set aside after possession has been delivered and the sale deed executed and that if the confirmed sale was in conformity with the well established guidelines/principles governing the same, and challenge to the sale was by a person who was not making a substantially higher but only marginally higher offer over the price offered by the auction purchaser, the confirmed sale would not be reversed or set aside on the mere asking of such person.
These principles do not arise in the present case inasmuch as this court is not concerned with a challenge to the sale.
78. A challenge is laid by Mr. Nigam to the locus standi of M/s Golden Dreams Buildcon Pvt. Ltd. to bring the present application. 35 It is urged that on the on showing of the applicant, it was claiming its locus to bring the present application by virtue of its position as a 'nominee' of the Morgan Ventures Ltd. It is urged that title of the property having passed in favour of the respondent on the date of confirmation of the auction, the respondent being the owner of the property, cannot ask the erstwhile seller to execute conveyance in favour of a nominee or a third party.
79. In support of this proposition, reliance is placed on the pronouncement of the Rajasthan High Court reported at AIR 2008 Raj. 138 Megha Enterprises Pvt. Ltd. v. The Official Liquidator (M/s Rathi Alloys & Steel Ltd. (in liquidation), Jaipur. The question which arose for consideration in this judgment was as to whether an auction purchaser can compel the owner of the property to execute a conveyance deed in favour of a third party being his assignee or nominee. It was held by the court that the obligation on the seller to execute a proper conveyance is statutorily recognised in India in section 55(1)(d) of the Transfer of Property Act. It was the duty of the buyer not only in the first instance to pay or tender the price but also to propose a conveyance and tender it to the seller for execution. While considering the question raised in the case, the court also considered the question as to the date on which title of the property passes to the purchaser in an auction sale where the highest bid is accepted and the sale confirmed by the company 36 court. Reliance was placed on the pronouncement of the Apex Court in Bishan Paul (supra) and it was held that the title to the property passed to the respondent on the date of confirmation of the sale and the sale certificate, when issued, relates back to the date when the sale became absolute. The court observed that the situation would have been different had the applicant made a request to the court before confirmation of the sale to execute a conveyance in favour of its nominee.
80. In para 18 of the pronouncement, the court also observed that nomination did not confer title in the property. The court observed that the :-
"Word 'Nominee' does not connote the transfer or assignment to the nominee of any property in or owner ship or the rights of the person nominating him. The dictionary meaning of word "nominee" in "Words and Phrases" Permanent Edition Volume 28A at page 316 is as under:
The word "nominee" in its commonly accepted meaning connotes the delegation of authority to the nominee in a representative or nominal capacity only, and does not connote the transfer or assignment to the nominee of any property in or ownership or the rights of the person nominating him. Cisco v. Van Lew 141 P. 2d 433, 438 60 Cal App 2d. 575."
81. It was submitted by Dr. A.M. Singhvi, learned senior counsel for the applicant that in the case in hand the request for execution of the sale deed in favour of the nominee was made prior to confirmation of the same and for this reason, it is contended that the present application would be maintainable. 37
82. The respondent has staunchly contested the applicant's claim that it had abided with the terms of agreement. Mr. Nigam submits that in terms of the agreement, the applicant was required to pay a sum of Rs.4.5 crores as earnest money. The balance amount payable in three instalments as per clause (ii) first instalment of 4.50 crores on or before 20th November, 2007; the second instalment of Rs.4.5 crores was payable on or before 20th November, 2008 while the third and final instalment of Rs.4,68,18,189/- on or before 20th May, 2008. The respondent has contended that the first instalment of Rs. 4.50 crores was not paid on due date of 20th November, 2007 and it was compelled to write letters dated 20th November and 21st November, 2007 pointing out the breach to the applicant. The total sale consideration in the agreement to sell was Rs.18,18,18,189/-
The respondent has further complained that payments were made as per the whims and fancies of the applicant which was in the teeth of clause 5 and in this background a letter dated 19 th November, 2008 was sent by the respondent revoking/terminating the agreement to sell dated 23rd August, 2007 and forfeiting the earnest money of Rs.4.50 crores. The respondent sought acceptance of this communication and stated that on receipt of the same, the balance amount of Rs.9 crores paid by the respondent would be sent through a demand draft/cheque.
