Karnataka High Court
The Karnataka Industrial Areas vs Gangavathi Sugar Mills Limited on 21 March, 2017
Equivalent citations: 2017 (3) AKR 204
Bench: Jayant Patel, P.S.Dinesh Kumar
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
Dated this the 21st day of March, 2017
PRESENT
THE HON'BLE MR. JUSTICE JAYANT PATEL
AND
THE HON'BLE MR. JUSTICE P.S. DINESH KUMAR
O.S.A. No.24/2014
BETWEEN
THE KARNATAKA INDUSTRIAL AREAS
DEVELOPMENT BOARD
NO.14/13, 2ND FLOOR, R.P.BUILDING
NRUPATHUNGA ROAD
BANGALORE - 560 001
REPRESENTED BY ITS CHIEF EXECUTIVE
OFFICER AND EXECUTIVE MEMBER ...APPELLANT
(By Shri.D.L.N.RAO, SENIOR COUNSEL FOR
Shri.P.V.CHANDRA SHEKAR, Adv.,)
AND
1. GANGAVATHI SUGAR MILLS LIMITED
(IN LIQUIDATION)
REPRESENTED BY THE OFFICIAL LIQUIDATOR
ATTACHED TO THE HON'BLE HIGH COURT
OF KARNATAKA, CORPORATE BHAVAN
12TH FLOOR, RAHEJA TOWERS, No.26, 27
M.G. ROAD, BANGALORE - 560 001
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2. GODHA REALTORS (INDIA) PRIVATE LIMITED
"SANDEEP NILAYAM", RAMAIAH REDDY COLONY
SECTOR C, BASAVANAGAR, MARATHHALLI POST
BANGALORE - 560 037
REPRESENTED BY ITS DIRECTOR
SRI.RAMAIAH REDDY
3. IFCI LIMITED
A GOVERNMENT OF INDIA UNDERTAKING
IFCI BHAVAN, 4TH FLOOR, No.2
CUBBONPET MAIN ROAD
N.R.SQUARE, BENGALURU
REPRESENTED BY ITS
ASST. GENERAL MANAGER
Ms.YAMINI DAS
4. STATE BANK OF INDIA
STRESSED ASSETS MANAGEMENT BRANCH
2ND FLOOR, OFFICE COMPLEX BUILDING
LHO CAMPUS, No.65, St. MARK'S ROAD
BENGALURU - 560 001
REPRESENTED BY ITS
AUTHORISED SIGNATORY
Ms.YAMINI DAS
5. STATE BANK OF HYDERABAD
NO.85, SHERIEFF HOUSE, 1ST FLOOR
RICHMOND ROAD, BENGALURU - 560 001
REPRESENTED BY ITS
AUTHORISED SIGNATORY
Ms.YAMINI DAS
6. CANARA BANK
ARM BRANCH
II FLOOR, CIRCLE OFFICE
SPENCER TOWERS
NO.86, M.G.ROAD
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BENGALURU - 560 001
REPRESENTED BY ITS
SENIOR MANAGER
Mr.S.P.SIVAKUMAR ...RESPONDENTS
(By Shri. K.S.MAHADEVAN, Adv., FOR R1;
Shri.P.S.MANJUNATH & Shri. T.P.VIVEKANANDA, Advs.,
FOR R2;
Shri. S.S.NAGANAND, SENIOR COUNSEL FOR
Shri.VIKRAM UNNI RAJAGOPAL, Adv., FOR M/s.JUST LAW
FOR IMPLEADING APPLICANTS - R3 TO R6)
THIS OSA IS FILED UNDER SECTION 483 OF THE
INDIAN COMPANIES ACT, 1956, R/W SECTION 4 OF THE
KARNATAKA HIGH COURTS ACT, 1961, PRAYING TO (I) SET-
ASIDE THE ORDER DATED 28/02/2014 PASSED IN
CO.A.NO.14/2014 IN CO.P NO.66/1997 AND PASS SUCH
OTHER ORDERS AS THIS HON'BLE COURT DEEMS FIT, IN
THE FACTS AND CIRCUMSTANCES OF THE CASE.
