Gujarat High Court
Vijaykumar Nagardas Jogani vs Official Liquidator Of Vitta Mazda Ltd on 23 January, 2023
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/COMA/275/2014 ORDER DATED: 23/01/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/COMPANY APPLICATION NO. 275 of 2014
In R/COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2018
In R/COMPANY APPLICATION NO. 275 of 2014
With
R/COMPANY APPLICATION NO. 278 of 2014
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2018
In R/COMPANY APPLICATION NO. 278 of 2014
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 279 of 2014
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2018
In R/COMPANY APPLICATION NO. 279 of 2014
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 280 of 2014
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2018
In R/COMPANY APPLICATION NO. 280 of 2014
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 306 of 2015
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2017
In R/COMPANY APPLICATION NO. 306 of 2015
In
COMPANY PETITION NO. 126 of 1990
With
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CIVIL APPLICATION (OJ) NO. 2 of 2017
In R/COMPANY APPLICATION NO. 306 of 2015
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 8 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 9 of 2016
With
R/COMPANY APPLICATION NO. 11 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2016
In R/COMPANY APPLICATION NO. 11 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 12 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2016
In R/COMPANY APPLICATION NO. 12 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 13 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2016
In R/COMPANY APPLICATION NO. 13 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 14 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2016
In R/COMPANY APPLICATION NO. 14 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
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R/COMPANY APPLICATION NO. 15 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2016
In R/COMPANY APPLICATION NO. 15 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 16 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (OJ) NO. 1 of 2016
In R/COMPANY APPLICATION NO. 16 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 416 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 417 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2021
In R/COMPANY APPLICATION NO. 417 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 450 of 2016
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 10 of 2017
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2021
In R/COMPANY APPLICATION NO. 10 of 2017
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 11 of 2017
In
COMPANY PETITION NO. 126 of 1990
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With
R/COMPANY APPLICATION NO. 46 of 2017
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 47 of 2017
In
COMPANY PETITION NO. 126 of 1990
With
CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2021
In R/COMPANY APPLICATION NO. 47 of 2017
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 54 of 2017
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 55 of 2017
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 56 of 2017
In
COMPANY PETITION NO. 126 of 1990
With
R/COMPANY APPLICATION NO. 57 of 2017
In
COMPANY PETITION NO. 126 of 1990
==========================================================
VIJAYKUMAR NAGARDAS JOGANI
Versus
OFFICIAL LIQUIDATOR OF VITTA MAZDA LTD & 7 other(s)
==========================================================
Appearance:
MR DIGANT POPAT FOR MR DILIP L KANOJIYA(3691), MR RAVINDRA
SHAH, MRS PURVA R BHATT for the Applicant(s) No. 1
MR SHIVANG A THACKER(7424), MR C.J.VIN, MS K.J.BRAHMBHATT for
the Respondent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 23/01/2023
ORAL ORDER
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1.Heard learned advocate Mr. Digant Popat with learned advocate Mr. Dilip Kanojia, learned advocate Mr. Ravindra Shah and learned advocate Mr. Rutvij Bhatt with learned advocate Mrs. Purva R. Bhatt for the applicants and learned advocate Mr. Shivang A Thacker, learned advocate Mr. C.J. Vin and learned advocate Ms. K.J. Brahmbhatt for the respondents.
2.These applications are filed for validation of the sale deeds executed in favour of the applicants before the date of passing of the winding up order passed by this Court. These applications are heard together as common issue is involved for ratification of the sale deeds executed by the erstwhile management of M/s. Vitta Mazda Ltd. a company in liquidation.
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3.M/s. Vitta Mazda Ltd. was a public limited company incorporated under the provisions of the Companies Act, 1956. A Company Petition No.126/1990 was filed on 27.08.1990 for winding up of the company.
4.This Court by order dated 27.08.1998 ordered to wind up M/s. Vitta Mazda Ltd. under sections 433 and 434 of the Companies Act, 1956 and clarified that winding up order shall relate back to 14.08.1990. The Official Liquidator attached to this Court was appointed as Liquidator of the company (In Liquidation) and was directed to take over the possession of all the movable and immovable assets of the company.
5.The Official Liquidator took the possession of the assets of the company (In Liquidation) including the property known as "Narayan Page 6 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined Park" situated at Survey No. 78 having 291 blocks at village Kathiriya, Nani Daman (U.T.) on or about 28.11.1998 and notice to that effect was affixed on the premises being "Narayan Park" at the aforesaid place.
6.The Official Liquidator came to know during the course of taking over the possession of the property of the company(In Liquidation) that several sale deeds have been executed by M/s. Vitta Mazda Ltd. prior to the date of winding up order and several persons have preferred applications for regularization and validation of the sale before this Court.
7.The details of the plots in each of the Company Application are as under:
Sr. COMPANY NAME OF PLOT NO. DATE OF No. APPLICATI APPLICANTS EXECUTION OF ON NO SALE DEEDS 1 275/2014 Vijaykumar Plot No.18, 16.06.1994 Nagardas Sector No.2, Jogani admeasuring Page 7 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined 441 sq. mtrs.
2 278/2014 Vijaykumar Plot No.17, 16.06.1994
Nagardas Sector No.2
Jogani admeasuring
432 sq. mtrs
3 279/2014 Himmatlal Plot No.19, 16.06.1994
Nagardas Sector No.2
Jogani admeasuring
441 sq. mtrs
4 280/2014 Himmatlal Plot No.20, 16.06.1994
Nagardas Sector No.2
Jogani admeasuring
432 sq. mtrs
5 306/2015 i) Gopalbhai i)Plot No.33, 5.12.1990
Kalyanbhai Sector No.5
Tandel admeasuring
396.60 sq.
ii)Hashmukhbe mtrs i.e.
n, wd/o 4261 sq. ft.
Pruthviraj (in favour of
Amarchand applicant
Shah no.1)
iii) Shrenik
Pruthviraj ii) Plot
Shah No.33, Sector
No.5
iv) Sunil admeasuring
Pruthviraj 396.60 sq.
Shah mtrs i.e.
4261 sq. ft.
