Madras High Court
M.Lakshmi Narayana Choudhary vs The Official Liquidator on 30 April, 2013
Author: V.Ramasubramanian
Bench: V.Ramasubramanian
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 30/04/2013 CORAM THE HON'BLE MR.JUSTICE V.RAMASUBRAMANIAN Comp.A.No.125 of 2011 in C.P.No.103 of 1993 M.LAKSHMI NARAYANA CHOUDHARY, NO.1 KRISHNABAI STREET, T.NAGAR, CHENNAI 600017. VS 1 THE OFFICIAL LIQUIDATOR HIGH COURT, MADRAS AS THE LIQUIDATOR OF M/S.SETHURAM THIYAGARAJAN ENGINEERS PRIVATE LIMITED (IN LIQUIDATION) 2 STATE BANK OF INDIA COMMERCIAL BRANCH REPRESENTED BY ASSISTANT GENERAL MANAGER STRESSED ASSETS MANAGEMENT BRANCH, NO.32 RED CROSS BUILDING, EGMORE,CHENNI.8 3 THE RECOVERY OFFICER DEBTS RECOVERY TRIBUNAL-2 5TH FLOOR, NO.770-A ANNA SALAI, SPENCER TOWER, CHENNAI.2 ORDER
This is an application taken out by a third party to the winding up proceedings, seeking the validation of a transaction that took place between him and the company in liquidation way back on 30.01.1997, transferring the leasehold rights that the company in liquidation had, on an immovable property. This application is filed under Section 536(2) of the Companies Act, 1956.
2. I have heard Mr.T.K.Seshadri, learned senior counsel for the applicant, Mr.M.Devaraj, learned counsel for the State Bank of India which brought the property to sale before the Debts Recovery Tribunal, Mr.Thiyageswaran, learned counsel appearing for the auction purchaser and Mr.Arvind Shukla, learned Official Liquidator.
3. The sequence of events that have led to the filing of the above application, can be summarised in the chronological order as follows:
(a) M/s. Easun Engineering Co. Ltd. was the sole and absolute owner of two pieces of land, one measuring 52507 sq.ft. (21 grounds and 2107 sq.ft.) and another measuring 6360 sq.ft. (2 grounds and 1560 sq.ft.), both bearing Municipal Door No. Old No.35/5 and New No.476, Anna Salai, Nandanam, Chennai 600 035;
(b) Out of the aforesaid land of the total extent of 58867 sq.ft. (24 grounds and 1267 sq.ft.), the original owner M/s. Easun Engineering Co. Ltd. granted a lease in respect of small extents, out of one portion measuring about 9 grounds in favour of different lessees, with a view to enable all of them to jointly put up a multistoried complex, known as Temple Towers/Meenakshi Plaza;
(c) By a registered lease dated 30.3.1990 (registered as Document No.3256 of 1990 in the office of the District Registrar of Madras South), M/s. Easun Engineering Co. Ltd. granted a lease of an extent of 354 sq.ft. of land, out of the greater extent of 9 grounds, forming part of the whole extent, to and in favour of Sethuraman Thiayagarajan Engineers Pvt. Ltd., for a term of 999 years;
(d) In pursuance of the lease so obtained on 30.3.1990, in respect of the land of the extent of 354 sq.ft. for a period of 999 years, the lessee, namely, Sethuraman Thiayagarajan Engineers Pvt. Ltd. entered into a Builder's Agreement on 9.4.1990 with a builder by name M/s.R.K. Investments, for putting up an office premises in the 5th floor of the proposed multistoried complex, measuring a built up area of 1279 sq.ft.;
(e) On 16.8.1993, a petition for winding up M/s. Sethuraman Thiayagarajan Engineers Pvt. Ltd. was filed on the file of this Court;
(f) When the company petition for winding up was pending, the State Bank of India, which is the third respondent herein, filed a suit on the file of this Court in C.S.No.2117 of 1995, against Sethuraman Thiayagarajan Engineers Pvt. Ltd. as well as its Directors and guarantors, praying for a decree for recovery of a sum of Rs.1,96,44,468.77. The State Bank of India claimed in the suit that on 30.01.1991, the company (borrower) created an equitable mortgage by deposit of title deeds relating to the leasehold property. The leasehold property was described as item No.1 in Schedule 'A' to the plaint in the suit C.S.No.2117 of 1995, as follows:
Flat situate at Temple Towers of M/s. R.K.Investments, Old Door No.35/3, New No.476, Anna Salai, Nandanam, Madras 600 035, bounded on the North by land belonging to lessor, South by leasehold land belonging to K.Prakash, East by land belonging to lessor and West by leasehold land belonging to K.A.Chakravarthy measuring about 2467 sq.ft. in the premises and 354 sq.ft. of building site;
(g) By a deed of transfer of lease dated 30.01.1997, registered as Document No.1798 of 1997 in the office of the District Registrar of Madras South (actually presented for registration on 17.4.1997 and not on 30.01.1997), Sethuraman Thiayagarajan Engineers Pvt. Ltd., hereinafter referred to as the company in liquidation, transferred their leasehold rights in the land of the extent of 354 sq.ft., created by the lease deed dated 30.3.1990, in favour of one M.Lakshmi Narayana Choudhary. Clause (2) of the lease deed stated that the lease was for a period of 993 years commencing from 01.4.1996. It is strange that the date of commencement of lease was fixed as 01.4.1996, when clause (1) of the lease deed indicated a conveyance only in presenti and did not record as though the lease had already been orally created even before the date of execution of the deed;
(h) In pursuance of the said deed of transfer of lease dated 30.01.1997, lessee M.Lakshmi Narayana Choudhary, who is the applicant in the above application, also entered into a Builder's Agreement with M/s. R.K.Investments on 17.4.1997. Actually, there was already a Builder's Agreement between the company in liquidation and R.K.Investments for putting up a construction of a built up area of 1297 sq.ft. with reference to the land of the extent of 354 sq.ft. and that Builder's Agreement was dated 09.4.1990. Yet, after the transfer of the leasehold rights by the company in liquidation to the applicant herein, the applicant entered into a second Builder's Agreement dated 17.4.1997 for constructing an office space of 2,648.. sq.ft. in the very same fifth floor of the proposed complex, namely, Temple Towers. Interestingly, the Builder's Agreement between the applicant and R.K.Investments dated 17.4.1997 was solely on the basis of the transfer of lease of the land of the extent of 354 sq.ft. only, as seen from Schedule 'C' to the Builder's Agreement dated 17.4.1997. In other words, the paradox was that when the company in liquidation obtained a lease of land of the extent of 354 sq.ft. from the original owner M/s. Easun Engineering Co. Ltd., they acquired a right to construct a building in the fifth floor, only to the extent of 1279 sq.ft.,. But, when the company in liquidation transferred their leasehold rights, to the applicant herein, in respect of the very same land of the extent of 354 sq.ft., I do not know how the applicant got the right to put up a construction of an extent of 2648 sq.ft. It is a fundamental principle of law that no one confer a better right or title than what he himself has;
(i) I should also take note of one more fact, namely, that under the deed of transfer of lease entered into by the company in liquidation with the applicant, the total consideration mentioned was only Rs.2,68,080.21.This amount was arrived at on the basis of the rent payable by the company in liquidation to the original owner at the rate of Rs.269.97ps per year for the remaining period of lease of 993 years. Similarly, under the Builders Agreement dated 17.4.1997 entered into by the applicant with R.K.Investments, the amount payable to the builder was fixed only at Rs.7,44,088/-. In other words, the applicant herein was to get a leasehold right in the land of the extent of about 354 sq.ft. along with built up office space of the extent of 2648 sq.ft. at a total cost of little over Rs.10.00 Lakhs;
(j) After the constitution of the Debts Recovery Tribunal, in pursuance of the 1993 Act, the suit filed by the State Bank of India got transferred to the file of the Debts Recovery Tribunal I and numbered as T.A.No.426 of 1998;
(k) On 10.12.1999, this Court ordered the winding up of the company in liquidation, after hearing both parties;
(l) Interestingly, when the records relating to the winding up proceedings were summoned by me, they threw light upon certain events, which are as follows:
(i) the company petition for winding up was presented on 18.8.1993;
(ii) on 03.9.1993, the company petition was admitted and notices were ordered to be published in the Notice Board and also served on the company in liquidation and on the Registrar of Companies. However, publication was not ordered;
(iii) on 15.02.1996, advertisement was ordered;
(iv) on 23.4.1996, R.Jayasimha Babu,J, passed an order to the following effect:
Counsel for the company says that the assets belonging to the company is in the process of being sold; that the Bank has also agreed in principle to set apart a portion of the sale proceeds for being paid to the petitioner herein. The respondent shall not sell the assets of the company without the permission of this Court. The matter is adjourned to second week of June 1996; and
(v) Subsequently, on 10.12.1999, the order for winding up was passed;
(m) Therefore, it is clear that an interim order prohibiting the company in liquidation from alienating its assets was passed on 23.4.1996. This appears to be reason why the company in liquidation executed a deed of transfer of lease on 30.01.1997 in favour of the applicant, with retrospective effect from 01.4.1996;
(n) After the company was ordered to be wound up, the Official Liquidator wrote a letter dated 04.5.2000 to the State Bank of India, calling upon them to furnish details of the properties mortgaged to the Bank. It was stated in the said letter by the Official Liquidator that the flat in question was in possession of M.S.Ram Mohan Rao and his son, who is the applicant herein;
(o) By a separate letter dated 25.7.2000, the Official Liquidator also wrote to the applicant asking the applicant to hand over the possession of the property, by pointing out the provisions of Section 536(2). This was followed by a reminder dated 17.01.2001 sent by the Official Liquidator to the applicant;
(p) However, the applicant gave a reply through his counsel on 01.02.2001, claiming that the applicant obtained a transfer of lease by a document dated 30.01.1997. Interestingly, the applicant claimed in the said legal reply dated 01.02.2001 that he had paid Rs.30.00 Lakhs to the State Bank of India on 17.4.1997, with an understanding that the Bank would release the equitable mortgage. This was despite the fact that the consideration fixed for the lease of the land was only Rs.2,69,700/- and the cost of construction fixed was only Rs.7,44,088/-, taking the total cost to a little over Rs.10 lakhs. In other words, this letter dated 01.02.2001 disclosed that the applicant was aware of the claim of the State Bank of India though the applicant disclaimed any knowledge of the winding up proceedings;
