Delhi High Court
M/S Vipul Logistic & Warehousing ... vs Dsiidc & Ors. on 16 March, 2022
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 10 March 2022
Judgment pronounced on: 16 March 2022
+ W.P.(C) 7047/2014 and CM No. 16542/2014 (stay)
M/S VIPUL LOGISTIC & WAREHOUSING PVT. LTD.
..... Petitioner
Through: Mr. Rohan Jaitley, Ms. Bhumika
Kapoor, Ms. Surbhi Sardana and Mr.
Dev Pratap Shahi, Advs.
versus
DSIIDC & ORS. ..... Respondents
Through: Ms. Anusuya Salwan, Ms. Nikita
Salwan, Mr. Abhishek Singh Pundir,
Mr. Bankim Garg and Mr. Chaitanya
Bansal, Advs. for DSIIDC.
Mr. A.K. Tewari and Mr. Tushar
Upreti, Advs. for R-2 /Custodian.
Mr. Sudhir Nandrajog, Sr. Adv. with
Mr. Parvinder Chauhan, Adv. for R-
3.
+ W.P.(C) 10059/2020 and CM Nos. 32002/2020 (stay), 32004/2020
(permission)
M/S RAVEN SERVICES AND ENGINEERS PVT LTD.
..... Petitioner
Through: Mr. Sudhir Nandrajog, Sr. Adv. with
Mr. Parvinder Chauhan, Adv.
versus
DELHI STATE INDUSTRIAL AND INFRASTRUCTURE
DEVELOPMENT CORPORATION LTD AND ORS.
..... Respondents
W.P. (C) 7047/2014 & 10059/2020 Page 1 of 24
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
Through: Ms. Firdouse Qutb Wani, Md.
Zaryab Jamal Rizvi and Mr. Musheer
Zaidi, Advs. for DSIIDC.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
JUDGMENT
1. These writ petitions have been preferred with the petitioners'
asserting competing rights and interests in property bearing No. 217/B,
Okhla Industrial Estate, Phase- III, New Delhi. Vipul Logistic claims rights
over the said property by virtue of being the successful auction purchaser in
proceedings which were conducted by the custodian under the Provisions of
the Special Court (Trial of Offences Relating to Transactions in Securities)
Act, 19921. Raven Services, the petitioner in the connected matter, claims
rights on the basis of an asserted sale made in its favour by Killick Nixon,
the judgment debtor on 26 October 2003.
2. In order to evaluate and adjudge the rights of the respective
petitioners which are claimed in these two writ petitions, it would be
appropriate to briefly advert to the following background facts. On 14 July
1980, the Commissioner of Industries, Delhi is stated to have leased the
said property to M/s Lalita Dolls, a partnership firm. The original allottee
is stated to have executed an agreement to sell in favour of one M/s Killick
Nixon on or about September 1990. The respondent Corporation, which is
the successor entity of the Commissioner of Industries, asserts that the said
1 1992 Act
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
transfer was in violation of clause 5(a) of the lease deed. It is contended
that clause 5 clearly injuncted the lessee from transferring, selling,
assigning or otherwise parting with the possession of the whole of or any
part of the industrial plot except with the previous consent of the lessor.
The record further reflects that since no such consent had been obtained by
the original lessee, the lease deed came to be determined by an order of 2
March 1993. Killick Nixon to whom the property had been conveyed by
the original lessee is stated to have preferred an appeal before the Lt.
Governor. The aforesaid appeal was dismissed on 27 August 1998.
Despite the cancellation of the lease, the respondent Corporation did not
obtain possession of the leased premises.
3. From the facts placed on the record by the Custodian, it further
transpires that one M/s Dhanraj Mills Pvt. Ltd. was declared as a notified
party under the provisions of the 1992 Act on 5 August 1992. Consequent
thereto all the properties of that notified party came to be attached in
pursuance of the provisions made in Section 3 of the 1992 Act. Killick
Nixon was recognised as the judgment debtor of M/s Dhanraj Mills Pvt.
Ltd. Post attachment of the property in question under Section 3 of the
1992 Act, the Special Court proceeded to take steps for the auction of the
attached properties. The sale of the attached properties of the judgment
debtor which included the leased premises in question was notified for sale
by way of a public notice which came to be published on 17 November
2005. Vipul Logistics participated in the auction proceedings and emerged
as the highest bidder. Its bid which stood at Rs. 3.55 crores came to be
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
accepted by the Special Court in terms of its order of 21 December 2005.
