TMI Blog2010 (5) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... ich had swelled to a sum of ₹ 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 ₹ 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 ₹ 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditional order dated 12-11-1979 was passed against the order of assessment passed by the Estate Officer. However, the appeal was dismissed on 28-11-1980 because the conditional order dated 12-11-1979 was not complied with. The possession however continued to be with company-in-liquidation. On 15-6-1980 the company illegally leased a part of the property to another firm known as M/s. Engineer Continental (P.) Ltd. respondent No. 3 (for brevity Engineer Continental ). The Corporation filed a petition under section 31 of the State Financial Corporation Act, 1951 which was accepted on 15-3-1983 by the Addl. District Judge, Ludhiana. A second lease deed was executed by the company-in-liquidation on 30-5-1984 in favour of Engineer Continental for an additional area of 3120 sq. feet. On 24-9-1984, the Corporation filed an execution petition against M/s. Pretty Cycle (P.) Ltd. (in liquidation) seeking possession of the land. 3. The Company Petition No. 10 of 1986 against Company-in-Liquidation was filed by M/s. Modula Hatreats and the company was ordered to be wound up on 19-2-1987 and possession was taken over by the Official Liquidator, The Corporation filed C.P. No. 141 of 1987 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (M/s. Pretty Cycles (P.) Ltd.). It was also clarified that total area is 6556 sq. yds. and it was on lease. The notice mentioned reserved price to be Rs. 80.21 lakhs. On 29-2-1996 negotiations were held between the highest bidder including Engineer Continental-respondent No. 3 and eventually M/s. Leisure Wear Fashions - respondent No. 2 was found to be the highest bidder for Rs. 1,32,00,000. The aforesaid fact is evident from the minutes of the proceedings of the Sale Committee headed by one Mr. Sudhir Mittal, IAS, Managing Director in the presence of the Official Liquidator. These proceedings deserves to be read in extenso : " M/s. Pretty Cycles. Ludhiana The Corporation in response to the advertisement for sale of the properties of the captioned concern in terms of orders of the Hon ble High Court received 7 offers. Before the tenders could be opened at 3.45 PM two bidders namely M/s. Surpal Cycles Ltd. and M/s. Anand Industries requested to withdraw their tenders. Accordingly, the members and Official Liquidator accepted their request and their tenders were returned to them. Then other 5 tenders were opened in the presence of members, of the sale committee, Mr. M.K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms shall be made to get the vacant possession. Decision was also taken by the Sale Committee on the advise of Official Liquidator that payment of outstanding amount, if any, against the land shall be made by the Corporation and not by the purchaser out of the sale proceeds, to the Government Agency which had allotted plot of land to the promoter." 5. The learned Company Judge in his order dated 21-3-1996 has noticed that the Official Liquidator did not have any objection to the confirmation of sale and also recorded his submission that the amount fetched in auction is over and above the dues of the Corporation, who was a secured creditor. It was indicated that the amount deserved to be paid to the Corporation. Accordingly the learned Company Judge confirmed the sale. He also issued directions to the Civil Judge (Jr. Division), Ludhiana to dispose of the suit seeking ejectment of Engineer Continental respondent No. 3 as expeditiously as possible and preferably within six months. The order dated 21-3-1996 of the learned Company Judge confirming the sale deserves to be read in extenso which reads thus : "After hearing learned counsel for the parties and perusing the recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. On 29-3-1996 the auction purchaser-(M/s. Leisure Wear Fashions) was asked to deposit 25 per cent of the auction proceeds. Accordingly a total amount of Rs. 33 lakhs was paid on 30-3-1996. On 7-5-1996 an agreement to sell was executed between the auction purchaser and the Corporation with the stipulation that dues of the Estate Officer, PUDA were to be paid out of the sale consideration. The auction-purchaser (M/s. Leisure Wear Exports-respondent No. 2) was given possession of the vacant property on 14-5-1996 which obviously excluded the portion under the occupation of Engineer-Continental respondent No. 3. The auction purchaser then started raising various demands which were not within the four corners of the conditions of auction. On 24-7-1996 it was represented that proportionate interest be charged from them by the Corporation in proportionate to possession of land area delivered. On 25-7-1996 they made another representation for payment of balance instalment after physical possession of the remaining property was delivered. A request was also made for payment of balance amount in instalments on 26-8-1996. The demand appears to be accepted. On 27-9-1996, first instalment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plot in question to Punjab Financial Corporation instead of restoring it to the original allottee, at a price of Rs. 600 per sq. yd. The rate offered by PUDA has been accepted by Punjab Financial Corporation. Mr. Prabhakar has placed two photocopies of letters in that behalf, which are taken on record. Mr. Prabhakar seeks three weeks time to complete the formalities. Adjourned to 26-2-1999." 