Delhi High Court
M/S Sharun Wires Pvt Ltd vs M/S M & A Orient Accessories Pvt Ltd on 3 April, 2024
Author: Dharmesh Sharma
Bench: Dharmesh Sharma
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on : 06 February 2024
Judgment pronounced on: 03 April 2024
+ CO.PET. 436/2012 and CO.APPL. 1083/2014, OLR 119/2017,
OLR 19/2023 and CO.APPL. 38/2023
M/S SHARUN WIRES PVT LTD ..... Petitioner
Through: Mr. Mohan Soni, Adv.
versus
M/S M & A ORIENT ACCESSORIES PVT LTD
..... Respondent
Through: Mr. S.K. Sharma, Mr. Rohan
Kumar and Mr. Chitranjit,
Advs. for R-3
Mr. N.P. Gaur and Mr. Umesh
Prasad, Advs. for Andhra Bank
(now Union Bank of India)
Ms. Sangeeta Chandra,
Standing Counsel for the
Official Liquidator
+ CRL.O.(CO.) 2/2014
M/S M &A ORIENT ACCESSORIES (P) LTD ..... Petitioner
Through: Ms. Sangeeta Chandra,
Standing Counsel for the
Official Liquidator
versus
SH. PRAGEET SHARMA & ANR. ..... Respondents
Through: Mr. S.K. Sharma, Mr. Rohan
Kumar and Mr. Chitranjit,
Advs. for R-2
Mr. N.P. Gaur and Mr. Umesh
Prasad, Advs. for Andhra Bank
(now Union Bank of India)
Signature Not Verified
Digitally Signed By:PRAMOD
KUMAR VATS CO.APPLs. 1868/2013, 340/2016, 1540/2016, 1365/2018, 641/2019 & 706/2023 Page 1 of 34
Signing Date:04.04.2024
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CORAM:
HON'BLE MR. JUSTICE DHARMESH SHARMA
CO.APPL. 1868/2013, CO.APPL. 340/2016, CO.APPL. 1540/2016,
CO.APPL. 1365/2018, CO. APPL. 641/2019, CO.APPL. 706/2023
1. This order shall decide the above-noted applications moved in
the present company petition which was instituted seeking winding up
of the respondent company - M/s. M&A Orient Accessories Pvt.
Ltd., on the ground of non-payment of outstanding rent amounting to
Rs. 35,64,867.28/- which is payable by the respondent company as per
the Lease Deed dated 30.06.2009 entered into between the parties.
These applications have been moved by the various
applicants/stakeholders in the context of a Sale Deed executed by the
company (in liquidation) on 30.01.2013, in respect of the property
situated at LGG-116, The Laburnum Condominium Complex, Block-
A, Sushant Lok, Sector-28, Gurgaon.
FACTUAL BACKGROUND:
2. It would be expedient to consider the conspectus of facts out of
which the present applications arise before adjudication of the
respective applications. Briefly stated, the present company petition
was preferred before this Court on 22.08.2012 and was first taken up
on 17.09.2012 and notice was issued to the respondent company (in
liquidation) vide order dated 09.10.2012. Thereafter, on 15.01.2013
the respondent company (in liquidation) entered appearance in the
matter through its counsel.
Signature Not Verified
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3. It is stated that the Official Liquidator was appointed as a
Provisional Liquidator to the company (in liquidation) vide order
dated 15.07.2013 and was directed to take over the assets, books of
accounts and the records of the company (in liquidation). However, in
the interregnum, the company (in liquidation) executed a Sale Deed on
30.01.2013 with respect to the property bearing No. LGG-116, The
Laburnum Condominium Complex, Block-A, Sushant Lok, Sector-28,
Gurgaon in favour of Ms. Pranjali Khanna (Minor) through her
mother Smt. Vandana Khanna, for a consideration of Rs. 7.75 crores.
Said transaction was executed on behalf of the company (in
liquidation) by the then Director of the company (in liquidation),
namely Ms. Manju Kawar. Admittedly, the said property was
mortgaged with Andhra Bank, M-35, Connaught Circus, New Delhi,
as security for a loan taken by the company back in the year 2005.
4. It is borne out from the material on the record that prior to the
institution of the present company petition before this Court, Ms. Anju
Rathore, who was a Director of the company (in liquidation), had
moved a petition bearing C.P. No. 67(ND) of 2010, under Sections
397, 398 read with allied provisions of the Companies Act, 19561
before the Company Law Board, New Delhi2 as against Ms. Manju
Kawar, Ex-Director of the company (in liquidation) seeking certain
reliefs on grounds of oppression and mismanagement. The matter was
taken up by the Company Law Board on 13.07.2010 and an order was
passed on the said date whereby it was directed that status quo was to
1 The Act
2
CLB
Signature Not Verified
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be maintained with regard to the fixed assets of the respondent
company (in liquidation) and the shareholding pattern was also
directed to be maintained from the date of the service of the order.
Relevant portion of the order dated 13.07.2010 has been produced
hereinbelow:
"Petition mentioned
Heard on Interim reliefs. Learned Counsel for the Applicant stated
that notice by registered post were sent to the Respondent No. 1 &
2 on 09.07.2010, however no one has appeared on behalf of the
Respondents. After hearing the learned counsel for the Applicant
and on perusal of the documents filed with the petition it is ordered
that status quo with regard to the fixed assets of the R-1 Company
as also the shareholding pattern shall be maintained from the date
of service of a copy of this order on the respondents till the next
date of hearing. Learned Counsel for the Applicant shall serve
notice of the next date of hearing on the Respondents. A copy of
this order shall be enclosed with notice.
List on 11.08.2010 at 10.30 a.m."
5. Subsequently, Andhra Bank moved an application before the
CLB, being C.A. No. 574/2012 in C.P. No. 67(ND), seeking
impleadment in the petition and praying for vacation of the status quo
with respect to the property in question and also seeking permission to
take steps with regard to the mortgaged property so as to recover its
dues. The following order, dated 03.12.2012, was passed by the CLB
in respect of the above noted application:
"The Applicant Bank moved an application to vacate the status quo
order dated 13.07.2010 with respect to the mortgaged property
LGG-116J Garden Greens, Laburnum Condominium Complex,
Block-A, Sushant Lok; Sector-28, Gurgaon, as the property has
been mortgaged with the bank by the company. To which the
Applicant counsel has conceded that he has no grievance if the
bank exercises right over the property as per law.
In pursuance of the submissions of either side, CA 574/12 is
hereby disposed of holding that bank is at liberty to take action
against the mortgaged property as per law, but whereas the status
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quo order will remain as it is as to the other Respondents in this
case."
6. With regard to the above noted order of the CLB and in view of
the facts, it has been urged on behalf of the Official Liquidator as also
the other applicants before this Court, that the status quo was relaxed
only with respect to Andhra Bank and not towards the company (in
liquidation) or its Directors. It is stated that the sale in contention was
not permitted by any specific order and that Andhra Bank effectuated
a private sale in collusion with Ms. Manju Kanwar, Ex-Director of the
Company in the garb of a bank sale. Further, that the company (in
liquidation) did not take the leave of this Court before selling the
property in question and that neither was the Official Liquidator
informed of the sale nor were the proceeds of the sale deposited with
the office of the Official Liquidator. It has also been brought forth that
the sale price of the property of Rs. 7.75 crores, was grossly
undervalued as against the value of Rs. 9 crores estimated in the
valuation report prepared by BRK Technical Services dated
13.03.2010 for Andhra Bank.