From the proceedings of that date, it further transpires that Raven Services
also filed objections. This appears to have been prompted in light of the
transfer of the leased premises by M/s Killick Nixon in its favour on 26
August 2003. While noticing the objection which had been preferred at its
behest, the Special Court proceeded to pass the following order:-
"IN THE SPECIAL COURT (TRIAL OF OFFENCES RELATING TO
TRANSACTIONS OF SECURITIES ACT 1992) AT BOMBAY
REPORT NO. 63 OF 2005
REPORT OF THE CUSTODIAN DATED 14.12.2005 FOR SALE OF
LEASE HOLD RIGHTS IN PERPETUITY OF INDUSTRIAL LAND
AND STRUCTURE SITUATED AT 217-B OKHLA INDUSTRIAL
ESTATE. PHASE -III. NEW DELHI 110 020 - BELONGING TO M/S
KILLICK NIXON LTD.. JUDGMENT DEBTORS OF M/S DHANRAJ
MILLS PVT. LTD AN ENTITY NOTIFIED UNDER THE SPECIAL
COURT (TRIAL OF OFFENCES RELATING TO TRANSACTIONS IN
SECURITIES) ACT. 1992.
Mr. G.R. Joshi i/b M/s P.M.S. Slithi & co. for the Custodian.
Mr. Shekhar Sherya with Mr. N. D. Kapadia for Judgment Debtor present.
Mr. R.M. Kadam for the intervenor.
Mr. Rajiv Agarwal for Ways Infotechnologies Pvt. Ltd. -Bidder present.
Mr. Surinder Kumar Garg, Vipul Logistics Pvt. Ltd. - Highest bidder
present.
CORAM : D.K. DESHMUKH J.
DATED 21st DECEMBER, 2005
P.C.:-
1. The property is a leasehold rights in perpetuity of Industrial land and
structure situated at 217-B, Okhla Industrial Estate, Phase III, New Delhi
110 020. As per the report the highest offer was given by Vipul Logistic &
Warehousing Pvt. Ltd. of Rs.2,60,00,000/- (Rupees Two crores Sixty lakhs
only). The second highest bidder was Ways Infotechnologies Pvt. Ltd. Both
the bidders are present in the Court. I permitted the bidders to better their
bids. The highest bid is given in the Court by Vipul Logistic &
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
Warehousing Pvt. Ltd. for Rs.3,55,00,000/- (Rupees Three crores fifty five
lakhs only). Perused the valuation report. The highest bid given by the
bidder Vipul Logistic & Warehousing Pvt. Ltd. of Rs.3,55,00,000/- is way
above the value of the land and building given in the valuation report.
2. There is an objection raised to the sale by one Raven Services &
Engineers Pvt. Ltd. It appears that the judgment debtor - M/s Killick Nixon
Ltd. to whom the property belongs had entered into some arrangement with
Raven Services & Engineers Pvt. Ltd. after this Court passed an order of
injunction restraining M/s Killick Nixon Ltd. from transferring the property.
Subject to any rights that may or may not have been transferred by the
judgment debtor to said Raven Services & Engineers Pvt. Ltd., the highest
bid given by the bidder viz. Vipul Logistic & Warehousing Pvt. Ltd. is
directed to be accepted. The Custodian to proceed further. The report is
disposed of.
Seal of Special Court, Bombay"
4. The confirmation of sale however did not consummate in a final
transfer being made in favour of Vipul Logistic since it appears to have
failed to pay the entire bid amount within the stipulated time. On the record
are communications exchanged between the office of the Custodian as well
as Vipul Logistic which evidence the fact that it had failed to pay the entire
bid amount by 3 February 2006 as was mandated under the terms of the
auction. However, the Special Court proceeded to condone the delay as
well as the default and called upon Vipul Logistic to pay the balance bid
amount along with interest. Upon compliance being affected, the office of
the Custodian in terms of its letter of 29 March 2006 confirmed the
finalization of the auction, the payment of full consideration amount and
left it open to Vipul Logistic to get the property registered in its name by
the competent authority.