(in favour of 04.05.1992
applicant
no.2 to 4 by
applicant
no.1)
6 8/2016 Shri Cyrus Plot 9.02.1993
Fali Palia No.78/230,
Sector No.5
admeasuring
369.60 sq.
mtrs
7 9/2016 Shri Farzad Plot 9.02.1993
Jimmy Palia No.78/231,
Sector No.5
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admeasuring
369.60 sq.
mtrs
8 11/2016 i) Bhavnin R. Plot bearing 12.09.1994
Jani Survey
no.78/258/E,
ii) Dharmin Plot bearing
R. Jani Survey
no.78/258/F
and
Plot bearing
Survey
No.78/258/G,
(1/6th share)
9 12/2016 Chakor Plot bearing 12.09.1994
Navinchandra Survey
Shah no.78/258/E,
Plot bearing
Survey
no.78/258/F
and
Plot bearing
Survey
No.78/258/G,
(1/6th share)
10 13/2016 Dilip K Shah Plot bearing 12.09.1994
Survey
no.78/258/E,
Plot bearing
Survey
no.78/258/F
and
Plot bearing
Survey
No.78/258/G,
(1/6th share)
11 14/2016 Kishor Plot bearing 12.09.1994
Ratilal Shah Survey
no.78/258/E,
Plot bearing
Survey
no.78/258/F
and
Plot bearing
Survey
No.78/258/G,
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(1/6th share)
12 15/2016 Kamlesh Plot bearing 12.09.1994
C.Shah Survey
no.78/258/E,
Plot bearing
Survey
no.78/258/F
and
Plot bearing
Survey
No.78/258/G,
(1/6th share)
13 16/2016 Pooja Smit Plot bearing 12.09.1994
Mehta Survey
no.78/258/E,
Plot bearing
Survey
no.78/258/F
and
Plot bearing
Survey
No.78/258/G,
(1/6th share)
14 416/2016 Nayan Dangi Plot 24.08.1994
No.78/91,
Sector No.2,
admeasuring
216 sq. mtrs.
15 417/2016 Rajubhai Plot 24.08.1994
Fakirbhai No.78/60,
Tandel Sector No.2
admeasuring
470.43 sq.
mtrs.
16 450/2016 Jamana Madou Plot 13.06.1994
No.78/95,
(Private Plot
No.39),
Sector No.2,
admeasuring
216 sq. mtrs.
17 10/2017 Satish Devji Plot 24.06.1997
Deugi No.78/88,
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Sector No.2
admeasuring
216 sq. mtrs.
18 11/2017 R J Plot No.1, 15.04.1991
Investment Sector No.5
through admeasuring
partner Shri 986.72 sq.
Rajendra mtrs.
Ishwarlal
Parekh
19 46/2017 Keshavbhai Plot 14.02.1992
Bhanabhai No.78/46,
Tandel Sector No.1
admeasuring
289.80 sq.
mtrs.
20 47/2017 Kalpeshkumar Plot 24.06.1997
Bhanabhai No.78/88,
Rana Sector No.2
admeasuring
216 sq. mtrs.
21 54/2017 Gopal K. Plot No.78/69 21.07.1994
Tandel (Private Plot
No.13, Sector
No.2)
admeasuring
4747.03 sq.
mtrs.
22 55/2017 Rumi K. Palia Plot 9.02.1993
No.78/227
admeasuring
369.60 sq.
mtrs.
23 56/2017 Legal heirs Plot 9.02.1993
and No.78/225
representativ admeasuring es of 369.60 sq. deceased Mrs. mtrs.
Bacha Dhanjisha Anklesaria, Mrs. Zeubin Meher Palia 24 57/2017 Meher K. Plot 9.02.1993 Page 11 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined Palia No.78/226 admeasuring 369.60 sq. mtrs.
8.There are three different types of plot holders who have approached this Court for validation of the sale deeds executed prior to the date of winding up order which are as under:
1st Batch In this batch of applications, after the
order of winding up, group of applicants had approached this Court seeking validation of the sale in light of Section 536(2) of the Companies Act, 1956 wherein this Court validated the sale of group of applicants vide order dated 24.11.2005 passed in Company Application 313 of 2003. Against the order dated 24.11.2005, O.J. Appeals were preferred by the Official Liquidator whereby this Court Page 12 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined granted the order of status quo and all the O.J. Appeals are pending adjudication.
2nd Batch In this batch of applicants i.e. Company Application No. 345 of 2003 and allied matters, this Court dismissed the Company Applications vide order dated 27.09.2006.
Against the order dated 27.09.2006, the plot holders had preferred O.J. Appeal No. 53 of 2012 and allied matters which were dismissed vide order dated 08.04.2013 and the order of the learned Single Judge passed in Company Application No. 345 of 2003 was confirmed.
Against the order dated 08.04.2013, the plot holders had approached the Hon'ble Supreme Court by filing Special Leave to Appeal and the Hon'ble Supreme Court was pleased to issue notice and grant an order of Status-
Quo.
Page 13 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined 3rd Batch In this batch of applications, similarly situated group of plot holders have filed the present applications which are heard and disposed of by this common order.
9.It appears from the record that one Mr. Manoj Naik had approached before the Sale Committee of the Secured Creditors with a bid of Rs.
1.05 Crore as against valuation of Rs. 6.25 Crore for 291 plots. The Official Liquidator approached this Court by placing a report for acceptance of the bid. This Court vide order dated 18.12.2004 passed in OLR No.100/2003 rejected the report.
10. Being aggrieved by the order dated 18.12.2004, Mr. Manoj Naik preferred OJ Appeal No.81/2004 which was dismissed by order dated 30.08.2011.
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11. Being aggrieved by the rejection of the OJ Appeal, Mr. Manoj Naik approached the Hon'ble Supreme Court by preferring Special Leave Petition Nos.34782-34783 of 2012. The Hon'ble Supreme Court by order dated 19.08.2014 directed the Official Liquidator to issue an advertisement to auction the plots.
12. Meanwhile, many of the plot holders by preferring Interlocutory Applications (IAs) approached the Hon'ble Supreme Court seeking impleadment in the pending proceedings on the ground that Official Liquidator had misrepresented the facts about the plots.
13. GITCO submitted a report dated 14.10.2014 stating that 113 plots out of 291 plots were free from encumbrances. The Hon'ble Supreme Court passed an order dated 28.10.2014 to continue the auction Page 15 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined proceedings and further directed the applicants of IAs to file applications before this Court.
14. The Hon'ble Supreme Court by order dated 24.03.2015 recorded that though M/s. Star & Associates who had submitted bid for Rs. 70 Crore was not able to take the property and Mr. Manoj Naik renewed his deed for 65 Crore with an undertaking to deposit Rs.15 Crore before 24.04.2015. The Hon'ble Supreme Court however, by order dated 29.04.2015 extended the time to deposit Rs. 15 Crore by Mr. Manoj Naik upto 25.05.2015. By order dated 13.05.2015, the Hon'ble Supreme Court asked the Managing Director and General Manager of GITCO to personally remain present on the next date of hearing and amount of Rs. 5 Crore paid by Mr. Naik was ordered to be kept in short term fixed deposit and further time was granted to deposit remaining Rs.10 Crore Page 16 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined within four weeks. It appears that thereafter Hon'ble Supreme Court vide order dated 31.07.2015 directed to issue the fresh advertisement calling for the offers.
