Patna High Court - Orders
M/S Auto Knight Pvt.Ltd. vs - on 1 August, 2024
Author: Anshuman
Bench: Anshuman
IN THE HIGH COURT OF JUDICATURE AT PATNA
COMPANY PETITION No.21 of 1999
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M/S AUTO KNIGHT PVT. LTD. (In Liquidation)
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Appearance :
For the Ex-Management : Mr. P.K. Shahi, Sr. Adv.
Mr. Nilanjan Chatterjee, Adv.
Mr. Sahil Kumar, Adv.
Mr. Ujjwal Raj, Adv.
Mr. Anirvan Choudhari, Adv.
For the Prowess : Mr. S. D. Sanjay, Sr. Advocate
For the AIADA : Mr. Amaresh Kumar Sinha, Adv.
Mr. Alok Chaubey, Adv.
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CORAM: HONOURABLE MR. JUSTICE DR. ANSHUMAN
ORAL ORDER
118 01-08-2024Re. Item No. (1):- I.A. No. 800/2014 and Counter Affidavit & its related matter.
Heard Mr. P. K. Shahi, learned Sr. Counsel assisted by Mr. Nilanjan Chatterjee, Mr. Sahil Kumar, Mr. Ujjawal Raj and Mr. Anirvan Choudhari, Advocates, appearing on behalf of namely, Ex M.D. of M/s Auto Knight Pvt. Ltd (hereinafter called as 'Company in Liquidation), Mr. S. D. Sanjay, learned Sr. Counsel for M/s Prowess International Engineers & Consultants (hereinafter called as 'M/s Prowess') and Mr. Amresh Kumar, learned counsel for the Adityapur Area, Jamsedhpur (hereinafter called as 'AIADA') as well as Official Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 2/28 Liquidator for Company in Liquidation (hereinafter called as 'O.L').
2. Learned counsel for the Bihar State Financial Corporation (hereinafter called as 'BSFC') is not present but affidavit has been filed on his behalf in this case.
3. The present Interlocutory Application has been filed under rule 9 of the Companies (Court) Rules, 1959 with prayer for setting aside the sale/allotment/lease of 45000/- sq. ft. land bearing Plot No. A-28 in Phase-VI, in the AIADA in favour of M/s Prowess and upon setting aside the said sale/allotment/lease of the land which belongs to the Company in Liquidation and further to direct AIADA to restore the land which lawfully belongs to the Company in Liquidation or for any other relief or reliefs along with supplementary affidavit intimating to this Court that a W.P.(C) No.580 of 2007 was filed by the BIADA which was disposed of as infructuous granting liberty to the petitioner of the present Interlocutory Application to take appropriate recourse against AIADA and M/s Prowess as provided under the law concerning the plot in question.
M/s Prowess has filed a counter affidavit as well as supplementary counter affidavit objecting to the Interlocutory Application on the point of its maintainability as well as on Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 3/28 merit whereas AIADA has filed its separate counter affidavits, objecting to the stand of the present Interlocutory Application but the O.L. has filed its report No. 14 of 2014 as well as other supplementary affidavit in support of O.L.R. 14 of 2014 by which stand taken in Interlocutory Application No. 800/2014 has been supported.
4. Learned Sr. Counsel for the petitioner of I.A. who alleged himself to be the Ex-managing Director of the Company In Liquidation submits that the present I.A. has been filed challenging the cancellation of lease and transfer of land appertaining to an area of 45000/- sq. ft. situated at AIADA Phase-VI, Industrial Area Adityapur, Plot NO. A-28 in favour of M/s Prowess International Engineers and Consultants.
5. Learned Sr. Counsel for the petitioner submits that the said Plot No. A-28 was leased out in favour of M/s Auto Knight Pvt. Ltd. (Company in Liquidation) on 26.09.1986 vide order 2604/AIADA. Counsel further submits that the said lease deed was executed and registered between the company M/s Auto Knight Pvt. Lt.d and AIADA on 07.08.1987 for a period of 99 years with respect to Plot No. A-28 & A-17.
