Gupta Refractories vs Consolidated Steels & Alloys Ltd. ...
2011 Latest Caselaw 4315 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                     Reserved on: 25th July, 2011
%                          Date of decision: 5th September, 2011

+      CO. APP. 21/2009

GUPTA REFRACTORIES                           ..... APPELLANT
             Through:          Mr. Sandeep Sethi, Senior
                               Advocate with Mr. Kunal Sinha,
                               Advocate.
              -versus-

CONSOLIDATED STEELS & ALLOYS LTD. AND OTHERS
                                   ..... RESPONDENTS
             Through: Mr. Rajiv Bahl, Advocate for the
                      Official      Liquidator/Respondent
                      No.1.
                      Mr.      Arvind      Nigam,   Senior
                      Advocate with Mr. Amit Sibal,
                      Mr. Alok Agarwal, Mr. Sanjay
                      Chabbra, Mr. Manu Nayyar and
                      Mr.       Abhay       Chattopadhyay,
                      Advocates for Respondent No.3.
                      Mr. Sangram Patnaik, Advocate
                      and Ms. Renu Narula, Advocates
                      for Respondent No.4 along with
                      Ms. Reena Antony, AGM.
                      Mr. R.D. Makheeja and Mr. A.K.
                      Munjal, Advocates for MPFC.



       CORAM:
       HON'BLE MR. JUSTICE VIKRAMAJIT SEN
       HON'BLE MR. JUSTICE SIDDHARTH MRIDUL

      1.     Whether reporters of local papers may be allowed to see
             the judgment? No.
      2.     To be referred to the Reporter or not? Yes.
      3.     Whether the judgment should be reported in
             the Digest? Yes.




CO.APP. 21/2009                                          Page 1 of 23
 SIDDHARTH MRIDUL, J.

1. The present Appeal assails the Order of the learned

Company Judge dated 7th November, 2008 whereby the

application of the Appellant being C.A. No.385/2007 was

dismissed.

2. The facts as are relevant for the disposal of the present

Appeal are as follows:

(a) The Company in liquidation, Respondent No.1

herein, filed a reference under Section 15(1) of SICA

before BIFR being Case No.62/1989. The BIFR after

conducting an enquiry under Section 16 of SICA

concluded that it would be just, equitable and in the

public interest that the Company in liquidation is

wound up under Section 20 of SICA vide order dated

13th January, 1998. The Appeal filed against the said

final order of BIFR was dismissed by AAIFR on 28th

May, 1999.

(b) A Company Petition being C.P. No. 25/1998 was

registered in this Court in terms of the order dated

13th January, 1998 passed by the BIFR. Further, a

winding up petition was also filed by

M/s Rameshwar Dass Devi Dayal against the

Company in liquidation being C.P. No.428/2002.

Vide its order dated 13th September, 2004, the said

winding up petition was admitted by this Court and

a Provisional Liquidator was appointed. This Court

vide order dated 4th April, 2005 passed the final

winding up order in respect of the Company in

liquidation and appointed the Official Liquidator as

the Liquidator of the Company.

(c) It transpires that while the matter was pending

consideration in this Court in C.P. No.25/1998, but

before passing of the order dated 13th September,

2004 in C.P. No.428/2002, the Tehsildar and

Recovery Officer, District- Morena (Madhya

Pradesh) issued a proclamation for sale of the

property of the Company under Section 147-C of the

Madhya Pradesh Land Revenue (Code), 1959. The

said proclamation was published in the daily

newspaper Dainik Bhaskar on 26th June, 2001. By

this proclamation the assets of the Company, which

had been attached, were sought to be sold for

recovery of `1,82,30,677/- on account of electricity

dues owed to Madhya Pradesh Electricity Board, as

arrears of land revenue.

(d) The Collector and Tehsildar, District- Morena fixed

the auction for sale of assets of the Company on 24th

July, 2001 in terms of the aforesaid proclamation.