THIS OSA HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 10.2.2017 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY,
P.S. DINESH KUMAR, J., PASSED THE FOLLOWING:-
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JUDGMENT
This appeal is directed against the order dated 28.2.2014 in Company Application No.14/2014 directing the appellant to execute a Deed of Conveyance in favour of the second respondent in respect of the subject property within an outer limit of four weeks there from.
2. Briefly stated the facts of the case are, first respondent - Company was directed to be wound up by this Court in Company Petition No.66/1997. Pursuant thereto, the Official Liquidator ('OL' for short) took over the assets of the Company. This Court vide Order dated 2.12.2011 in OLR No.361/2011 permitted sale of assets belonging to the Company. Sale notices were published in the News Paper. Second respondent was the successful bidder having offered to purchase the assets for Rs.45.90 Crores. The said offer was accepted and second respondent was directed to deposit the consideration within 30 days to be reckoned from 8.2.2012. In the meanwhile, Company Applications :5: No.152/2012 and 431/2012 were filed by one K.R. Bhadraswamy Gupta and M/s. India Sugar & Refineries Limited with a prayer to reject the offer made by the second respondent on the premise that the value of the assets was more than Rs.100 Crores. The said applications were dismissed by Order dated 2.4.2012. The application in OLR 106/2012 was ordered and sale of land measuring 283 acres in favour of the second respondent was confirmed. The OL was directed to handover the said property to the second respondent and the said direction was complied with by issuing a Possession Certificate dated 16.4.2012. The original documents in respect of the property were also collected from the Secured Creditors and handed over to the second respondent. Appellant was informed about the sale and transfer of possession of the property in favour of the second respondent.
3. It appears, second respondent submitted a representation dated 24.9.2012 to the appellant with a :6: request to execute a Sale Deed in respect of the land in question. As there was no response, second respondent renewed its request on 2.11.2012. The appellant demanded a sum of Rs.54,363/- towards delayed payment and even after payment of the said sum, Sale Deed was not executed. Hence, appellant approached the learned Company Judge seeking a direction against the appellant to execute a Deed of Conveyance in it's favour. The said application was resisted contending inter alia that the land in question was subject matter of lease-cum-sale agreement, therefore, what could be brought to sale was only what was possessed by the Company in Liquidation; Company was only a Lessee and therefore what could be transferred was only the 'leasehold rights'. After considering the rival contentions, the learned Company Judge allowed the application and directed the appellant to execute a Deed of Conveyance in favour of 2nd respondent within an outer limit of four weeks from the date of the impugned order. Hence, this appeal.
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4. Heard Shri D.L.N. Rao, learned Senior Counsel appearing for the appellant; Shri K.S. Mahadevan, learned Counsel for Respondent No.1; Shri P.S. Manjunath and Shri T.P. Vivekananada, learned Counsel for Respondent No.2 and Shri S.S.Naganand, learned Senior Counsel for Respondents No.3 to 6.
5. Arguing in support of this appeal, Shri D.L.N. Rao, learned Senior Counsel strongly contended that first respondent-Company which was in liquidation possessed only the leasehold rights in respect of the land in question. He adverted to a copy of the notice published in the News Paper inviting 'Sealed Tenders' from prospective purchasers interested in the land and pointed out that what was offered was the land which was allotted on 'lease-cum-sale' basis as per 'lease agreement' dated 12.3.1975 between the Company in Liquidation and the appellant.
6. Thus, the sheet anchor of the argument of learned Senior Counsel for the appellant is that in the light of :8: undeniable factual matrix that the first respondent Company in Liquidation was possessed with 'leasehold rights' only. He declared that appellant has no objection for conveyance deed to be executed for transfer of 'leasehold rights' of the land in question. Accordingly, he prays for partly allowing this appeal.