6. Learned Sr. Counsel further submits that a winding- up petition was filed at the behest of M/s Hindustan Composites Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 4/28 Ltd. supplier of brake shoe liners to the company on 10.12.1999. The said case was numbered as Company Petition No. 21 of 1999. Counsel further submits that during the pendency of the said company petition, AIADA cancelled the allotment of land to the company under liquidation on 05.09.2005. Counsel further submits that the Bihar State Financial Corporation (BSFC) informed the AIADA about the company's dues and asked them to stop taking action against the company for cancellation of the lease. The BSFC being a secured creditor wrote a letter to the Managing Director of the AIADA that the plot of the company comprising 45000 sq. ft. which the AIADA is going to be allotted to another company is the mortgaged property before the corporation along with the other plot A-17 as well as the other assets of the company. But the AIADA has not stopped from cancelling the lease deed of the Company in Liquidation during the pendency of winding up proceeding and allotted land of Plot A-28 in favour of one Indrapal Singh partner of M/s Prowess. The allotment letter has been issued for the said plot A-28 in which said plot was leased out to M/s Prowess with the condition that if in future because of any legal action taken by the BSFC for its dues or for any legal consequences, the allottee will fully and solely responsible for Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 5/28 payment of requested dues and liabilities. Subsequently, the AIADA executed the registered deed in favour of M/s Prowess on 14.02.2007. Counsel submits that as per section 441 of the Companies Act 1956, the commencement of Liquidation proceeding initiated by the institution of company case in which on 31.07.2008, an order for liquidation of the company was passed and O.L. has been appointed. It has been submitted by the petitioner of I.A. that within the span of time compromise agreement was executed wherein the Ex-managing director of the company paid dues of M/s Hindustan Composites Ltd. in full and final settlement of claim. As such, the creditor agreed to withdraw the winding up petition bearing company petition no. 21 of 1999, and thereafter, the company filed the permanent stay of winding up proceedings dated 18.02.2010.
7. Sr. Counsel for the petitioner further submits that the dues of BSFC were also cleared as a time settlement scheme, 2009 and no objection certificate was obtained from the BSFC dated 29.12.2011. Counsel further submits that in January 2021, the company cleared the dues of the Central Bank of India and of all other creditors. Counsel further submits that the petitioner's company is a small-scale industry established on 23.07.1979. The production unit of the company was situated at Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 6/28 Phase-VI Adityapur Industrial Area, Jamshedpur, Jharkhand in its plot No. A-17 and A-28. The company was an ancillary unit of Telco and was manufacturing a large number of sheet metal and other parts for Tata Trucks. The company was fully operated till 2005, but due to circumstances beyond its control, the company became sick and one of its creditors filed a winding up petition bearing company petition No. 21 of 1999.
8. Learned Sr. Counsel for the petitioner further submits that the most important aspect is that the AIADA, BSFC and the Central Bank of India entered into a tripartite agreement in respect of financial accommodation provided to the company in liquidation. The land and other assets were mortgaged in favour of the BSFC. The second charge was of the Central Bank of India and despite knowledge of pending liquidation proceedings before this Hon'ble Court, the AIADA instead of proper response to the protest made by the BSFC, allotted the land in favour of M/s Prowess and executed a lease on 14.02.2007. It has further argued that after clearing all dues of creditors, Ex-management had taken steps to revive the unit and, therefore, filed I.A. No. 1643 of 2010 for permanent stay of the liquidation process.