When the Madhya Pradesh Financial Corporation

(hereinafter referred to as „MPFC‟), Respondent

No.2 herein, learnt of the aforesaid proclamation, it

objected to the proposed auction before the

Tehsildar, Recovery Officer, Morena by filing

objections dated 25th July, 2001. Although the

auction scheduled for 24th July, 2001 was postponed

till 26th July, 2001, the objections filed by MPFC

were rejected. Thereafter the auction proceedings

were held on 26th July, 2001, wherein the Tehsildar

in his proceedings recorded that the property of the

Company in liquidation was offered for inspection to

17 persons attending the auction. The estimated

value of the property sold and auctioned had been

previously assessed by M/s A.K. Pathak & Associates

at `47,08,800/-. In the circumstances, the minimum

bid was fixed at `35 lakhs.

(e) The Appellant herein submitted the highest bid at

`52 lakhs and on being declared as the highest

bidder, deposited a sum of `39 lakhs with the

Tehsildar and Collector in accordance with law.

Thereafter, the whole amount of `52 lakhs was

deposited by the Appellant with the Collector. The

Collector vide its letter dated 12th February, 2002

requested the Appellant to take delivery of the

movable property of the Company (except the land,

building and the permanent construction on the

land) lying at the premises.

(f) After the receipt of the aforesaid letter from the

Office of the Collector, the movable goods lying at

the factory of the Company were delivered to the

Appellant from 12th February, 2002 to 25th February,

2002. After the said movable property was sold in

favour of the Appellant, MPFC filed a writ petition

being W.P. No.325/2002 in the Madhya Pradesh

High Court, whereby MPFC claimed to have the first

charge on the said goods lying at the premises of the

Respondent Company. The Madhya Pradesh High

Court after hearing MPFC stayed the delivery of the

auctioned goods in favour of the Appellant vide

order dated 25th February, 2002. Thereafter on 17th

May, 2002 the Madhya Pradesh High Court was

pleased to modify the said order by allowing the

Appellant to remove the remaining goods. Pursuant

to the said order dated 17th May, 2002 the Tehsildar,

Banmor, requested the Appellant to remove the

remaining goods from the premises of the

Respondent Company and as such the delivery

process was resumed and the movable goods were

delivered to the Appellant from 28th May, 2002 to 5th

June, 2002.

(g) According to the Appellant despite the orders of the

Madhya Pradesh High Court the Appellant was

unable to collect all the movable goods and

structure due to the lack of cooperation on behalf of

the Tehsildar and further due to the dispute with

MPFC and as such the Appellant moved an

application before the High Court for maintaining

status quo in the matter with respect to the

remaining goods in question. The Hon‟ble High

Court vide order dated 18th October, 2004 was

pleased to order status quo with respect to the

remaining goods. The Appellant also moved another

application in W.P. No. 325/2002 seeking a direction

for the delivery of the remaining goods lying at the

premises of the Respondent Company.

(h) The MPFC on its part moved an application being

I.A. No.6197/2006 seeking a direction that the

Appellant be restrained from taking delivery of the

remaining goods on the ground that Appellant had

allegedly taken delivery of all the remaining goods

and there were no movable goods remaining which

belonged to the Appellant. According to the

Appellant the alleged inventory list filed by the

MPFC whereby the goods were alleged to be

delivered from 6th June, 2002 to 10th June, 2002 was

fake and fabricated inventory list and that the goods

mentioned therein had never been taken delivery of

by the Appellant. Thereafter, the Appellant after

coming to know of the said inventory list filed a writ

petition being W.P. No.3148/2006 whereby the

Appellant challenged the said fake and fabricated

inventory list and the Madhya Pradesh High Court

was pleased to issue notice of the same.

(i) Since this Court in the meantime had passed an

order provisionally winding up the Company in

liquidation on 13th September, 2004, MPFC filed I.A.