(q) The suit filed by the State Bank of India, which first got transferred to the Debts Recovery Tribunal-I and numbered as T.A.No.426 of 1998, later got re-transferred to Debts Recovery Tribunal-II and re-numbered as T.A.No.532 of 2001. In the said application, a certificate of recovery was issued on 01.11.2004 by the Debts Recovery Tribunal, in favour of the State Bank of India for a total amount of Rs.8,08,24,183/-;
(r) Subsequently, by way of abundant caution, the Bank also lodged a claim in Form 66 with the Official Liquidator on 24.8.2006;
(s) In pursuance of the certificate of recovery issued by the Debts Recovery Tribunal in DRC No.148 of 2004, the Recovery Officer brought to sale, the property, by issuing an auction sale notice. It appears that the auction sale notice was issued towards the end of August 2009, inviting offers by 15.9.2009 and indicating the date of auction as 24.9.2009. After seeing the auction notice, the applicant filed an affidavit of protest with the Recovery Officer of Debts Recovery Tribunal. In the affidavit of protest, the applicant made certain claims. Those claims are to be noted at this stage, before proceeding further. They were as follows:
(i) that he got the transfer of leasehold rights from the company in liquidation under the deed dated 30.01.1997 in respect of the land measuring 354 sq.ft. with a right to put up a construction in the first floor;
(ii) that he entered into a Builders Agreement to construct 2648 sq.ft.;
(iii) that he had thereafter become the absolute owner of the commercial space measuring 2697 sq.ft. in the fifth floor;
(iv) that for the above land and building, he had paid a total amount of Rs.30.00 Lakhs to the State Bank of India for the release of the mortgage and also paid Rs.7,44,088/- to the builder R.K.Investments and further paid a sum of Rs.2,68,080/- towards the lease rentals to the company in liquidation, totaling to an amount of Rs.40,13,168.21; and
(v) that he had let out the property to Philips India and also started receiving a rent;
(t) The State Bank of India filed a counter to the protest petition filed by the applicant, indicating that the amount of Rs.30.00 Lakhs claimed by the applicant to have been paid to the Bank on 17.4.1997 was actually paid not by the applicant and not even by his tenant Philips India, but was paid by a company by name M/s. Henkel Spic India Ltd. with an accompanying letter indicating that it was an advance for Temple Tower, 5th floor;
(u) In view of the protest petition, the auction could not be held on 24.9.2009;
(v) Thereafter, the State Bank of India moved an application in this Court in Comp.A.No.1445 of 2009 seeking permission of this Court to bring the property of the company in liquidation (namely the subject matter of the present application) to sale. After hearing the counsel for the Bank, the counsel for the applicant and the Official Liquidator, I allowed the said application Comp.A.No.1445 of 2009, permitting the Bank to proceed before the Debts Recovery Tribunal and leaving it open to the applicant herein to work out his remedies before the very same Debts Recovery Tribunal. I made it clear at that time that I was not pronouncing any opinion as to who is the owner of the property in dispute. I directed the Recovery Officer to involve the Official Liquidator at every stage;
(w) Thereafter, the Recovery Officer issued a fresh auction notice on 19.3.2010, fixing the upset price as Rs.1,30,00,000/- and fixing the date of auction as 29.4.2010;
(x) It appears that the applicant immediately moved an appeal in Appeal No.7 of 2010 along with a prayer for stay of the auction. But, the prayer for the stay of the auction was rejected by the Tribunal on 28.4.2010. Therefore, the Recovery Officer proceeded with the auction on 29.4.2010;
(y) 18 persons participated in the auction and the fourth respondent herein became the successful bidder, offering a sum of Rs.1,30,10,000/-;
(z) After the auction was over on 29.4.2010, the applicant herein filed a civil suit in C.S.No.531 of 2010 on the file of this Court, against the State Bank of India and against the company in liquidation, praying for a decree of declaration that the auction conducted on 29.4.2010 was null and void and for a permanent injunction restraining the Bank from confirming the sale. He also prayed for a mandatory injunction to direct the Bank to return the original lease deed dated 30.3.1990. The relief prayed in paragraph 20(c) of the suit C.S.No.531 of 2010, should be taken note of, as it has something to do with the stand now taken by the applicant. The relief sought in the said paragraph is for a mandatory injunction to direct the Bank to return the original lease deed dated 30.3.1990 entered into between M/s. Easun Engineering Co. Ltd. and the company in liquidation. The suit was actually filed on 11.5.2010;
(aa) It appears that as per the auction notice dated 19.3.2010, the successful bidder was obliged to remit 25% of the bid amount (less EMD) immediately on the sale being knocked down. The balance amount, in addition to poundage fee, was to be paid within 15 days. This condition could be found at serial No.3 in the auction notice dated 19.3.2010;
(ab) However, it appears that the fourth respondent herein paid only a sum of Rs.39.00 Lakhs till 08.7.2010 and the Recovery Officer passed an order on 08.7.2010 calling upon the fourth respondent to pay the amount immediately and threatening to cancel the auction if it was not paid;
(ac) But, it appears that the fourth respondent auction purchaser remitted a sum of Rs.50.00 Lakhs on 30.7.2010, another sum of Rs.25.00 Lakhs on 04.8.2010 and the balance amount of Rs.17,40,110/- only by the end of August 2010;
(ad) Accepting the payments so made over a period of four months, the Recovery Officer issued a notice on 31.8.2010 proposing to confirm the sale and to issue a sale certificate by 22.9.2010. Accordingly, a sale certificate was issued by the Recovery Officer on 11.10.2010 to the fourth respondent. Simultaneously, an order of confirmation of sale was also made;
(ae) In the meantime, the civil suit filed by the applicant herein in C.S.No.531 of 2010, got transferred to the Fast Track Court, Chennai and re-numbered as O.S.No.7532 of 2010. This was in view of the fact that the applicant had valued the reliefs prayed for in the suit at Rs.10,03,000/- and after the filing of the suit, the pecuniary jurisdiction of the City Civil Court at Chennai got enhanced. As I have already pointed out, the first relief prayed for in the suit C.S.No.531 of 2010 was for a declaration that the auction conducted on 29.4.2010 was null and void. The auction actually fetched the highest bid amount of Rs.1,30,10,000/- and the upset price itself was Rs.1,30,00,000/-. Yet the applicant claimed in paragraph 18 of the plaint that the relief of declaration was incapable of valuation. I do not know how this was legally tenable and how the suit got numbered;
(af) After finding that the sale was confirmed and a sale certificate was issued on 11.10.2010 and after finding that the fourth respondent auction purchaser had paid the bid amount only after a period of four months in violation of the conditions of auction, the applicant moved an application for withdrawing his first suit O.S.No.7532 of 2010, with leave to file a fresh suit in a comprehensive manner;
(ag) Again, the procedure adopted by the applicant was not very clean. The applicant first filed a fresh suit in C.S.No.970 of 2010 on the file of this Court along with an application for leave to sue under clause 12 of the Letters Patent. The applicant obtained leave of this Court on 24.11.2010, when his first suit C.S.No.531 of 2010 on the very same cause of action, was actually pending before the Fast Track Court in O.S.No.7532 of 2010;
(ah) It is only after filing an application for leave to sue under Clause 12 and obtaining the leave on 24.11.2010, that the applicant herein moved the Fast Track Court with an application in I.A.No.148 of 2010 under Order XXIII, Rule 1(3), CPC for leave to withdraw the first suit with liberty to file the next suit. This application was actually filed on 25.11.2010 after obtaining leave to institute the second suit;
(ai) When the application for leave to withdraw the first suit with liberty was actually pending before the Fast Track Court, the applicant moved an application for injunction in the second suit C.S.No.970 of 2010. In that application for injunction O.A.No.1239 of 2010, a learned Judge of this Court granted an injunction restraining the Bank, the Recovery Officer and the auction purchaser from confirming the sale. This order was passed on 02.12.2010. But, by then, the sale had already been confirmed on 11.11.2010;
(aj) It is only after the applicant obtained an interim injunction in the second suit C.S.No.970 of 2010 on 02.12.2010, that his application before the Fast Track Court I.A.No.148 of 2010 for withdrawal of the first suit with liberty was allowed. It was actually allowed on 07.12.2010;
(ak) Unfortunately, the Bank did not file a counter and bring these facts to my notice, but merely sought time for filing a counter, when the application for injunction in the second suit O.A.No.1239 of 2010 in C.S.No.970 of 2010 came up before me about two years ago on 12.01.2011. Therefore, I ordered the injunction to continue while granting time to the Bank to file a counter. It appears that the said application is still pending and the said interim order is still in force. However, it should be pointed out that the injunction granted therein is of no avail, in view of the fact that even before 02.12.2010, the date on which injunction was granted, the sale had been confirmed in favour of the fourth respondent on 11.11.2010 itself;
(al) Thereafter, the applicant came up with the present application (filed towards the end of January or the first week of February 2011), praying for an order validating the transfer of leasehold rights by the company in liquidation in favour of the applicant under the deed dated 30.01.1997 registered on 17.4.1997 as Document No.1798 of 1997, in terms of Section 536(2) of the Companies Act.