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
5. Raven Services aggrieved by the rejection of the objection by the
Special Court approached the Supreme Court by way of Special Leave to
Appeal (C) 2684/2006. That Special Leave Petition came to be dismissed
summarily on 13 February 2006. Vipul Logistic pursuant to the
confirmation of the sale then approached the respondent Corporation
praying for being inducted in possession of the leased premises. Since the
Corporation did not accede to its request, it instituted W.P.(C) 10413/2006
before this Court in which an interim order was passed on 19 June 2006
restraining the respondents from executing any orders of allotment or
creating third party rights. In those proceedings, the respondent Corporation
appeared and disclosed to the Court that the Special Court had not been
apprised of the fact that the lease of the original allottee had already been
cancelled and the said order of cancellation had attained finality consequent
to the rejection of the appeal taken by Killick Nixon before the Lt.
Governor. Parallelly the respondent Corporation appears to have moved
the Special Court by way of a review petition seeking recall of the order of
21 December 2005 in terms of which the sale in favour of Vipul Logistic
had come to be confirmed. The review petition preferred by the respondents
came to be dismissed by the Special Court by its order of 11 April 2007. It
would be apposite to extract that order which read thus:-
"1. This review petition is moved by the Commissioner of Industries,
Government of National Capital Territory of Delhi for review of the order
passed by this court selling the property i.e. Leasehold right in perpetuity of
Industrial land and structure situated at 217-B, Okhla Industrial Estate,
Phase III, New Delhi-110020. That property was sold as the property of the
judgment debtor by name M/s. Killick Nixon Ltd. M/s. Killick Nixon Ltd.
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
was the judgment debtor of the notified party M/S Dhanraj Mills. The case
of the review petitioner is that the review petitioner is the owner of the
property. The property was given on lease by lease deed dated 14.07.1980 in
favour of M/s. Lalita Dolls through its sole proprietor Mrs. Lalita Dixit. In
terms of the lease deed she was not entitled to transfer or assign the lease
without prior permission of the review petitioner. According to the review
petitioner, the lease of the lease Mrs. Lalita was determined by order dated
2.3.1993 and the proceedings were taken up against her for possession of
the property under the Public Premises Act. According to the review
petitioner, therefore, the property does not belong to M/s Killick Nixon Ltd-
the judgment debtor, and therefore, it could not have been sold by this Court
as the property of the judgment debtor, and therefore, the order sanctioning
the sale in favour of the respondent no. 8 should be reviewed.
2. Now it is clear that in the notice calling offers published by the
Custodian, it was made clear that the property is being sold on "as is where
is" basis. The respondent no. 8 who is represented by the Advocate has
stated that it is clearly understood by the purchaser that in the notice inviting
bids it was specifically stated that the property is being sold on "as is where
is" basis. As the property was sold as the property of M/s Killick Nixon Ltd.
the respondent no. 8 purchaser will get all the rights that M/s Killick Nixon
Ltd. had, and neither this Court nor the Custodian can transfer to the
purchaser better title than what M/s Killick Nixon Ltd. had. Therefore, there
is no question of review of the order. In spite of this clear position, the
review petitioner which is a Government organisation has approached the
Court unnecessarily and therefore, in my opinion, exemplary costs are to be
imposed on the review petitioner, specially because due to filing of this
review petition by the review petitioner, the auction purchaser who is based
in Delhi has to come here from Delhi. The review petition is disposed of.
3. The Review petitioner is directed to pay cost of this review petition Rs.
15,000/- to the Custodian as also Rs. 15,000/- to the respondent no. 8."
6. Assailing that order the Corporation thereafter approached the
Supreme Court by way of C.A No. 1655-57 of 2008, diary No. 20524/2007.
That petition came to be dismissed on 25 February 2008. The writ petition
preferred by Vipul Logistic ultimately came to be disposed of as withdrawn
by a learned Judge of the Court on 27 October 2009. The review petition
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
preferred against the said order also came to be dismissed. Those orders
were challenged by Vipul Logistic in a Letters Patent Appeal which was
disposed of on 22 February 2010 with the Bench observing that while it
would be open for Vipul Logistic to approach the Bombay High Court or
any other appropriate forum in Mumbai, in case those Courts come to the
conclusion that they lacked territorial jurisdiction, it would have the liberty
to approach the Delhi High Court yet again.
7. Vipul Logistic proceeded to petition the Bombay High Court
accordingly. However, the aforesaid writ petition came to be dismissed on
30 March 2011. It thereafter sought revival of its original writ petition.
While W.P.(C) 10413/2006 came to be revived by an order of the Court of
4 May 2011, during the pendency thereof Vipul Logistic made yet another
representation to the respondent Corporation to induct it into possession.
That representation came to be rejected by an order of 6 June 2014. It is
that order which Vipul Logistic impugns in its writ petition.
