TMI Blog2009 (7) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... uction Purchaser to opt for any of these mechanism within a reasonable time, failing which the Official Liquidator will have to proceed on the assumption that the Auction Purchaser is unwilling to fulfil its obligation of paying balance consideration and taking delivery of the assets. In which case, will have to proceed with resale of the entire property forthwith by invoking the terms and conditions of the sale - COMPANY APPLICATION NO. 338 OF 2009 IN COMPANY PETITION NO. 345 OF 2006 - - - Dated:- 13-7-2009 - A.M. KHANWILKAR, J. Riyaz I. Chagala and H.K. Sudhakara for the Applicant. C.N. Mehta for the Security Agency. P.K. Samdani, P. Ramarao and Vishwajeet Sawant for the Official Liquidator. ORDER 1. By this order I propose to dispose of the Application preferred by the Auction Purchaser as well as the Official Liquidator s Report dated 24-3-2009 together. 2. Briefly stated, pursuant to the direction issued by the Company Judge, the movable and immovable assets of the Company in liquidation were put up for auction. On the basis of inventory and valuation report submitted by Yardi Prabhu Consultants Pvt. Ltd. dated 1-3-2008, reserved price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is and Whatever there is basis". Amongst other, clause 20 of the terms and conditions of the sale clearly provides that the properties are being sold on "As is Where is and Whatever there is basis" and the purchaser shall not be entitled to raise any objection as to quality, quantity, misdescription, area, boundary or title, as the same are believed to be and shall be taken as correct and if any error or misstatement or omission if discovered in the particulars of the assets, the same shall not annul the sale nor shall be entitled to any compensation from the Official Liquidator. In spite of such condition, the Auction Purchaser participated in the bid process and gave his composite offer with full knowledge about the condition of the movable assets lying at the site. Valuation given by the Auction Purchaser being the highest offer in the sum of Rs. 17.05 crores and in excess of the Reserved Price ( i.e. Rs.15 crores), this Court confirmed the sale in favour of the Applicant/Auction Purchaser on October 3, 2008 on usual terms and conditions. 4. Thereafter, the Applicant/Auction Purchaser deposited the amount of Rs. 4,26,25,000 as earnest money. The Auction Purchaser was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries, the Applicant/Auction Purchaser apprehends that it would be difficult to start the factory after getting possession in the changed circumstances. Further, it would also cause unwarranted loss and hardship. It is the case of the Applicant/Auction Purchaser that on account of supervening circumstances arising after confirmation of sale and before delivery of property in question, it may not be now possible to the Official Liquidator to deliver the property to the Applicant as per the expressed promise given in the sale notice and the terms and conditions of sale on "As is Where is and Whatever there is basis" on the date of confirmation of sale, which was the foundation for negotiation. In other words, it will be no longer possible to practically fulfil expressed terms and conditions of the sale as the machineries and other movable properties have become unusable. It is on this premises, the Applicant/Auction Purchaser has approached this Court by way of present Application on 16-3-2009 praying for the following reliefs. "( a )This Hon ble Court be pleased to cancel the confirmation of the sale in favour of the Applicants vide order dated 3-1-2008; ( b )This Hon ble be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmit his valuation report. Accordingly, the said valuer has submitted his report on 21-1-2009. In his assessment the realizable value of the machineries now located in the factory premises as per the opinion and inspection furnished as on the date of inspection, i.e., 29-12-2008 would be around Rs. 13,66,000. This valuation was based on selling price method. Whereas, the distress sale value would be around Rs. 10,93,000. Insofar as the movable assets of the Company(in liquidation) which was in the custody of police authority, the same have been valued at realizable value of Rs. 2,63,000 and distress sale value at Rs. 2,29,000. In other words, realizable value of the assets lying at the factory as also in the custody of police authority together would be around Rs. 16,29,000 and distress sale value thereof would be around Rs. 13,22,000. During the course of hearing, a comparative chart was produced. The same is prepared on the basis of contents of the subsequent valuation report and compared with the first valuation report. It is noticed that about seven items of the aggregate value (as in the first valuation report) of Rs. 1,16,500 are missing from the site. The chart also gives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their custody, as per the valuation report dated 26-2-2009 to M/s. Wasan Realtors Pvt. Ltd. as and when they are informed by Official Liquidator to do so. ( e )Any other and further orders/directions as may be deemed fit and proper." 6. According to the Counsel for the Applicant/Auction Purchaser, the confirmation of sale of Lot No. I in terms of Order dated 3-1-2008 should be set aside in toto and the amount deposited by the Applicant towards earnest money and further deposit should be refunded to the Applicant. The thrust of the argument is that the Applicant/Auction Purchaser had participated in the bid on the basis of representation made in the sale notice and the terms and conditions of sale as well as first valuation report. The Applicant gave their offer with a hope that after the sale is confirmed in their favour, they would restart the factory after taking possession thereof. However, on account of changed situation, it may not be possible to do so. As a result, Applicant/Auction Purchaser would suffer unwarranted loss and hardship. Moreover, the Official Liquidator was not in a position to fulfil his promise of delivery of movable and immovable assets on "As is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traced