Delhi High Court
Karamchand Appliances Pvt. Ltd. vs M/S. Bharat Carpets Ltd. & Others on 6 May, 1999
Equivalent citations: 1999IIIAD(DELHI)749, [2001]103COMPCAS552(DELHI), 79(1999)DLT441, 1999(49)DRJ637
Author: D.K. Jain
Bench: D.K. Jain
ORDER D.K. Jain, J.
1. This application, by M/s. Karamchand Appliances Pvt. Ltd., the auction purchaser of the land, building, plant and machinery belonging to M/s Bharat Carpets Limited, the company in liquidation, inter alia, seeks setting aside of sale of the said assets in favour of the applicant company and refund of the entire amount deposited by the applicant, pursuant to order dated 17 December, 1996, with the Official Liquidator together with interest, damages and costs.
2. Pursuant to the advertisement issued by the Official Liquidator on 21 September, 1996, for sale of assets of the company in liquidation, including leasehold land measuring 25222 sq.yds approximately and freehold land measuring 15000 sq. yds approximately, on "as is where is basis", three parties, including the applicant, gave their bids but subsequently, vide order dated 13 December, 1996, another party namely, S. Bhupinder Singh was also permitted to participate in the bidding. Keeping in view the area of the property, the Court considered it appropriate to go in for open bidding, in which only the said S. Bhupinder Singh and the applicant company participated. The bid of S.Bhupinder Singh was for Rs. 6.05 crores and that of the applicant for Rs. 6.03 crores. The highest bidder was directed to deposit 20% of the bid amount by noon of 16 December, 1996, failing which, the applicant, the second highest bidder, was required to deposit 20% of the bid amount. The balance payment by the successful bidder was to be made in terms of the advertisement for sale. It appears that S. Bhupinder Singh failed to make the said deposit and, therefore, applicant's bid was accepted. They were granted time to deposit the stipulated amount by the same evening i.e., 16 December, 1996, which was done and their bid was finally confirmed on 17 December, 1996. While accepting the bid, the Court directed that the remaining amount of the bid as per clause 7 of the terms and conditions of the sale shall be deposited by the applicant within a period of one year from that date in quarterly equal instalments with prevailing rate of interest from the date of acceptance of offer, failing which the entire money deposited by them shall stand forfeited and the Official Liquidator will be at liberty to re-auction the property in question. The applicant was also required to furnish bank guarantee for the deferred payment amount.
3. The present application is for recall of this order, on the ground that it stands vitiated completely because the foundation of the said order is based on the bid submitted by the applicant, which in turn was based on misrepresentation and mistakes of fact in the advertisement, inviting the bids. According to the applicant there was complete mis-understanding on the part of the Official Liquidator in respect of the nature of the assets owned by the company in liquidation and the information furnished in the advertisement was incorrect inasmuch as: (i) out of total 15000 sq.yds, stated to be freehold land, only 2400 sq.yds is actually freehold; (ii) out of the balance 12600 sq.yds of the so represented freehold land, 12229 sq.yds is of leasehold nature and in respect of balance of approx. 371 sq. yds, there are no records; (iii) though there are two power of attorneys in respect of 12229 sq.yds freehold land in favour of Mr. R.N. Gupta, the exManaging Director of the company in liquidation, authorising him to execute the sale deed, neither the original nor copies of the agreements for sale are traceable; (iv) the said power of attorneys have been executed as far back as in the year 1975 and it is not clear whether the original land owners or their attorneys, who had executed the said power of attorneys are still alive and that the power of attorneys have not been revoked; (v) no explanation whatsoever is available for inordinate delay in execution of the said sale deeds, which gives rise to a legitimate apprehension as to the efficacy of the said power of attorneys; (vi) it is not certain whether the conversion of the land use has been effected or not; (vii) as regards the leasehold land, on verification of the revenue records it has been found that instead of 25222 sq.yds, as mentioned in the advertisement, only 24744 sq.yds of land is possessed by the company in liquidation; (viii) the lease deed pertaining to the said leasehold land imposes a restriction on the lessee not to sub-lease any portion of the said land without prior written permission of the lessor, namely, M/s. Arya Pratinidhi Sabha.
4. The application is vehemently resisted by the Official Liquidator, the financial institutions, namely, Haryana Financial Corporation (HFC) and the UCO Bank, Connaught Place Branch, New Delhi, having pari passu charge on the assets of the company in liquidation and the charge of mis-representation of facts in the advertisement for sale is refuted. It is alleged that the application has been filed only with a view to wriggle out of the order passed on 17 December, 1996 as the applicant is not in a position to pay the balance amount in terms thereof. In the reply-affidavits, filed in opposition, it is stated that: (i) in the latest jamabandi for the year 1990-91, M/s. Bharat Carpets Pvt. Ltd., the company in liquidation, is recorded as the lessee for 99 years commencing from 24 July, 1975 onwards and the executants of the general power of attorneys in favour of Mr. R.N.Gupta are recorded as the owners of their respective shares; (ii) Mr. R.N. Gupta is holding general power of attorneys on behalf of the said owners of land and sale considerations have also been paid to them; (iii) the UCO Bank has already applied to this Court for issue of directions to Mr. R.N. Gupta for executing the sale deed in favour of the company in liquidation and thereafter the company will become the absolute owner in actual physical possession of the above pieces of land and as such there is no infirmity whatsoever in the title of the company over the said lands; (iv) permission was granted to the company for change in land use and after the change the factory building was constructed on the land in question; (v) an addendum document dated 24 November, 1967 was executed by M/s. Arya Pratinidhi Sabha (lessor) in favour of M/s. Bharat Carpets Limited, clari-
fying the total area of 25222 sq. yds by giving complete details of the khasra Nos., which was inadvertently left out in the original lease deed. Besides, it is also pointed out that till date no claimant has come forward claiming any right, title or interest in the property in question and furthermore, the UCO Bank and HFC have undertaken to indemnify the applicant company in case they suffer any loss on account of defect in title.