8. Raven Services which admittedly claimed rights in the subject
property pursuant to an agreement to sell executed by M/s Killick Nixon
ultimately faced proceedings for eviction drawn by the Corporation under
the Public Premises (Eviction of Unauthorised Occupants) Act, 19712. The
Estate Officer proceeded to frame an order of eviction against them on 19
September 2019. That order was affirmed by the District Judge in appeal
on 24 September 2020. Those orders came to be challenged by Raven
2 1971 Act
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
Services in the connected writ petition. When the writ petition was initially
entertained, a learned Judge of the Court noticed the submissions addressed
on its behalf to the effect that it essentially sought restoration of the lease
notwithstanding the transfer having been made without the prior consent
and approval of the Corporation. The aforesaid prayer was stated to have
been made in light of the policy for regularisation and restoration of lease
hold rights as famed and adopted by the Corporation. Taking note of the
aforesaid contentions, the Court on 9 December 2020 passed the following
order:-
"W.P.(C) 10059/2020, CM APPL. 32002/2020 & CM APPL. 32004/2020
3 The petitioner seeks restoration of the lease deed in terms of the policy for
Transfer/Regularisation/Restoration of leasehold rights in respect of
Industrial Plots/sheds under jurisdiction of DSIIDC (except those under
Relocation Scheme).
4 The original allottee lost the appeal for restoration of lease deed. The
petitioner is the second subsequent purchaser. Clause 2.4 of the said policy
reads as under:
Sr. Particulars Rates Recommended Revised rates
No. by Board in meeting proposed for
dt. 29.06.2020 consideration
2. Rates for Restoration of lease (% of market value of plot)
2.4 Where the appeal for
restoration of lease deed
filed by the ex-allottee/
subsequent
purchaser has been
rejected/pending and
restoration has been
sought in favour of
subsequent GPA and
Agreement to Sell
holders/purchaser.
If the GPA and
Agreement to sell is
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
executed prior to 25% 10%
cancellation of lease
deed.
If the GPA and
Agreement to sell is
executed on date 50% 20%
subsequent to
cancellation of
lease
5 The petitioner has already filed an application for restoration of the lease
deed, in terms of the said policy.
6 Issue notice.
7 The learned counsel named above accepts notice on behalf of R-1.
8 Reply be filed in four weeks. Rejoinder, if any, be filed in four weeks
thereafter.
9 List on 10.05.2021."
Pursuant to notices having been issued, parties have exchanged affidavits
and have thereafter been heard on merits by the Court.
9. Vipul Logistic on whose behalf submissions were addressed by Mr.
Jaitley, learned counsel, essentially asserts that it was a bona fide purchaser
for value in an auction which was conducted by a competent statutory
authority. Mr. Jaitley contends that the petitioner was never informed of
the existing encumbrances which burdened the property which was
auctioned. It was submitted that Vipul Logistic despite due diligence had
no means to ascertain or discover the fundamental defects with respect to
the title and validity of the Custodian to proceed against the property in
question. It was submitted that Vipul Logistic had paid valuable
consideration for the property and therefore it cannot now be deprived of its
right to obtain possession of the same.
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
10. Mr. Jaitley would submit that the mistake on the part of the
Custodian to have noticed the fact that the lease interest of the original
allottee stood cancelled cannot be made a basis for depriving the petitioner
of the right to obtain possession. Learned counsel laid great emphasis on
the fact that the auction itself was one which was conducted by the
Custodian and which had also been confirmed by the Special Court. It was
submitted that Raven Services which claimed rights only through Killick
Nixon cannot possibly be recognised as being entitled in law to continue to
occupy the subject land despite a valid auction sale having been made in its
favour. It was also urged that once the challenge of Raven Services to the
order of the Special Court confirming the sale in favour of Vipul Logistic
came to be negatived by the Supreme Court, it could not possibly assert any
right over the property in question.
11. Questioning the assertion of Vipul Logistic being a bona fide
purchaser, Mr. Nandrajog, learned Senior Counsel appearing for Raven
Services would contend as follows. Mr. Nandrajog has firstly drawn the
attention of the Court to the disclosures made on behalf of Killick Nixon
before the Special Court and as comprised in the affidavit of 13 February
2003. The attention of the Court was specifically drawn to the qualified
disclosures as made with respect to the subject property where Killick
Nixon specifically disclosed that title in its respect was disputed. This is
evident from the list of immovable properties which has been set out at
page 40 of the paper book. Learned Senior Counsel then submitted that the
public notice itself made specific reference to the proceedings taken before
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
the Special Court and more particularly its order of 6 April 2005. Mr.