4. After filing the above Comp.A.No.125 of 2011 under Section 536(2) for validating the transaction in question, the applicant came up with three more applications, namely,
(a) Comp.A.No.899 of 2011 to grant leave to him to pursue the civil suit C.S.No.970 of 2010 by impleading the Official Liquidator;
(b) Comp.A.No.940 of 2011 to order the transfer of Appeal No.7 of 2010 pending on the file of the Debts Recovery Tribunal II, Chennai, against the proceedings of the Recovery Officer rejecting the protest petition of the applicant and proceeding with the auction sale; and
(c) Comp.A.No.941 of 2011 for an interim stay of further proceedings before Debts Recovery Tribunal II, Chennai, in Appeal No.7 of 2010, pending disposal of the transfer petition Comp.A.No.940 of 2011.
5. By an order dated 19.3.2013, I allowed Comp.Application No.940 of 2011, transferring the appeal filed by the applicant herein on the file of the Debts Recovery Tribunal in Appeal No.7 of 2010 to the file of this court. Thereafter, I heard arguments in the transferred appeal (Tr.Comp.A.No 511 of 2013) also. By a separate order the transferred appeal is also being disposed of today.
6. Mr.T.K.Seshadri, learned senior counsel appearing for the applicant, formulated his contentions broadly under four foundations. They are:
(i) A transaction entered into by a company facing liquidation proceedings, after the filing of the petition for winding up, is not always void, but can be ratified by the Court in view of the express language used in Section 536(2) of the Companies Act, 1956 and in view of the interpretation given by various Courts, including the Supreme Court. All that the Court should see while considering an application for ratification of the transaction is whether the transaction was entered into in the ordinary course of business of the company and whether it was a bona fide transaction. Again, the question of bona fides has to be tested only from the point of view of the transferee and not from the point of view of the company in liquidation. The Official Liquidator has not only omitted to challenge the transaction dated 30.01.1997, but has also not made out any case in his own report to show how the transaction was not bona fide. Therefore, on the facts of the case, the deed of transfer of leasehold rights executed by the company in liquidation on 30.01.1997, during the pendency of the winding up proceedings, deserves to be ratified, since a major part of the consideration for the transaction went towards the discharge of the obligations of the company to the State Bank of India, which claims to be a secured creditor;
(ii) The State Bank of India cannot today oppose the claim of the applicant, since the Bank is not in possession of the original title deeds. It appears that a mortgage by deposit of title deeds was created only with Xerox copies of the certified copies and such a creation of a mortgage is invalid. The very initiation of proceedings by the Bank is also improper, in view of the failure of the Bank to obtain leave from this Court. While the company petition was filed on 16.8.1993, the suit was filed only on 08.01.1995, but the Bank failed to take leave of this Court;
(iii) In any case, there are lot of discrepancies in the description of the property and hence, the Recovery Officer could not have sold it; and
(iv) The auction purchaser cannot oppose this application since after participating in the auction on 29.4.2010, he failed to deposit 75% of sale consideration within 15 days as per the conditions of the auction notice. The Recovery Officer committed a gross illegality in accepting the balance sale consideration in instalments over a period of four months. Hence, the applicant has a good case on merits to succeed in the civil suit C.S.No.970 of 2010 as well as in the appeal before Debt Recovery Tribunal Appeal No.7 of 2010.
7. The learned Official Liquidator has filed a report opposing the prayer of the applicant for ratification of the transfer of leasehold rights, on the following grounds:
(i) that apart from the State Bank of India, which is the third respondent herein, which filed an affidavit of proof of debt on 20.4.2006, three other secured creditors, namely, Bank of Baroda, Sundaram Finance Limited and Sakthi Finance Limited, had lodged claims with the Official Liquidator;
(ii) that since the proceedings for winding up would relate back to the date of filing of the petition, namely, 18.8.1993, in terms of Section 441, all the assets and liabilities of the company shall be deemed to be in the custody of this Court even from the said date, in terms of Section 456(2), making the transaction in question invalid;
(iii) that since the proceedings for winding up commenced on 18.8.1993 and the transaction in question happened only on 30.01.1997, it is null and void under Section 536;
(iv) that in an application filed by the third respondent Bank in Comp.A.No.1445 of 2009, this Court allowed the applicant to get impleaded and thereafter, passed an order on 26.11.2009, permitting the Bank to proceed before the Debts Recovery Tribunal and also allowing the applicant to work out his remedies before the Debts Recovery Tribunal and hence, the applicant cannot now come before this Court;
(v) in any case, the present prayer for ratification made in the year 2011, was not made when this Court allowed Comp.A.No.1445 of 2009, permitting the Bank to proceed with the sale through Debts Recovery Tribunal; and
(vi) that the applicant has already filed a civil suit as well as an appeal before the Debts Recovery Tribunal and hence, he cannot seek parallel remedies.
8. The State Bank of India, which is the third respondent, has filed a counter affidavit contending inter alia
(i) that the present application has been filed in the year 2011, after 12 years of the Official Liquidator taking possession in 1999 and hence, it is barred by limitation;
(ii) that the Recovery Officer of the Debts Recovery Tribunal already attached the property by an order dated 05.01.2007 and the applicant has come up with the above application after four years of the said order and hence, it is barred by limitation even from the said date;
(iii) that the acceptance by the bank, of the payment of Rs.30.00 Lakhs, in April 1997, was not on the basis of any undertaking by the Bank to discharge the property from mortgage or to discharge the company of its liabilities;
(iv) that the applicant cannot attack the creation of equitable mortgage, on the ground that there are no original documents, since what is required for creating an equitable mortgage, is the deposit of documents evidencing the title of the property; and
(v) that the applicant appears to have bought another piece of undivided share in the land, with a view to construct a single module (flat) and he is now trying to take advantage by projecting some discrepancies.
9. The auction purchaser, who is impleaded as the fourth respondent, has filed a counter affidavit contending
(i) that the very transaction of transfer of leasehold right, was during the subsistence of the mortgage in favour of the Bank and hence, the applicant cannot get a right larger than the rights of the mortgagee;
(ii) that the claim of the applicant is highly belated;
(iii) that the transfer of lease in favour of the applicant was a mala fide one with full knowledge of the subsistence of the mortgage; and
(iv) that therefore, the prayer of the applicant cannot be granted.
10. From the pleadings and the contentions advanced by the learned counsel appearing on both sides, it appears that the following questions arise for consideration:
(i) Whether the application of the applicant under Section 536(2) is barred by delay and laches or limitation?
(ii) Whether, on merits, the applicant is a bona fide transferee and hence, entitled to have the transaction ratified, on the ground that it is not a void transaction, but only voidable under Section 536(2)?
(iii) Whether the mortgage in favour of the State Bank of India is a valid mortgage, when the original title deeds were not allegedly deposited with them?
(iv) Whether the discrepancies in the description of the property, would make the mortgage as well as the sale invalid? and
(v) Whether the failure of the auction purchaser to remit the balance sale consideration within the time stipulated in the auction notice, would make the sale invalid?
Issue of limitation 11.1. Since the State Bank of India, which is the third respondent herein, has raised the issue of limitation, it is necessary to consider the same in the first instance, before dealing with the merits of the case. It is the contention of Mr.M.Devarajan, learned counsel for the State Bank of India, that in terms of Article 137 of the Schedule to the Limitation Act and the decision in Rathinam P.V. v. Official Liquidator ((2011) 168 Company Cases 168 (Bom.)), the application filed by the applicant is barred by limitation and hence, liable to be dismissed outright.
11.2. However, it is contended by Mr.T.K.Seshadri, learned senior counsel for the applicant that for seeking the ratification of a transaction under Section 536(2) of the Act, no period of limitation is stipulated by the Act and that it is only when the property is attempted to be brought to sale, by the Bank, that a cause of action arose for the applicant to seek ratification. The learned senior counsel also submitted that the applicant had no knowledge of the initiation of the proceedings for winding up, when the applicant obtained the transfer of leasehold rights and that the applicant came into the picture only when an attempt was made to take possession of the property and to bring it for sale. Insofar as the decision relied upon by the learned counsel for the Bank is concerned, it is contended by the learned senior counsel for the applicant that the decision of the Bombay High Court is not on the application of Article 137 and hence, it has no application to the case on hand.