83. Learned senior counsel for the respondent would submit that 38 admittedly Golden Dreams Buildcon Pvt. Ltd. had not made payment of the amount of Rs.4,68,18,189/- on or before the 20th May, 2008 in terms of the agreement inasmuch as the e-mail on 19th of May, 2008 did not amount to tender of the amount and the letter with the cheques was admittedly sent through courier on 21 st May, 2008.
My attention is drawn to para 12 of this application where the applicant has pleaded that the respondent sent a copy of the letter dated 20th of May, 2008 by way of an e-mail to Morgan Ventures Ltd. on 19th May, 2008. It is also stated by the applicant that the letter alongwith the cheques for rupees two crores and Rs.2,68,18,189/- was sent thereafter through a courier on 21st May, 2008.
The further submission is that the tender of the amount by the cheques alongwith the letter dated 20th May, 2008 was also not an unconditional and that the covering letter stated that the cheques could be encashed "subject to execution of the deed of conveyance by the Official Liquidator in its favour".
84. Before me, the status of the applicant as the nominee of the respondent is disputed. Breach and cancellation of the agreement by virtue of the letter dated 19th of May, 2008 is pleaded. There is admittedly no request on behalf of the auction purchaser for execution of the sale deed in favour of the applicant at any point of time. The parties are hotly contesting each others claims in 39 proceedings under the Arbitration & Conciliation Act, 1996.
These rival claims on the rights of the parties under the agreement, its validity or bindingness do not require to be decided here and shall be adjudicated upon in the appropriate proceedings. However it has become necessary to notice the submissions in view of the claim by the applicant.
85. It has been objected that the applicant has no locus standi to bring or maintain the present application and that invocation of the inherent powers of the company court under rule 9 of the Companies Court Rules is permissible only if the court is otherwise possessed of the jurisdiction under the substantive provisions of the Companies Act. In this behalf reliance is placed on (1994) 79 Com.Cases 53 (63) Kishore Y. Patel & Ors. vs. Patel Engineering Co. Ltd. & Ors. wherein it was held by the Apex Court that while considering the applications made to the company court under the substantive provisions of the Companies Act, 1956, the company court is entitled to mould the relief and exercise its inherent jurisdiction whenever found necessary to prevent injustice. The court is therefore required to address itself to the question as to which could be the substantive provision of the Companies Act 1 of 1956 under which the application would be made by the applicant. If the application is found maintainable under some specific substantive provision of the Act, then alone rule 9 of the Rules can be pressed into service and not otherwise. 40
86. Dr. A.M. Singhvi has placed reliance on the pronouncement of the Apex Court reported at AIR 1962 SC 806 : 1962 32 Com.Cases 97 Satish Churan Law V. H.K. Ganguly to urge that rule 9 of the Companies Court Rules reserves to the court its inherent powers to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of process of law and that, a direction to effect an order previously made is in a proper case within the court's inherent jurisdiction. However, as noticed hereinabove, the jurisdiction of this court to exercise inherent powers would remain circumscribed by the statutory provisions of the Companies Act, 1956 and the powers of this court in proceedings relating to winding up of a company. This court is concerned with the best interest of the company which is certainly not extendable to a dispute between the auction purchaser and its claimed assignee/nominee.
87. Reliance has been placed on a Full Bench judgment of this court reported at ILR (1982) 1 Delhi 582 Life Insurance Corporation of India vs. Asia Udyog Pvt. Ltd. & Ors. wherein it was held that the company court is the custodian of the companies which are being wound up. It was observed that the legislature wanted that all matters concerning them should be dealt with by the winding up courts under its supervision and by its leave so that the distribution of assets and liabilities are dealt with equitably and to the satisfaction of all concerned including the 41 company, creditors, members.