Accordingly an advertisement was issued on 6.08.2015 by the Official Liquidator for sale of the 113 plots on "as is where is basis".
15. Thereafter Hon'ble Supreme Court passed an order dated 3.03.2016 accepting the bid for Rs. 45 Crore from M/s. Shiv Pooja LLP.
16. It appears that thereafter the successful bidder approached the Hon'ble Supreme Court for clarification about the term "as is where is basis" on the ground that the successful bidder has clear title and absolute owner of 113 plots wherein the Hon'ble Supreme Court passed an order dated 3.05.2017 observed that M/s. Shiv Pooja LLP in whose favour the agreement was executed by Page 17 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined the Official Liquidator can file applications and take such steps for getting all the statutory permission from the competent authority in accordance with law and name of the said LLP was substituted in name of M/s.
Vitta Mazda in earlier order and except such modification the Hon'ble Supreme Court was not inclined to say anything more.
17. Thus, the facts are not in dispute. The Hon'ble Supreme Court has directed the Official Liquidator to conduct the auction sale for 113 plots on the basis of report of the GITCO which certified that these plots were free from encumbrances. In such circumstances, the sale of the plots of the applicants by the Apex Court forming part of the list of 113 plots, a question arises to be considered as to whether the condition of "as is where is basis" can be looked into by this Court so as to validate the sale of the Page 18 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined plot in question in favour of the applicants, more particularly, when such plots are sold by public auction by the Apex Court treating the same as free from encumbrances on the basis of the report of GITCO.
18. Learned advocate Mr. Digant Popat with learned advocate Mr. Dilip Kanojia for the applicants submitted that multiple plot holders had approached the Hon'ble Supreme Court by filing IA seeking impleadment and stay of the auction sale in Special Leave Petition Nos. 34782-34783 of 2012 on the ground that the Official Liquidator has misrepresented the facts before the Supreme Court about the plots being free hold plots and in fact, the said plots were owned by the applicants therein.
19. It was submitted that the Hon'ble Supreme Court while passing the order dated Page 19 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined 28.10.2014, in Special Leave Petition Nos.
34782-34783 of 2012 while allowing the bidders to participate in the auction vide order dated 28.10.2014, had also clarified that the applicants shall file necessary applications before the High Court.
20. It was therefore, submitted that it was clear that the Hon'ble Supreme Court was appraised by the plot holders about the disputed ownership and the plot holders have rightly approached this Court in light of the directions given by the Hon'ble Supreme Court. Therefore, this Court has jurisdiction to examine the sale deeds and to validate the sale of the present applicants.
21. It was submitted that an advertisement was published by the Official Liquidator in newspapers calling for the bids on 06.08.2015. The said advertisement Page 20 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined categorically stated that the plots will be sold on "as is where is basis". It was submitted that the tender terms and conditions also mentioned that the property will be sold on "as is where is basis".
During the tender process, the successful bidder was given chance to inspect the property on 16th and 17th September, 2014.
Thus, the successful bidder, after satisfying himself has purchased the property on "as is where is basis" with all the encumbrances which will include all the pending litigation as well.
22. It was further submitted that while confirming the sale of the property in Special Leave Petition Nos. 34782-34783 of 2012, the Hon'ble Supreme Court was aware of IA filed by the plot holders and about the disputed title of the land.
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23. It was submitted that the plots were never free from encumbrances as the plot holders are registered sale deed holders of the subject land. Further, pursuant to their registered sale deeds, their names have been mutated in the revenue record. It was therefore submitted that the Official Liquidator had misrepresented the facts about the ownership of the land and the sale was conducted on "as is where is basis". It was submitted that the order passed by the Hon'ble Supreme Court dated 03.03.2016 finalizing the sale, has to be interpreted in light of the facts that the Hon'ble Supreme Court was aware of the disputed title and thus, the order of sale of property on the basis of "as is where is basis" was passed by the Hon'ble Supreme Court.
24. Learned advocate Mr. Digant Popat further submitted that the successful bidder Page 22 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined i.e. Shiv Pooja Developers LLP had approached the Hon'ble Supreme Court seeking clarification of the term "as is where is basis" on the ground that while they were allegedly given 113 plots free from encumbrances, the plot holders had raised objections before the Mamlatdar while mutation proceedings were undertaken. It was submitted that the Hon'ble Supreme Court did not pass any orders for prayers seeking clarification of the term "As is where is basis"
25. It was submitted that the Official Liquidator had categorically averred in the counter affidavit filed before the Hon'ble Supreme Court opposing above IA clarification as sought for by the successful bidder that the successful bidder was always in the knowledge of the state of 113 plots for which they submitted their bid. The official Page 23 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined Liquidator had also mentioned that the tenderers had full knowledge of what was offered for sale and the successful bidder never approached Official Liquidator seeking clarification in this regard.
26. It was submitted that the tender conditions clearly mention that the intending purchasers shall be deemed to have purchased the properties after complete due diligence, examination, and inspection of it and shall not be entitled to make any requisition or raise any objection as to the title or consideration of the property or any part thereof. It was submitted that the concept of "as is where is basis" is no longer res-
integra whenever a sale is undertaken on as is where is basis. It includes the encumbrances, claims and liabilities with it.
Therefore, it is the duty of the bidder/intending purchase to verify the Page 24 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined records including that of ownership before placing the bids. It was submitted that since the sale is not made by the owner of the property but is a sale undertaken by the Court, liquidator or any statutory body, the duty is cast upon the bidder to satisfy himself of the title or encumbrances on the land. It was further submitted that the names of the applicants were reflected in the revenue records as well at relevant point of time.
27. It was submitted that the intending purchasers were part of the bidding process before the Hon'ble Supreme Court and were also represented by advocates thus, the parties had knowledge of the IA filed by the plot holders raising disputes about the title. Thus, it could not be said that the property was ever free from encumbrances and that the successful bidder was not aware of Page 25 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined the title disputes qua the land in question.
28. Learned advocate Mr. Digant Popat submitted that 113 plots which are sold by the official liquidator are sold without any assurances or guarantees as they were sold on "as it where is basis" as the matter was pending before the Hon'ble Supreme Court, which was overlooking the entire sale proceedings, especially with regards to the consideration which the sale would fetch. The sale transaction between the official liquidator and the successful bidder was merely placed before the Hon'ble Supreme Court for approval on above consideration i.e., the purchase price and the procedure.
The Hon'ble Supreme Court while approving the sale has only approved the sale consideration thus, it cannot be stretched to mean that the Hon'ble Supreme Court has sold the property or is otherwise responsible in any manner for Page 26 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined the properties or any encumbrances on it.