9. Counsel submits that the AIADA has illegally Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 7/28 cancelled the deed and executed the lease in favour of M/s Prowess. Counsel further submits that the law is well established that from the date of filing of the liquidation proceeding, the winding-up process is treated to be initiated, and therefore, once, the winding-up process has been initiated then every action he has to take only with permission of the Court (Company Judge) and in the present case, no permission has been taken by the AIADA from the Company Court, and therefore, every action after commencement of winding up has been illegal, arbitrarily and in gross violation in the light of Section 536 and 537 of the Companies Act, 1956. Hence, prayer has been made in the I.A. to cancel the lease and transfer of land appertaining to Area 45000/- sq. ft. appertaining to Plot A-28.
10. In support of his argument, learned Sr. Counsel relied on provision laid down in Section 428 read with 518of the Companies Act, 1956 and submitted that section 518of the Companies Act, 1956 clearly provides the liquidator or any contributory or creditor may apply to the Court to determine any question arising in the winding up of a company; or to exercise, as respects of enforcing of calls, the staying or proceedings or any other matter, all or any of the powers which the Court might exercise if the company were being wound up by the Court. Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 8/28 He further submits that Section 428 of the Companies Act 1956 explains the word 'contributory' "contributory" means every person liable to contribute to the assets of a company in the event of its being wound up, and includes the holder of any shares which are fully paid up; and for the purposes of all proceedings for determining, and all proceedings prior to the final determination of, the persons who are to be deemed contributories, includes any person alleged to be a contributory. He further submits that the company is being represented through its Director (here Mr. Birendra Kr. Singh) who has contributed through fully paid-up share capital of the company and he is further interested in taking steps for revival of the company by discharging all its debts. Therefore, he conclusively agreed that the petitioner of the I.A. being contributory is the stakeholder in the winding-up proceeding having locus to raise questions regarding the winding-up proceeding. Therefore, being a contributory, the petitioner is legally entitled to ensure that the entire process has to be conducted fairly in terms of the provisions of the Companies Act and the Companies Court Rules. Hence in this view of the matter, there is no question as raised by M/s Prowess, that ex-Management has no locus to question as raised in the present I.A. Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 9/28 Learned Sr. Counsel in support of his argument relied on provisions laid down in Sections 536 and 537 of the Companies Act and submitted that winding up proceedings has to be made always subject to the supervision of the Court, 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 the members made after the commencement of the winding up, shall be void unless the court otherwise orders. He further submits that during the winding up proceeding attachment/distress/execution/any sale made without leave of the Company Court shall be void. In support of his argument, learned Sr. Counsel relied on judgment rendered by Hon'ble Apex Court in the case of ICICI Ltd Vs. Ahmadabad Manufacturing and Calico Printing Co. Ltd. reported in(2004) 9 SCC 747 in which it has been categorical terms held that leave under Section 536(2) of the Companies Act, 1956 can only be granted when it is in the interest of the creditors and not otherwise. He further submits that in the instant case, the transfer of land has been made by the AIADA in favour of M/s Prowess, has been made without taking leave from any Court and it is also not in the interest of creditors. He further submits that the said transfer made by the AIADA of the land which was Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 10/28 allotted to the petitioner company for the lease of 99 years, transferred to 3rd party without taking leave which is in violation of sections 536 and 537 of the Companies Act and therefore, the said transaction is said to be void ab initio. As such, he has requested to this Court that the said allotment/lease/sale of lands bearing Plot No. A-28 in favour of Prowess be set aside and the AIADA be directed to restore the land to the Company in Liquidation as it lawfully belongs to the Company in Liquidation.
