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TMI Blog2008 (11) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... actories be directed to either return the properties and assets removed by it, or to pay the additional costs as per the valuation. (b)C. A. No. 385 of 2007 filed on April 3, 2007, by M/s. Gupta Refractories for an order excluding the structures, machines and other movable goods lying at the premises situated at Banmore Industrial Area, Tehsil Morena, Madhya Pradesh, from the preview of the auction proceedings ordered to be held pursuant to the orders of this court. (c)C. A. No. 706 of 2007 filed on July 17, 2007, by the auction purchaser Cosmos Wampun P. Ltd. (Cosmos), the purchaser of the assets of the company in liquidation for Rs. 6.15 crores in the court auction held on April 26, 2007, whereby it seeks a direction to the official liquidator to execute conveyance documents in respect of the immovable property of the company in liquidation purchased by the applicant in its favour or in favour of its nominee and to complete all the requisite formalities in respect thereof. The applicant also seeks compensation for the delay in the completion of the said process. (d)C. A. No. 992 of 2007, filed on September 19, 2007 and C. A. No. 1031 of 2008, filed on September 16, 2008, by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f electricity dues owed to the Madhya Pradesh State Electricity Board, as arrear of land revenue. When the MPFC learnt of the aforesaid proclamation it objected to the proposed auction before the Tehsildar, Recovery Officer Morena by filing objections dated July 25, 2001. 3. It appears that the Collector and Tehsildar, District Morena fixed the auction on July 24, 2001, in terms of its aforesaid proclamation. However, the same was postponed till July 26, 2001. The objections preferred by the MPFC were rejected. The machinery/plant, etc., of the company in liquidation was purportedly shown to the bidders. The Tehsildar, Morena in his proceedings of July 26, 2001, records that the "movable property" of the company in liquidation was offered for inspection by 17 persons attending the auction. The auction of the "movable properties" was started from the amount of Rs. 35 lakhs and the highest bid of Rs. 52 lakhs was offered by Shri J. P. Gutpa of M/s. Gupta Refractories, Gwalior. It was further recorded that the estimated value of the property sold in auction had been assessed by Shri A. K. Pathak at Rs. 4,78,800. M/s. Gupta Refractories deposited 25 per cent. of its bid amount of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quidation valued vide order dated September 8, 2005, the court directed the issuance of the sale proclamation. Since the sale could not take place, a fresh valuation was ordered by this court on October 13, 2006, in respect of land, building, plant and equipment available in the factory. On March 15, 2007, the court directed issuance of the fresh composite sale proclamation for the land, building, structures and various machines of the company in liquidation lying at the factory premises in Morena. On April 3, 2007, M/s. Gupta Refractories preferred C. A. No. 385 of 2007 to say that they were concerned with the movable goods and machinery and structures owned by the company in liquidation which they had purchased in the auction proceedings conducted by the Tehsildar and Collector Morena as aforesaid. Their bid of Rs. 52 lakhs being the highest had been accepted by the Tehsildar and the Collector. It was stated that some movable goods lying at the factory premises of the company in liquidation were delivered to the applicant M/s. Gupta Refractories from February 12, 2002 to February 25, 2002. It was further stated that initially the Madhya Pradesh High Court had stayed the delivery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory premises of the company in liquidation at Banmore Industrial Area, Tehsil Morena, Madhya Pradesh, from the purview of the auction proceedings being held by the official liquidator. 7. C. A. No. 385 of 2007 was listed before the court on April 4, 2007. The court directed the issuance of notice of the application to the non-applicants. The same was adjourned to April 26, 2007. On April 26, 2007, the applicant M/s. Gupta Refractories sought an adjournment to file certain additional documents in support of C. A. No. 385 of 2007. Consequently, the application was adjourned to May 24, 2007. On April 26, 2007, itself, the bids received from the various bidders were opened and open bidding was held in the court. Cosmos emerged as the highest bidder with a bid of Rs. 6,15,00,000. The court accepted the highest bid of Cosmos and directed that upon payment of the entire amount the highest bidder would be entitled to take possession of the property of the company in liquidation and to deploy its own security guards on payment of 25 per cent. of the bid amount. The court further directed that the auction purchaser, i.e., Cosmos shall not remove the machines from the premises till the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a company within six months before commencement of its winding up is deemed to be a fraudulent preference of its creditors and would be invalid. It is argued that the sale of the property by the Tehsildar and Collector, Morena, in pursuance of the sale proclamation published in Dainik Bhaskar on June 26, 2001, under section 147C of the Madhya Pradesh Land Revenue Code, 1959, is void, as it had been undertaken after the commencement of the winding up proceedings of the company in liquidation, without the permission of this court. 