No. 18093/2006 in its writ petition filed in Madhya

Pradesh High Court seeking to withdraw the same

with liberty to raise the question involved therein

before this Court. Vide order dated 2nd November,

2006 the Madhya Pradesh High Court permitted the

withdrawal of the writ petition with liberty as

prayed. Thereafter, the Appellant came to know that

the Official Liquidator attached to this Court had

published a sale notice dated 15th February, 2007 for

the sale of the land and building and the structures

and the various machines pursuant to the winding

up order passed by this Court. The Appellant

immediately filed an application for stay of the

auction in W.P. No.3148/2006 before the Madhya

Pradesh High Court. Vide order dated 13th March,

2007 the Madhya Pradesh High Court held that

since the auction had been ordered by this Court

therefore it would be appropriate to move this Court

for staying the auction sale of the said goods. This

Court in C.P. No.428/2002 had passed an order

fixing the date of auction as 15th March, 2007.

(j) Pursuant to the direction of the Madhya Pradesh

High Court, the Appellant approached this Court on

15th March, 2007 i.e. the day of auction and

although due to paucity of time the Appellant was

unable to file an application in this Court, however

his Counsel appeared before the Court on 15th

March, 2007 and objected to the auction sale and

prayed for stay of auction proceedings. This Court

was pleased to cancel the auction for 15th March,

2007 and adjourned the matter for 26th April, 2007.

However, since the auction with respect to the said

goods was not stayed by the learned Company Judge

vide order dated 15th March, 2007, the Appellant

moved an application being C.A. No.385/2007 in

C.P. No.428/2002 on the ground that the said

movable goods, structures and machines lying at

the premises situated at Banmor Industrial Area,

District and Tehsil Morena, Madhya Pradesh

belonged to the Appellant and as such should be

excluded from the purview of the auction

proceedings.

(k) On 26th April, 2007 the bids received from the

various bidders were opened and open bidding was

held in the Court. M/s Cosmos Wampun Pvt. Ltd.,

Respondent No.3 herein, emerged as the highest

bidder with a bid of `6,15,00,000/-. This Court

accepted the highest bid of the Respondent No.3

and directed that upon payment of entire amount,

the highest bidder would be entitled to take

possession of the property of the Company in

liquidation and deploy its own security guards on

payment of 25% of the bid amount. The Court

further directed that the auction purchaser i.e.

Respondent No.3 shall not remove the machines

from the premises till the entire bid amount is

deposited with the Official Liquidator and

possession of the premises is handed over to it.

(l) Being aggrieved, the Appellant preferred two

Company Appeals. The first being Company Appeal

No.19/2007 was decided on 24th April, 2007. By that

order the Division Bench had expressed the hope

that before directing the sale of plant, machinery

and structures of the Company in liquidation, C.A.

No.385/2007 would be disposed of by the Company

Court. The second Company Appeal No.23/2007 was

directed against the acceptance of the bid of the

Respondent No.3 on 26th April, 2007, as aforesaid,

without first disposing of C.A. No.385/2007. The

Company Appeal No.23/2007 was disposed of by the

Division Bench on 17th August, 2007 with the

direction that C.A. No.385/2007 be examined and

disposed of by the Company Court before any

further directions regarding removal or

appropriation of the fixtures of the machinery lying

in the factory premises are issued. The Division

Bench directed that till C.A. No.385/2007 was

disposed of by the Company Court, the auction

purchaser shall maintain status quo as regards the

assets claimed by the Appellant and that the

Respondent No.3 shall not remove from the factory

premises or otherwise encumber any part of the

machinery or other fixtures or any other movables

whether or not embedded to earth pending disposal

of C.A. No.385/2007.

(m) The learned Company Judge after hearing the

Appellant as well as MPFC and the Respondent No.3

reserved the judgment on 29th April, 2008. Vide the

impugned Judgment dated 7th November, 2008 the

Company Judge dismissed the application being C.A.