7. It appears that prior to the sale of the property in question, there
was significant correspondence between Andhra Bank and the
company (in liquidation) as regards keeping the account of the
company active as a Performing Asset and vide letter dated
28.12.2012, Andhra Bank intimated the company (in liquidation) that
it was not satisfied with the plan of the company to maintain its
account as a Performing Asset and further that the Bank would be
constrained to move against the company under the SARFAESI Act,
Signature Not Verified
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20023. Thereafter, on 14.01.2013, the Bank agreed to a proposal put
forth by the company for the release of the property in question, on
receipt of Rs. 6.50 crores from the company i.e., the balance amount
to be paid by the company (in liquidation) to the Bank, along with due
interest. It is stated in this regard that out of the sale proceeds of
Rs.7.75 crores, realized from the property, only Rs. 6.50 crores were
received by the Bank, while the remaining Rs.1.25 crores was
siphoned off by the Ex-Director Manju Kanwar. The sale of the
property in question seems to have been executed subsequent to a
Board Resolution dated 15.01.2013 passed by the company, per which
Ms. Manju Kanwar appears to be authorized by the company to
proceed with the sale of the asset of the company.
8. At this juncture, it would be expedient to consider the
respective applications, the facts out of which they arise and the
prayers sought therein:
CO.APPL. 340/2016
9. This application has been moved on behalf of the Official
Liquidator stating that the sale of the property in question vide Sale
Deed dated 30.01.2013 is void ab initio and liable to be set aside. It is
further stated that the sale of the property was not in the ordinary
course of business and has resulted in loss to the workers and creditors
of the company (in liquidation) thereby causing grave prejudice to
their interests. In view of the same, the following prayers have been
made in the application:
3 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act
Signature Not Verified
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―(i) Cancel the sale deed dated 30.01.2013;
(ii) Cancel the current mutation in favour of Ms. Pranjali
Khanna and direct R-3 to enter mutation in favour of the
company (in prov. Liquidation);
(iii) Direct SDM, Gurgaon to modify the revenue records &
show the Company as the owner of property bearing No.
LGG- 116, The Laburnum Condominium Complex, Block -
A, Sushant Lok, Sector 28, Gurgaon.‖
10. Reply to the aforesaid application has been filed by the
respondent No. 2/Ms. Manju Kanwar. While opposing this application
moved by the Official Liquidator, it is submitted that the sale of the
property in question effected on 30.01.2013 was a genuine and
bonafide sale, carried out by her on the behest of Andhra Bank.
Reliance is placed on a series of long correspondence between her and
Andhra Bank, whereby all efforts were made so as to ensure that the
account of the company (in liquidation) with Andhra Bank does not
become classified as a ‗Non-Performing Asset'4 and thereby allow her
to continue running the affairs of the company. It has also been denied
inter alia that the property was sold much below the market value. In
this regard it is stated that the prevailing circle rate of the property as
per the Haryana Government was Rs. 70,000/- per square yard and the
property in question, which is 462.32 square metres, would come to
543.38 square yards otherwise fetching about Rs. 2,20,32,000/-
whereas it was sold for Rs. 7,75,00,000/-. She has also placed on the
record a sale deed dated 26.07.2013 which is in respect of another
property bearing No. LGG-123, Garden Green, Gurgaon sold for a
total consideration of Rs. 6,50,00,000/- as also copy of another sale
4 NPA
Signature Not Verified
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deed dated 09.11.2012 in respect of another property bearing No.
LGG-131, Garden Green, Gurgaon sold for Rs. 5,00,00,000/- so as to
buttress the point that the property in question was not undervalued
and rather sold at the most profitable market price.
11. Reply has also been filed by respondent No.3/Ms. Pranjali
Khanna, opposing the reliefs sought by the Official Liquidator and
inter alia it is pointed out that the sale in contention was a bonafide
purchase of the property by her through her mother who is her natural
guardian. It is stated that the sale consideration of Rs.7,75,00,000/-
that was paid through cheque/RTGS in the company account, out of
which Rs. 6,50,00,000/- was paid to Andhra Bank and Rs.
1,25,00,000/- was paid to Vijaya Bank towards settlement of certain
debts purportedly taken by the company (in liquidation).
12. Reply has also been filed by Andhra Bank wherein, while
opposing the application moved by the Official Liquidator, it is
pointed out that a packing credit limit of Rs. 6.95 crores had been
sanctioned to the company (in liquidation) and that the Bank made all
attempts to ensure that the company (in liquidation) remains
financially viable. Further, it is stated that subsequent to the order of
the CLB dated 03.12.2012, it merely agreed to the sale of the
mortgaged property by way of a private treaty involving the Bank, the
company (in liquidation) and the bonafide purchaser, and that there is
no mandate in the law providing that in order to realise its debt the
Bank must only and only proceed under the SARFAESI Act, or that
auction course is the only way for the property to have been sold.
13. It is also stated that although the market value of the property
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was Rs. 7,60,85,000/-, its distress value was Rs. 6,46,72,250/-. While
the evaluators assessed the value of the property at Rs. 9,01,00,000/-
as on 15.03.2010. However, due to recession in the market, it was
eventually sold at the best available price of Rs. 7,75,00,000/-.
CO.APPL. 1868/2013
14. This application has been moved on behalf of the applicant -
Ms. Pranjali Khanna through her mother Smt. Vandana Khanna, who
is stated to be the bonafide purchaser of the property in question.
15. It has been stated in the application that subsequent to the
passing of the winding up order, the Official Liquidator visited the
various properties of the company (in liquidation) as reflected in the
Balance Sheet. As regards the factory premises of the company (in
liquidation) situated at A-13, Sector 57, Noida, the same was sealed.
However, the other factory premises of the company (in liquidation)
which was situated A-137, Sector 63, Noida was not sealed by the
Official Liquidator as the same was occupied by one Mr. Manohar
Lal, who was able to provide sufficient documentation to show
ownership of the said premises, and it was seen from the Balance
Sheet that the company (in liquidation) was only a tenant of the same.
16. As regards the property in question, it is stated that the Official
Liquidator visited the premises on 26.09.2013 and sealed the same. It
is urged on behalf of the applicant herein that they paid Rs. 6.50 crores
to Andhra Bank, subsequent to which the Bank released the property
papers on 30.01.2013 and on the same date the Sale Deed was
executed in favour of the applicant. The remaining amount of the sale
consideration for the property in question i.e., Rs. 1.25 crores, was
Signature Not Verified
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transferred by the applicant herein to an account in Vijaya Bank.
17. In view of said facts, it is the case of the applicant that the
property in question is in her possession and that her family members
are residing there, and on the date the property was sealed by the
Official Liquidator, the same was done in the absence of the family
members who were out on that particular day and had duly locked the
property. It is further stated that when the Official Liquidator visited
the property in question on 26.09.2013, members of the Residents
Welfare Association had provided them a photocopy of the Sale Deed
dated 30.01.2013, however, the Official Liquidator went ahead and
sealed the property anyway, relying on Section 531A of the
Companies Act, 1956, which provides for Fraudulent Transfers.
18. In this regard, it is stated on behalf of the applicants that the
Official Liquidator exceeded its powers in sealing the property in
question, as Section 531A does not empower the Official Liquidator
to arrive at a determination that the sale was void, and that reasons
have to be provided by the Official Liquidator in case such a decision
is made and on reaching such a conclusion, and the bonafides of such
a sale have to then be ascertained by the Court.
19. This contention has been buttressed by the applicant by stating
that the Official Liquidator has exercised discretionary powers in
sealing the property in question but had decided differently in the case
of the factory premises situated at A-137, Sector 63, Noida, where it
chose to not seal the property on the basis of being presented with
relevant documents of ownership by Mr. Manohar Lal.
20. In view of the facts and contentions espoused, it has been
Signature Not Verified
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prayed by the applicants that the property in question be de-sealed and
that possession of the same be handed over to the applicant.