11. Learned senior counsel appearing for M/S Prowess on the other hand submits his argument in two folds. The first line of argument is on the point of maintainability of the I.A. in question at the instance that, it has been filed on behalf of the Ex-Management and secondly, on the merit of the said I.A. On the point of maintainability, learned senior counsel submits that the present I.A. is not maintainable, before deciding the another I.A., filed by the Ex-Management for revival of the Company in Liquidation. He submits that the issue of surrender of Plot No.A-28 will not require to be adjudicated in the present proceeding even if, it is treated to be cancellation. The said cancellation has been made by the Statutory Authority under the AIADA Act which he ought to raise earlier. He further submits Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 11/28 that Ex-Management has filed this application to avoid and overcome those remedies. Counsel further submits that Plot No.A-28 which is the subject matter of the present I.A. was allotted to the Company in Liquidation which is basically an additional plot adjacent to Plot No.A-17 being an original leassee. Counsel further submits that production in the original unit at Plot No. A-17 was suspended and industrial Plot No.A- 28 (in question) was never established that is to say, production never started. Therefore, AIADA has made cancellation of Plot No.A-28 in terms of the agreement and provisions of the AIADA Act or on surrender by the allottee even without disclosing the pendency of the company petition filed in the year 1999. Counsel further submits that admittedly, no industry was set up on this plot. The Ex-Management is using Company Court as a tool to return back plot No.A-28 by filing I.A. after nine years of its surrender and seeking a direction from this Court after twenty years of its surrender knowing fully well that the plot was allotted to the present respondent for consideration without notice in the year 2006. Counsel also submits that Ex- Management has full knowledge that M/S Prowess had made a huge investment and set up its industrial unit on said Plot No.A- 28 in which a number of workers are employed and the unit is Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 12/28 fully functional. He submits that the present proceeding could not have been used as a tool for the revival of the company which was already surrendered voluntarily in the year 2005 by Ex-Management. He submits that Ex-Management has no right to file I.A. in the year 2014 claiming that the AIADA had cancelled Plot No.A-28 without notice to him. Counsel further submits that submissions made by the Ex-Management (petitioner of I.A.) are apparently false and contrary to the record. He submits that Ex-Management has tried to repay the loan to the BSFC outside the winding-up proceeding and using it as a tool to retain the plot even after surrendering the plot in the year 2005. He submits that Ex-Management has never informed AIADA or even BSFC or O.L. or to this Hon'ble Court that he has submitted his affidavit consenting for re- allotment of Plot No.A-28 by the AIADA to any third party. Therefore, the present I.A. No.800 of 2014 suffers from false and incorrect facts and is also belated. In the contention of his first point, he submits that in the year 2006, M/s Prowess after taking possession of the plot, set up its industrial unit which has been running since then. Thus, I.A. of Ex-Management also suffers from mala fide and ill motive and therefore, is not maintainable at such a level.
Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 13/28
12. Learned counsel for M/s Prowess submits that section 536 of the Companies Act, 1956 has been legislated with the object and rationale to protect the property of the company from its disposition mainly by the Ex-Management to protect the interest of its creditors and therefore, section 536(2) of the Companies Act empowered all powers and discretion on the company Judge to pass appropriate order. Counsel submits that the disposition of the property of a company after winding up proceeding cannot be mechanically said to be void considering its object. He submits that in the present case, Ex-Management has brought ample time of ten years during which period, it could manage funds and have settled the dues of its creditors out of the winding up proceedings. Thereafter, it had filed an application for revival of its company. He submits that the prayer made in the present I.A. has nothing to do with the benefit of creditors, but it is for the benefit of Ex-Management who himself gave their consent and surrendered Plot No.A-28 in the