Nandrajog submits that the property in question being possibly encumbered
or suffering from material defects fell for notice before the Special Court
itself as would be evident from its order passed on that date, the relevant
extracts whereof are reproduced hereinbelow: -
"2. In my opinion, taking overall view of the matter, it would be
appropriate to set in motion the machinery for conducting sale of the
properties listed at Sr. Nos. 1, 2 and 3 as also the properties at Sr. Nos. 7, 8
and 9 in the Chart at -2' at page no.2. some of the encumbrances on the
properties which are to the knowledge of the Custodian, are mentioned in
the Charg at "X-2". As per the sale procedure, public notices are required to
be issued for selling the properties, therefore, if there are any more
encumbrances, information about the same will be received after the public
notice for sale is issued. The learned Counsel for the judgment debtors viz.
Killick Nixon Ltd. and Khosa Investment submits that in view of the
properties which are already available and order for sale of which are
already available and order for sale of which has already been made, the sale
of these properties would not be necessary. He also submits that the
properties listed at Sr. Nos. 2 and 3 at page 2 of the Chart at "X-2" are not
available for sale. In my opinion, as in relation to the other properties, the
order for sale has already been made, obviously, these properties will come
up for sale only after those properties are sold and if enough amount is
recovered by sale of those properties, it will be possible for the judgment
debtors to object to the sale of these properties at that stage.
3. So far as the objection in relation to the properties at Sr. Nos. 1, 2
and 3 is concerned, in my opinion, that objection can be raised by the
persons who might have encumbrances on the properties at Sr. Nos. 1 to 3,
after the public notice for sale is issued. The judgment debtors would also
be free to raise the objection after the public notice for sale of properties is
issued. As per the procedure, after all the bids are received, the matter is
placed before the Court alongwith all objections that may be received, for
appropriate orders, at that time all the objections can be considered by the
court."
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
12. According to learned Senior Counsel these facts were clearly
discernable from the disclosures carried in the public notice itself and in
any case it was incumbent upon the petitioner to satisfy itself with respect
to the title of the subject property as well as the right of Killick Nixon. Mr.
Nandrajog further submits that Vipul Logistic cannot possibly claim to be a
bona fide purchaser without notice since Raven Services had duly appeared
before the Special Court and disclosed its claim over the subject property
which was duly noticed and recorded in the order of 21 December 2005. It
was highlighted that in the proceedings which were conducted by the
Special Court on that date, Vipul Logistic was duly represented and
therefore had full knowledge of the competing claim of Raven Services. It
was further submitted that despite having full knowledge and notice of the
defects and the encumbrances which burdened the property in question,
Vipul Logistic chose to proceed further and continued to seek confirmation
of the auction sale in its favour. On basic principles it was submitted that
undisputedly the auction was conducted on an "As is where is" basis. In
view of the settled position in law with respect to such auctions, Mr.
Nandrajog submitted that Vipul Logistic cannot claim any rights superior to
that of Raven Services having chosen to participate in the auction process
with open eyes and being fully aware of the circumstances surrounding the
inclusion of the property in the auction sale.
13. Insofar as the proceedings drawn under the 1971 Act are concerned,
Mr. Nandrajog submits that notwithstanding the order of eviction as framed
in those proceedings, the policy as framed by the respondent Corporation
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
itself confers a right on the petitioner to seek restoration of lease and for
regularisation of its possession. The attention of the Court was specifically
drawn to the policy titled "Policy for Transfer/Regularisation/Restoration of
leasehold rights in respect of Industrial Plots/sheds under the jurisdiction of
DSIIDC (except those under Relocation Scheme)". According to Mr.
Nandrajog the case of Raven Services clearly falls within the ambit of
clause 2.4 which reads as follows: -
Sr. No. Particulars Rates Recommended Revised rates
by Board in meeting proposed for
dt. 29.06.2020 consideration
2. Rates for Restoration of lease (% of market value of plot)
2.4 Where the appeal for
restoration of lease deed filed
by the ex-allottee/ subsequent
purchaser has been
rejected/pending and
restoration has been sought in
favour of subsequent GPA and
Agreement to Sell
holders/purchaser.
25% 10%
If the GPA and Agreement to
sell is executed prior to
cancellation of lease deed.