CO.APPL. 1540/2016
21. Briefly stated, this application has been moved on behalf of the
applicant - Mr. Prageet Sharma, who is an Ex-Director of the
company (in liquidation). The applicant herein was appointed as an
Additional Director of the company (in liquidation) on 07.04.2010,
pursuant to allotment of shares worth Rs. 5 lacs, which was done in
lieu of a debt owed by the company (in liquidation) to the applicant.
22. It is stated that apart from the property in question and other
assets of the company (in liquidation), the applicant had mortgaged
his personal property (certain agricultural village land in Gautam
Buddha Nagar, Uttar Pradesh) to Andhra Bank as collateral security,
and on 18.01.2010, the Bank increased the Packing Credit Limit of the
respondent company from Rs. 7.2 crores to Rs. 9.24 crores.
23. It is brought forth that a Notice dated 19.07.2013 was served
upon the applicant by Andhra Bank, under Section 13(2) of the
SARFAESI Act, calling upon him to repay a sum of Rs. 85,96,743/-,
failing which the Bank would be constrained to undertake measures
under the SARFAESI Act against the mortgaged asset of the
applicant. Said liability was disputed by the applicant vide letter dated
07.09.2013, however no satisfactory response was received from the
Bank explaining how an amount of Rs. 85 lacs was still due despite
the Bank receiving a payment of Rs. 6.50 crores. Thereafter, the Bank
took symbolic possession of the asset of the applicant and issued a
Notice for sale/auction dated 20.12.2013. Said notice was assailed by
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the applicant before the DRT under Section 17 of the SARFAESI Act,
and came to be quashed by the Lucknow Bench of the DRT vide order
dated 22.01.2014.
24. It is stated that the applicant only became aware that the Sale
Deed dated 30.01.2013 was executed by Ms. Manju Kanwar and not
the Bank, on 03.12.2013, when he appeared before the Official
Liquidator. With regards to the sale of the property in question, it has
been urged on behalf of the applicant that the Resolution of the
company dated 15.01.2013, authorising the sale of the property, is a
fabricated document and that the signatures of the applicant therein
have been forged.
25. In view of the above-mentioned contentions, the following
prayers have been sought in the instant application:
(i) Direct Ms. Pranjali Khanna to produce the original of the
alleged Board Resolution dated 15.01.2013 authorizing Ms.
Manju Kawar to sell the Company's property.
(ii) Direct Andhra Bank to produce the original of the alleged
Board Resolution dated 15.1.2013 authorizing Ms, Manju
KawaI' to negotiate with the Bank.
(iii) Affidavit No. 66A, 69X and 914 purportedly sent by applicant
be summoned from the possession of Andhra Bank and lor
official liquidator and be submitted for forensic examination
of the signatures of the applicant on the said documents to
examine genuineness and authenticity of the documents.
CO. APPL. 641/2019
26. This application has also been instituted by Mr. Prageet
Sharma, Ex-Director. It is stated therein that per the reply filed by
Andhra Bank to the other application moved by him bearing
CO.APPL. 1540/2016, it is brought to the fore that out of the sale
consideration for the property in question i.e., Rs. 7.75 crores,
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curiously only a sum of Rs. 6.50 crores was received by Andhra Bank.
It is further stated that the remaining amount of Rs. 1.25 crores was
taken by Ms. Manju Kanwar, and the Bank was aware that out the said
amount of Rs. 1.25 crores, a sum of Rs. 88 lacs was transferred by Ms.
Manju Kanwar to M/s. VNS Accessories Pvt. Ltd. and VK
International, while the remaining amount appears to have been
retained by Ms. Manju Kanwar.
27. In this regard it is stated that since the sale of the property in
question as also the transfer of Rs. 1.25 crores to third parties was
done at the behest of Ms. Manju Kanwar during the pendency of the
present winding up petition, it is but evident that the entire transaction
was a preferential/fraudulent transaction. Further, that the amount has
been taken out of the company and paid to certain third parties in
preference over the creditors of the company (in liquidation).
28. In light of these facts being brought out, it is prayed on behalf
of the applicant that the beneficiaries who have received the sum Rs.
1.25 crores, namely M/s. VNS Accessories Pvt. Ltd, M/s. VK
International and Ms. Manju Kanwar, be directed to return the said
amount and deposit the same along with due interest.
CO.APPL. 706/2023
29. This too is an application moved on behalf of Mr. Prageet
Sharma, Ex-Director, seeking to place on record the following
additional documents:
(i) The Final order dt. 28.10.2022 in the Review Application
bearing RA No. 03/2021 passed by the Sh. Rajesh Malhotra,
Presiding Officer, Debt Recovery Tribunal-II, New Delhi by
Prageet Sharma against the impugned Final Order dated
05.02.2021 passed by the Hon'ble DRT in OA 30712013 titled
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"Union Bank of India (erstwhile Andhra Bank) vs M/s. M&A
Orient & Ors."
(ii) The Summoning Order dated 07.12.2022 passed by the Sh.
Yashdeep Chahal, Metropolitan Magistrate -01, New Delhi
District, Patiala House Courts, New Delhi in the Complaint Case
No. 674/1/2014 (New No. 52276/2016) titled "Prageet Sharma vs.
Manju Kawar & Ors."
30. It is stated that the above-mentioned documents be placed on
the record so as to ensure proper and fair adjudication of the case as
placed by the applicant.
CO.APPL. 1365/2018
31. This application has been moved on behalf of Andhra Bank
under Section 325 of the Companies Act, 2013 stating that the Bank
has opted to realise all the assets/properties mortgaged with it, instead
of relinquishing the same to the Official Liquidator and accordingly
proving its debt before the Official Liquidator. It has been stated that
the respondent company had permitted the sale of the mortgaged
property on a request to liquidate its loan liability as against the Bank,
and it was agreed by the Bank to release the said property on payment
of Rs. 6.50 crores. Further, it has been urged on behalf of the Bank
that a reply dated 06.09.2016 has already been filed to the application
moved by the agitating Director, Mr. Prageet Sharma, who's consent
and knowledge of the sale has been duly annexed in the said reply.
32. In view of the above-stated, it is the contention of the
applicant/Andhra Bank, that taking possession of the property in
question and sealing of the same by the Official Liquidator is
erroneous since even in the eventuality of cancellation of the Sale
Deed dated 30.01.2013, the property will revert back to the
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mortgagee/Andhra Bank. In light of these averments, it is prayed on
behalf of the applicant that it may be allowed to exercise the option to
realise the mortgaged assets on its own and further that the Official
Liquidator be directed to not take possession of the
mortgaged/hypothecated assets that have been secured by the
respondent company in favour of the applicant/Andhra Bank.
ANALYSIS & DECISION
33. I have given my thoughtful consideration to the elaborate
submissions advanced by the learned counsels for the rival parties at
the Bar. I have also perused the relevant record of the case including
the documents placed on the record by the respective parties. No case
law has been cited at the Bar as such.
34. First things first, the issues that have been racked up by the
applicant Mr. Prageet Sharma are ex facie beyond the purview and
scope of inquiry or proceedings before this Court. Quite apparently,
the applicant Mr. Prageet Sharma is making an attempt to wriggle out
of the financial mess created by the company (in liquidation) while he
was one of the Ex-Directors. His main plea that the resolution by the
Board of Directors dated 15.01.2013, authorizing Ms. Manju Kanwar
to execute the sale deed in favour of the buyer was not consented by
him and that his signatures were forged, is belied from the fact that
consequent to the sale of the property in question, when notice dated
19.07.2013 was issued to him by the Andhra Bank for payment of Rs.