11.3. In order to find an answer to the issue on hand, it is first necessary to take note of a few dates, again, at the cost of repetition. The dates are:
(a) On 16.8.1993, the petition for winding up was presented to this Court;
(b) On 08.01.1995, the State Bank of India filed the suit against the company in liquidation for recovery, claiming that there was a mortgage of the property;
(c) On 30.01.1997, the applicant got a deed of transfer executed and also got it registered on 17.4.1997;
(d) The order of winding up of the company was passed on 10.12.1999;
(e) The applicant claims to have made payment of Rs.30.00 Lakhs to the State Bank of India on 17.4.1997, towards the discharge of the mortgage dues. This claim on the part of the applicant shows that he was aware of the mortgage. Therefore, it is clear that he purchased the leasehold rights with the full knowledge of the mortgage and was even eager to get the mortgage discharged;
(f) On 25.7.2000, the Official Liquidator admittedly wrote a letter to the applicant, calling upon him to hand over the property within ten days. The Official Liquidator again wrote another letter on 17.01.2001;
(g) On 01.02.2001, the applicant gave a reply through his lawyers, to the Official Liquidator, claiming that he was a bona fide purchaser for valuable consideration and that he was not aware of the presentation of the winding up petition and hence, the transfer is not hit by Section 536(2);
(h) On 30.8.2004, the Debts Recovery Tribunal passed a final order leading to the issue of a certificate of recovery in DRC No.148 of 2004 on 01.11.2004;
(i) On 05.01.2007, the Recovery Officer of Debts Recovery Tribunal ordered the attachment of the property in question;
(j) In 2009, the Bank came up with an application in Comp.A.No.1445 of 2009 before this Court seeking permission to sell the property through the Debts Recovery Tribunal, in pursuance of the certificate of recovery issued by the Debts Recovery Tribunal. During the pendency of the said application, the applicant came up with an application in Comp.A.No.1694 of 2009 seeking to implead himself as a party to the application Comp.A.No.1445 of 2009. That impleading application was allowed on 26.11.2009 and the applicant came on record and objected to the sale;
(k) On 26.11.2009, I allowed Comp.A.No.1445 of 2009, in the presence of the applicant and after hearing his counsel, permitting the sale of the property through the Debts Recovery Tribunal and leaving it open to the impleaded respondent to work out his remedies before the Debts Recovery Tribunal;
(l) Thereafter, the applicant filed objection petitions before the Recovery Officer, got his objections overruled and filed an appeal in A.No.7 of 2010 before the Tribunal; and
(m) Subsequently, on 31.01.2011, the applicant came up with the above application Comp.A.No.125 of 2011.
11.4. In the light of the above admitted facts, we have to see whether the application is barred by limitation, after first finding out whether there is any period of limitation at all, for an application under Section 536(2). In other words, we have to find out (i) whether the Companies Act prescribes any limitation for such a petition (ii) whether the provisions of the Limitation Act, 1908, applies and if so, (iii) whether this application is within the period of limitation or not.
11.5. The Companies Act, 1956, as a whole, does not talk about the application of the provisions of the Limitation Act in general to all proceedings. But, in certain Sections of the Act, there is a reference to the Limitation Act, 1908.
11.6. Insofar as the proceedings for winding up are concerned, Section 458-A makes a reference to the Limitation Act. But, Section 458-A is applicable only to a suit or application filed in the name and on behalf of a company which is being wound up by the Court. In other words, whenever a suit or application filed in the name of and on behalf of a company which is being wound up by the Court is to be instituted, the period of limitation for such institution should be computed, under Section 458-A, after excluding the period from the date of commencement of the winding up, to the date of the order of winding up and a period of one year immediately following the date of the order of winding up. This exclusion of the period for computing the period of limitation, is facilitated by Section 458-A, notwithstanding anything contained in the Limitation Act or any other law for the time being in force.
11.7. Coming to Section 536, it is seen that the provisions therein are just declaratory in nature. While Sub-section (1) declares the transfer of shares and any alteration in the status of the members of the company, made after the commencement of the proceeding for winding up, void, in the case of a voluntary winding up, Sub-section (2) makes a similar declaration in respect of any disposition of property, in the case of winding up by the Court. In other words, Sub-section (1) deals with voluntary winding up and the declaration contained therein is confined only to transfer of shares and alteration in the status of the members of the company. Sub-section (2) relates to winding up by the Court and it covers any disposition of property as well as transfer of shares or alteration in the status of its members.
11.8. What is important to be noted is that Section 536 does not prescribe any procedure either for a declaration of a transaction to be void or for the declaration of a transaction to be valid. Though, in practice, applications are filed by the Official Liquidator in terms of Section 536(2) for declaring certain transactions to be void, and though similar applications are also filed by transferees for a positive declaration that the transactions are valid, Section 536, by itself, does not provide for any such procedure, either for an application by the Official Liquidator or for an application by a transferee. However, Rule 9 of the Companies (Court) Rules, 1959, confers inherent powers upon the Company Court to give such directions and pass such orders as are necessary to meet the ends of justice and to prevent the abuse of the process of Court. It is perhaps by invoking this inherent power conferred by Rule 9 that applications are filed one way or the other for declaring certain transactions to be void or valid. Interestingly, Rule 11(a) gives a list of applications to be made by petition. There are 23 matters listed under Rule 11(a). They relate to applications under Sections 17, 79, 101, 107, 141, 155, 186, 203, 237, 391(2), 395(1) or (2), 397, 398, 407(1)(b), 439, 517, 522, 542, 543, 559, 560(6), 579 and 633(2). There is no reference in Rule 11(a) to Section 536.
11.9. Similarly, Rule 12(a) gives a list of 18 matters to be heard in open Court. None of them relate to an application under Section 536.
11.10. Therefore, it is clear that Section 536 contains only a statutory declaration about the validity of the transactions entered into after the commencement of the proceedings for winding up and it does not provide a procedure for ratifying or invalidating a transaction. Consequently, the applications filed in relation to the same are to be construed only in terms of Rule 9, invoking the inherent powers of the Court.
11.11. Rule 6 of the Companies (Court) Rules states that the provisions of the Code of Civil Procedure shall apply to all proceedings under the Act and the Rules. Rule 7 confers powers upon the Court to extend or abridge the time appointed by these Rules or fixed by the Court. The power to enlarge time is available even if an application is not made for such enlargement before the expiration of the time allowed or appointed.
11.12. Now, let us come to the provisions of the Limitation Act, 1963. Section 3(1) of the Limitation Act, 1963, mandates that every suit instituted, appeal preferred and application made after the prescribed period, shall be dismissed, although limitation has not been set up as a defence. But, this is subject to the provisions of Sections 4 to 24, both inclusive. The expression "application" is defined under Section 2(b) to include a petition. Section 29(2) of the Limitation Act, 1963, states that where any special or local law prescribes, for any suit, appeal or application, a period of limitation different from the one prescribed by the Schedule to the Limitation Act, the provisions of Section 3 shall apply, as if such period were prescribed by the Schedule. Sub-section (3) of Section 29 excludes any suit or other proceeding under any law relating to marriage and divorce, from the application of the provisions of the Limitation Act.
11.13. Article 137 in the Schedule to the Limitation Act, 1963, contains a residuary clause. It prescribes three years as the period of limitation for any application for which no period of limitation is provided elsewhere in that division. But, time would begin to run only from the date on which the right to apply accrues. Therefore, insofar as matters covered by special enactments are concerned, the period of limitation prescribed for initiating any proceeding, under those enactments, are covered by Section 29(2).
11.14. By virtue of Section 29(2) of the Limitation Act, the provisions of Sections 4 to 24 are applicable, for the purpose of determining the period of limitation, insofar as proceedings under any special or local law are concerned, provided these provisions are not expressly excluded by such special or local law. The Companies Act does not exclude the provisions of the Limitation Act, 1963, either expressly or impliedly.
11.15. But, generally, two requirements are to be satisfied for the applicability of Section 29(2) and for importing the machinery of the provisions contained in Sections 4 to 24. They are (a) there must a provision for a period of limitation under any special or local law, in connection with any suit, appeal or application; and (b) such prescription of the period of limitation under such special or local law should be different from the period of limitation prescribed by the Schedule to the Limitation Act, 1963.
11.16. If both the above requirements are satisfied, then the consequences contemplated by Section 29(2) would automatically follow. These consequences are: (i) Section 3 of the Limitation Act would apply; and (ii) the provisions of Sections 4 to 24 would also apply insofar as and to the extent they are not expressly excluded by such special or local law.
11.17. But, it should also be borne in mind that where the special or local law is a complete Code in the matter of limitation, then, Section 29(2) is not applicable. Therefore, two questions would arise for consideration, namely, (a) Whether the Companies Act, 1956, is a complete Code in the matter of limitation? and (b) Whether, in the absence of any prescription regarding the period of limitation, for invoking Section 536(2) of the Companies Act, 1956, Section 29(2) would still come into operation?
11.18. On the first question, there can be no difficulty. The Companies Act is not a complete Code in the matter of limitation. It is a complete Code insofar as various other matters are concerned. But, it is certainly not a complete Code insofar as the law of limitation is concerned.
11.19. But, on the second question, it is seen from the language of Section 536(2) that no period of limitation is prescribed for invoking Section 536(2). The reason is that Section 536 does not even prescribe any procedure for declaring as valid or invalid, any transaction. It is only when a procedure is prescribed, that a period of limitation for adopting the procedure would also be prescribed. When there is no procedure for filing an application for validating or invalidating a transaction under Section 536, there could also be no period of limitation prescribed therefor.
11.20. Section 29(2) of the Limitation Act starts with the sentence "where any special or local law prescribes for any suit, appeal or application, a period of limitation". Therefore, it can be inferred that Section 3 of the Limitation Act would come into operation, only when the special or local law (the Companies Act, in this case) prescribes a period of limitation, for the proceeding in question. If no period of limitation is prescribed for a particular action under the special or local law, the invocation of Section 3 of the Limitation Act becomes doubtful. If the applicability of Section 3 is doubtful, the computation of the period by applying Sections 4 to 24 would also become doubtful.
11.21. Coming to Article 137, it actually corresponds to Article 181 of the Limitation Act, 1908. Article 181 of the Schedule to the Limitation Act, 1908, was held by Courts to apply only to applications under the Code of Civil Procedure, on the principle of ejusdem generis. This is, in view of the fact that the wording of Article 181 of 1908 Act was as follows: "Application for which no period of limitation is provided elsewhere in this Schedule or by Section 48 of the Code of Civil Procedure, 1908.".