5. I have heard Mr. Bishwajit Bhattacharjee, learned counsel for the applicant-auction purchaser, Mr. S.R. Khandelwal, learned counsel for the UCO Bank and Mr. Rajiv Behl, learned counsel for the Official Liquidator. In my view there is no merit in the application.
6. It is well settled that 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 on 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. Having purchased the property on such terms, he cannot prefer any claim or raise objection on the ground of defect in title or description of the property (See: United Bank of India Vs. The Official Liquidator & Ors. 1993(4) Scale 19).
7. In the instant case, as noticed above, in the advertisement for sale of assets of the company in liquidation it was made clear that the sale would be on "as is where is basis" and before making the bid the applicantauction purchaser had ample time to satisfy itself on all aspects concerning the properties, including the nature of the company in liquidation's right in the property or description of the property. Having given the bid, participated in the open inter se party bidding, it is too late in the day for the applicant to raise the aforenoted issues. Besides, though the areas of leasehold and freehold lands mentioned in the advertisement are on approximate basis, yet as per the averments in the affidavit in opposition, there is no discrepancy in the total area of the land. In the light of the facts stated in the affidavits in opposition, I reject the stand of the applicant that there was mis-statement of facts in the advertisement for sale of assets of the company in liquidation.
8. Further, during the course of arguments it was brought to the notice of the Court that Mr. R.N. Gupta, holding two general power of attorneys on behalf of owners of the freehold land, has already executed sale deed in favour of the Official Liquidator and the same was presented for registration on 8 February, 1999 but on account of some dispute with regard to valuation for the purpose of stamp duty it has been referred to the Registrar for final decision. On registration of the said sale deed, the Official Liquidator would execute the sale deed in favour of the auction purchaser and in that event, it will be a valid transfer of land in favour of the applicant.
9. I also find from the record that an application (CA 263/97) was filed by the applicant, seeking a direction to the Official Liquidator to transfer the marketable title of the lands admeasuring 6875 sq. yds., and 5354 sq. yds to the applicant and along with the application a draft sale deed, which the applicant wanted the Official Liquidator to execute in their favour, was annexed. I feel that in the event of execution of sale deed in the format furnished by the applicant, the applicant company will acquire a clear title in the lands in question and no cause for applicant's grievance in this behalf will survive.
10. Relying on Section 20 of the Indian Contract Act, 1872, it was submitted by learned counsel for the applicant that since the applicant had submitted their bid under a mistake as to a matter of fact regarding the nature of company's interest in the lands in question, the said bid was void ab initio. Since I have found that there has been no mistake of any fact in the advertisement, inserted for sale of assets of the company in liquidation, the applicant's bid cannot be held to be void.
11. Relying on Sri Tarsem Singh Vs. Sri Sukhminder Singh, , the submission of Mr. Bhattacharjee, learned counsel for the applicant that when the bid in question was itself void, the Official Liquidator, who has received part of the bid amount under the said bid in terms of order dated 17 December 1996, is bound to refund the amount so paid by the applicant along with interest thereon is equally untenable. In view of my finding that there was neither any mistake of fact nor was it so understood by either of the parties, I am not persuaded to accept the contention.
12. For all these reasons, the application, being devoid of merit, is dismissed. However, bearing in mind the fact that this application has been pending disposal for some time and the sale deed executed by Mr. R.N. Gupta in favour of the Official Liquidator in respect of freehold land is yet to be registered, I am inclined to grant one more opportunity to the applicant-auction purchaser to deposit with the Official Liquidator 50% of the balance amount payable in terms of order dated 17 December, 1996 on or before 30 May 1999. The remaining amount shall be deposited by the applicant within thirty days of receipt of intimation from the Official Liquidator about the date and time for execution of sale deed in their favour after the same has been registered in favour of the Official Liquidator. The Official Liquidator shall take appropriate steps for getting the matter, stated to be pending before the Registrar, expedited and submit a monthly progress report in this behalf on the administrative side. If the applicant fails to make payment in terms of this order, the entire amount deposited by them with the Official Liquidator shall stand forfeited. It is also directed that in the sale deed to be executed in favour of the applicant, a clause, stating that the applicant company shall be indemnified by UCO Bank as well as HFC, in case any loss is suffered by the auction purchaser for the alleged imperfect title, will be incorporated. UCO Bank and HFC will also sign the sale deed by way of confirmation of their undertaking, noted above.
CA 379/9713. As prayed in CA 446/97, the application is dismissed as not pressed.