85,96,743/-, the applicant in his letter addressed to the Bank dated
07.09.2013 did not even raise a whisper of protest that the Board
Resolution dated 15.01.2013 was forged in any manner. His only
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contention was that since Rs. 6.50 crores had already been paid
towards full and final settlement of the dues of the company (in
liquidation) through Ms. Manju Kanwar, Ex-Director, there was no
occasion for Andhra Bank to demand any further amount and thereby
resort attachment and sale of his property at village Noorpur, Chholas,
Dadri, Gautam Budh Nagar, State of Uttar Pradesh. Needless to state
that if the applicant Mr. Prageet Sharma has a grievance as regards
oppression and mismanagement in running of the affairs of the
company (in liquidation), the remedy lies elsewhere.
35. It is borne out from the record that initially, the packing credit
limit of the company (in liquidation) was Rs. 7.2 crores, and such
limit was provided by the Bank for the purposes of effecting exports.
The same was increased to Rs. 9.24 crores, however, due to
continuous losses suffered by the company (in liquidation) as a result
of not getting export orders, it was consequently reduced to Rs. 6.95
crores as per his consent as Director on 25.05.2012; and insofar as the
demand for Rs. 85,96,743/- vide notice dated 19.07.2013 is
concerned, the same already stands quashed by the Debt Recovery
Tribunal, Lucknow vide order dated 22.01.2014 and although an
appeal is pending before Debt Recovery Appellate Tribunal,
Lucknow, there is no interim order in favour of the Bank. In any case,
at the cost of repetition, the said issues are beyond the jurisdiction of
this Court. It is also pertinent to mention that neither Ms. Manju
Kanwar nor Mr. Prageet Sharma have cared to place on the record
copies of resolutions of the Board of Directors from the period
25.05.2012 till June 2013.
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36. Reverting back to the Company Application No. 340/2016,
moved by the Official Liquidator is concerned, it would be appropriate
to refer to the relevant provisions of the Companies Act, 1956 that
come into consideration, which provide as under:-
―531-A. Avoidance of voluntary transfer.--Any transfer of
property, movable or immovable, or any delivery of goods, made
by a company, not being a transfer or delivery made in the ordinary
course of its business or in favour of a purchaser or encumbrancer
in good faith and for valuable consideration, if made within a
period of one year before the presentation of a petition for winding
up by [the Tribunal] or the passing of a resolution for voluntary
winding up of the company, shall be void against the liquidator.‖
37. A careful perusal of the aforesaid provision would show that
transfer of an immovable property made by a company, which is not
made in the ordinary course of its business and not done in good faith
and lacking an element of not being made for valuable consideration,
within a period of one year before the presentation of a petition for
winding up, may be held to be void against the Liquidator. As regards
the disposition of any property/assets of the company in liquidation,
after commencement of a winding up petition, the following
provisions have to be considered:
"Section 536. Avoidance of transfers, etc., after commencement
of winding up
(1) In the case of a voluntary winding up, any transfer of shares in
the company, not being a transfer made to or with the sanction of
the liquidator, and any alteration in the status of the members of the
company, made after the commencement of the winding up, shall
be void.
(2) In the case of a winding up by 1 [the Tribunal], any disposition
of the property (including actionable claims) of the company, and
any transfer of shares in the company or alteration in the status of
its members, made after the commencement of the winding up,
shall, unless the 2 [Tribunal] otherwise orders, be void.
1. Substituted for "or subject to the supervision of the Court" by the
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Companies (Second Amendment) Act, 2002 (w.e.f. a date yet to be
notified).
2. Substituted for "court" by the Companies (Second Amendment)
Act, 2002 (w.e.f. a date yet to be notified).
Section 537. Avoidance of certain attachments, executions, etc.,
in winding up by tribunal
(1) Where any company is being wound up by the Tribunal -
(a) any attachment, distress or execution put in force,
without leave of the Tribunal against the estate or effects of the
company, after the commencement of the winding up ; or
(b) any sale held, without leave of the Tribunal of any of
the properties or effects of the company after such commencement
; shall be void.
(2) Nothing in this section applies to any proceedings for the
recovery of any tax or impost or any dues payable to the
Government.]
38. In the case decided by this Court in Reserve Bank of India v.
J.V.G. M/s. Finance Limited5, the Court dealt with a report filed by a
one-man Committee appointed by the Court whereby the claim of the
applicant with regard to an Agreement to Sell executed by the
company (in liquidation) after commencement of the winding up
proceedings was rejected. This Court referred with approval, the
decision of the Calcutta High Court in the case of J. Sen Gupta
Private Ltd. (In Liquidation)6, which dealt with Section 536(2) of
the Act and observed as under:-
―12. It seems to me, therefore, upon considering various authorities
on this subject that the following principles are doubtless
applicable to sub-sec (2) of Sec. 536 of the Companies Act, 1956:
1. The Court has an absolute discretion to validate a transaction;
and that
2. This discretion is controlled only by the general principles which
apply to every kind of judicial discretion; and that .
3. The Court must have regard to all the surrounding circumstances
and if from all the surrounding circumstances it comes to the
5 (20110 SCC OnLine Del 5135
6 AIR 1962 Cal. 405
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conclusion that the transaction should not be void, it is within the
power of the Court under Sec. 536(2) to say that the transaction is
not void; and lastly that
4. If it be found that the transaction was for the benefit of and in
the interests of the company or for keeping the company going or
keeping things going generally, it ought to be confirmed.‖
39. In the above-noted judgment of this Court, reference was also
invited to a decision by the Gujarat High Court in the matter of the
Sidhpur Mills Company Limited, (1987) 1 Comp. L.J. 71 (Guj.)
wherein it was held as under:-
―12. It is trite position in law that the commencement of
winding-up proceedings relates back to the presentation of the
petition (see: section 441 of Companies Act, 1956). It should
be recalled that the winding-up petition in which the order
was made was company petition No.9 of 1979 which was
presented on 22.2.1979. The winding-up order was made by
this Court on October 18, 1979. In the circumstances,
therefore, any transfer of shares of Siddhpur Mills Co. Ltd.
made after the presentation of the winding-up would be void
unless as otherwise directed by the Court. The Court has an
absolute discretion as to validating the transaction after
presentation of the winding-up petition. The discretion is to be
exercised on recognized principles which guide the exercise
of judicial discretion generally with particular attention to the
interest of the company. The Court can validate such
impugned transaction in those bona fide cases which demand
protection of equitable consideration. (See B.B. Khanna v.
S.N. Ghose 1976 Tax L.R. 1740).‖
40. In view of the aforesaid proposition of law this Court held that:
―it has the discretion to validate any disposition of the property
made after passing of the winding up order, but the said discretion
is not an untrammelled one, as it has to be exercised on sound
judicial principles. In the opinion of this Court, while validating
any disposition of the property after the appointment of the
Provisional Liquidator, the Company Court, has to keep in view all
surrounding circumstances and if it finds that the transaction is a
bona fide one for the benefit of the company, then alone the same
would be validated‖.
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41. Reference can also be invited to the decision by this Court in
the case of Smt. Benu Berry v. JVG Finance Ltd.7, wherein the
respondent company was ordered to be wound up vide order dated
05.06.1998 and after commencement of the winding up proceedings, a
property belonging to the company (in liquidation) at Mumbai had
been sold to one Smt. Anita Jain on the premise that the company
owed certain monies to her for the promotion work done by her, vide
Agreement to Sell dated 23.03.2001. It was found that the concerned
Housing Society had recognized Smt. Anita Jain as the bonafide
owner of the plot in question but she had also sold the said property to
the appellant vide agreement to sell dated 13.12.2001. Finding that
the aforesaid disposition or sale was not genuine and bonafide, it was
held as under:
―9. Be that as it may, we have otherwise looked into the matter.