11.22. But, Article 137 of the Schedule to the 1963 Act reads as follows: "Any other application for which no period of limitation is provided elsewhere in this division". Therefore, the reference to the Code of Civil Procedure has been removed now.
11.23. In Kerala State Electricity Board v. T.P.Kunhaliumma (AIR 1977 SC 282), a three member Bench of the Supreme Court took note of the definition of the expression "application" under Section 2(b) of the Limitation Act, 1963, and held that the object of the 1963 Act was to include petitions, original or otherwise, under special laws. The Court further held that the alteration of the division as well as the change in the collocation of words in Article 137 of the 1963 Act, compared with Article 181 of the 1908 Act, would show that applications contemplated under Article 137 are not confined to applications under the Code of Civil Procedure. The Court pointed out that the earlier interpretations made on the principle of ejusdem generis would not hold good any more and that the expression "any other application" in Article 137 would take within its fold, any application under any Act. The only restriction is that such application should be to a Court and not to a statutory body or a quasi judicial tribunal.
11.24. There can be no dispute about the fact that this company court is a Court within the meaning of Section 2(11) of the Companies Act, 1956. The procedure before this Court is prescribed by the Companies (Court) Rules, 1959. Rule 6 makes the provisions of the Code of Civil Procedure applicable to the proceedings.
11.25. The fact that the provisions of the Limitation Act would apply to proceedings under the Companies Act, 1956, became very clear with the introduction of Section 458-A. But for Section 458-A, any claim made by the Official Liquidator in the form of a suit or application against the debtors of the company in liquidation would have been governed by the normal law of limitation under the Limitation Act. While dealing with the scope of Section 458-A, the Supreme Court held in Karnataka Steel & Wire Products v. Kohinoor Rolling Shutters and Engineering Works (2003 (1) SCC 76) that Section 458-A merely excludes the period during which a company was being wound up by the Court, form the date of commencement of proceedings till the order of winding up is made and an additional period of one year immediately following the date of winding up. But, the Supreme Court made it clear that for the application of Section 458-A, there must be a legally enforceable debt on the date of commencement of winding up proceedings. The Court made it clear that Section 458-A would not resurrect a time barred debt or claim, which was not enforceable on the date of winding up.
11.26. In Best & Crompton Engineering Ltd. v. The Official Liquidator {AIR 1995 Madras 20}, a Full Bench of this Court approved the ratio laid down by a Division Bench in Official Liquidator vs. Southern Screws Pvt. Ltd {1988 (63) Comp. Cases 749}, to the effect that Article 137 of the Limitation Act is not the Article that could be applied in all cases. The passage found in the decision of the Division Bench, which was quoted with approval by the Full Bench is as follows:-
"If the claim could have formed the subject matter of a normal application in a Regular Court or if the application is filed under any specific provision of the Companies Act, then the corresponding Article in the Limitation Act, will have to be applied and if no other specific Article is applicable, the residuary Article 137 would have to be applied."
11.27. From the above observations, it is clear that Article 137 would apply, if no period of limitation is prescribed for an application even under the Companies Act, 1956, except to the extent that Section 458-A comes into operation. In the case on hand, Section 458-A has no application. Therefore, Article 137 would apply and the application for ratification of a transaction, is clearly barred even on admitted facts. I have already pointed out that the applicant was put on notice of the proceedings for winding up, by the Official Liquidator, way back on 25.7.2000 and 17.01.2001. The applicant gave a reply to the Official Liquidator on 01.02.2001, claiming to be a bona fide transferee. Therefore, at least from July 2000 or January 2001, the applicant could have come up with an application within three years. But, the applicant filed the above application only in January 2011, after a period of about ten years. Hence, the application is barred by limitation.
12. Issue of bona fide (or otherwise) nature of the transaction:
12.1. Though I have found that the application is barred by limitation, I would also deal with the merits of the case to find out whether the applicant is a bona fide transferee and whether the transaction can be ratified, by the exercise of a discretionary power granted to this Court under Section 536(2).
12.2. Though Section 536(2) declares any disposition of the property of the company, made after the commencement of the winding up, to be void, such a declaration is qualified with the expression "unless the Court otherwise orders". Therefore, the declaration of voidity under Section 536(2) is only a qualified declaration and not an absolute one.
12.3. In support of the above contentions, Mr.T.K.Seshadri, learned senior counsel for the applicant relied upon the following decisions to drive home the scope of Section 536(2) and the discretionary power vested in this Court and also to impress upon me that the applicant is a bona fide purchaser. I must fairly mention here that the learned senior counsel cited decisions, where such transactions were not only validated, but also cases where such transactions were not validated by the Court. But, the principles of law that the learned senior counsel advanced, are reflected in those decisions, without any conflicting view. The decisions relied upon by the learned senior counsel are as follows:
(i) N.Subramania Iyer v. Official Receiver Quilon & another (AIR 1958 SC 1);
(ii) Sankar Ram and Co. v. Kasi Naicker (AIR 2003 SC 3732);
(iii) AIR 1922 Mad.144;
(iv) The Mercantile Bank of India, Ltd., Madras v. The Official Assignee, Madras (1913 ILR (39) 250);
(v) Chetan K.Singh v. Citi Bank N.A. ((2009) 150 CC 409);
(vi) Travancore Rayons Ltd. v. Registrar of Companies ((1988) 64 CC 819);
(vii) Escorts Finance Ltd. v. Fidelity Industries Ltd. and Another ((2003) 117 CC 282);
(viii) Administrator, MCC Finance Ltd. v. Ramesh Gandhi ((2005) 127 CC 85); and
(ix) Archean Granites Pvt. Ltd. v. RPS Benefit Fund Ltd., rep. by the Official Liquidator ((2007) 139 CC 191);
12.4. From a careful perusal of the above decisions cited by the learned senior counsel, the following propositions of law emerge:
(a) the discretion is granted to this Court under Section 536(2) not to hold a transaction to be void, if it passes the test of bona fides;
(b) the bona fides of a transferee cannot be impeached solely on account of the dishonesty of the transferor;
(c) for finding out if a transferee is a bona fide transferee or not, the test of honesty is more important than the test of due care;
12.5. Keeping in mind the above principles, let me look at the factual matrix of this case:-
(d) the Official Liquidator did not take any steps in the past 12 years and more, to set aside the transaction and to take possession of the property;
(e) the Official Liquidator, even in his letters dated 25.7.2000 and 17.01.2001, did not allege that the transaction was mala fide or that there was any collusion between the company and the applicant;
(f) the applicant was not at all aware of the pendency of the winding up petition on the date on which he got the transfer effected in his favour;
(g) since the applicant also parted with a huge amount of Rs.30.00 Lakhs to the Bank, on the date of the transfer, he cannot be branded as a mala fide transferee;
(h) since the transaction benefited the company in liquidation, as well as a secured creditor, in the form of payment of Rs.30.00 Lakhs to the Bank, the transaction should be held to be in the ordinary course of business of the company in liquidation and hence protected by law;
(i) the mere pendency of a petition for winding up does not prohibit the company from transacting business in the ordinary course and from effecting genuine and benign transfers; and
(j) even in his report filed on 15.11.2011, the Official Liquidator has not made necessary allegations to show that the transfer was mala fide or that the transfer was not in the ordinary course of business or that the transfer was not even for a valid consideration.