If the GPA and Agreement to 50% 20%
sell is executed on date
subsequent to cancellation of
lease
14. Learned Senior Counsel submits that since the Corporation has taken
a decision to consider restoration and regularisation of infractions of the
lease terms, the case of Raven Services is liable to be considered in
accordance with the policy decision of the respondents themselves. It was
further submitted that Raven Services is ready and willing to pay all sums
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
as may be due in terms of the policy as adopted by the respondent
Corporation.
15. Learned counsel appearing for the Corporation in the Vipul Logistic
petition, submitted that the lease of the property stood duly determined and
thus it clearly stood reverted to it. According to learned counsel, once the
cancellation of the lease attained finality, no right could be claimed by
either of the parties. Learned counsel contends that the rights of the
Corporation remained intact notwithstanding the auction of the subject
property. The attention of the Court was specifically drawn to the qualified
observations made by the Special Court which while rejecting the review
petition preferred had observed that the auction was on an "as is where is"
basis and that the auction purchaser would have acquired only those rights
as could be claimed by Killick Nixon. Viewed in light of the above, learned
counsel would submit that the auction as held cannot be understood as
having effaced the right and title of the Corporation over the property.
16. Learned counsel appearing for the Corporation in the connected writ
petition questioned the right of Raven Services to seek regularisation and
restoration contending that once it had been held to be an unauthorised
occupant, it could claim no rights in the subject property. Learned counsel
also questioned the factum of a conveyance by Killick Nixon in its favour
by submitting that no credible evidence in that regard had been placed on
the record to substantiate a transfer having been made.
17. Learned Counsel Mr. Tewari appearing on behalf of the Custodian
submitted that in order to pay the government liabilities of the notified party
Signature Not Verified
Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
- M/s Dhanraj Mills Pvt. Ltd., the property in question came to be attached
under the purview of the 1992 Act. It was explained by him that as a result
of the auction conducted by the Special Court the said property was sold to
Vipul Logistic and as such the proceeds recovered were credited into the
attached account of the Notified Party. It was further submitted that that the
execution of the Agreement to Sell on 26 August 2003 by M/s Killick
Nixon Ltd. in favour of Raven Services was in flagrant violation of the
injunction dated 18.08.2001 passed by the Special Court. Further in
response to the submissions of Raven Services, Mr. Tewari contended that
with the sale of the property in question being upheld by the Special Court
and the Supreme Court, the sale has thus become final. It was contended
that the Special Court was fully justified in proceeding to place the property
to auction and that in any case parties were clearly placed on notice of all
encumbrances that attached to the subject property. It was lastly submitted
that the 1992 Act does not envisage a Sale Certificate being issued by the
Custodian and that in any case would not impact the validity of the sale
conducted pursuant to the orders of the Special Court.
18. In order to adjudicate upon the rights of respective parties and the
rival claims laid by the petitioners on the subject property, it would be apt
to firstly consider the rights if any that Vipul Logistic can claim by virtue of
the auction sale that was conducted by the Custodian. However before
proceeding to do so, it would be apposite to briefly dwell upon the concept
of an auction conducted on an "as is where is". An "as is where is" auction
places an intending bidder on notice of the obligation to independently
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Digitally Signed
By:RAJENDER SINGH
KARKI
Signing Date:16.03.2022
17:15:33
undertake a due diligence exercise, make requisite enquiries and evaluate
all factors that may have a bearing or impact on the value of the property
put up for auction. The auctioneer in auctions of this genre is essentially
required to make requisite disclosures on the basis of material which is in
its possession and which may enable and assist intending bidders to assess
and evaluate the viability of submitting a bid. The auctioneer proffers no
warranties apart from being placed under the obligation of making a full
and complete disclosure with respect to the property based on the material
in its possession. While the auctioneer may be recognised in law to be
placed under an obligation not to withhold or conceal information which
may otherwise be in its possession and which may impede the decision of
an intending bidder or cloud its judgment, that does not detract from the
duty and responsibility of the intending bidder to independently assess and
weigh all risks and factors attached to the subject of the auction.
19. This duty of the intending bidder assumes greater significance where
the subject property comes to be put up for auction as a result of
enforcement action that may be taken by statutory authorities. Undisputedly
where properties are placed for auction as a result of adoption of coercive
measures by statutory authorities or where they are intended to be disposed
of in cases of default, it would be reasonable to presume that the intending
bidder would move forward with due caution and prudence, inform itself of
the background in which the property has been placed for auction as well as
the past dues and encumbrances that may burden it. The intending bidder
must therefore be recognised to be placed under the burden of diligently
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KARKI
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weighing in balance all factors that may effect or influence the value of the
property, the impediments that may impact its takeover before proceeding
to submit a bid. While considering an assertion of a bidder of having been
wronged, the Court must also bear in mind whether factors which are
subsequently discovered to impair the value of the property were
discoverable by a person from the material disclosures made or existing on
the record. Ultimately such challenges would have to be adjudged by
adopting the test of due enquiries having been made from the standpoint of
a reasonable and prudent person.