10. On 3-6-1999 the learned Company Judge directed the auction purchaser to appear before the Managing Director of the Corporation for reconsideration of the whole issue. 11. On 9-6-1999 auction purchaser-respondent No. 2 filed a representation for refund of Rs. 33 lakhs and requested for cancellation of sale in their favour. On 6-7-1999 the request of the auction purchaser-respondent No. 2 was declined by the Managing Director. However, respondent No. 2 applied for re-schedulement of instalments and it was to put up the same with some concrete proposal. 12. On 12-7-1999, Company Application Nos. 343 and 344 of 1996 were filed with a prayer for amendment of the Company Application No. 341 of 1996 to substitute the prayer to cancellation of lease deed and grant cost of shed rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the paper book) it was stipulated between the Corporation and the auction purchaser that the transfer was to be effected only after the receipt of full consideration as is evident from clause 5( i ) the Corporation has also undertaken to pay the outstanding dues as per the minutes of the Sale Committee which have been noticed in the order dated 21-3-1996 confirming the sale. 15. Mr. G.S. Sandhawalia has also attacked the reasoning adopted by the learned Company Judge concerning possession of M/s. Engineer Continental-respondent No. 3 and ignorance of the auction purchaser with regard to delay in obtaining full possession. He has argued that the aforesaid line of reasoning is against the record because of the following facts. ( i )In Company Petition No. 79 of 1995 filed by the Official Liquidator, the presence of the tenant M/s. Engineers Continental (P.) Ltd.-respondent No. 3 was specially mentioned and he was arrayed as respondent No. 3. ( ii )In the status report dated 2-2-1996 filed by the corporation giving value of the property it was specifically mentioned that M/s. Engineers Continental Pvt. Ltd. - respondent No. 3 was a tenant of the company-in-liquidation, induc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold the same as a trustee. Till the payment of entire sale consideration in terms of this agreement. The purchaser shall hold on the said property as trustee on behalf of the transferor and shall be liable for criminal breach of trust if the purchaser fails to pay the balance sale consideration and also to recovery the property in the same good condition to the transferor. 5.( i ) The deed of transfer shall be executed by the transferor after receipt of full consideration as agreed upon above and also obtain N.O.C. from Estate Officer, Punjab Urban Development Authority. But dues if any of Estate Officer. Punjab Urban Development Authority/the department which allotted Plot No. C-80 to Pretty Cycles (P.) Ltd., Ludhiana, shall be paid out of the sale consideration. 5.( v ) In the event, the purchaser failing to make the balance payment of Rs. 99 lakhs (Rupees ninety nine lakhs only) or any part thereof together with interest in the manner mentioned above to the transferor within the said stipulated period or in case of breach of any of the above convenants, the amount of Rs. 33 lakhs (Rupees thirty three lakhs only) and other amounts already paid to the transferor sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Engineering Continent. ( d )Even a direction was given by the learned Company Judge on 21-8-1998 to the Appellate Court to decide the appeal filed by Engineering Continental with respect to the aforesaid decree dated 5-5-1998 at the earliest, preferably on the next date of hearing. Further direction was issued to the Estate Officer Urban Estate, Ludhiana to ensure the release of the resumed plot at an early date. That in pursuance of directions dated 21-8-1998, the Estate Officer, PUDA agreed to sell the resumed plot to the Corporation instead of restoring it, at a current market price of Rs. 600 per sq. yard. ( e )That before the learned Company Judge on 3-6-1999, grievance was made by the auction purchaser that he is handicapped to develop his unit as the entire possession of the auction plot had not been given to him and, therefore, a prayer for re-schedulement of the payment of the due instalments. The learned Company Judge vide its order dated 3-6-1999 directed the Managing Director of the Corporation to reconsider the issue sympathetically so as to safeguard the interest of both auction purchaser and the Corporation. However, contrary to his earlier stand in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e auction purchaser has failed to deposit till date any of the due instalments and enjoying the property by paying a paltry amount of 25 per cent earnest money alone. It is pertinent to mention that the appeal of the unauthorised occupant of Engineers Continental-respondent No. 3 filed against ejectment decree dated 5-5-1998 has been consigned to the record room by the Addl. District Judge, Ludhiana on account of their non-appearance on 27-7-2009." [Emphasis supplied] 17. Mr. Amit Rawal, learned counsel for the auction purchaser-respondent No. 2 has supported the order passed by the learned Company Judge and has argued that categorical findings have been recorded by the learned Company Judge and there was no valid title with the corporation at the time of execution of sale agreement in favour of the auction purchaser and admittedly a part of the premises was in possession of tenant-respondent