12.6. If the claim of the applicant is tested on the strength of the principles of law and the factual matrix enunciated above, it will be clear that the applicant cannot be construed as a bona fide purchaser. This can be seen from certain dates and events, which are very important. They are as follows:
(a) On 30.3.1990, M/s. Easun Engineering Co. Ltd. grants a lease in favour of the company in liquidation, of the land of the extent of 354 sq.ft., with a right to have an office space constructed thereon, at the premises bearing Old No.35/5 and New No.476, Anna Salai, Nandanam, Chennai 600 035, for a period of 999 years, commencing from 01.4.1990;
(b) On 09.4.1990, the company in liquidation enters into a Builder's Agreement with a builder by name M/s. R.K.Investments, for putting up an office space in the fifth floor of the proposed complex, of an extent of about 1279 sq.ft.;
(c) On 30.01.1991, the company in liquidation deposited the documents of title, with the State Bank of India, with a view to create a charge on the property for the loan availed from the Bank;
(d) On 31.12.1991, the company in liquidation also files necessary form, namely, Form 8, with the Registrar of Companies, in terms of Sections 125 and 135, since they had already created a charge over other properties. The charge was registered with Registration No.6945 on 29.01.1992;
(e) On 18.8.1993, the company petition for winding up was presented before this Court;
(f) On 03.9.1993, the company petition for winding up was admitted by this Court and notices were directed to be issued to the company as well as to the Registrar of companies;
(g) On 23.4.1996, this Court passed an order directing the company in liquidation not to sell its assets without the permission of this Court. Subsequently, on 10.12.1999, the company was ordered to be wound up;
(h) On 30.01.1997, a deed of transfer of leasehold rights, for a period of 993 years was executed by the company in liquidation, in favour of the applicant. Interestingly, the deed was executed on stamp papers of the value of Rs.10/- only (two stamp papers of the value of Rs.5/- each). It is presented for registration, only on 17.4.1997 (within three months of execution, which is permitted by law). The consideration for the transfer is mentioned in the recital part of the transfer deed to be Rs.2,68,080.21ps. But, the mortgage value is indicated in the last page (page no.14) after Schedule 'C', as Rs.1,18,000/-;
(i) Interestingly, the actual recitals regarding conveyance, indicate only a conveyance in presenti. They read (clause 1 of the transfer deed) as follows: "Now this deed of transfer of lease witnesseth as follows: That in pursuance of the above agreement and in consideration of the sum of Rs.2,68,080.21ps paid by the transferee to the transferor on the date of execution of these persons, the transferor do by these presents grant, convey, assign by way of transfer of lease .... ";
(j) After transferring the leasehold rights, in presenti, by the deed dated 30.01.1997, the transferor attempted to give effect to the transfer from 01.4.1996, as seen from clause 2 of the deed of the transfer. Clause 2 of the deed of transfer reads as follows: "The transfer of lease is for a certain period of 993 years commenced from 1st April 1996";
(k) Even the concluding portion of clause 1 of the transfer deed is to the same effect and it reads that the transferee shall possess (wrongly typed as process in the lease deed), the land for a period of 993 years commencing from 1st day of April 1996";
(l) There was no occasion for the applicant to enter into a deed of transfer on 30.01.1997, with retrospective effect from 01.4.1996 and have the deed of transfer presented for registration on 17.4.1997. The deed of transfer does not indicate anywhere that it was a record of the past transaction. The deed of transfer does not indicate anywhere that the parties had a prior agreement and that in pursuance of such a prior agreement, the applicant (transferee) was put in possession on 01.4.1996 itself. Therefore, the date 01.4.1996 had obviously been chosen by the transferee, namely, the applicant herein and the transferor, namely, the company in liquidation, only with a view to overreach the order of injunction granted by this Court on 23.4.1996. Otherwise, there is no rhyme or reason for the deed of transfer dated 30.01.1997 to take effect retrospectively from 01.4.1996. It must be noted that the company in liquidation was aware of the interim prohibitory order. It was passed in their presence. Therefore, the applicant, as a transferee, cannot reap the benefit of a transaction that was entered into in total violation of an order of injunction and whose sole purpose was to make the injunction infructuous;
(m) I am not able to think that the applicant is ignorant of the injunction order passed on 23.4.1996. If he was so innocent, he would have probed as to why the deed of transfer dated 30.01.1997, registered on 17.4.1997, chose the date of coming into force of the lease as 01.4.1996, when the more appropriate choice would have been the date 01.4.1997;
(n) There could not have been an oral lease on 01.4.1996, since the lease in this case was for a period of 993 years and was for a consideration of more than Rs.2.00 Lakhs. Therefore, an oral transfer is prohibited by the provisions of Transfer of Property Act, 1882. Hence, even if I go out of the way to look at the applicant sympathetically as an innocent victim, he cannot have any benefit flowing out of the deed of transfer dated 30.01.1997, since on the date on which the deed was executed, there was an injunction in force, granted by this Court on 23.4.1996. Therefore, my granting ratification for such a transaction would tantamount to this Court eating a humble pie and granting sanction for a violator of the order of injunction;
(o) The name of the applicant is M.Lakshmi Narayana Choudhary. The name of his father is M.S.Rama Mohan Rao. The builder to whom the task of developing the whole property was granted even originally by the company in liquidation as well as their predecessor in title was M/s. R.K.Investments. In applications under Section 9 of the Arbitration and Conciliation Act, the very same applicant represented the very same M/s. R.K.Investments before me in different proceedings. Therefore, in the course of hearing of the above application, I questioned as to how the applicant, who now represents M/s. R.K.Investments, could have entered into a Builder's Agreement with M/s. R.K.Investments in 1997. From the answers provided by the learned counsel on record for the applicant, it appears that the applicant's father was a partner of M/s. R.K.Investments. Therefore, it appears that the company in liquidation had entered into some kind of an arrangement with the applicant as well as M/s. R.K.Investments, for the purpose of violating the order of injunction and defrauding the creditors. Hence, the plea of bona fide transferee is not at all available to the applicant.
12.7. There are also other aspects, which make the plea of bona fide transferee weaker and weaker. They relate to the consideration allegedly paid by the applicant for the transfer. I shall deal with them separately.
12.8. The consideration part of the transaction makes the ground murkier and murkier. I have already pointed out that the total sale consideration mentioned in the deed of transfer of lease executed by the company in liquidation, in favour of the applicant on 30.01.1997, is stated to Rs.2,68,080.21ps. This consideration, as seen from Clause 1 of the deed was stated to have been paid on the date of execution of the deed. Once it is accepted that the consideration was paid on the date of execution, namely, 30.01.1997 and once Clause 1 of the deed states "The transferor do by these presents grant ...", there is no question of any retrospective effect to the lease from 01.4.1996. This also I have already pointed out.
12.9. After having stated in Clause 1 of the deed of transfer that the sale consideration was Rs.2,68,080.21ps, the transferor and transferee declared the mortgage value of the property conveyed to be only Rs.1,18,000/-, towards the end of the deed of transfer. I am not trying to make that as an issue.
12.10. After stating the consideration for the deed of transfer to be around Rs.2.68 Lakhs, the applicant stated the consideration payable under the Builder's Agreement, to be Rs.7,44,088/-. Therefore, the total consideration for acquiring the leasehold rights and putting up a construction is claimed to be only around Rs.10.00 Lakhs.
12.11. But, the applicant claims to have made payment of about Rs.30.00 Lakhs to the State Bank of India for clearing the charge over the property in question. If this is true, the total consideration agreed to between the parties should have been more than Rs.40.00 Lakhs. It is not reflected to be so anywhere.
12.12. While as per the deed of transfer and as per the Builder's Agreement, the consideration was stated to be Rs.2,68,080/- and Rs.7,44,088/- respectively (totalling to Rs.10,12,168/-), the applicant claimed in his legal notice dated 01.02.2001 addressed to the Official Liquidator that even the original owner M/s. Easun Engineering Co. Ltd. was entitled only to get Rs.2,69,700/- from the company in liquidation for the lease of 999 years. Similarly, they were obliged to pay the Builder a consideration of Rs.10,77,200/- for the construction. The discrepancy between the sale consideration in respect of the land is understandable, in view of the fact that the period of lease was 999 years between M/s. Easun Engineering Co. Ltd. and the company in liquidation, while it was 993 years in respect of the lease between the company in liquidation and the applicant.
12.13. But, what is intriguing is not only the discrepancy in the cost of construction, but also the claim that an amount equivalent to three times more than the total investment (as per the lease agreement and as per the Builder's Agreement) is claimed to have been paid to the Bank for the release of the charge. This makes the transaction very suspicious.
12.14. Apart from the above, there is one more perplexing phenomena. It is that the amounts of Rs.20.00 Lakhs and Rs.10.00 Lakhs allegedly paid on 17.4.1997 to the State Bank of India, were not paid by the applicant herein. They could have at the most been paid by the company in liquidation. This is seen from two documents filed by the applicant himself. One of them is a printed memo in the letter head "Henkel Spic India Ltd." addressed to the company in liquidation, enclosing a sum of Rs.30.00 Lakhs. The purpose of payment is indicated as "advance for Temple Towers 5th Floor". The second document is the xerox copies of two cheques dated 17.4.1997, for Rs.20.00 Lakhs and Rs.10.00 Lakhs, drawn by Henkel Spic India Ltd. It is on the basis of these documents that the applicant claims to have paid Rs.30.00 Lakhs to the State Bank of India for the discharge of the dues of the company in liquidation, for the purpose of a one time settlement.
12.15. But, the following points falsify the theory floated by the applicant:
(i) The cheques were issued not by the company in liquidation, nor by the applicant. The cheques were issued by Henkel Spic India Ltd. purportedly towards advance for the fifth floor in the complex Temple Towers;
(ii) The cheques were not even handed over to State Bank of India by Henkel Spic India Ltd., through the applicant. The cheques were handed over to the company in liquidation, as seen from the name of the addressee contained in the memo dated 17.4.1997 of Henkel Spic India Ltd.; and
(iii) Therefore, it is clear that neither the money was routed through the applicant, nor the money belonging to the applicant routed through anybody else to the State Bank of India. The memo and the cheques disclose that the money paid to the State Bank of India was that of Henkel Spic India Ltd. It was perhaps paid on behalf of the company in liquidation. It was not even paid on behalf of the applicant. Going by the consideration reflected in the deed of transfer of lease and the Builder's Agreement, which totals to a mere Rs.10.12 Lakhs, this payment of Rs.30.00 Lakhs to the Bank could not be taken to be by or on behalf of the applicant.
12.16. There is only one link between the payment of Rs.30.00 Lakhs to the State Bank of India and the applicant. The link is that the memo dated 17.4.1997 makes a mention about the fifth floor of Temple Towers. But, this link is such a weak link in the chain that it cannot be taken to have any connection to the applicant. There is nothing on record to show how many flats were constructed in the fifth floor. Therefore, I do not know whether the payment made by Henkel Spic India Ltd. on 17.4.1997 was for taking the office space allotted to the applicant. If it was for the office space allotted to the applicant, then, Henkel Spic India Ltd. should have handed over the cheques to the applicant and not to the company in liquidation.