year 2005 itself. He submits that under section 538(2) of the Companies Act with respect to the plot allotted by the AIADA to the Company in Liquidation is still subject to the discretion of the Hon'ble Company Judge. But the object of section 536(2) has to be fulfilled. He submits that here in the present case, Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 14/28 neither the AIADA nor M/s Prowess had any knowledge about the commencement of this proceeding. Therefore, neither the AIADA nor M/s Prowess is at fault in exercising the power for the cancellation of the plot and its re-allotment. Counsel further submits that AIADA is a special Act and under section 6 of the said act, power is vested in the authority to cancel the allotment or lease, if the unit is not set up within six months or does not become functional whereas, section 13 of the AIADA Act provides overriding powers over other act. In this background, section 6(2)(a) of the AIADA Act and section 536(2) of the Companies Act, the special act shall prevail. In support of his argument, counsel relied on a judgment rendered in the case of Phatu Rochiram Mulchandani Vs. Karnataka Industrial Areas Development Board & Ors. reported in (2015) 5 SCC 244 in which it has been held in paragraph no. 38 that for the purpose of cancellation of allotment of plot, there is no requirement of taking permission from the Court of Hon'ble Company Judge. Counsel further relied on a judgment in the case of Official Liquidator, Uttar Pradesh and Uttrakhand Vs. Allahabad Bank & Ors. reported in (2013) 4 SCC 381 and submits that it has clearly been held in paragraphs nos.8, 9, and 17 that special acts will have an overriding effect over the Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 15/28 general act. In conclusion, he submits that the Ex-Management has surrendered the plot in question A-28 to AIADA in 2005 and re-allotment of the said plot in favour of the M/s Prowess in 2006 is completely in accordance with law and thus, the interest of justice demands that the action which took place in the year 2005 and 2006 without knowledge of winding up proceeding, warrants no interference to upset the transaction of re-allotment on Plot No.A-28 particularly when it has been set up its unit in the year 2007. With these arguments, learned counsel for M/s Prowess humbly submits to this Court that interlocutory application filed by the Ex-Management be rejected.
13. The official liquidator of the Company in Liquidation under winding up filed his reply in the form of O.L.R. No. 14 of 2014. In the said report, it is clearly stated that once the winding up case that is company petition No. 21 of 1999 has been filed, the process of winding up has been deemed to be initiated. Admittedly, Plot A-28 is the leased property of the company in liquidation, and therefore, anyone who wants to disturb or transfer any of the property of the company, shall have to be done only with the permission of the Company Court otherwise, it shall be treated to be void. It has been the categorical stand of the official liquidator that the AIADA has Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 16/28 created complications by re-alloting Plot No. A-28 to the third party during the course of the process of winding up. The re- allotment of Plot A-28 which is the property of the company in liquidation is void pursuant to Sections 356(2) and 537of the Companies Act, 1956, and liable to be set aside by the Hon'ble Company Judge of the High Court. It has also been submitted that re-allotment of Plot A-28 by the AIADA is unlawful because the winding up petition of the said company filed on 10.12.1999 and during the pendency of winding up and without leave of this Hon'ble Court even though the loan was sanctioned by the BSFC mortgaging the plant and machinery of lands of Plot A-28 and Plot A-17 of the company in liquidation. The AIADA has no locus standi to act as an agent to a third party for recovery of loan from the BSFC, and therefore, re-allotment made by the AIADA to M/s Prowess International Engineers And Consultants is null and void and land has been directed to be handover to O.L. By virtue of that the pleading of the official liquidator is in favour of I.A. No. 800 of 2014.
14. Learned counsel for the BSFC is not present, but an affidavit has been filed on his behalf. From the affidavit, it transpires that the BSFC has consistently raised objections before the AIADA, but the AIADA has not restrained himself Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 17/28 and is adamant to proceed in gross violation of law. According to the BSFC, the said allotment is in violation of the company law.