29. It was submitted that the word "encumbrances" as per the Black's Law Dictionary Eleventh edition means any claim or liability and such claim would include any assertion of right including the right of title and ownership. Thus, when a land is purchased in auction on "as is where is basis", it is purchased with all encumbrances with it.
30. Learned advocate Mr. Popat therefore, submitted that the successful bidder has purchased the properties on "as is where is basis" and with encumbrances. Thus, any dispute with regard to any encumbrances on land will have to be appropriately decided before an appropriate forum. It was submitted that in this case, since there are registered sale deeds, the auction purchasers may file a Page 27 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined suit for cancellation of registered sale deeds. Similarly, in lieu of declaration the applicants - registered sale deed holders have filed company petitions for validation of sale. It was submitted that the competent respective Courts will have jurisdiction to decide on the said issue in spite of the sale being approved by the Hon'ble Supreme Court.
31. It was submitted that the Official Liquidator as well as the successful bidder also while preparing the list of 113 plots has not taken into consideration the disputed titles and also did not check the revenue entries qua 113 lands. Thus, a fraud was played upon this Court as well as upon the Hon'ble Supreme Court while portraying the 113 plots to be free from encumbrances.
32. It was submitted that this Court has jurisdiction under Section 536(2) of the Page 28 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined Companies Act, 1956 to validate the sale for the plots concerned and this Court had validated the sale in Company Application No.313 of 2003, while allowing the Company petitions.
33. It was submitted that it is not in dispute that all the above-mentioned transactions took place after the petition for winding up of the Company was presented before the Company Court i.e. after 14th August, 1990. All the aforesaid dispositions have been made by registered sale deeds. It was submitted that the applicants has paid purchase price of the concerned parcels of land to the Company at the prevalent market rate and the said amount was duly received by the Company and that each applicant was put into possession of the concerned parcel of land and since then the said parcels of land are in possession of the concerned Page 29 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined applicants.
34. It was submitted that disposition of the assets of a company pending winding up petition, if made by such company with bona fide intention to keep the company going, such transactions shall be validated by the Company Court as envisaged by Section 536 (2) of the Act. In the present matters, the applicants have purchased the concerned parcels of the said land Survey No. 78 by registered sale deed on payment of full consideration. It was submitted that it was also not the case of the Official Liquidator that the sale consideration has not been paid or the sale transaction has taken place to defraud the creditors of the Company, or to prefer any particular creditor/s. Thus, there are no lapses or malafide in the sale in favour of the present applicants.
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35. It was submitted that the applicants will face double jeopardy inasmuch as the amount of sale consideration paid to the company is already distributed by the Official Liquidator to the Creditors and over and above that even the plots purchased by the applicants by way of a registered sale deeds is sought to be sold.
36. It was submitted that section 536(2) of the Companies Act, 1956 confers an enabling power on the Court to direct that a disposition of the property of a company shall not be void though it was effected after the commencement of the winding up proceedings. It was submitted that the present transactions are not even alleged to be void or illegal and thus, this Court may validate the sale as this Court is conferred with the jurisdiction.
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37. Learned advocate Mr. Ravindra Shah submitted that the auction sale conducted pursuant to the order passed by Hon'ble Supreme Court is specifically on the condition of "as is where is basis" and therefore, only this Court as a Company Court can look into the condition of "as is where is basis" so that the sale in favour of the applicants can be validated under section 536(2) of the Companies Act, 1956 as the applicants are bona fide purchasers of the plot during the pendency of winding up proceedings before this Court and conditions of provisions of the Companies Act, 1956 are fulfilled so that the sale consideration paid by the applicants as bona fide purchasers of the plots in question has to be considered and the plots which are purchased by the applicants are required to be taken out of winding up proceedings as well as list of 113 plots which were ordered to be auctioned by Page 32 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined Hon'ble Supreme Court considering the same as free from encumbrances on the basis of report of GITCO.
38. It was further submitted that the entire proceedings initiated before this Court which reached upto the Apex Court started from offer to purchase all 291 plots by one Manoj Naik for Rs. 1.03 crores which ultimately culminated in fetching Rs.45 Crore for 113 plots alleged to have been free from encumbrances on the basis of report of GITCO tendered before the Hon'ble Supreme Court by the Official Liquidator. It was submitted that auction advertisement issued by the Official Liquidator also contains the condition which is even included in the order of the Apex Court dated 3.3.2016 that plot in question is sold to the auction purchaser on "as is where is basis" and therefore, when the applicants have already purchased the Page 33 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined plot prior to the date of winding up as a bona fide purchaser for a value for consideration, the same is required to be validated and the consequences which may follow be considered so far as the auction sale to be conducted by the Official Liquidator pursuant to the order passed by the Hon'ble Supreme Court.
39. In support of their submissions, the following decisions are relied upon by the learned advocates for the applicants:
1) United Bank of India v. Official Liquidator reported in 1994(1) SCC 575.
2) Ai Champdany Industries Limited v.
Official Liquidator reported in 2009(4) SCC
486.
3) In Re: J. Sen Gupta (Private) Ltd. (In Page 34 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined Liquidation) reported in AIR 1962 Cal 405.
4) Pankaj Mehra and another v. State of Maharashtra and others reported in (2000) 2 Supreme Court Cases 756.
40. On the other hand learned advocate Mr. Shivang Thacker for the Official Liquidator submitted that the Official Liquidator has carried out the orders passed by the Hon'ble Supreme Court and the sale deeds are already executed in favour of the auction purchaser pursuant to the order dated 3.03.2016 and possession of all 113 plots are handed over to the auction purchaser. It was further submitted that the applicants have not approached the Hon'ble Supreme Court for clarification of the order passed by Apex Court and this Court should not interpret the order of the Hon'ble Supreme Court while entertaining these applications.
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41. Learned advocate Mr. C.J. Vin who appeared for auction purchaser - M/s. Shiv Pooja Developers LLP for 113 plots submitted that this Court on 17.1.2018 adjourned the matter so as to enable the applicants to approach the Hon'ble Supreme Court for clarification but the applicants have chosen not to approach the Hon'ble Supreme Court for the grievances raised in these applications.
Learned advocate Mr. Ravindra Shah has submitted the same is not the case in his matter.
42. It was also submitted that the Hon'ble Supreme Court has passed the order of sale in favour of auction purchaser considering all 113 plots as free from encumbrances and/or on "as is where is basis". The Hon'ble Supreme Court has also clarified by a subsequent order in IA preferred by the auction Page 36 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined purchaser to include the name of the auction purchaser in the revenue record in place of company (In Liquidation). It was also submitted that the plots in question are already in the possession of the auction purchaser and therefore, there is no question of validation of sale deeds in favour of the applicants in view of the order passed by Hon'ble Apex Court.