12.17. We must remember that the deed of transfer of lease was executed on 30.01.1997 and was registered on 17.4.1997. But, that registration happened within the statutory period and hence, the lease actually took effect from 30.01.1997. Once the lease had taken effect from 30.01.1997, the lessor, namely, the company in liquidation had no right to fix a tenant and take an advance of Rs.30.00 Lakhs from Henkel Spic Inida Ltd. The fact that this advance of Rs.30.00 Lakhs was paid by Henkel Spic India Ltd. to the company in liquidation would indicate only any one of two things, namely, (a) that it related to another office space in the fifth floor; or (b) that the company in liquidation gave effect to the lease only after this payment on 17.4.1997. In either case, this payment cannot be linked to the applicant. If this amount did not relate to this office space, the applicant cannot claim the benefit of this payment. If the applicant allowed the company in liquidation to take this money, as part of the consideration, then, it should have been reflected in the deed of transfer. In the absence of both, this payment of Rs.30.00 Lakhs cannot be linked to the applicant.
12.18. Therefore, the only basis on which the applicant claims to be a bona fide purchaser, namely, the payment of Rs.30.00 Lakhs to the State Bank of India, stands completely exposed as a myth. Hence, even on merits, I hold that the transaction between the applicant and the company in liquidation, is bereft of any bona fides. The applicant can be anybody, but, certainly not a bona fide purchaser.
12.19. I have not tested the bona fides of the transaction on the strength of the conduct or character of the company in liquidation. I have tested only the applicant's conduct to see if he is a bona fide purchaser. I find that by no stretch of imagination, the applicant could be termed as a bona fide purchaser. Hence, the second issue is answered accordingly.
Issue of validity of the mortgage in favour of the State Bank of India:
13.1. According to the applicant, the State Bank of India cannot have any right over the property and that they cannot be treated as a mortgagee. This, according to the learned senior counsel for the applicant, is due to fact that the original title deeds relating to the property were not deposited by the company in liquidation with the Bank.
13.2. At the outset, I should point out that the applicant is not competent to raise this objection, once it is found that he is not a bona fide transferee. If the mortgage in favour of the Bank fails, the property will go to the common kitty of the Official Liquidator and will enure to the benefit of the large body of unsecured creditors. But, the applicant cannot stand to benefit. Despite such a position, I would consider whether this contention is correct or not.
13.3. The claim of the applicant that the original title deeds were not deposited with the Bank and that therefore, there was no valid mortgage in favour of the Bank, is only presumptuous. The applicant has no concrete proof to establish this. But, the applicant seeks to draw a presumption on the basis of (i) the list of documents found in the Schedule to the plaint filed by the Bank, (ii) the proof affidavit filed by the Bank with the Debts Recovery Tribunal, and (iii) the admission made by the Bank in the counter affidavit to this application.
13.4. It is true that in the list of documents annexed to the plaint in C.S.No.2117 of 1995 filed by the Bank against the company in liquidation, most of the documents are indicated only to be xerox copies. But, it does not mean that the Bank did not have the originals at all. The list of documents filed in terms of Order VII, Rule 14, CPC, found in the plaint shows that even loan sanction letters and demand promissory notes were not filed by the Bank, along with the plaint in original. Only the xerox copies of these documents were filed at the time of institution of the suit. Therefore, I cannot presume that the company in liquidation did not deposit the original title deeds.
13.5. Similarly, in the proof affidavit filed by the Bank before the Debts Recovery Tribunal, the Bank had stated in paragraph 8 that the loan was secured by the creation of equitable mortgage by deposit of title deeds Exx.A36 and A37, by the Managing Director of the company in liquidation. According to the applicant, the memorandum of deposit of title deeds, produced by the Bank, was only a xerox copy.
13.6. But, it is not stated anywhere in the proof affidavit filed by the Bank that the originals were not deposited with them. Therefore, the presumption of the applicant in this regard is also baseless.
13.7. In paragraph 12 of the counter affidavit filed by the Bank to this application, the Bank merely stated whatever was their understanding of the law and further stated that the original title deeds are not available. Paragraph 12 of the counter affidavit of the Bank reads as follows:
"With respect to the averment made in paragraph 8 of the affidavit it is submitted that the settled position of law for creating equitable mortgage is deposit of the documents evidencing title to the property and not the original title documents. In view of the various transactions and the transfer of accounts and handling of the documents by various persons, the original is not available as such the certified copy of the lease deed would be given."
13.8. All that the Bank has stated is that the original is not available with them due to the handling of the documents by various persons. The Bank has not stated that the originals were never deposited with them. If originals had been deposited and if mortgage had been created, the fact that the Bank lost possession of those documents subsequently, would not mean that the mortgage itself is invalid. The applicant could have sustained his plea if the Bank had agreed that the original documents were never deposited. It is one thing to say that the originals are not available as on date. It is another thing to say that the originals were never deposited. The contention of the applicant loses sight of this fine distinction.
13.9. There is no dispute about the fact that on this property, a charge was created in terms of Section 125 of the Companies Act. Form 8 has admittedly been filed and the Register reflects the creation of a charge. Therefore, it is not open to a person like the applicant, whom I have found to be not a bona fide purchaser, to raise such an issue.
13.10. Mr.M.Devaraj, learned counsel for the Bank relied upon the decisions in K.J.Nathan v. S.V.Maruthi Rao & Others (AIR 1965 SC 430) and Rajagopal v. State Bank of Travancore (1995 (1) MLJR 175) and contended that what is necessary for creating an equitable mortgage, is only the deposit of documents evidencing title and not the original documents of title. But, I need not go into the question whether the deposit of originals are necessary for the creation of a valid mortgage or not. Today, it is not the case of the Bank that mortgage was created only by the deposit of xerox copies or certified copies. Their only case is that due to transfer of records and the handling of documents by various persons, the originals are not available now. Therefore, I need not go into the other aspect.
13.11. In any case, apart from being not a bona fide purchaser, the applicant is not entitled to raise this issue for one more reason. According to the applicant, he paid Rs.30.00 Lakhs to the Bank for the discharge of the mortgage liability and for the release of the property from security. Therefore, today, after a period of about 14 years of such payment, the applicant cannot claim that no valid mortgage was created.
13.12. Mr.T.K.Seshadri, learned senior counsel for the applicant, referred to an order of attachment passed by the Recovery Officer of the Debts Recovery Tribunal on 05.01.2007 and contended that if there was a mortgage, there was no necessity for an order of attachment. This, according to the learned senior counsel, is one more ground to conclude that there could have been no valid mortgage.
13.13. But, I do not agree. The mere fact that the Recovery Officer chose to order the attachment of the property, would not militate against the mortgage. The Debts Recovery Tribunal has actually passed a decree and issued a certificate of recovery on the basis that there was a mortgage. The Recovery Officer is only an instrument of the Debts Recovery Tribunal and his order of attachment cannot eclipse or supersede the mortgage decree and certificate of recovery issued by the Tribunal. Therefore, I reject the contention that there was no valid mortgage created by the company in liquidation in favour of the State Bank of India.
Issue of discrepancies in the description of the property:
14.1. According to the learned senior counsel for the applicant, the undivided share of land conveyed by the company in liquidation to the applicant under the deed of transfer dated 30.01.1997 was 354 sq.ft. This is indicated in Schedule 'C' to the deed of transfer dated 30.01.1997. There is no discrepancy about this.
14.2. As per the Builder's Agreement dated 17.4.1997, entered into by the applicant with M/s. R.K.Investments, the office space to be constructed on the fifth floor was 2648 sq.ft., as seen from Schedule 'D' to the Builder's Agreement. Schedule 'C' to the Builder's Agreement indicated the extent of land only to be 354 sq.ft.
14.3. In Schedule 'A' to the plaint filed by the Bank in C.S.No.2117 of 1995, the extent of land is indicated as 354 sq.ft. and the building is indicated to be about 2967 ... sq.ft. Therefore, in the sale notice issued by the Recovery Officer of the Debts Recovery Tribunal, the extent of land was indicated as 354 sq.ft. and the office space was indicated as 2967 sq.ft.
14.4. However, in Schedule 'D' to the Builder's Agreement that the company in liquidation entered into on 09.4.1990 with M/s. R.K.Investments, the built up area of the office space was indicated as 1279 sq.ft. Therefore, the advertisement issued by the State Bank of India indicated the built up area only to be 1279 sq.ft. Hence, it is contended by the learned senior counsel for the applicant (i) that there are discrepancies with regard to the extent of the built up area; and (ii) that the Bank is attempting to bring to sale a larger extent than what was mortgaged to them, if at all there was a mortgage.
14.5. As pointed out earlier, it is not open to the applicant to raise these objections, once it is found that he is not a bona fide transferee. But, I would choose to deal with this objection, in order to show that this contention is also unfounded, as can be seen from the following facts:
(i) By the deed of lease dated 30.3.1990, M/s. Easun Engineering Co. Ltd. granted a lease for 999 years, in favour of the company in liquidation. The extent of land given on lease was indicated in the said document as 354 sq.ft. in Schedule 'C';
(ii) Under the Builder's Agreement dated 09.4.1990 entered into by the company in liquidation with M/s. R.K.Investments, the office space to be constructed was indicated as 1279 sq.ft. in Schedule 'D';
(iii) But, there was yet another deed of lease dated 14.8.1995 executed by M/s. Easun Engineering Co. Ltd. itself, in favour of the applicant. The said lease deed was registered as document No.3661 of 1995 in the office of the District Registrar of Madras South. As per this lease deed, the applicant got leasehold rights in respect of 167 sq.ft. of land, for a period of 999 years commencing from 14.8.1995 itself. The applicant has not come out clean as to whether the lease of this additional extent of 167 sq.ft. of land (apart from 354 sq.ft. which got from the company in liquidation) was the reason for 1279 sq.ft. of built up area getting enlarged into 2967 sq.ft.