15. Counsel for the AIADA submits that it was not within the knowledge of the AIADA that there were any winding-up petitions pending. He put emphasis that the AIADA has issued letters on 22.02.2005, 02.04.2005, 28.07.2005, 05.09.2005, and on 27.10.2005, when the then Managing Director Mr. Birendra Singh filed an affidavit before the AIADA stating that he had no objection if the plot is alloted to any other unit by the AIADA then only the AIADA proceed further and allotted this land to M/s Prowess. Counsel submits that the AIADA is a statutory authority created under section 3 of the Bihar Industrial Area Development Authority Act, 1974, and being the statutory authority guided by special law, it has been stated that the said plot A-28 Adityapur Industrial Area, Phase- VI has already been allotted in favour of M/s Prowess and for cancellation of allotment and termination of lease deed, there is a special provision in the special law by way of preferring a statutory appeal against the order of cancellation of plot and in this view of the matter that there is a separate law, such application is not maintainable before the Company Court. It Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 18/28 has been submitted that after allotment by the AIADA to the company in liquidation, a survey was conducted and the plot in question was almost vacant with no manpower and no industrial activity and this plot was used as parking space and the plot in question was against the purpose of allotment and in violation of a provision of lease deed, therefore cancellation proceeding was initiated, But after subsequent allotment made in favour of M/s Prowess, industrial activity has been initiated. It has also been submitted that the company in liquidation was filed in the year 1999, order for liquidation of the company was passed on 31.07.2008 in which AIADA was not party in company petition No. 21 of 1999. The lease agreement in favour of the company under liquidation was cancelled in 2005, fresh allotment was made in favour of M/s Prowess in the year 2006, lease deed was executed on 14.02.2007, the entire exercise of cancellation, allotment, termination of lease deed and allotment of plot A-28 to M/s Prowess was completed by the AIADA that is much prior to passing of winding up process dated 31.07.2008. Therefore, the action of the AIADA cannot be said to be arbitrary and unsustainable in law. A plea has also been taken that the principal file of the Company in Liquidation is not traceable in the office of the AIADA. It has also been stated that the AIADA Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 19/28 being to instrumentality of the state cannot effort at an act in the statutory body and instrumentality of the State cannot do an act in the manner mentioned. It is the stand of the AIADA that it has acted fairly in the matter and the only remedy left to the petitioner of I.A is to prefer a statutory appeal under the Special Act before Jharkhand.
16. After considering the pleadings of the parties and upon hearing their arguments, there are the following issues involved here:
I) Whether I.A. No. 800 of 2014 is maintainable or not ?
ii) Whether the transfer of land i.e Plot No. A-28 (which is the land allotted to the company originally by AIADA on lease for 99 years) situated at Adityapur Industrial Area by the AIADA to M/s Prowess without taking leaves/permission from the Company Judge after commencement of winding up, the proceeding shall be void.
iii) Whether the Section 6(2) of the AIADA (Mother Act-BIADA) and Section 13 shall prevail upon the provision of Section 536(2) of the Companies Act, 1956 or not ?
Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 20/28 Issue No. 1:
With a view to deciding Issue No. 1, this Court after going through the order passed by the Hon'ble Jharkhand High Court dated 19.07.2017 in W.P.(C) No. 5802 of 2007 BSFC Vs. the State of Jharkhand and Ors. in which AIADA as well as M/s Prowess and Ex-Management M/s Auto Knight Pvt. Ltd. all were party and liberty was granted by this Hon'ble Court to company M/s Auto Knight Pvt. Ltd to take appropriate recourse against Respondent No. 2 (AIADA) and Respondent No. 3 (M/s Prowess) under the law concerning the plot in question.
It is upon reading the provision of Section 518 read with Section 428 of the Companies Act, 1956 that the Director of the Company is also treated to be the contributors, and therefore, this Court is of the firm view that the present I.A. No. 800 of 2014 is maintainable.
Issue No. 2.
With a view to deciding the second issue, from the documents, pleading and arguments, it transpires to this Court that the plot in question i.e. Plot No. A-28 and A-17 which are adjacent plots to each other were originally allotted to the company namely, M/s Auto Knight Pvt. Ltd in the year 1986. The said allotment was valid for 99 years and Company namely Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 21/28 Auto Knight Pvt. Ltd. went into liquidation by virtue of Company Petition No. 21 of 1999 on the petition filed by M/s Hindustan Composite Ltd. At that very time, the land in question of the company was mortgaged by way of first charge to the BSFC and second charge to Central Bank of India which is Main Branch, Jamshedpur and it was well within the knowledge of the AIADA that both plots were mortgage properties and as there was Tripartite agreement prepared.
