2010 (5) TMI 388 - HC - Companies Law

Whether the auction purchaser was throughout aware of the presence of the unauthorised occupant in part of the plot in question the status of the plot i.e. it stood resumed by PUDA and that the auction purchaser at every opportunity had used the process of Court for getting the possession of the plot? Held that - The learned Company Judge has allowed himself to be persuaded by completely overlooking the facts on record and the conduct of the auction purchaser amply demonstrated in various applications preferred by him despite taking possession of the vacant part of the property on 14-5-1996 after making on payment of only 25 per cent earnest money. It is obvious that the auction purchaser has enjoyed the property for all these years without paying the outstanding 75 per cent balance amount as per the schedule of payment. It cannot be disputed that as per the terms of the agreement dated 7-5-1996 an amount of rupees two crores was due to be paid by the auction purchaser on 20-7-1999 which had swelled to a sum of Rs. 23, 67, 94, 369 as on 1-11-2008. In view of the above we are left with no option but to accept the appeal. Accordingly the impugned order dated 23-7-1999 is hereby set aside. The application bearing C.M. No. 5 of 2009 filed in the present appeal by the auction purchaser respondent No. 2 praying for withdrawal of CA Nos. 343 and 344 of 1999 thus seeking to revive his initial prayer (in CA No. 341 of 1996) for re-schedulement of payment of due instalments is dismissed with costs of Rs. 50, 000 to be paid to the Corporation within a period of two months from the date of receipt of certified copy of this order. The amount calculated as on 1-11-2008 was Rs. 23, 67, 94, 369. The auction purchaser is directed to pay aforesaid amount to the Corporation within four weeks from today. The Corporation is directed to intimate the auction purchaser within four weeks from today the total balance amount due to be paid by him in terms of the agreement dated 7-5-1996. The auction purchaser is further directed to pay the entire balance amount found due as intimated by the Corporation within next three months failing which the appellant Corporation shall be entitled to resume the plot and take possession in accordance with law. The Corporation is also given liberty to take steps to recover compensation if found due on account of use and occupation of portion of the plot by the auction purchaser. The auction purchaser - respondent No. 2 shall be entitled to the remaining portion of the plot in question in pursuance to the decree dated 5-5-1998 subject to the payment of all outstanding dues towards the Corporation.

Summary

Issues Involved:
1. Validity of the title of the property at the time of sale.
2. Possession and occupation of the property by a third party.
3. Delay in delivery of possession and its implications.
4. The auction purchaser's obligations and conduct.
5. The Corporation's responsibilities and actions.
6. The legal proceedings and their outcomes.

Detailed Analysis:

1. Validity of the Title of the Property at the Time of Sale:
The learned Company Judge found that the Punjab Financial Corporation (the Corporation) did not have a valid title to the property at the time of the sale agreement with the auction purchaser. The Corporation had agreed to sell the plot to the auction purchaser, but the plot was under litigation and had been resumed by the Punjab Urban Development Authority (PUDA). The Corporation later managed to get the plot re-sold to them by PUDA at Rs. 600 per sq. yd., paying approximately Rs. 40 lakhs, part of which was from the sale proceeds.

2. Possession and Occupation of the Property by a Third Party:
The property was partly occupied by M/s. Engineers Continental (respondent No. 3), who was an unauthorized occupant. This fact was known to the auction purchaser at the time of bidding and was mentioned in the status report and advertisement. The auction purchaser was aware that the possession of the entire property was not immediately available and that efforts were being made to obtain vacant possession through legal proceedings.

3. Delay in Delivery of Possession and Its Implications:
The learned Company Judge noted that litigation concerning the eviction of the unauthorized occupant had been pending for over three years, with no immediate resolution in sight. This delay in obtaining full possession was a significant factor in the auction purchaser's request for modification of the sale terms and eventual cancellation of the sale. The learned Company Judge felt that the auction purchaser could not be expected to buy into prolonged litigation and uncertainty regarding possession.

4. The Auction Purchaser's Obligations and Conduct:
The auction purchaser, despite being aware of the property's status and the ongoing litigation, failed to pay the remaining 75% of the sale consideration. They made various requests for modifications, including re-scheduling of payments and proportionate interest charges based on the possession of the property. The auction purchaser's shifting demands and eventual request for a refund of the earnest money were seen as attempts to avoid fulfilling their contractual obligations.

5. The Corporation's Responsibilities and Actions:
The Corporation was responsible for ensuring the transfer of the plot and payment of outstanding dues to PUDA. They paid Rs. 40 lakhs to PUDA to secure the plot's re-sale, fulfilling their part of the contractual obligation. However, the Corporation's failure to deliver full possession of the property due to the ongoing litigation was a point of contention.

6. The Legal Proceedings and Their Outcomes:
The suit for possession and ejectment of the unauthorized occupant was decreed in favor of the Corporation and the auction purchaser on 5-5-1998. However, the appeal against this decree was still pending, contributing to the delay in delivering full possession. The learned Company Judge's order dated 23-7-1999, which allowed the auction purchaser's request for a refund of the earnest money with interest, was based on the prolonged litigation and uncertainty regarding possession.

Conclusion:
The High Court set aside the learned Company Judge's order dated 23-7-1999, finding that the auction purchaser was aware of the property's status and the ongoing litigation at the time of the sale. The auction purchaser's conduct and shifting demands were seen as attempts to avoid fulfilling their contractual obligations. The appeal was accepted, and the auction purchaser was directed to pay the outstanding amount to the Corporation within a specified period, failing which the Corporation could resume the plot and take possession. The Corporation was also given liberty to recover compensation for the use and occupation of the property by the auction purchaser.