Counsel for the appellant has argued that the learned company
judge erred in not considering that the appellant was a bona fide
purchaser for value and in proceeding on the premise that the
transaction was void merely for the reason of having been effected
after the order of winding up. It is contended that it was incumbent
upon the company judge to record a finding whether Smt. Anita
Jain was a bona fide creditor of the company or not and that the
preference shown to Smt. Anita Jain as a creditor could have been
held to be bad only if found to be fraudulent and of which there is
no finding. It is contended that the subject transaction is in good
faith and for valuable consideration within the meaning of sections
531A and 536(2) of the Companies Act, 1956 and is not a nullity.
It is further argued that the appellant had paid the then prevalent
market price for the flat. The appellant in this regard has also filed
an additional affidavit along with documents being the sale deeds
of the other flats and valuation reports with respect to the property.
10. The purported transfer of the flat aforesaid in the present case is
admittedly after the order of winding up and appointment of
7
2012 SCC OnLine Del 6378
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provisional liquidator. Upon such happening the ex-management of
the company which is alleged to have transferred the flat, lost any
right to act on behalf of the company or to transact any of the
properties of the company. The transfer thus claimed by the
appellant has not been affected by any person authorised to do so.
Section 531A of the Companies Act deals with transfers within a
period of one year before the presentation of a petition for winding
up and has no application to the facts of the present case. Section
536(2) declares transfers of the property of the company after the
commencement of winding up as ―void‖ unless otherwise ordered.
11. The question which thus arises is as to in what cases the court
should order the transfer effected (of the property of the company),
after the commencement of winding up as otherwise then void. The
learned company judge in this regard has already referred to J. Sen
Gupta (Private) Ltd., In re, [1962] 32 Comp Cas 876; AIR 1962
Cal 405 and Siddhpur Mills Co. Ltd., In re, [1987] 61 Comp Cas
756 (Guj); [1987] 1 Comp. LJ 71. We find that the Supreme Court
in Pankaj Mehra v. State of Maharashtra, [2000] 100 Comp Cas
417; (2000) 2 SCC 756, to have laid down the ―test of whether the
transfer was under compulsion of circumstance or other
commercial compulsion to enable the company in liquidation to
run its business‖. We further find a Division Bench of the Bombay
High Court in Laxman Yeswant Prabhudesai v. NRC Ltd., [2010]
155 Comp Cas 88; [2010] 2 Comp. LJ 380, to have, after noticing a
large volume of case law on the subject deduced that the
transaction undertaken by company in liquidation can be validated
if under section 536(2) under compulsion of circumstances, in
order to save or protect the company, provided evidence is
produced about such compulsion; it was further held that the assets
of the company (in liquidation) cannot be disposed of at the mere
pleasure of the company and only such disposal shall be validated
which is found to be for the benefit and interest of the company; it
is for enabling the company to continue as a going concern and to
protect the interest of the shareholders and creditors, that power of
validation under section 536(2) should be exercised. We also find a
Division Bench of this court to have in H.L. Seth v. Wearwell
Cycle Co. (India) Ltd., [1992] 46 DLT 599, observed the test to be
applied for validating a transaction in exercise of the powers under
section 536(2) is of ―good faith in the ordinary course of trade, for
the benefit of the company‖. Similarly in Reserve Bank of
India v. Crystal Credit Corporation Ltd., [2006] 132 Comp Cas
363 (Delhi); [2005] 121 DLT 375, the following principles for
exercise of the powers under section 536(2) were laid down (page
367 of 132 Comp Cas):
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―(i) Transactions bona fide entered into and completed in the
ordinary course of trade must be protected.
(ii) If the disposition is made for the purpose of preserving the
business as a going concern, then also the discretion of the court
must be exercised.
(iii) A disposition must not be validated merely because the party
bona fide entered into the transaction.
(iv) Knowledge of the presentation of the winding up is
immaterial.‖
42. In light of the aforesaid proposition of law, reverting back to the
instant matter, the first and foremost issue that arises in the present
matter is whether Andhra Bank, which had the first charge over the
property in question and is evidently a secured creditor, could have
effected a sale of the property in question by way of a private treaty.
In consideration of the same, this Court has gone through the relevant
provisions of the SARFAESI Act, 2002 as also the Companies Act of
1956. There is no gain saying that the company (in liquidation) was a
borrower in terms of Section 2(f)8 of the SARFAESI Act and the debt
was taken and in existence against the property in question, which was
recoverable by the Bank. Further, the property in question was a
financial asset of the Bank in terms of Section 2(l)9 and there also
8 (f) ―borrower‖ means 1 [any person who, or a pooled investment vehicle as defined in clause (da)
of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) which,] has been
granted financial assistance by any bank or financial institution or who has given any guarantee or
created any mortgage or pledge as security for the financial assistance granted by any bank or
financial institution 2 [and includes a person who, or a pooled investment vehicle which,] becomes
borrower of a 3 [asset reconstruction company] consequent upon acquisition by it of any rights or
interest of any bank or financial institution in relation to such financial assistance 4 [or who has
raised funds through issue of debt securities];
9 (l) ―financial asset‖ means debt or receivables and includes--
(i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or
(ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or
(iii) a mortgage, charge, hypothecation or pledge of movable property; or
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arose a default in so far that there was apparently non-payment of the
debt taken by the borrower in terms of Section 2(j)10 of the
SARFAESI Act.
43. It is pertinent to appreciate that Andhra Bank being a secured
creditor by virtue of Section 2(zd)11, had a security interest within the
meaning of Section 2(zf)12. At this juncture, it would be relevant to
(iv) any right or interest in the security, whether full or part underlying such debt or receivables; or
(v) any beneficial interest in property, whether movable or immovable, or in such debt,
receivables, whether such interest is existing, future, accruing, conditional or contingent; or
[(va) any beneficial right, title or interest in any tangible asset given on hire or financial lease or
conditional sale or under any other contract which secures the obligation to pay any unpaid portion
of the purchase price of such asset or an obligation incurred or credit otherwise provided to enable
the borrower to acquire such tangible asset; or
(vb) any right, title or interest on any intangible asset or licence or assignment of such intangible
asset, which secures the obligation to pay any unpaid portion of the purchase price of such
intangible asset or an obligation incurred or credit otherwise extended to enable the borrower to
acquire such intangible asset or obtain licence of the intangible asset; or]
(vi) any financial assistance;
10
[(j) ―default‖ means-- (i) non-payment of any debt or any other amount payable by the borrower
to any secured creditor consequent upon which the account of such borrower is classified as non-
performing asset in the books of account of the secured creditor; or (ii) non-payment of any debt or
any other amount payable by the borrower with respect to debt securities after notice of ninety
days demanding payment of dues served upon such borrower by the debenture trustee or any other
authority in whose favour security interest is created for the benefit of holders of such debt
securities;]
11 [(zd) ―secured creditor‖ means--
(i) any bank or financial institution or any consortium or group of banks or financial institutions
holding any right, title or interest upon any tangible asset or intangible asset as specified in clause
(l);
(ii) debenture trustee appointed by any bank or financial institution; or
(iii) an asset reconstruction company whether acting as such or managing a trust set up by such
asset reconstruction company for the securitisation or reconstruction, as the case may be; or
(iv) debenture trustee registered with 5 [the Board and appointed] for secured debt securities; or
(v) any other trustee holding securities on behalf of a bank or financial institution, in whose favour
security interest is created by any borrower for due repayment of any financial assistance.]