7. Thus, in sum and substance, appellant is agreeable to transfer the 'leasehold rights' possessed by the Company in Liquidation in favour of the 2nd respondent and to consider it's request to execute an absolute Sale Deed subject to compliance of all the terms and conditions enumerated in the Lease-cum-Sale Agreement in accordance with the KIADB Act and the Rules.
8. Opposing the appeal, Shri P.S. Manjunath, learned Counsel for 2nd respondent vehemently contended that 2nd respondent is the successful bidder to purchase the assets belonging to the Company in Liquidation. It is true that the Company in Liquidation was possessed with :9: 'leasehold rights' in respect of the land in question but the Company had paid the entire sale consideration except a small sum towards the lease rents. Upon a representation submitted, the appellant had demanded and received a sum of Rs.54,363/- as interest towards delayed payment. Thus, the appellant having received the entire sale consideration and period of lease having since been expired the only formality that ought to have been completed was to execute a Sale Deed in favour of the successful bidder. Appellant, only in order to harass the successful bidder is resisting its move to obtain a Sale Deed. He further submitted that in several identical cases, appellant has executed the Sale Deed without any demur.
9. Shri. S.S. Naganand, learned Senior Counsel for impleading applicants and Secured Creditors supported the contentions of successful bidder.
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10. We have given our careful consideration to the submissions of the learned Counsel for the parties and perused material papers.
11. The entire issue is in a very narrow compass. Incontrovertible facts are that, the assets belonging to the Company in Liquidation were offered for sale. It is significant to note that what was offered was sale of Land, Building and Plant & Machinery belonging to the Company in Liquidation. The relevant portion of the notice inviting Sealed Tender reads as follows:-
"NOTICE OF INVITING SEALED TENDERS Sealed tenders are invited for sale of Land, Building and Plant & Machinery of M/s .GANGAVATHI SUGAR MILLS LIMITED, (IN LIQUIDATION), situated at Marali, Hobli Marali, Taluk Gangavathi, Koppal District, Karnataka. The details of assets is as follows:
I. LAND : situated at Sy. Nos.5/1A, 5/1B, 5/1C, 8/1, 8/2, 9/1H, 9/2H, 10, 11/1H, 11/2H, 11/3H, 12/H4, 12/H5, 12/H6, 12/H2, 13/H1, 13/H2, 13/H3, 13/H4, 14, 15 (part), 16, 17, 18/1, 18/2, 21/1, 21/2A, 22, 23, 69/1, 154/1, 154/2, 12/H3 (Land admeasuring 283 acres) in the industrial Area within the village limits of Marali, Hobli Marali, Taluk Gangavathi, Koppal District. The land was allotted on lease : 11 : cum sale basis vide lease agreement dated 12.03.1975 for a period of 11 years by KIADB".
(emphasis supplied)
12. Thus, it is clear that the Notification is perspicuous offering land which was allotted on 'lease-cum- sale basis'. Second respondent has submitted it's offer in response to the above notice. It was a commercial call and a conscious decision by the second respondent. As on the date of offer, the Company in Liquidation was possessed with only 'leasehold rights'. Therefore, what was permissible to transfer was only the 'leasehold rights'. We have also perused the order in OLR 361/2011 dated 2.12.2011 in Company Petition No.66/1997. It is recorded therein that the appellant had filed its objections and resisted 'sale of the land' but consented for transfer of 'leasehold rights'. After considering the rival contentions, this Court has granted permission to sell only the 'leasehold rights'. The said order precisely reads as follows:-
: 12 :"BMJ: CO.P.NO.66/1997
02.12.2011 ORDERS ON OLR 361/2011 The Official Liquidator files this report seeking permission of the court to sell the land, building, plant and machinery belonging to M/s.Gangavathi Sugar Mills Limited (in liquidation) situated at Marali Village, Gangavathi Taluk, Koppal District.
