Jhalani Tools (India) Ltd. vs Morgan Ventures Ltd.
2009 Latest Caselaw 2100 Del

                 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

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

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

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

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

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

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

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

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

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.

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

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

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

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

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,

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

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

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

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

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.

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

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

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

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

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

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.

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

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.

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

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.

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

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

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

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

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.

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

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.

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

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

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.

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

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

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

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.

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