No.385/2007 filed by the Appellant. Vide the

impugned Order the learned Company Judge

directed the appointment of a Local Commissioner

and called for a report on the aspect whether the

Appellant had removed from the factory premises of

the Company in liquidation any machinery/parts

thereof, which were attached to the earth and were,

therefore, immovable property, and also to

determine whether there is any movable property

presently lying in the factory premises, which the

Appellant can lay a claim to. The impugned Order

further directed that at the conclusion of the

inspection the Respondent No.3 would be entitled to

deal with all the properties found on the factory

premises of the Company in liquidation, irrespective

of the fact that there may be some items at the

factory premises of the Company in liquidation over

which the Appellant may lay their claim. It was

directed that the claim of the Appellant for such

items, if found admissible, would be met from out of

the sale proceeds deposited by the Respondent No.3

or adjusted from the value of any immovable

property which may have been already removed by

the Appellant. The impugned order specifically

directed that C.A. No.385/2007, filed by the

Appellant, was dismissed, subject to the right of the

Appellant to stake their claim, if any, for the value of

any movable asset, after receipt of the report of the

Local Commissioner and Technical Expert.

(n) Aggrieved by the said impugned Order dated 7th

November, 2008, the Appellant has preferred the

present Company Appeal.

3. On behalf of the Appellant, it was urged by Mr. Sandeep

Sethi, Senior Advocate, that the Appellant had purchased all the

plant, machinery and structures of the Company in liquidation

and only the land, building and other permanent structures

were not purchased by it. In this behalf, the Appellant has relied

upon the valuation report prepared by M/s A.K. Pathak &

Associates dated 28th July, 2001. The Appellant further relied

upon the proceedings recorded by the Tehsildar, District-

Morena, at the time of auction on 26th July, 2001, which, inter

alia, reads: "the machinery, plant etc. of the debtor consumer

Company available for sale was shown to the present auction

bidders at the site and auction started. The present auction

bidders started the auction for plant and scrap except the land,

building and other permanent structure...........".

"For the auction of machinery/scrap of M/s Consolidated

Steels Alloys Pvt. Ltd., it was got evaluated from Sh. A.K. Pathak

& Associates, Gwalior. The detailed valuation report is enclosed.

The estimated value of this property has been offered as Rs.

Fifty two lakhs".

4. On the other hand, Mr. Arvind Nigam, Senior Advocate,

appearing on behalf of the Respondent No.3 supported the

impugned Order and stated that all that had been purchased by

the Appellant at the auction conducted by the Tehsildar,

Morena, was the movable goods, which had already been

removed by the Appellant as far back as in 2002.

5. Having heard learned Counsel for the parties and perused

the relevant documents, we are of the opinion that the present

Appeal filed by the Appellant is without merit and untenable for

the following reasons:

(a) Firstly, the contention of the Appellant that it had

purchased all the plant and machinery of the

Company in liquidation and only land, building and

other permanent structures were not purchased by

it, is contradicted by their own statements made in

earlier proceedings. In this behalf, it is observed

that the case of the Appellant, who was arrayed as

Respondent No.7 before the Madhya Pradesh High

Court in W.P. No.325/2002 preferred by MPFC, was

that it had only purchased the movable property and

it shall remove only the movable and not the

immovable properties from the factory premises of

the Company in liquidation. This is evident from the

order dated 17th May, 2002 passed by the Madhya

Pradesh High Court in the aforesaid writ petition.

The relevant extract from the said order reads as

follows.

"It is the case of Shri Mody, learned Counsel appearing for respondent no.7 that he has purchased the moveable property in auction. He, therefore, submits that he is only removing the movable property which has been purchased by him.

However, Shri Jain, submits that the immovable properties are also being removed to cutting them and removing them from ground.

The aforesaid fact is disputed by Shri Mody.

However, it is made clear that as the respondent no.7 had only purchased the movable property, he shall only remove the movable property and she has not remove the immovable property."