By virtue of Company Petition No. 21 of 1999 read with Section 441(2)of the Companies Act, 1956, the winding of the company shall be deemed to commence at the time of presentation of the petition for winding up. Meaning thereby, winding of the proceeding commenced in the year 1999 itself.
It transpires to this court by the order no. 70 dated 19.06.2014, order no. 74 dated 20.11.2014 and order no. 77 dated 25.06.2015 and order no. 101 dated 23.03.2013 passed in the present Company Petition No. 21 of 1999 that the AIADA has full knowledge of the Company in Liquidation. But even then AIADA has cancelled the allotment of the land of the Company in liquidation namely A-28 and allotted it to M/s Prowess. The contention taken by the AIADA and the Prowess in the pleadings and argument that consent has been given by Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 22/28 the Ex-management to cancel/Resettle the lease which cannot be accepted by the Court due to the reason that BSFC was continuously contesting with the AIADA on the land of the company which has been mortgaged before the BSFC. Therefore, acceptance of any letter from the management for cancellation of the lease has been wrongly accepted by the AIADA ignoring the provision of Law.
17. It transpires to this Court that the AIADA intentionally did not opt to move before the Company Judge for taking permission for cancellation and taking possession of the land and to further for re-allotment to M/s Prowess.
18. In the light of the judgment raised by the Counsel for M/s Prowess that for cancellation of the plot, there is no need for any permission as mentioned in the judgement in the case of Phatu Rochiram Mulchandani Vs. Karnataka Industrial Areas Development Board and Ors. Reported in 2015 (5) SCC 244, where it has been mentioned that for the purpose of cancellation of allotment, there is no requirement of taking permission from the Court of Hon'ble Company Judge but in the same Judgement, it has been mentioned that after commencement of winding up, the possession of land cannot be taken without leave of the Court and after cancellation of lease, Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 23/28 the lessor would become entitled to file such application under Section 537 of Company Act, 1956 which has not been done by the AIADA for taking possession of Plot No. A-28.
19. As such, in the light of the said judgment, the cancellation of the lease may be corrected but taking possession of land without permission of the Company Judge and Re- allotment of the said land to the M/s Prowess are wrong and illegal. Therefore, on the basis of the Judgment on which the M/s Prowess relied i.e. Phatu Rochiram Mulchandani Vs. Karnataka Industrial Areas Development Board and Ors. (Supra), this Court is of the firm view that possession of the land ought to be subject to winding up proceedings and has been taken illegally by the AIADA and further allotment of the said land to M/s Prowess was also illegal, void, and in violation of the provisions of sections 536(2) and 537 of the Company Act, 1956. It is therefore, the Second Issue answered accordingly.
20. With regard to deciding the third issue, the Hon'ble Supreme Court judgement in the case of the Official Liquidator, Uttar Pradesh and Uttrakhand v. Allahabad Bank and Ors. reported in (2013) 4 SCC 381 is very much relevant in which it has been decided by Hon'ble the Supreme Court that in the statute mainly Recovery of Debts, Dues to Bank and Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 24/28 Financial Institutions Act, 1993 and the provisions of company law, the provisions of RDB Act being a special law shall prevail upon the provisions of Company Court. The Hon'ble Supreme Court has pleased to assign the reason in paragraph 35 of the judgment as under :-
35. It has been submitted by Mr Banerji, learned Senior Counsel, that if the Company Court as well as DRT can exercise jurisdiction in respect of the same auction or sale after adjudication by DRT, there would be duality of exercise of jurisdiction which the RDB Act does not envisage. By way of an example, the learned Senior Counsel has submitted that there are some categories of persons who can go before DRT challenging the sale and if the Official Liquidator approaches the Company Court, then such a situation would only bring anarchy in the realm of adjudication. The aforesaid submission of the learned Senior Counsel commends acceptance as the intendment of the legislature is that the dues of the banks and financial institutions are realised in promptitude. It is to be noted that when there is inflation in the economy, the value of the mortgaged property/assets depreciates with the efflux of time. If more time is consumed, it would be really difficult on the part of the banks and Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 25/28 financial institutions to realise their dues.