20. The claim of Vipul Logistic may now be assessed based on the
fundamental principles enunciated hereinabove. Starting from the public
notice in terms of which bids were invited, the Court notes that it
specifically referred to the order of the Special Court of 6 April 2005. That
order clearly noticed that the property in question was encumbered and that
issues may arise in the course of its sale by way of auction. However, the
Special Court formed the opinion that the process of sale must be set in
motion and any objections that may be received in its respect would be duly
considered at an appropriate stage. The Court also takes note of the
disclosure made before the Special Court by the representative of Killick
Nixon where it described the subject property as "Disputed DDA Title".
This material existed on the record of the Special Court and was open for
inspection by all intending bidders. Additionally, paragraph 4 of the public
notice clearly stipulated that not only would the property be open for
inspection in the presence of a representative of the Custodian, interested
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KARKI
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parties could also address queries and seek appropriate clarifications from
the office of the Custodian with regard to the property in question.
21. One may then proceed to notice the order of 21 December 2005 of
the Special Court. In the proceedings that ensued on that date before the
court, both Vipul Logistic as well as Raven Services were present and duly
represented. The claim raised by Raven Services over the subject property
and of the asserted transfer in its favour by Killick Nixon was duly noted.
Vipul Logistic, however, chose to proceed further undeterred by the said
disclosure. It neither voiced any reservations in proceeding further nor did it
assert any right to withdraw its bid even at this stage. This led to the Special
Court accepting the highest bid subject to whatever rights which may or
may not have been transferred to Raven Services. It further transpires from
the record that when Vipul Logistic failed to pay the entire bid amount, the
Custodian proceeded to forfeit the earnest money deposit in terms of its
communication of 14 February 2006. Aggrieved by that action, Vipul
Logistic petitioned the Special Court for extension of time to make the
requisite deposit. In fact, the Special Court in its order of 16 February 2006
recorded the submission of counsel for Vipul Logistic who submitted that it
was ready and willing to deposit the entire bid amount together with interest
@12 p.a. It was this offer which was duly accepted by the Special Court by
its order passed on that date. For our purposes, the aforesaid order also
attains significance in light of the Special Court in unambiguous terms
recording that "the property is encumbered and had fetched the value way
above the value of the land and building given in the valuation report.....".
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There possibly could not have been a more categorical and candid
disclosure with respect to the character of the property for which Vipul
Logistic submitted its bid. On 29 March 2006, the office of the Custodian
duly acknowledged that the entire consideration had been deposited by
Vipul Logistic and thus closed all proceedings at its end. The
communication of 29 March 2006, as was rightly pointed out by Mr.
Nandrajog, cannot be construed to be akin to a sale certificate or one which
may have vested title in Vipul Logistic by operation of law. This since the
Custodian left it open to Vipul Logistic to take further steps to get the
property registered in its name from the appropriate authority.
22. The merits of the contentions addressed by Mr. Jaitley may also be
tested in light of the orders that were passed by the Special Court during the
course of the auction proceedings. It would be apposite to recollect that the
bid of Vipul Logistic was accepted by the Special Court in terms of its
order of 21 December 2005 "Subject to any rights that may or may not
have been transferred by the judgment debtor to said Raven Services.......".
The Special Leave Petition which was preferred by Raven Services against
that order came to be dismissed summarily without leave being granted.
Similarly, while rejecting the review petition preferred by the Corporation
on 11 April 2007, the Special Court pertinently observed that since the
auction had been conducted on an "as is where is" basis, the auction
purchaser would be entitled to claim only such rights as inhered in Killick
Nixon and that its orders could not be construed as conferring on the
auction purchaser rights that may have ranked superior to those
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recognisable in law as vesting in Killick Nixon. There was thus no
repudiation of the predominant claim raised by the Corporation in respect
of the property. The Special Court also did not either overrule or negative
the assertion of title by the Corporation over the subject property or its
action of annulling the allotment. It becomes equally important to note that
even this order was passed in the presence of representative for Vipul
Logistic.