43. Having heard learned advocates for the respective parties, it would be germane to refer to the orders passed by Hon'ble Supreme Court with regard to 113 plots which were ordered to be auctioned by the Hon'ble Supreme Court by the Official Liquidator.
44. The Hon'ble Apex Court in the order dated 28.10.2014 has observed as under:
"8. Here the sad story begins. Mr. Tushar Mehta, learned Additional Solicitor General, while defending the stand of the Official Page 37 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined Liquidator, though made certain efforts to justify his action, yet ultimately realised that it was a Sisyphean endeavour because the action may be genuine but should not have been undertaken. Mr. Tushar Mehta learned Additional Solicitor General, and Mr. Gaurav Agrawal, learned counsel, appearing for the Official Liquidator, while expressing regret about the steps taken by the Official Liquidator who has also rendered unconditional apology, submitted that the prices of the land have gone up and there is a valuation report by the Gujarat Industrial and Technical Consultancy Organisation Ltd (GITCO) which has estimated the price at Rs. 66,15,22,000/- in respect of total freehold land available for sale, that is, 113 plots.
9. The said valuation report compelled us to think in a different way and impelled us to recapitulate certain authorities of this Court. In Ram and Shyam Company Vs. State of Haryana[1], the Court observed thus:
"12. ...Owner of private property may deal with it in any manner he likes without causing injury to any one else. But the socialist or if that word is jarring to some, the community or further the public property has to be dealt with for public purpose and in public interest. The marked difference lies in Page 38 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined this that while the owner of private property may have a number of considerations which may permit him to dispose of his property for a song. On the other hand, disposal of public property partakes the character of a trust in that in its disposal there should be nothing hanky panky and that it must be done at the best price so that larger revenue coming into the coffers of the State administration would serve public purpose viz. the availability of larger funds. This is subject to one important limitation that socialist property may be disposed at a price lower than the market price or even for a token price to achieve some defined constitutionally recognized public purpose, one such being to achieve the goals set out in Part IV of the Constitution. But where disposal is for augmentation of revenue and nothing else, the State is under an obligation to secure the best market price available in a market economy. An owner of private property need not auction it nor is he bound to dispose it of at a current market price. Factors such as personal attachment, or affinity, kinship, empathy, religious sentiment or limiting the choice to whom he may be willing to sell, may permit him Page 39 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined to sell the property at a song and without demur. A welfare State as the owner of the public property has no such freedom while disposing of the public property. A welfare State exists for the largest good of the largest number more so when it proclaims to be a socialist State dedicated to eradication of poverty. All its attempt must be to obtain the best available price while disposing of its property because the greater the revenue, the welfare activities will get a fillip and shot in the arm. Financial constraint may weaken the tempo of activities. Such an approach serves the larger public purpose of expanding welfare activities primarily for which the Constitution envisages the setting up of a welfare State."
10. In the aforesaid case, the Court held auction in Court in respect of some quarries relating to minor minerals. The appellant therein who initially had given an offer of Rs.5.5 lakhs, eventually offered Rs.25 lakhs. Taking note of the state of affairs, the Court observed:
"6. Shock and surprise was visible on the face of each one in the Court. Shock was induced by the fact that public property was squandered away for a song by persons in power who hold the position of trust. Surprise was that how judicial intervention Page 40 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined can serve larger public interest. One would require multi-layered blind-fold to reject the appeal of the appellant on any tenuous ground so that the respondent may enjoy and aggrandize his unjust enrichment. On this point we say no more."
11. In Committee of Management of Pachaiyappa's Trust Vs. Official Trustee of Madras and Another[2], the Court placing reliance on paragraph 12 in Ram & Shyam Company (supra) and Para 27 in Chenchu Rami Reddy V. Govt. of A.P.[3], opined thus:
"28. The aforesaid observations in the context of public property and property belonging to religious and charitable endowments and institutions would equally apply to trust property as in the present case."
12. In Meerut Development Authority V. Association of Management Studies and Another[4], after referring to number of decisions including Ram and Shyam Co. (supra), the Court reproduced a passage from Wayde's treatise on Administrative Law[5], which is as follows:
"The powers of public
authorities are therefore
essentially different from those of private persons. A man making his will may, subject to any rights of his dependants, dispose of his property just as Page 41 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his land, to release a debtor, or, where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do none of these things unless it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. So a city council acted unlawfully when it refused unreasonably to get a locally rugby football club use the city's sports ground, though a private owner could of course have refused with impunity. Nor may a local authority arbitrarily release debtors, and if it evicts tenants, even though in accordance with a contract, it must act reasonably and 'within the limits of fair dealing'. The whole conception of unfettered discretion is inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good."
13. At this juncture, we are obliged to state that in the case at hand, we are dealing with properties owned by a Company under liquidation and there has been price fixation by the Page 42 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined Company Court. GITCO has estimated the valuation in praesenti. It is not in dispute, as per the orders passed by the Company Court as well as the Division Bench in Company Appeal and as understood by this Court, 291 plots were to be put to auction and for the total number of plots the prices were offered by the bidders who had shown interest before this Court to bid and this Court had fixed the reserve price at Rs.10 crores. Counsel for the parties on 02.07.2014 had gone to the extent of saying that they were prepared to offer Rs.25-30 crores in the auction and we have already mentioned offers have come in the sealed cover.
14. Ordinarily, what we would have done is absolutely another matter. There can be no speck of doubt that the properties of a company under liquidation when sold, there has to be a proper auction, a fair one. It must fetch the maximum price. It takes care of statutory dues, dues of the workmen and the creditors. It has its own public character. In any case, it cannot be allowed to be sold for a song. The estimated price given by GITCO is more than Rs.66 crores for 113 plots, which are free. Therefore, we thought it seemly to ask the learned counsel appearing for the parties, if they are agreeable for open auction by giving their offers before this Court.