(b) Secondly, in the proceedings recorded by the

Tehsildar on 26th July, 2001 he clearly records "in

respect to the machinery of the defaulter consumer

company, the present auctioneers shown the same

on spot and initiated the said proceedings. By

leaving to land, building and other permanent

fixtures, the auctioneers started the auction of plant

and scrap. Because the land is related with

industrial department, therefore auction proceeding

for land and building will be initiated thereafter. The

movable assets of this consumer company were

inspected to all 17 persons as participants in the

auction and thereafter knowledge of auction

proceeding was given to them and an amount of

`25,000/- was deposited by every participant as a

security amount and thereafter the auction

proceeding was started. Auction of this movable

asset was started with an amount of `35 lakhs and

last bid of auction was fixed of auction was fixed at

`51 lakhs (highest), which was done by Sh. J.P.

Gupta-Gupta Refactories, Gwalior. No other person

was called excessive bid against such highest bid,

therefore this bid was confirmed as last and final".

Thus, it is seen that all that was purportedly sold in

the auction conducted by the Collector and

Tehsildar, Morena and all that was purchased by the

Appellant in the auction, was only the "movable

property" i.e. "Chal Sampatti". The proceeding sheet

prepared by the Tehsildar, Morena clearly records

that the bidders were informed that the immovable

property was not being sold and only the "Chal

Sampatti" was being sold. The bidders were given

inspection of the "Chal Sampatti" i.e. plant and

scrap and bids were invited.

(c) Thirdly, the Nazir, Tehsil Morena sent a

communication to the Additional Tehsildar, Morena

on 28th May, 2002 stating that on the said date a

joint inventory of the movable properties had been

prepared which included only those which are lying

on the ground and were not attached to the earth.

This inventory was prepared in the presence of the

Appellant. The list of the articles inventorized shows

that it includes articles which are petty movables

and not the plant and machinery installed at the

factory premises in question. It was only these

articles which the Appellant was entitled to remove

and nothing more.

(d) Fourthly, the Tehsildar, Morena reported on 9th

June, 2002 that the Appellant had removed all the

movable assets lastly between 28th May, 2002 and

9th June, 2002. It was reported by him that there is

no other movable property existing on the site. The

relevant extract from the said communication dated

9th June, 2002 reads as follows.

"Today the 9.6.2002 in compliance of order dated 27.5.2002 of Hon‟ble Collector and Order dated 28.5.2002 of Hon‟ble additional Tehsildar, the movable property as per inventory prepared handed over to the buyer and there is no other movable property lying at the site and therefore the action of handing over movable property closed. The main entrance of factory was sealed."

(e) Lastly, the communication dated 1st March, 2005

addressed to the Official Liquidator of this Court by

the Additional Tehsildar, Sub-Tehsil, Banmore,

District- Morena, Madhya Pradesh, clearly states

that the Tehsildar, Morena had for the present only

auctioned movable property i.e. properties which

are lying on the site and was not embedded in the

earth. The factory sheds and the machinery which

were embedded in the earth and plant and

machinery were still present in the factory and they

were not auctioned. Relevant extract of the said

communication dated 1st March, 2005 reads as

follows:

"2. At present only moveable property has been auctioned. Only those properties which were lying on the site and were not embedded in earth were included. The Factory sheds and the machinery which were embedded in the earth and Plant and Machinery are still present in the

factory and they were not auctioned. A list of the assets is enclosed."

6. There is also no force in the reliance placed on the

valuation report of M/s A.K. Pathak & Associates by the

Appellant. As found by the learned Company Judge the said

report, as filed in this Court, is bereft of the annexures to which

it refers. As also found by the learned Company Court, the

report which has in fact been placed is an incomplete report. As

further observed by the learned Company Court, even if it were

to be assumed that the said valuation report was in respect of

the entire plants and machinery and structures at the site, it

does not follow that the entire assets evaluated in that report

had been sold. We agree with the reasoning of the learned

Company Judge to the effect that "This is so because it is not

only possible, but even probable that at the time of open

auction, even a fraction of the total evaluated asset may fetch a

higher price than the valuation arrived at for the entire asset.