88. The present application is also not relatable to any substantive provisions of the Companies Act, 1956. The principles aforenoticed support the view that the present dispute between an assignee of the auction purchaser and its nominee are clearly beyond the scope of the winding up proceedings and the jurisdiction of the court under the Companies Act, 1956.
89. A legal bar to the maintainability of the application has been asserted under section 5 of the Arbitration & Conciliation Act, 1996. The respondents have contended that a sole arbitrator was appointed on the 30th June, 2008 to arbitrate upon the disputes between the parties. The applicants have challenged the authority of the arbitrator by filing an application under section 12 of the Arbitration & Conciliation Act, 1996.
90. It is also asserted that the application deserves to be rejected on the ground of non-disclosure of material facts. Other than a vague suggestion, the respondent has failed to give full particulars of the cancellation of the agreement. The letter dated 19th of May, 2008 has also been withheld from this court. There is substance in this objection as well.
91. Ms. Rajdeepa Behura, learned counsel for the Official Liquidator has submitted that so far as the confirmation of the sale is concerned, the principles of Section 53A relating to part performance of the contract would also apply. Reliance has been 42 placed on the pronouncement AIR 2007 AP 225 Late Syed Burhan (died) by LRs v. Mohammad Jahangir and AIR 1964 SC 877 Chaliagulla Ramachandrayya & Ors. v. Boppana Satyanarayana & Ors.
92. It is urged that on receipt of sale consideration, possession stands handed over to the nominee of the auction purchaser. Consequently the statutory provisions of Section 53A of the Transfer of Property Act relating to part performance of the contract would come into play and would govern the rights of parties.
It is contended that in view thereof, there is no warrant for involving the Official Liquidator in this dispute between two private parties unrelated to the company or the liquidation proceedings in any manner.
93. I do not find any prohibition to the applicant having sought an appropriate prayer under section 9 Arbitration Act petition being MARJI250/2008 against the respondent with regard to transfer of title in his favour. No such prayer was sought. This is not to say that it would necessarily be entitled to such a prayer.
94. So far as the argument based on the covenant to pay stamp duty on the sale deed is concerned, it requires to be borne in mind that Golden Dreams Buildcon Pvt. Ltd. has requested postponement of execution of the sale deed in favour of Morgan Ventures Ltd. The respondent has also pleaded cancellation/termination of the agreement to sell on account of 43 breach by the applicant and that it is disentitled to registration of a sale deed in respect of the subject property in its favour. In this view of the matter, if the litigation ultimately ends in favour of the applicant, certainly it would not be open for Morgan Ventures Ltd. to claim the charges incurred towards registration of the sale deed in its favour by the Official Liquidator. It shall also not be open to the Morgan Ventures Ltd. to set off the amount of charges detailed in clause 14 of its agreement to sell against the balance sale consideration already paid by Golden Dreams Buildcon Pvt. Ltd. or to construe the non-payment of these charges as a default in making payment as part of the sale consideration.
95. For all the aforenoticed reasons, the present application is clearly misconceived and devoid of merit.
An appointment of a liquidator sets into motion a mammoth exercise. The burden of maintaining the Official Liquidator's office falls squarely on the public exchequer. The Official Liquidator on behalf of the company in liquidation and the respondent company have been compelled to contest the present application over prolonged hearings. Valuable judicial time and public money has also been expended on the same.
96. The costs of liquidation which includes costs of conducting the liquidation and litigation; the administrative costs etc are a drain on the hard pressed resources of the company in liquidation. The applicant is therefore liable to be burdened with appropriate costs. 44
Accordingly, this application is dismissed with costs of Rs.1 lakh to be equally apportioned between the Official Liquidator and the respondent in this application. The costs of Rs.50,000/- shall be deposited by the applicant in the Common Pool Fund and Rs.50,000/- towards the costs be paid to the respondent within two weeks from today.
(GITA MITTAL) JUDGE May 18, 2009 kr 45