2. In the report, official liquidator submitted that M/s.Gangavathi Sugar Mills Limited was ordered to be wound up by order dated 31.01.2005 in COP No.66/97 and the official liquidator attached to this court has become liquidator of the aforesaid company.
In the present report he sought for alienation of plant and machinery and 283 acres of land situated at various survey numbers of Marali Village, Gangavathi Taluk, Koppal District.
3. K.I.A.D.B has filed their objection. In their objection they have stated that lease-cum-sale has been executed in favour of M/s.Gangavathi Sugar Mills Limited in respect of 283 acres of industrial land. However they have no objection to transfer the leasehold rights to the prospective buyer subject to payment of a sum of Rs.10,23,871/-. Other Secured Creditors have no objection for alienation of plant and machinery and land and buildings. Accordingly permission has been granted to official liquidator to sell the assets such as plant and machinery and leasehold rights of land belonging to M/s.Gangavathi Sugar Mills Limited situated at Marali Village, Koppal District on "as is where is" basis by inviting the sealed tender without fixing the reserve price. EMD is fixed at Rs.50,00,000/-. As per the terms and conditions mentioned in the OLR : 13 : and also the condition mentioned in the objections filed by KIADB in paragraphs 12 to 18, advertisement to be published in the newspaper Economic Times, English version all India edition, "Times of India", English version, Karnataka Edition and "Prajavani" Kannada version, Karnataka edition. The official liquidator shall fix the date to take out paper publication.
With the above directions OLR 361/2011 stands disposed of."
(emphasis supplied)
13. In the common order dated 2.4.2012, in Company Applications No.152/2012 and 431/2012 while dealing with the objections raised by one K.R. Bhadraswamy Gupta and M/s. India Sugars & Refineries Limited, this Court has observed as follows:-
"14..................The successful bidder after weighing all the pros and cons has invested a sum of Rs.45,90,00,000/- after inspecting the property on 'as is where is' basis. Any further delay would result in deterioration of plant and machinery and would lead to waste of the valuable assets. Further, the manner in which the successful bidder would put the property to use is in the realm of speculation as it is a matter which is entirely between them and KIADB................"
(emphasis supplied) : 14 :
14. Thus, at every stage it was explicit that what was offered was 'leasehold rights'.
15. The land was admittedly allotted by the KIADB which is a State Owned Authority. The allotment is in accordance with the KIADB Act and the Rules framed there under. Allottee of an Industrial land is bound by the terms and conditions of allotment. Initial allotment of industrial land and to enlarge the limited right of lease into absolute ownership falls entirely within the realm and prerogative of KIADB, which obligation, it has to discharge in accordance with the statutory provisions. Equally so, enforcement of any right flowing under any agreement entered into between the KIADB and the allottee under the KIADB Act or any substantive statute like Transfer of Property Act shall remain open to the allottee. In the instant case, it is indubitable that what was offered and accepted is only the 'lease hold rights' possessed by the Company in Liquidation. In the premise, it is inconceivable to grant any direction in excess of the order : 15 : passed by this Court in OLR 361/2011 extracted supra. But, by the impugned order the learned Company Judge has directed the appellant to execute a conveyance in favour of second respondent. In our view, it is impermissible in law and hence, the impugned order is unsustainable to that extent. However, the learned Company Judge ought to have directed for execution of deed of conveyance for transfer of 'leasehold rights'.
16. Resultantly, this appeal merits consideration and deserves to be partly allowed. Hence, the following:-
ORDER
(i) Order dated 28.2.2014 in Company Application No.14/2014 is modified to the extent that deed of conveyance shall be for transfer of 'leasehold rights' of the Company in Liquidation for the land in question. It is clarified that after acquisition / transfer of 'leasehold rights' in favour of Respondent No.2, it would be open to Respondent No.2 to pursue the matter for execution of Sale Deed as per agreement of : 16 : lease deed and at that stage rights and contentions of appellant and Respondent No.2 shall remain open.
Appeal partly allowed accordingly.
No order as to costs.
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