15. Mr. A. Saran, learned senior counsel, Mr. Braj Kishore Mishra, Page 43 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined learned counsel, Mr. Vivek Singh, learned counsel and Mr. Amar Dave, learned counsel, conceded to the said suggestion. In the High Court initially Rs.6.25 crores had been offered, and we had fixed the reserve price at Rs. 10 crores and, to test the bona fide of the bidders, we had directed them to deposit Rs. 10 crores each before the Registry of this Court which has been done. Now the initial thought, graduated to a shock. When auction commenced, Mr. Braj Kishore Mishra, learned counsel, along with Mr. Vivek Trivedi, learned counsel, after obtaining instructions from Mr. S.D. Verma, a partner of M/s Star & Associates, informed the Court that they are willing to offer Rs. 31 crores for 113 plots which are free. Determined not to lag behind, Mr. A. Saran, being instructed by Mr. Amit Kumar, learned counsel, on behalf of the petitioner, ultimately raised the figure upto Rs.65 crores. Be it stated, we had requested the bidders to hike their price by Rs.5 crores so that the auction becomes real and not unnecessarily time-consuming. Mr. A. Saran, learned senior counsel, Mr. Braj Kishore Mishra, learned counsel, Mr. Vivek Singh, learned counsel and Mr. Amar Dave, learned counsel, co-operated. Eventually, Mr. Braj Kishore Mishra, learned counsel, appearing for M/s Star & Associates enhanced the price to Rs. 70 crores. Mr. A. Saran, Mr. Vivek Singh and Mr. Amar Dave did Page 44 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined not think, as instructed by their respective clients, to bid further. Thus, we find that the report submitted by GITCO appears to be correct. That is a redeeming feature to pardon the Official Liquidator and we do so.
16. In view of the aforesaid, we direct M/s. Star and Associates to deposit a sum of Rs.20 crores by the end of November, 2014 and another Rs.40 crores by March 15, 2015 before the Registry of this Court. The amount shall be deposited in an interest bearing fixed deposit in a UCO Bank, Supreme Court Compound, New Delhi. After Rs.60 crores are deposited, Rs. 10 crores that have been deposited by the company before the Registry shall be added and handed over by way of a banker's cheque to the Official Liquidator along with interest. Needless to emphasise, if any of the directions is not complied with or for any reason, extension is sought, Rs. 10 crores that has been deposited before this Court along with interest shall stand forfeited and go to the account of the company. This aspect is also conceded to by Mr. Braj Kishore Mishra and Mr. Vivek Trivedi.
17. As far as deposits made by the petitioner and Mr. Ranjitsinh Parmar before this Court are concerned, the deposits shall be refunded along with interest within two weeks hence. The amount deposited by Mr. Laxmi Narayan Garg with the Official Liquidator shall also be refunded Page 45 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined within a week from today. Any earnest money that has been deposited with the Official Liquidator shall also be refunded to the concerned company/person.
18. At this juncture, it is appropriate to mention that the rest of the plots in respect of which there is an order of status quo by this Court or which are subjudice before the appellate court on the company side before the High Court, needless to say, shall be dealt with at the subsequent date.
19. At this juncture, we are obligated to clarify that interlocutory applications which have been filed before this Court can be filed before the High Court and the orders passed by the High Court shall be filed before this Court in these special leave petitions so that they can be appositely dealt with. The order of stay granted earlier, that is, directing stay of further proceedings before any Court relating to the property involved in this case, is modified to the extent indicated above."
45. Pursuant to aforesaid order passed by Apex Court, the auction sale was conducted by Official Liquidator and following order dated 3.3.2016 was passed:
"Heard learned counsel for the Page 46 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined parties.
It is submitted by Mr. Pradhuman Gohil, learned counsel for the respondent No.9, Ranjitsinhji N. Parmar, that he has already deposited Rs.45 crores (Rupees forty five crores) in the Registry of this Court. In view of the aforesaid, a requisite agreement shall be entered into between the Official Liquidator and M/s. Shiv Pooja Developers LLP regard being had to the terms and conditions which has been floated for sale of property pursuant to the orders passed by this Court. We may hasten to add that the said Ranjitsinhji N. Parmar shall only get the property on "as is where is"
basis. Be it noted, we have mentioned the name of M/s. Shiv Pooja Developers LLP as Mr. Gohil, learned counsel appearing for the respondent No.9 submitted that the Official Liquidator may be directed to enter into an agreement with M/s. Shiv Pooja Developers LLP.
The Registry is directed to prepare a draft of the amount deposited by the respondent No.9 along with the interest accrued thereon, in the name of the respondent No.1, Official Liquidator, and hand over the same to the Official Liquidator, who shall come and take the draft in-person from the Registry of this Court on proper identification. The said exercise be completed within four weeks hence. It is hereby ingeminated that the agreement Page 47 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined executed in favour of M/s. Shiv Pooja Developers LLP is on "as is where is" basis.
Needless to say, all formal expenses for execution of the agreement shall be met by M/s. Shiv Pooja Developers LLP.
The Registry is directed to issue requisite certificates to the individuals/companies/firms, who had deposited the money before the Registry of this Court and had availed the benefit of refund by virtue of the order of this Court.
The special leave petitions and the interlocutory applications stand disposed of."
46. Thereafter auction purchasers preferred an interim application for clarification of "as is where is basis" term in the sale deeds on the basis of term of auction wherein the Apex Court passed the following order on 3.05.2017:
"UPON hearing the counsel the Court made the following O R D E R The present I.As. have been filed for the following reliefs:-
"(a) Clarify that the term "AS IS Page 48 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined WHERE IS AND WHATEVER THERE IS" is only with regard to the actual total area of land available i.e. 92,008,87 sq. mtrs and that the Applicant herein is entitled to get the afore-mentioned area of land as the absolute owner,
(b) Clarify that the Applicant herein is entitled to revise and/or modify the layout plan and the area sold by the Official Liquidator in the auction is free from encumbrance for the Applicant herein to develop and sell as plots;
(c) Further clarify that the Official Liquidator shall clarify and make the necessary changes in the Sale Deed dated 12/05/2016 bearing Sr. No.1095 by way of a rectification deed clarifying that the 'common open space' can also be revised and/or modified by the Applicant herein;
(d) Clarify that the name of M/s.
Vitta Mazda as reflected I the column of occupier qua Survey No.78/291 is incorrect and that the name of M/s. Shiv Pooja Developers LLP ought to be removed from the column of other rights and reflected in the column of occupier, and
(e) Pass such other Orders as this Hon'ble Court may deem fit in the facts and circumstances of the case."
Having heard Mr. Shekhar Naphade, Page 49 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined learned senior counsel along with Mr. Nakul Diwan and Mr. Pradhuman Gohil, learned counsel for the applicant and Mr. Ravindra Kumar, learned counsel appearing for the official liquidator, we are only inclined to modify our earlier order by stating that the name of 'M/s. Vitta Mazda' shall be substituted and in its place 'M/s. Shiv Pooja Developers LLP' be brought in. We have so directed as the said company M/s. Shiv Pooja Developers LLP had become the successful bidder and the auction was in its favour. Be it clarified, the official liquidator has accepted the said position.
Once the name of M/s. Shiv Pooja LLP comes on record, needless to say, the authorised representative of the said company can file applications and take such steps for getting all the statutory permissions from the competent authorities in accordance with law.
Barring the aforesaid modification, we are not inclined to say anything more.
The Interlocutory Applications stand disposed of."