12
[2(zf) ―security interest‖ means right, title or interest of any kind, other than those specified in
section 31, upon property created in favour of any secured creditor and includes-- (i) any
mortgage, charge, hypothecation, assignment or any right, title or interest of any kind, on tangible
asset, retained by the secured creditor as an owner of the property, given on hire or financial lease
or conditional sale or under any other contract which secures the obligation to pay any unpaid
portion of the purchase price of the asset or an obligation incurred or credit provided to enable the
borrower to acquire the tangible asset; or
(ii) such right, title or interest in any intangible asset or assignment or licence of such intangible
asset which secures the obligation to pay any unpaid portion of the purchase price of the intangible
asset or the obligation incurred or any credit provided to enable the borrower to acquire the
intangible asset or licence of intangible asset;]
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refer to Section 13 of the SARFAESI Act, which provides as under:-
"13. Enforcement of security interest.--(1) Notwithstanding
anything contained in section 69 or section 69A of the Transfer of
Property Act, 1882 (4 of 1882), any security interest created in
favour of any secured creditor may be enforced, without the
intervention of court or tribunal, by such creditor in accordance
with the provisions of this Act.
(2) Where any borrower, who is under a liability to a secured
creditor under a security agreement, makes any default in
repayment of secured debt or any instalment thereof, and his
account in respect of such debt is classified by the secured creditor
as non-performing asset, then, the secured creditor may require the
borrower by notice in writing to discharge in full his liabilities to
the secured creditor within sixty days from the date of notice
failing which the secured creditor shall be entitled to exercise all or
any of the rights under sub-section (4).
[Provided that--
(i) the requirement of classification of secured debt as non-
performing asset under this sub-section shall not apply to a
borrower who has raised funds through issue of debt securities; and
(ii) in the event of default, the debenture trustee shall be
entitled to enforce security interest in the same manner as provided
under this section with such modifications as may be necessary and
in accordance with the terms and conditions of security documents
executed in favour of the debenture trustee.]
(3) The notice referred to in sub-section (2) shall give details of the
amount payable by the borrower and the secured assets intended to
be enforced by the secured creditor in the event of non-payment of
secured debts by the borrower.
[(3A) If, on receipt of the notice under sub-section (2), the
borrower makes any representation or raises any objection, the
secured creditor shall consider such representation or objection and
if the secured creditor comes to the conclusion that such
representation or objection is not acceptable or tenable, he shall
communicate [within fifteen days] of receipt of such representation
or objection the reasons for non-acceptance of the representation or
objection to the borrower:
Provided that the reasons so communicated or the likely action of
the secured creditor at the stage of communication of reasons shall
not confer any right upon the borrower to prefer an application to
the Debts Recovery Tribunal under section 17 or the Court of
District Judge under section 17A.]
(4) In case the borrower fails to discharge his liability in full within
the period specified in sub-section (2), the secured creditor may
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take recourse to one or more of the following measures to recover
his secured debt, namely:--
(a) take possession of the secured assets of the borrower
including the right to transfer by way of lease, assignment or sale
for realising the secured asset;
[(b) take over the management of the business of the
borrower including the right to transfer by way of lease,
assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or
sale shall be exercised only where the substantial part of the
business of the borrower is held as security for the debt:
Provided further that where the management of whole of the
business or part of the business is severable, the secured creditor
shall take over the management of such business of the borrower
which is relatable to the security for the debt;]
(c) appoint any person (hereafter referred to as the
manager), to manage the secured assets the possession of which
has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who
has acquired any of the secured assets from the borrower and from
whom any money is due or may become due to the borrower, to
pay the secured creditor, so much of the money as is sufficient to
pay the secured debt.
(5) Any payment made by any person referred to in clause (d) of
sub-section (4) to the secured creditor shall give such person a
valid discharge as if he has made payment to the borrower.
[(5A) Where the sale of an immovable property, for which a
reserve price has been specified, has been postponed for want of a
bid of an amount not less than such reserve price, it shall be lawful
for any officer of the secured creditor, if so authorised by the
secured creditor in this behalf, to bid for the immovable property
on behalf of the secured creditor at any subsequent sale.
(5B) Where the secured creditor, referred to in sub-section (5A), is
declared to be the purchaser of the immovable property at any
subsequent sale, the amount of the purchase price shall be adjusted
towards the amount of the claim of the secured creditor for which
the auction of enforcement of security interest is taken by the
secured creditor, under sub-section (4) of section 13.
(5C) The provisions of section 9 of the Banking Regulation Act,
1949 (10 of 1949) shall, as far as may be, apply to the immovable
property acquired by secured creditor under sub-section (5A).]
(6) Any transfer of secured asset after taking possession thereof or
take over of management under sub-section (4), by the secured
creditor or by the manager on behalf of the secured creditor shall
vest in the transferee all rights in, or in relation to, the secured asset
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transferred as if the transfer had been made by the owner of such
secured asset.
(7) Where any action has been taken against a borrower under the
provisions of sub-section (4), all costs, charges and expenses
which, in the opinion of the secured creditor, have been properly
incurred by him or any expenses incidental thereto, shall be
recoverable from the borrower and the money which is received by
the secured creditor shall, in the absence of any contract to the
contrary, be held by him in trust, to be applied, firstly, in payment
of such costs, charges and expenses and secondly, in discharge of
the dues of the secured creditor and the residue of the money so
received shall be paid to the person entitled thereto in accordance
with his rights and interests.
[(8) Where the amount of dues of the secured creditor together with
all costs, charges and expenses incurred by him is tendered to the
secured creditor at any time before the date of publication of notice
for public auction or inviting quotations or tender from public or
private treaty for transfer by way of lease, assignment or sale of the
secured assets,--
(i) the secured assets shall not be transferred by way of
lease assignment or sale by the secured creditor; and
(ii) in case, any step has been taken by the secured creditor
for transfer by way of lease or assignment or sale of the assets
before tendering of such amount under this sub-section, no further
step shall be taken by such secured creditor for transfer by way of
lease or assignment or sale of such secured assets.]
(9) [Subject to the provisions of the Insolvency and Bankruptcy
Code, 2016, in the case of] financing of a financial asset by more
than one secured creditors or joint financing of a financial asset by
secured creditors, no secured creditor shall be entitled to exercise
any or all of the rights conferred on him under or pursuant to sub-
section (4) unless exercise of such right is agreed upon by the
secured creditors representing not less than [sixty per cent.] in
value of the amount outstanding as on a record date and such
action shall be binding on all the secured creditors:
Provided that in the case of a company in liquidation, the amount
realised from the sale of secured assets shall be distributed in
accordance with the provisions of section 529A of the Companies
Act, 1956 (1 of 1956):
Provided further that in the case of a company being wound up on
or after the commencement of this Act, the secured creditor of such
company, who opts to realise his security instead of relinquishing
his security and proving his debt under proviso to sub-section (1)
of section 529 of the Companies Act, 1956 (1 of 1956), may retain
the sale proceeds of his secured assets after depositing the
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workmen's dues with the liquidator in accordance with the
provisions of section 529A of that Act:
Provided also that liquidator referred to in the second proviso shall
intimate the secured creditor the workmen's dues in accordance
with the provisions of section 529A of the Companies Act, 1956 (1
of 1956) and in case such workmen's dues cannot be ascertained,
the liquidator shall intimate the estimated amount of workmen's
dues under that section to the secured creditor and in such case the
secured creditor may retain the sale proceeds of the secured assets
after depositing the amount of such estimate dues with the
liquidator:
Provided also that in case the secured creditor deposits the
estimated amount of workmen's dues, such creditor shall be liable
to pay the balance of the workmen's dues or entitled to receive the
excess amount, if any, deposited by the secured creditor with the
liquidator:
Provided also that the secured creditor shall furnish an undertaking
to the liquidator to pay the balance of the workmen's dues, if any.
Explanation.--For the purposes of this sub-section,--
(a) ―record date‖ means the date agreed upon by the
secured creditors representing not less than [sixty per cent.] in
value of the amount outstanding on such date;
(b) ―amount outstanding‖ shall include principal, interest
and any other dues payable by the borrower to the secured creditor
in respect of secured asset as per the books of account of the
secured creditor.