This is quite common. From the offers that MPFC claims to have

received from other parties, it appears, that either the report of

M/s Pathak & Associates is way off the mark, or it does not

include the plant and machinery and pertains only to the bare

movables."

7. In the grounds of appeal the Appellant had also raised a

ground with regard to the prima facie finding in the impugned

Order that the Appellant had removed parts of the plant and

machinery installed at the site and attached to the earth in the

garb of removing movables. The impugned Order in Paragraph

16 records that the issue whether the Appellant has removed

only the movables or even the immovable properties by cutting

and dismantling the same is an issue which could not be

determined at that stage. In Paragraph 16 of the impugned

Order the learned Single Judge observed as follows:

"16. As to whether M/s Gupta Refractories have removed only the movables, or even the immovable properties by cutting and dismantling the same, is also an issue which cannot be determined by me at this stage. To determine this aspect further enquiry is necessary to be conducted for which directions are presently being issued. I may also observe that the determination of this aspect is a serious concern of this Court, since it has befallen upon the Court to protect the legitimate interests and assets of the company in liquidation."

8. Further, in the impugned Order although the learned

Single Judge prima facie held that the Appellant appeared to

have removed immovable properties including parts of plant and

machinery attached to the earth, the Court came to the

conclusion that based on the record as it existed then it was not

possible for the Court to come to any definite conclusion on this

aspect. In this behalf, in Paragraph 35 of the impugned Order

the learned Single Judge observed as follows:

"35. From this it prima facie appears that M/s Gupta Refractories have not only removed the movables, but in the garb of removing movables they have even removed the parts of the plant and machinery which was assembled and installed at the site, and were attached to the earth. From the materials placed on record as at present, it is not possible for the Court to come to any definite conclusion on this aspect, or as to the quantity, nature, weight and value of the items dismantled from the plant and machinery at the factory site in question, if any."

9. In order to resolve the controversy whether the Appellant

had removed from the factory premises of the Company in

liquidation any machinery/parts thereof attached to the earth

and therefore immovable property and also to determine

whether there was any movable property presently lying in the

factory premises which the claimant could lay a claim to, the

learned Single Judge appointed a Local Commissioner and

called for a report on the aforesaid aspect. In this behalf, it is

seen that although the report of the Local Commissioner was

placed on the record by Respondent No.2, the Appellant herein

did not assail the same nor raised any objections questioning

the findings contained therein before us at any time including at

the time of final arguments. We are therefore not entering into

this issue in the present discussion.

10. The learned Single Judge while dealing with the aspect,

whether the plant and machinery in the factory premises of the

Company in liquidation was movable or immovable property,

also relied on the Judgments in Duncans Industries Ltd. -vs-

State of U.P. & Ors., (2000) 1 SCC 633 and M/s T.T.G.

Industries Ltd. Madras -vs- Collector of Central Excise,

Raipur, (2004) 4 SCC 751, and came to the conclusion that

heavy machinery, plant and equipments as also the sheds

installed by the Company in liquidation, at the time of their

installation or erection, were installed or erected with a view to

permanently install and erect the plant at the site, which

established that the machinery had been imbedded into the

earth with the intention of permanently establishing the plant.

The learned Single Judge therefore concluded that the

machinery, plant and sheds at the factory site of the Company in

liquidation, except those which were not attached to the earth,

constituted movable property purchased by the Appellant. We

do not find any infirmity or perversity in this finding arrived at

by the learned Single Judge having considered the principles

enunciated by the Supreme Court in Duncans Industries Ltd.

(supra) and M/s T.T.G. Industries Ltd. Madras (supra).

11. In view of the foregoing discussion, we find no merit in the

present Appeal and dismiss the same, however without any

order as to costs.

SIDDHARTH MRIDUL, J.

VIKRAMAJIT SEN, J.

SEPTEMBER 05, 2011 mk