47. From the above orders passed by Hon'ble Apex Court, it is clear that 113 plots certified as free from encumbrances on the Page 50 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined basis of report of GITCO, were auctioned by the Official Liquidator. If the applicants have any right, title or interest over the plot which is included in the list of 113 plots certified by GITCO as free from encumbrances, the applicants are required to take appropriate action in accordance with law rather than pursuing these applications under the provisions of the Companies Act, 1956 for validation of the sale, more particularly, when the Apex Court has already permitted the Official Liquidator to sell the plots as free from encumbrances. The word "encumbrances" is already considered by the Apex Court in case of AI Champdany Industries Ltd.(supra) as under :
"12. The terms and conditions of the sale must be read as a whole. It must be given a purposive meaning. The word `encumbrance' in relation to the word `immovable property' carries a distinct meaning. It ordinarily cannot be assigned a general and/or dictionary meaning. We may however notice some Page 51 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined dictionary meanings of the said word as reliance thereupon has been placed by Mr. Sibaji Sen. In Stroud's Judicial Dictionary of Words and Phrases 5th Edition Encumbrance is defined as "being, `a claim, lien, or liability, attached to property'; and this definition is wide enough to cover the plaintiff's claim," which was, as assignee for value of a reversionary interest, against a person coming in under a subsequent title."
In Supreme Court on Words and Phrases it is stated that "the word `encumbrance' means a burden or charge upon property or a claim or lien upon an estate or on the land." In Advanced Law Lexicon Encumbrance is defined as "an infringement of another's right or intrusion on another's property."
In Black's Law Dictionary Encumbrance is defined as "any right to, or interest in, land which may subsist in another to diminution of its value, but consistent with the passing of the fee."
13. Encumbrance, therefore, must be capable of being found out either on inspection of the land or the office of Registrar or a statutory authority. A charge, burden or any other thing which impairs the use of the land or depreciates in its value may be a mortgage or a deed of trust or a lien or an easement.
Encumbrance thus must be a charge on the property. It must run with the Page 52 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined property. If by a reason of the statute no such burden on the title which diminishes the value of the land is created, it shall not constitute any encumbrance."
48. Similarly the phrase "as is where is basis" is also interpreted by the Apex Court in case of United Bank of India (supra) as under :
"14.When the Official Liquidator sells the property and assets of a company in liquidation under the orders of the Court he cannot and does not hold out any guarantee or warranty in respect thereof. This is because he must proceed upon the basis of what the records of the company in liquidation show. It is for the intending purchaser to satisfy himself in all respects as to the title, encumbrances and so forth of the immovable property that he proposes to purchase. He cannot after having purchased the property on such terms then claim diminution in the price on the ground of defect in title or description of the property. The case of the Official Liquidator selling the property of a company in liquidation under the orders of the Court is altogether different from the case of an individual selling immovable property belonging to himself. There is, therefore, no merit in the application made on behalf of Triputi that there should be a diminution in price or that it should not be made liable to pay interest on the sum of Rs 1 crore 98 lakhs."Page 53 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023
NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined
49. The Hon'ble Apex Court in case of Pankaj Mehra and another (supra) while considering the provisions of section 536(2) read with sections 440 to 443, 449 and 450 of the Companies Act, 1956 has interpreted the word "void" as under:
7. We will presently consider the effect of Section 536(2) of the Com-
panies Act, The entire Section is quoted below :
"536 Avoidance of transfers, etc., after commencement of winding up. -
(1) la 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 or 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 its members, made after the commen-
cement of the winding up, shall, Page 54 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined unless the Court otherwise orders, be void."
8. Contextually Section 441(2) of the Companies Act is very relevant and hence that is also extracted here :
"441. Commencement of winding up by Court. - Where, before the presentation of a petition for the winding up of a company by the court, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Court on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.
(2) In any other case, the winding up of a company by the Court Shall be deemed to commence at the time of the presentation of the petition for the winding up."
9. Three modes of winding up have been prescribed in Part VII of the Companies Act, (vide Section 425). First is, winding up by the court, next is voluntary winding up and the third is winding up by subjecting to the supervision of the court.
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10. We need not bother ourselves with the first sub-section of Section 536 of the Companies Act as it deals with a case of voluntarily winding up of the company, because none of the companies in the present batch of appeals is involved in such a contingency. Sub-section (2) deals with the other two types of winding up. Section 439 of the Companies Act contemplates an application to the court for the winding up of the company. It can be done by presenting a petition by any one of the persons enumerated in sub- section (1) of Section 439. Such persons include any creditor, including any prospective creditor.
11. Once a petition for winding up is presented it is not a necessary concomitant that the winding up would follow. This position is made clear in Section 440(2) which says that:
"440(2) the court shall not make a winding up order on a petition presented to it under sub- section (1), unless it is satisfied that the voluntary winding up or winding up subject to the super- vision of the Court cannot be continued with due regard to the interests of the creditors or contributories or both."
12. So a judicial exercise is called for to reach the satisfaction of the court that winding up has to be Page 56 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined continued with due regard to the interest of the creditors or the contributors. Section 443 of the Companies Act is important in this context. Sub-section (1) of that Section says that on hearing a petition for winding up the court may either (1) dismiss the petition or (2) make any interim order as it thinks fit or (3) make an order for a winding up. Sub-section (2) says that "443(2) where the petition is presented on the ground that it is just and equitable that the company should be wound up, the Court may refuse to make ar order of winding up. if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy."
13. Two more provisions are relevant in this context. Section 450 says:
"At any time after the presentation of a winding up petition and before the making of a winding up order, the Court may appoint the Officer Liquidator to be liquidator provisionally".
Before appointing a provisional liquidator the court has to give notice to the company and reasonable Page 57 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined opportunity to make his representation. Section 449 enjoins that "449. on a winding up order being made in respect of a company the Official Liquidator shall, by virtue of his office, become the liquidator of the company."
In the above backdrop alone we can consider the impact of the legislative direction in Section 536(2) that any disposition of the property of the company made after the commencement of the winding up (i,e. after the presentation of a petition for winding up) shall be void. There are two important aspects here. First is that the word "void" need not automatically indicate that any disposition should be ab initio void. The legal implication of the word "void" need not necessarily be a stage of nullity in all contingencies. Black's Law Dictionary gives the meaning of the word "void" as having different nuances in different connotations. Once of them is of course "null, or having no legal force or binding effect". And the other is "unable in law, to support the purpose for which it was intended". After referring to the nuances between void and voidable the Lexicographer pointed out the following :
Page 58 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined "The word 'void' in its strictest sense, means that which has no force and effect, is without legal efficacy, is incapable of being enforced by law, or has no legal or binding force, but frequently the word is used an construed as having the more liberal meaning of 'voidable.