(10) Where dues of the secured creditor are not fully satisfied with
the sale proceeds of the secured assets, the secured creditor may
file an application in the form and manner as may be prescribed to
the Debts Recovery Tribunal having jurisdiction or a competent
court, as the case may be, for recovery of the balance amount from
the borrower.
(11) Without prejudice to the rights conferred on the secured
creditor under or by this section, the secured creditor shall be
entitled to proceed against the guarantors or sell the pledged assets
without first taking any of the measured specifies in clauses (a) to
(d) of sub-section (4) in relation to the secured assets under this
Act.
(12) The rights of a secured creditor under this Act may be
exercised by one or more of his officers authorised in this behalf in
such manner as may be prescribed.
(13) No borrower shall, after receipt of notice referred to in sub-
section (2), transfer by way of sale, lease or otherwise (other than
in the ordinary course of his business) any of his secured assets
referred to in the notice, without prior written consent of the
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secured creditor.‖
44. A careful perusal of sub-Section (1) to Section 13 would show
that it starts with a non-obstante clause and enables the secured
creditor to enforce its security interest without intervention of the
Court or Tribunal, in accordance with the provisions of the Act, and
further that this provision has an overriding effect on Section 6913 and
69A14 of the Transfer of Property Act. It would also be pertinent to
13
69. Power of sale when valid.--
(1) A mortgagee, or any person acting on his behalf, shall, subject to the provisions of this section
have power to sell or concur in selling the mortgaged property or any part thereof, in default of
payment of the mortgage-money, without the intervention of the court, in the following cases and
in no others, namely:--
(a) where the mortgage is an English mortgage, and neither the mortgagor nor the mortgagee
is a Hindu, Muhammadan or Buddhist or a member of any other race, sect, tribe or class from time
to time specified in this behalf by the State Government, in the Official Gazette;
(b) where a power of sale without the intervention of the court is expressly conferred on the
mortgagee by the mortgage-deed and the mortgagee is the Government;
(c) where a power of sale without the intervention of the court is expressly conferred on the
mortgagee by the mortgage-deed and the mortgaged property or any part thereof was, on the date
of the execution of the mortgage-deed, situate within the towns of Calcutta, Madras, Bombay, or in
any other town11 or area which the State Government may, by notification in the Official Gazette,
specify in this behalf.
(2) No such power shall be exercised unless and until--
(a) notice in writing requiring payment of the principal money has been served on the mortgagor,
or on one of several mortgagors, and default has been made in payment of the principal money, or
of part thereof, for three months after such service; or
(b) some interest under the mortgage amounting at least to five hundred rupees is in arrear and
unpaid for three months after becoming due.
(3) When a sale has been made in professed exercise of such a power, the title of the purchaser
shall not be impeachable on the ground that no case had arisen to authorise the sale, or that due
notice was not given, or that the power was otherwise improperly or irregularly exercised; but any
person damnified by an unauthorised or improper or irregular exercise or the power shall have his
remedy in damages against the person exercising the power.
(4) The money which is received by the mortgagee, arising from the sale, after discharge of prior
encumbrances, if any, to which the sale is not made subject, or after payment into Court under
section 57 of a sum to meet any prior encumbrance, shall, in the absence of a contract to the
contrary, be held by him in trust to be applied by him, first, in payment of all costs, charges and
expenses properly incurred by him as incident to the sale or any attempted sale; and, secondly, in
discharge of the mortgage-money and costs and other money, if any, due under the mortgage; and
the residue of the money so received shall be paid to the person entitled to the mortgaged property,
or authorised to give receipts for the proceeds of the sale thereof.
(5) Nothing in this section or in section 69A applies to powers conferred before the first day of
July, 1882.
14
69A. Appointment of receiver.--
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(1) A mortgagee having the right to exercise a power of sale under section 69 shall, subject to the
provisions of sub-section (2), be entitled to appoint, by writing signed by him or on his behalf, a
receiver of the income of the mortgaged property or any part thereof.
(2) Any person who has been named in the mortgage-deed and is willing and able to act as
receiver may be appointed by the mortgagee.If no person has been so named, or if all persons
named are unable or unwilling to act, or are dead, the mortgagee may appoint any person to whose
appointment the mortgagor agrees; failing such agreement, the mortgagee shall be entitled to apply
to the Court for the appointment of a receiver, and any person appointed by the Court shall be
deemed to have been duly appointed by the mortgagee.A receiver may at any time be removed by
writing signed by or on behalf of the mortgagee and the mortgagor, or by the court on application
made by either party and on due cause shown.A vacancy in the office of receiver may be filled in
accordance with the provisions of this sub-section.
(3) A receiver appointed under the powers conferred by this section shall be deemed to be the
agent of the mortgagor; and the mortgagor shall be solely responsible for the receiver's act or
defaults, unless the mortgage-deed otherwise provides or unless such acts or defaults are due to the
improper intervention of the mortgagee.
(4) The receiver shall have power to demand and recover all the income of which he is appointed
receiver, by suit, execution or otherwise, in the name either of the mortgagor or of the mortgagee
to the full extent of the interest which the mortgagor could dispose of, and to give valid receipts
accordingly for the same, and to exercise any powers which may have been delegated to him by
the mortgagee, in accordance with the provisions of this section.
(5) A person paying money to the receiver shall not be concerned to inquire if the appointment of
the receiver was valid or not.
(6) The receiver shall be entitled to retain out of any money received by him, for his remuneration,
and in satisfaction of all costs, charges and expenses incurred by him as receiver, a commission at
such rate not exceeding five per cent, on the gross amount of all money received as is specified in
his appointment, and, if no rate is so specified, then at the rate of five per cent. on that gross
amount, or at such other rate as the court thinks fit to allow, on application made by him for that
purpose.
(7) The receiver shall, if so directed in writing by the mortgagee, insure to the extent, if any, to
which the mortgagee might have insured, and keep insured against loss or damage by fire, out of
the money received by him, the mortgaged property or any part thereof being of an insurable
nature.
(8) Subject to the provisions of this Act as to the application of insurance money, the receiver shall
apply all money received by him as follows, namely:--
(i) in discharge of all rents, taxes, land revenue, rates and outgoings whatever affecting
the mortgaged property;
(ii) in keeping down all annual sums or other payments, and the interest on all principal
sums, having priority to the mortgage in right whereof he is receiver;
(iii) in payment of his commission, and of the premiums on fire, life or other insurances,
if any, properly payable under the mortgage-deed or under this Act, and the cost of executing
necessary or proper repairs directed in writing by the mortgagee;
(iv) in payment of the interest falling due under the mortgage;
(v) in or towards discharge of the principal money, if so directed in writing by the
mortgagee,and shall pay the residue, of any, of the money received by him to the person who, but
for the possession of the receiver, would have been entitled to receive the income of which he is
appointed receiver, or who is otherwise entitled to the mortgaged property.
(9) The provisions of sub-section (1) apply only if and as far as a contrary intention is not
expressed in the mortgage-deed; and the provisions of sub-sections (3) to (8) inclusive may be
varied or extended by the mortgage-deed; and, as so varied or extended, shall, as far as may be,
operate in like manner and with all the like incidents, effects and consequences, as if such
variations or extensions were contained in the said sub-sections.
(10) Application may be made, without the institution of a suit, to the court for its opinion, advice
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refer to Rule 8 of the SARFAESI Rules, which provides as under:-
―RULE (8)
Sale by any methods other than public auction or public tender,
shall be on such terms as may be settled [between the secured
creditors and the proposed purchaser in writing] [Substituted
'between the parties in writing' by Notification No. G.S.R. 1046
(E), dated 3.11.2016 (w.e.f. 20.9.2002).].