No. 3 namely M/s. Engineers Continental and that litigation was pending for the last three years. He has also pointed out that there was huge delay in delivery of possession with remote possibility of ejectment of tenant - respondent No. 3 which is proved by the fact that the matter is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conceded position that PFC did not have a valid title to the property at the time of execution of the sale agreement in favour of the applicant, the auction purchaser. It is also the admitted case that a major portion of the property sold to M/s. Leisure Wear Exports Ltd. is in possession of M/s. Engineers Continental, allegedly a tenant on a part of the premises. As per the minutes of the meeting of the sale committee held on 29-2-1996, it was given out to the intending purchasers that about 40 per cent of the premises is in occupation of the tenant though it has no legal right therein and the committee members assured the intending purchasers that the PFC shall make all efforts to get the vacant possession by evicting the tenant whose status in the premises was like that of a trespasser as the Company was not competent to lease out the factory without the consent of the PFC. The Official Liquidator also explained the position about the status of the tenant and assured that all efforts shall be made to get vacant possession. It was perhaps in this situation the property was purchased by M/s. Leisure Wear Exports. From the assurance given by the sale committee, it can safely b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest on the amount deposited by it, at the rate of 12 per cent per annum with quarterly rests and in the same manner as is being charged by the PFC on its term loan. The reduction in rate of interest from 18 per cent to 12 per cent will compensate the PFC about the use and occupation of the premises by the auction purchaser. The auction purchaser also concededly raised some construction over the portion, the possession of which was delivered to it, and installed some machinery. The sale having been set aside, it will be open to the auction purchaser to remove all movable assets installed by it at its own costs but the construction, if any, raised by the auction purchaser shall vest in the PFC free of costs and it will also offset towards the amount of compensation for use and occupation. Since the interest has been allowed only at the rate of 12 per cent on the earnest money and the construction raised also goes to the PFC, I set aside the sale and direct the PFC to refund the amount of Rs. 33.03 lakhs deposited by M/s. Leisure Wear Exports, being 25 per cent of the earnest money, along with interest at the rate of 12 per cent with quarterly rests, from the date of deposit ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( c )Unamended CA No. 341 of 1996 was filed with the prayer that resumed plot be transferred in the name of the auction purchaser in which notice was issued to the Estate Officer, Ludhiana since plot was earlier resumed on 15-10-1976 and vide order dated 29-1-1999 with the intervention of the Court, the property was agreed to be re-sold to the corporation at the rate of Rs. 600 per sq. yd. approximately for a sum of Rs. 40 lakhs which was paid out of the sale proceeds of only Rs. 33 lakhs and the balance was paid by the Corporation out of its funds in anticipation of getting the balance 75 per cent from the auction purchaser. ( d ) Vide sale agreement dated 7-5-1996 the auction purchaser had agreed that the transfer will only be after the receipt of full consideration under clause 5( i ) (reproduced hereinabove) and the Corporation was to pay the outstanding dues as per the meeting of the Sale Committee and as noticed in the order of confirmation dated 21-3-1996. 2. That the reasoning in support of the conclusion that the Engineers Continental-respondent No. 3 was in possession and the auction purchaser-respondent No. 2 was not aware of the delay in getting full possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at every opportunity had used the process of Court for getting the possession of the plot. The learned Company Judge while confirming the sale vide order dated 21-3-1996 had directed the learned trial Court to dispose of the suit filed by the Corporation and auction purchaser for possession and also ejectment of unauthorised occupant from portion of the plot in question, as expeditiously as possible preferably within six months. The confirmation of sale was further subject to the payment of amount by the auction purchaser as agreed in negotiations and in terms of the advertisement. Accordingly, the auction purchaser had entered into agreement date 7-5-1996 with the Corporation with open eyes, which provided that in case of default in payment of balance 75 per cent of the auction money as per the stipulated time schedule, the property was liable to be resumed and possession taken by the Corporation. The auction purchaser was put in possession on the vacant part of the plot in question on 14-5-1996 subject to the terms and conditions of the agreement. It is the auction purchaser who on some pretext or the other has not fulfilled his part of the contractual obligation by not paying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be persuaded by completely overlooking the aforesaid discussed 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. 23. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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