The word 'void' is used in statutes in the sense of utterly void so as to be incapable of ratification, and also in the sense of voidable and resort must be had to the rules of construction in many cases to determine in which sense the Legislature intended to use it. An act or contract neither wrong in itself nor against public policy, which has been declared void by statute for the protection or benefit of a certain party, or class of parties, is voidable only."
15. For discerning the legislative idea in employing the word "void" in the context set out in Section 536(2) of the Companies Act the second aspect to be noticed is that the provision itself shows that the word void is not employed peremptorily since court has power to order otherwise. The words "unless the court otherwise order"
are capable of diluting the rigor of the word "void" and to choose the Page 59 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined alternative meaning attached to that word.
16. In Chittoor Distt. Coop. Marketing Society Ltd. v. Vegetols Ltd, [1987] Suppl. SCC 167, a two Judge Bench of this Court considered a plea for validation of payments made by a company after presentation of a petition for winding up. One set of payments were made before the passing of the winding up order and the other set of payments were made thereafter. This Court declined to validate such payments on the ground that "there is no evidence to show that those payments were made either under compulsion of circumstances in order to save or protect the property of the company or that there was any commercial compulsion to enable it to run its business".
The decision only indicates that such payments could have been made valid if evidence was adduced to show that there was compulsion of circumstances. In facts, this decision lands support to the interpretation that the payments which were made after the commencement of winding up proceedings, would not become ab initio void.
17. An early decision of a Division Bench of the Bombay High Court in Tulsidas Jasraj Parekh v. Industrial Page 60 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined Bank of Western India, AIR (1931) Bombay 2 was sought to be relied on by most of the learned counsel who argued for different appellant. The question which the Court considered therein pertained to Section 227(2) of the old Companies Act, 1913 which was identical to Section 536(2) of the present Act. Certain payments made by a company after commencement of the winding up proceedings were questioned and the Division Bench considered the scope of the sub-section and noticed that the principle had been borrowed from the English Companies Act. Hence some of the English authorities were also referred to by Marten C.J., who spoke for the Division Bench. Learned Judges stated thus:
"Now here as regards S 227(2) the Court has to steer a middle course between two extremes. On the one hand the words of the section are wide enough to include any sale or payment that a company may make after the date of the winding-up petition. On that basis any business would practically have to be stopped if a petition was presented, because it would be unsafe to dispose of any of the company's assets. For instance, a mill company might not be able to buy a ton of coal for the use of its furnaces or, on the other hand, it might not be able to sell any of its goods in the ordinary course of business.
Consequently, the Court has very Page 61 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined properly laid down that, speaking generally, any bona fide transaction carried out and completed in the ordinary course of current business will be sanctioned by the Court under S.227(2). On the Other hand it will not allow the assets to be disposed of at the mere pleasure of the company, and thus cause the fundamental principle of equality amongst creditors to be violated. To do so would in effect be to add to the preferential debts enumerated in s.230 a further category of all debts which the company might choose to pay wholly or in part."
18. It is useful to refer to the reasoning adopted by a Division Bench of the Gujarat High Court in Navjivan Mills Ltd., In re (1986) 59 Company Cases 201 in favour of adopting a pragmatic attitude when a Company Court was approached for approval of certain dispositions which a company made after presentation of a petition for winding-up. A clear distinction was drawn by the Division Bench between the period till the passing of the order for winding-up and thereafter, so far as dispositions are concerned. The following reasoning is useful for consideration of the issues involved :
"The court can exercise the jurisdiction under section Page 62 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined 536(2) of the Companies Act, 1956, of giving directions validating proposed transactions pending a petition for winding up but before the winding up order is made for the obvious reason that unless these transactions are saved from the consequence which may ensue, if at all, on an order of winding up being made, the company might find it difficult to keep itself going and its business might be paralysed. The purpose underlying the investment of the power in court is for the benefit and the interest of the company so as to ensure that a company which is made the subject of a winding-up petition may nevertheless obtain the money necessary for carrying out its business and so as to avoid its business being paralyzed. If that is the purpose and object of the section, it would hardly be proper and just to stultify the power and restrict its operation since otherwise it is bound to be counter- productive in the sense that the very purpose of keeping the company as a going concern so as to ensure the interest of the shareholders and creditors would be defeated."
19. In Grays Inn Construction Company Ltd (1980) 1 All E.R. 814 the Court of Appeal (Civil Division) considered the principle on which Page 63 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined discretion of the court to validate the dispositions of property made by a company, during the interregnum between presentation of a winding up petition and the passing of the order for winding up, has been dealt with. Section 227 of the English Companies Act, 1948 is almost the same as Section 536(2) of the Indian Companies Act. Dispositions which could be validated are mentioned in the decision. The said decision was cited before us in order to emphasise the point that courts would be very circumspect in the matter of validating the payments and the interest of the creditors as well as the company would be kept uppermost in consideration. Be that so, the said decision is not sufficient to support the contention that disposition during the interregnum would be irretrievably void."
50. In case of Pankaj Mehra (supra) while dealing with the issue with regard to penal liability for dishonor of cheque under section 138 of the Negotiable Instruments Act, 1881, issued during the pendency of petition for winding up by the Company in Liquidation on the ground that payment of cheque pursuant to the issuance of notice Page 64 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023 NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined under proviso (b) of section 138 would amount to disposition of the property of the company, the same was held to be void under section 536(2) of the Companies Act, 1956. It is clear that the provisions of section 536(2) of the Companies Act, 1956 would apply to all transactions for disposition of the property after the commencement of the winding up shall be void unless the Court otherwise orders. Therefore, considering the above dictum of interpretation of the phrase "as is where is basis" as well as the word "encumbrances" and keeping in mind the fact that the Apex Court has permitted the Official Liquidator to sale 113 plots free from encumbrances certified by GITCO, then this Court would not be able to exercise any jurisdiction for validation of sale deeds as prayed by the applicants under the provisions of the Companies Act, 1956.
Page 65 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023NEUTRAL CITATION C/COMA/275/2014 ORDER DATED: 23/01/2023 undefined
51. Therefore, the applications made for ratification of the sale transactions with regard to the plots which are sold during the pendency of the winding up petition are accordingly disposed of in view of the fact that such plots were declared as free from encumbrances before the Hon'ble Supreme Court and therefore, the sale transactions of the applicants-plot holders cannot be considered as valid as the Hon'ble Supreme Court has ordered to sale such plots by conducting public auction on "as is where is basis".
The applicants are free to take any other recourse available under the law.
52. In view of the foregoing reasons, these Company Applications as well as Civil Applications are disposed of with no order as to costs.
(BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 66 of 66 Downloaded on : Sun Sep 17 21:05:21 IST 2023