14.6. To put it differently, the applicant got a lease of 354 sq.ft. of land from the company in liquidation under the deed dated 30.01.1997. At that time, he had already obtained a lease directly from the original owner M/s. Easun Engineering Co. Ltd., way back on 14.8.1995, in respect of the land of the extent of 167 sq.ft. This is perhaps the reason why the applicant entered into a Builder's Agreement with M/s. R.K.Investments for constructing 2967 sq.ft. under the Builder's Agreement dated 17.4.1997. But, while doing so, the applicant committed a mistake. In Schedule 'C' to the Builder's Agreement dated 17.4.1997, the applicant did not show both these extents, namely, (i) 167 sq.ft. obtained directly from M/s. Easun Engineering Co. Ltd. on 14.8.1995; and (ii) 354 sq.ft. obtained from the company in liquidation on 30.01.1997. In the Builder's Agreement dated 17.4.1997, the applicant chose to show only 354 sq.ft. in Schedule 'C' and got the built up area mentioned as 2967 sq.ft. in Schedule 'D', without reference to 167 sq.ft., which he already had. Therefore, this is something for which the applicant has to blame himself. If cumulatively taken, the transfer deed dated 30.01.1997 showing only 354 sq.ft. of land and the Builder's Agreement dated 17.4.1997 showing the same extent of land for the construction of 2967 sq.ft., it will be clear that the applicant cannot now take advantage of any alleged discrepancy. Therefore, the fourth issue is also answered against the applicant.
14.7. It must be pointed out that in all places, the Bank had mentioned 2967 sq.ft. as a built up area. In Form No.8 filed with the Registrar of Companies under Section 125 on 31.12.1991, the Bank had indicated the area to be 2697 sq.ft. (perhaps by a typographical error, instead of 2967 sq.ft.). But, in the Schedule 'A' to the plaint, the Bank mentioned the extent to be 2967 sq.ft. This had been carried throughout. Therefore, it is not open to the applicant to raise this as an issue.
Issue of non payment of bid amount by the successful bidder within the stipulated time:
15.1. The auction was held by the Recovery Officer on 29.4.2010. The auction sale notice made it clear under Clause 3 that the successful bidder should pay 25% of the bid amount immediately on the sale being knocked down and the balance amount in addition to poundage fees within 15 days. It is on record and there is no dispute on that that the successful bidder, namely, the fourth respondent herein, paid the entire amount only over a period of four months, stretching up to 06.8.2010. To be precise, the successful bidder paid Rs.39.00 Lakhs on 29.4.2010. But, he took three more months to make payment of another Rs.9.00 Lakhs. By the letter dated 30.7.2010, the successful bidder agreed that up to that date, he had paid only Rs.39.00 Lakhs. Along with the letter dated 30.7.2010, he paid Rs.50.00 Lakhs. An amount of Rs.25.00 Lakhs was paid on 04.8.2010 and the balance of Rs.17,40,110/- was paid presumably by the end of August 2010. Therefore, it is clear that condition No.3 of the auction notice was not complied with at all.
15.2. Mr.Thyageswaran, learned counsel for the auction purchaser submitted that if this Court found for any reason that the sale in his favour was liable to be cancelled, his client would like to have the verdict here itself, instead of waiting for an order in the appeal filed by the applicant before the Debts Recovery Tribunal in Appeal No.7 of 2010 or in a judgment to be rendered in the civil suit filed by the applicant in C.S.No.970 of 2010. In other words, the auction purchaser wants to get out of the mess into which he had buried his head, if it was found that the sale was liable to be set aside. The learned counsel, in the presence of his client, who was present in Court, requested that in the event of my coming to the conclusion that the sale was liable to be set aside, the Bank may be directed to re-pay his money.
15.3. Therefore, I have to consider now whether the sale in favour of the fourth respondent is liable to be set aside for non payment of the bid amounts within the time stipulated in condition No.3 of the auction notice or not. Primarily, there is no dispute about the fact that the terms and conditions stipulated in the auction notice, prescribed a period of 15 days from the date of auction, for payment of the balance sale consideration, namely 75%, after remitting 25% of the amount on the date of the auction. There is no dispute about the fact that the successful bidder paid the balance amount over a period of four months, thereby, violating condition No.3 stipulated in the auction notice. Therefore, the question that arises for consideration is as to whether the non-payment of the amount as per the terms and conditions of auction would disentitle the highest bidder from claiming confirmation of sale.
15.4. Section 25 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, prescribes the attachment and sale of immovable and movable properties of the defendant, by the Recovery Officer, as one of the modes of recovery of debts. Section 29 makes the provisions of the II and III Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962, applicable to the proceedings under the Recovery of Debts Act. Therefore, the procedure for sale of a property for the recovery of the debts of a defendant, shall also follow the rules laid down in the II and III Schedules to the Income Tax Act, 1961. Therefore, the payment of the amounts by the successful bidder, should be as per the terms and conditions of the auction notice and as per the Rules laid down in the II Schedule to the Income Tax Act, 1961.
15.5. Rule 57(1) of the II Schedule to the Income Tax Act, 1961, states that on every sale of immovable property, the person declared to be the purchaser shall pay immediately after such declaration, a deposit of 25%, of the amount of purchase money, to the Officer conducting the sale. Sub-rule (2) of Rule 57 makes it clear that the full amount of purchase money shall be paid by the purchaser to the Tax Recovery Officer on or before the 15th day from the date of sale of the property. Rule 58 prescribes even the procedure in case of default of payment.
15.6. Rules 57 and 58 of the II Schedule to the Income Tax Act, read as follows:
"57. Deposit by purchaser and resale in default.--(1) On every sale of immovable property, the person declared to be the purchaser shall pay, immediately after such declaration, a deposit of twenty-five per cent on the amount of his purchase money, to the Officer conducting the sale; and, in default of such deposit, the property shall forthwith be re-sold.
(2) The full amount of purchase money payable shall be paid by the purchaser to the Tax Recovery Officer on or before the fifteenth day from the date of the sale of the property.
58. Procedure in default of payment.--In default of payment within the period mentioned in the preceding rule, the deposit may, if the Tax Recovery Officer thinks fit, after defraying the expenses of the sale, be forfeited to the Government, and the property shall be re-sold, and the defaulting purchaser shall forfeit all claims to the property or to any part of the sum for which it may subsequently be sold."
15.7. Therefore, it is clear that the fourth respondent/auction purchaser committed default in payment of the balance amount, as stipulated not only in condition No.3 of the auction notice, but also as stipulated in Rule 57(2) of the II Schedule to the Income Tax Act.
15.8. In M.V.Janarthan Reddy v. Vijaya Bank ((2008) 7 SCC 738), the Supreme Court pointed out that if the confirmation of sale by the Recovery Officer was made in violation of an order passed by the Company Court, the order of confirmation has no validity in law and that it creates no right in favour of the party in whose favour the sale was confirmed. The same logic would hold good, even when there is a violation of the statutory prescription.
15.9. The only case in which the Supreme Court put a seal of approval on the deposit of 25% of the bid amount on the date following the date of auction sale was in Rosali,V. v. Taico Bank ((2009) 17 SCC 690). In the said case, the Supreme Court interpreted the word "immediately" appearing in Order XXI, Rule 84, CPC, should be construed to mean "within reasonable time". But, that was a case where the auction was concluded at 4 pm on a particular date and the Court permitted the auction purchaser to deposit the money on the next day, as the Banks had been closed at that time. But, the principle behind the said case cannot be invoked to the benefit of the fourth respondent herein, since he has taken a very long time of about four months to pay the balance of 75% of the sale consideration.
15.10. In P.Kumaran v. Debts Recovery Appellate Tribunal ((2011) 6 CTC 369), a Division Bench of this Court was concerned with the question whether the Debts Recovery Officer is entitled to extend the time for payment of balance 75% of the bid amount. It was held by the Division Bench that the Recovery Officer has no such power, in the absence of a clause in the auction sale notice, empowering him to do so. In the case on hand, there was no clause reserving the power of the Recovery Officer to extend the time. Therefore, the auction sale is liable to be set aside.
15.11. The next question to be considered is as to whether the fourth respondent is entitled to take back the money deposited by him. As seen from Rule 58, which I have extracted above, the amount already deposited by the successful bidder is actually liable to be forfeited by the Government, after the Recovery Officer adjusts the amount incurred towards the expenses in conducting the sale. But, such forfeiture is not made mandatory, as seen from the expression "may" appearing in Rule 58. Therefore, the fourth respondent is given liberty to move an application before the Recovery Officer, for the refund of the amount deposited by him, explaining the circumstances leading to the non payment within the time stipulated. Upon such an application being moved, the Recovery Officer shall take into account the facts and circumstances, including the history of this litigation and pass such orders as are just and necessary in this case, perhaps after deducting the expenses incurred for the conduct of the auction.
16. In fine, the prayer of the applicant for ratification of the transfer of leasehold rights executed by the deed dated 30.01.1997 by the company in liquidation is rejected. The applicant is held to be not a bona fide transferee. The auction in favour of the fourth respondent is liable to be set aside by the Debts Recovery Tribunal due to the admitted failure on the part of the highest bidder to comply with Rules 57 and 58. But, the mortgage in favour of the Bank is upheld as there are no records to show that the original documents were not deposited by the company in liquidation with the Bank. On the contrary, the memorandum of deposit of title deeds as well as the security registered with the Registrar of Companies under Section 125 confirm that there was a mortgage. Therefore, it will be open to the Recovery Officer of the Debts Recovery Tribunal to bring the property to sale once again. With these observations, this application is dismissed.
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