Therefore, this Court in Allahabad Bank case [(2000) 4 SCC 406] has opined that it is DRT which would have the exclusive jurisdiction when a matter is agitated before DRT. The dictum in the said case has been approved by the three-Judge Bench in Rajasthan State Financial Corpn. [(2005) 8 SCC 190] It is not a situation where the Official Liquidator can have a choice either to approach DRT or the Company Court. The language of the RDB Act, being clear, provides that any person aggrieved can prefer an appeal. The Official Liquidator whose association is mandatorily required can indubitably be regarded as a person aggrieved relating to the action taken by the Recovery Officer which would include the manner in which the auction is conducted or the sale is confirmed. Under these circumstances, the Official Liquidator cannot even take recourse to the doctrine of election. It is difficult to conceive that there are two remedies. It is well settled in law that if there is only one remedy, the doctrine of election does not apply and we are disposed to think that the Official Liquidator has only one remedy i.e. to challenge the order passed by the Recovery Officer before DRT. Be it noted, an order passed under Section 30 of the RDB Act by DRT is appealable. Thus, we are inclined to Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 26/28 conclude and hold that the Official Liquidator can only take recourse to the mode of appeal and further appeal under the RDB Act and not approach the Company Court to set aside the auction or confirmation of sale when a sale has been confirmed by the Recovery Officer under the RDB Act."
21. But here in the present case, the question of recovery of debts, and dues to banks and financial institutions is not in question. Here the question is that the AIADA and its authority who allotted its land for 99 years of the lease in the year 1986 and the company to whom the lease has been allotted became subject to the winding up process and during the pendency of commencement of winding up process, the land which was mortgaged to the BSFC and was subject to winding up has been cancelled, ignoring that it is subject to mortgage and duly objected by the mortgagor and had been allotted to 3rd party. Sections 536 and 537 of the Companies Act, 1956createspecific bar on the same, and therefore this Court is of the firm view that the judgement passed by the Hon'ble Supreme Court relates to the recovery matter vs. Company Court and not relating to the allotment / cancellation / possession / re-allotment of land vs. Company Matter. Therefore, the said ruling shall not help either the AIADA or Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 27/28 M/s Prowess in any manner. Hence, this Court decides that the decision of the AIADA shall not prevail upon the provisions of the Companies Act. 1956.
22. Conclusively, after answering all the above issues mentioned, this Court hereby discusses the stand of AIADA that the AIADA has no knowledge about the proceedings pending in the winding up, is not acceptable to the Court due to the reason that in the agreement which is Annexure-1 of the present I.A. i.e. allotment letter of M/s Prowess paragraph 23 is very much clear in which it has been acknowledged by the Managing Director as well as M/s Prowess that any future case of any legal action taken by the BSFC for recovery of dues, debts or for any other legal consequences, the allottee will be fully and solely responsible for payment and requisites dues and liabilities and will not claim from the AIADA. Meaning thereby that it was well within the knowledge of the Managing Director, AIADA, and M/s Prowess that the land allotted to him was subject to litigation and both parties were ready to face the consequences.
23. In result, this Court hereby decides that the cancellation of the lease of the Company in Liquidation is within the preview of the AIADA, but taking possession of the land A-28 and re-allotment to M/s Prowess is absolutely illegal Patna High Court COMP PET No.21 of 1999(118) dt.01- 08-2024 28/28 and in violation of law. Therefore, it is directed to the AIADA to hand over the possession of the said land A-28 to the Official Liquidator of the Company in Liquidation within 30 days from this order.
24. It is made clear that the question of revival of the company in liquidation is not the subject matter of the present I.A. and, therefore, the Court restrains itself to pass any order on this issue.
25. Accordingly, the present I.A. is allowed.
(Dr. Anshuman, J) Ashwini/-
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