Sale of immovable secured assets.
(1) Where the secured asset is an immovable property, the
authorized officer shall take or cause to be taken possession, by
delivering a possession notice prepared as nearly as possible in
Appendix IV to these rules, to the borrower and by affixing the
possession notice on the outer door or at such conspicuous place of
the property.
(2) The possession notice as referred to in sub-rule (1) shall also be
published in two leading newspaper, one in vernacular language
having sufficient circulation in that locality, by the authorized
officer.
(2A) [ All notices under these rules may also be served upon the
borrower through electronic mode of service, in addition to the
modes prescribed under sub-rule (1) and sub-rule (2) of rule
8.] [Inserted by Notification No. G.S.R. 1046 (E), dated 3.11.2016
(w.e.f. 20.9.2002).]
(3) In the event of possession of immovable property is actually
taken by the authorized officer, such property shall be kept in his
own custody or in the custody of any person authorized or
appointed by him, who shall take as much care of the property in
his custody as a owner of ordinary prudence would, under the
similar circumstances, take of such property.
(4) The authorized officer shall take steps for preservation and
protection of secured assets and insure them, if necessary, till they
are sold or otherwise disposed of.
(5) Before effecting sale of the immovable property referred to in
sub-rule (1) of rule 9, the authorized officer shall obtain valuation
of the property from an approved valuer and in consultation with
or direction on any present question respecting the management or administration of the
mortgaged property, other than questions of difficulty or importance not proper in the opinion of
the court for summary disposal. A copy of such application shall be served upon, and the hearing
thereof may be attended by, such of the persons interested in the application as the Court may
think fit.
The costs of every application under this sub-section shall be in the discretion of the Court.
(11) In this section, ―the Court‖ means the Court which would have jurisdiction in a suit to enforce
the mortgage.
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the secured creditor, fix the reserve price of the property and may
sell the whole or any part of such immovable secured asset by any
of the following methods:-
(a) by obtaining quotations from the persons dealing with
similar secured assets or otherwise interested in buying the such
assets; or
(b) by inviting tenders from the public;
(c) [ by holding public auction including through e-auction
mode; or] [Substituted by Notification No. G.S.R. 1046 (E), dated
3.11.2016 (w.e.f. 20.9.2002).]
(d) by private treaty.
(6) the authorized officer shall serve to the borrower a notice of
thirty days for sale of the immovable secured assets, under sub-rule
(5):[Provided that if the sale of such secured asset is being effected
by either inviting tenders from the public or by holding public
auction, the secured creditor shall cause a public notice in the Form
given in Appendix IV-A to be published in two leading newspapers
including one in vernacular language having wide circulation in the
locality.] [Substituted by Notification No. G.S.R. 1040(E), dated
17.10.2018 (w.e.f. 20.9.2002).]
(7) [ every notice of sale shall be affixed on the conspicuous part
of the immovable property and the authorised officer shall upload
the detailed terms and conditions of the sale, on the web- site of the
secured creditor, which shall include;
(a) the description of the immovable property to be sold,
including the details of the encumbrances known to the secured
creditor;
(b) the secured debt for recovery of which the property is to
be sold;
(c) reserve price of the immovable secured assets below
which the property may not be sold;
(d) time and place of public auction or the time after which
sale by any other mode shall be completed;
(e) deposit of earnest money as may be stipulated by the
secured creditor;
(f) any other terms and conditions, which the authorized
officer considers it necessary for a purchaser to know the nature
and value of the property.]
(8) Sale by any methods other than public auction or public
tender, shall be on such terms as may be settled [between the
secured creditors and the proposed purchaser in
writing] [Substituted 'between the parties in writing' by
Notification No. G.S.R. 1046 (E), dated 3.11.2016 (w.e.f.
20.9.2002).].
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45. A bare perusal of the aforementioned provisions would show
that where a secured asset is an immovable property, sale by any
method other than public auction or public tender may be effected on
such terms as may be settled between the secured creditor and the
proposed purchaser in writing. Although, in terms of sub-Section (2)
to Section 13 of the SARFAESI Act, there was no specific declaration
as to the account of the company in liquidation having become a Non-
Performing Asset, such recourse was definitely on the cards.
46. Therefore, this court finds substance in the plea advanced by the
learned counsel for Andhra Bank, that by virtue of the order dated
03.12.2012 passed by the CLB, whereby liberty was granted to the
Bank to take action against the mortgaged property as per law, the sale
of the property in question by way of a private treaty with the
borrower and the purchaser was squarely included and envisaged. In
other words, it was not incumbent upon Andhra Bank to resort to the
long run procedure of enforcing its ‗security interest' in the manner
laid down under the SARFAESI Act, which involves the publication
of a notice, carrying out an e-auction, inviting tenders and thereafter
finalizing the deal by execution of a registered sale deed.
47. Having said that, the issue that begs a question - whether the
sale of the property in question on 30.01.2013 should be validated by
this Court? Indeed, the sale of the property, completed on 30.01.2013,
was effected after the commencement and issuance of notice to Ms.
Manju Kanwar for 15.01.2013. However, unhesitatingly from the trail
of correspondence viz., the letters/emails dated 20.12.2012,
22.12.2012, 27.12.2012, 28.12.20212 that preceded between the
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principal borrower i.e. the company (in liquidation) through Ms.
Manju Kanwar and Andhra Bank before the sale was effected, does go
to show that all efforts were being made to set the company (in
liquidation) on course to recovery and revive it, and further to ensure
that its account with the Bank does not become an NPA. If the said
letters dated 20.12.2012, 22.12.2012, 27.12.2012 and 28.12.20212,
emanating from the company (in liquidation) are to be believed, the
company was going through a poor commercial phase due to a world-
wide recession which greatly impacted Europe and United Kingdom
in particular.
48. Although, much has been argued about the property in question
being undervalued, no substantive material has been placed on behalf
of the Official Liquidator and/or for that matter on behalf of the
applicant- Mr. Prageet Sharma, Ex-Director so as to suggest that any
apparent collusion was resorted to in order to sell the property at a rate
lower than the prevailing market rate. On the contrary, Ms. Manju
Kanwar, Ex-Director has placed on the record copies of two registered
sale deeds regarding properties in the same project, which indicate that
different prices were fetched for similarly situated properties around
the relevant time period and rather for a lower price than the
consideration paid by the buyer - Ms. Pranjali Khanna through her
mother Smt. Vandana Khanna, in the present sale in contention.
49. In view of the foregoing discussion, unhesitatingly, this Court
finds that the reliefs claimed in Company Application No. 340/2016
moved on behalf of the Official Liquidator are not sustainable. There
are no justifiable reasons to invalidate the sale deed, for the simple
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reason that the sale had been effected by Andhra Bank under its aegis
through the principal borrower/debtor, under its overall supervision
and control and the entire sale consideration was duly received and
accounted for. There is not an iota of material placed on the record to
suggest that any part of the sale consideration was siphoned off or
misappropriated by anyone connected with the company (in
liquidation).
50. Accordingly, the company application bearing CA No.
340/2016 is hereby dismissed. The application bearing CA No.
1868/2013 moved by applicant Ms. Pranjali Khanna through her
mother Ms. Vandana Khanna is hereby allowed and the Official
Liquidator is directed to de-seal the property bearing No. LGG-116,
The Laburnum Condominium Complex, Block-A, Sushant Lok,
Sector-28, Gurgaon within 15 days from today.
51. All other applications are also disposed of accordingly.
CO.PET. 436/2012 & CRL.O.(CO) 2/2014
52. List on date already fixed i.e., 09.05.2024.
DHARMESH SHARMA, J.
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