to Rules 89, 90 and 91, as is observed by the Apex Court in the case of Ganpat Singh v. Kailash Shankar AIR 1987 SC 1443 ( See para-14). Besides the said provisions, it may be useful to keep in mind the parameters provided in Rules 77, 78 and in particular, Rule 90(2) of Order 21 of CPC Rule 77(2) stipulates that on payment of the purchase-money, the sale shall become absolute. In the present case, the purchase money has not been fully paid. Thus, it is possible to contend that the sale has still not become absolute notwithstanding the order of the confirmation of sale. Nevertheless, so long as the confirmation of sale operates, the Auction Purchaser would be bound by the terms and conditions of sale. Rule 78 of Order 21 provides that irregularity in publishing or conducting the sale of "movable property" shall not vitiate the sale but the person sustaining any injury by reason of such irregularity at the hand of any other person may institute a suit against him for compensation or for the recovery of the specific property. We may also keep in mind the principle stated in sub-rule (2) of Rule 90 of Order 21 which provides that no sale shall be set aside on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be necessary to straightaway set aside the order of confirmation of sale on account of damage or loss caused to the movable assets due to supervening circumstances of theft. Insofar as the immovable property is concerned, it is nobody s case that the same has become unusable or completely damaged due to the supervening circumstances of theft. 8. To get over this position, Counsel for the Auction Purchaser vehemently submitted that the Auction Purchaser had participated in the bid with the hope that they would restart the factory. This, in my view, is a tall claim. For, the Applicant/Auction Purchaser company is a Reality company, obviously dealing in properties. There is nothing on record to substantiate the position that running of factory or the business which was conducted by the Company (in liquidation) is within the permissible scope of activities provided in the Articles of Association of the Applicant Company. I have no hesitation in taking the view that the Applicant is using the supervening circumstances as the ploy to resile from the transaction, as it is not in a position to honour its commitments for reasons best known to it. The record substantiates the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt proceeded to give proportionate deduction from the total sum in relation to the short delivery of items and adjusted the equities between the parties but did not cancel the sale. Reliance is also placed on another decision of Calcutta High Court in the case of Manmatha Nath Mukherjee v. Jiaul Huq AIR 1952 Cal. 291. In that case, the Court has observed that generally a sale should be set aside or confirmed in its entirety but this proposition is subject to certain qualifications, as for instance, the bar of limitation, res judicata, etc. It has adverted to earlier decision of the same High Court in Amulya Krishna s case reported in 41 C.W.N.224, which is directly on the point. In that decision, the Court had dismissed the Application for setting aside the entire sale and instead confirmed the sale as regards the share and interest of the Judgment Debtors whose application for such relief were rejected on the earlier occasion. In substance, it is held that there was ample authority that it is permissible to set aside the sale in part. Reliance has also been placed on the decision of the Travancore-Cochin High Court in the case of Lakshmikutty Amma v. Cheruchikutty AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny(in liquidation) after the date of confirmation of sale. The Applicant/Auction Purchaser has not contested the contents of the subsequent valuation report by filing any affidavit before this Court. The argument of the Auction Purchaser was however, very specific. He would contend that the confirmation of sale be set aside in toto and was not interested in continuing with the transaction due to changed situation and he cannot be forced to take the assets in damaged condition, even if the Court were to accept the Official Liquidator s suggestion of providing adjustment of the loss or damage caused to the said property from the sale consideration. 11. For the reasons already mentioned it is not possible to accede to the argument of the Applicant/Auction Purchaser. Instead, I may proceed to consider the request of the Official Liquidator to determine the loss and damage caused due to theft. Going by the second valuation report in contrast to the first valuation report, it is noticed that about 7 items are found completely missing. The value thereof has been provided in first valuation report as Rs. 1,16,500. The movable items which are lying on the factory premises but have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor that the movable assets can then be resold and the loss suffered can be recovered from the Security Agency. This proposal is made by the Official Liquidator on the premises that the Court has power to set aside the confirmation of sale only in part in respect of the movable assets to adjust equities between the parties. With regard to the suggestion of the Official Liquidator to recover the loss to be suffered after resale from the Security Agency, the Security Agency relies on its affidavit filed in this Court to contest the charge of inaction or collusion and has disputed its responsibility to make the good the loss suffered on account of the theft. However, I will not burden this judgment with the said aspect and leave that question to be considered at the appropriate stage a little later by giving liberty to the Official Liquidator to move further report seeking necessary directions in that behalf after the issue qua the Auction Purchaser is finally settled. 13. As aforesaid, the Auction Purchaser is not inclined to accept any offer given by the Official Liquidator. According to him, the sale will have to be set aside as a whole. Ordinarily it would not be possible to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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