23. In the considered view of this Court, the Custodian as well as the
Special Court correctly recognised the obvious position of the property
having been disposed of by way of auction and leaving it open to the
auction purchaser to take such further steps as may be warranted. In any
case, the aforesaid recital of facts unerringly points towards Vipul Logistic
being fully aware of the encumbrances which saddled the property, of the
fact that the original allotment stood cancelled and of the rights claimed by
Raven Services. The disclosure of these facts did not dissuade or discourage
it from forging ahead and submitting a bid in the auction, seeking further
time to pay the bid amount and ultimately bending forward to even pay
interest on account of the delay caused in deposit of the bid amount. On an
overall conspectus of the aforesaid facts noted hereinabove, the Court finds
itself unable to sustain the contention that Vipul Logistic is liable to be
recognised as a bona fide purchaser for value and for consequential
directions being framed in its favour or for the Corporation being
commanded to hand over possession of the land to it.
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24. The Court then proceeds to consider the claim of Raven Services.
Undisputedly, Raven Services has been declared to be an unauthorised
occupant of the subject premises. This essentially rests on the indubitable
fact that the original allotment in favour of Lalita Dolls had been cancelled
and the appeal taken against that order by Killick Nixon rejected. Raven
Services claims rights in the subject property based on an asserted
conveyance made in its favour by Killick Nixon. The Corporation has
rightly submitted that transfers or conveyances of the demised land without
its permission or consent are in clear violation of the terms of the lease and
it was these facts which led to the cancellation of the original allotment.
However, the submission of Mr. Nandrajog, learned senior counsel, was
that the policy of the Corporation far from rendering illegal or irregular
transferees ineligible to seek regularisation of such infractions, conferred on
them a clearly articulated right to apply for restoration. Clause 2.4 of the
policy which was referred to clearly contemplates ex allotees as well as
subsequent purchasers applying for regularisation and restoration of leases.
It envisages consideration of cases even where appeals against cancellations
may have been rejected. It also extends the facility of restoration and
regularisation both where the transfer took place either prior to or after the
cancellation of the original lease. In the facts of the present case, the
transfer is shown to have been made after the cancellation of the lease on 2
March 1993 and after the rejection of the appeal on 27 August 1998. Its
right of consideration would clearly warrant consideration in terms of the
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provisions made in Clause 2.4 of the policy formulated and approved by the
Board of the Corporation in its meeting held on 29 September 2020.
25. Learned counsel for the Corporation while refuting the aforesaid
contentions addressed on behalf of Raven Services, did not question the
applicability of the policy on principle. It was however submitted that it had
failed to furnish any cogent evidence in support of the purported transfer by
Killick Nixon in its favour. It was further submitted that Raven had failed to
produce documents as demanded by the Corporation from time to time for
consideration of its claim. The aforesaid submissions were refuted by
learned counsel for the petitioner who drew the attention of the Court to the
documents placed at pages 513 onwards of the paperbook to submit that the
evidence in support of the purported transfer had been duly placed on the
record.
26. Having noticed the content of the objection raised on behalf of the
Corporation, this Court is of the considered view that the same would
clearly not justify either a dismissal of the writ petition or rejection of the
claim raised by Raven Services. This since it would always be open to the
Corporation to duly verify the factum of transfer and call upon Raven
Services to produce all relevant documents in that regard. Raven Services
would obviously be obliged to produce the same for the purposes of
consideration of its claim. It becomes pertinent to note that this Court has
not examined the veracity of the documents that have been produced on
behalf of Raven Services and this would also be an exercise which can be
independently undertaken by the Corporation. The objection raised in any
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case would not stand in the way of a direction being framed calling upon
the Corporation to consider the claim of Raven Services in light of the
policy.
27. Accordingly, and for all the aforesaid reasons, Writ Petition (Civil)
No. 7047 of 2014 shall stand dismissed along with pending application.
28. Writ Petition (Civil) No. 10059 of 2020 shall stand allowed to the
extent that the Corporation shall now be obliged to consider the claim of the
petitioner for regularisation and restoration of the lease deed in question in
accordance with the prevalent policy. The petitioner shall be obliged to
furnish necessary documentation in support of its asserted stand of transfer
of the leased premises in its favour. The Court also leaves it open to the
Corporation to duly verify the same and thereafter proceed to attend to the
prayer for regularisation in accordance with law.
YASHWANT VARMA, J.
MARCH 16, 2022
SU
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KARKI
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