9. Having considered the aforesaid submission of learned counsel for the MPFC, Mr. R. D. Makheeja, I am not inclined to set aside the auction sale conducted by the Tehsildar and Collector, Morena, in respect of the movable properties of the company in liquidation situated at its factory premises at Morena on the ground that the said auction sale is hit by the aforesaid provisions of the Companies Act, 1956. No doubt the final opinion of the BIFR under section 20 of the SICA opining that the company in liquidation should be wound up in public interest was registered in this court as C. P. No. 25 of 1998 in the year 1998. However, it appears that no effecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said, whereby M/s. Gupta Refractories had been allowed to remove the remaining goods as well. This court observed that the company had been ordered to be wound up thereafter and the factory premises at Morena had been sealed by the official liquidator because of which M/s. Gupta Refractories were not able to remove the goods. The official liquidator did not deny the averments made in C. A. No. 1453 of 2004. The court observed : "Since the applicant had purchased the goods in public auction much before passing of the winding up order, it is made clear that in so far as the present proceedings are concerned, there is no impediment for removing the goods by the applicant. The applicant would, therefore, be entitled to remove these goods subject to the order that may be passed by the Madhya Pradesh High Court in the writ petition pending before it. The official liquidator shall deseal the premises to enable the applicant to remove the goods and after the goods are removed, the premises shall be sealed again." 11. Therefore, the view taken by this court in the said order dated April 4, 2005, was that the auction sale conducted by the Tehsildar, Morena, on July 26, 2001, was prior to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, and the rejection of the objections of MPFC by the Tehsildar on July 26, 2001, is concerned, the said issues are not being gone into by me at this stage. The issue whether the claim of MPFC had priority over that of Madhya Pradesh State Electricity Board and, if so, the effect thereof on the right of appropriation of Rs. 52 lakhs realised by the Tehsildar in auction conducted by him can be determined only after hearing being granted to Madhya Pradesh State Electricity who would be directly affected by the determination of that issue. No arguments have been heard be me on that aspect of the matter, and this aspect is not being decided by me at this stage. 15. Similarly, the claim of MPFC that the valuation at which the movables were sold to M/s. Gupta Refractories was low is also not being gone into at this stage. Pertinently, even the complete valuation report of M/s. Pathak and Associates with its annexures have not been placed on record. In the absence of the same that issue cannot be considered. 16. As to whether M/s. Gupta Refractories have removed only the movables, or even the immovable properties by cutting and dismantling the same, is also an issue which cannot be dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the number of guards were reduced from 20 per day to 2 per day to reduce the expense on maintenance of security at the factory premises. 20. The MPFC has placed on record the offer it had received on February 7, 2001, from Malik Enterprises P. Ltd., whereby they had offered to purchase all the assets except land and office building, i.e., the complete plant along with machinery, electronic goods, motor transformer set and other store goods, power house, etc., except office and land for an amount of Rs. 2,21,00,781. It is argued that the amount of Rs. 52 lakhs bid by M/s. Gupta Refractories is far too less and it was never the intention of any of the bidders at the auction held by the Tehsildar that the plant and machinery which is attached to the earth and is an immovable property was being offered for sale. Another offer was received from Khan and Sirohi Electro Mechanical on May 30, 2001, whereby they had similarly made an offer to purchase all the assets excluding the land and building at the site for Rs. 2.25 crores. 21. A perusal of the application C. A. No. 385 of 2007 shows that the applicant, M/s. Gupta Refractories are seeking the inclusion of, inter alia, the structu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s "in respect to the machinery of the defaulter consumer company, the present auctioneers shown the same on spot and initiated the said proceedings. By leaving to land, building and other permanent fixtures, the auctioneers started the auction of plant and scrap. Because the land is related with industrial department, therefore auction proceeding for land and building will be initiated thereafter. The movable assets of this consumer company were inspected to all 17 persons as participants in the auction and thereafter knowledge of auction proceeding was given to them and an amount of Rs. 25,000 was deposited by every participant of auction as a security amount and thereafter the auction proceeding was started. Auction of this moveable asset was started with an amount of rupees thirty five lakhs and last bid of auction was fixed on rupees fifty two lakhs (highest), which was done by Shri J. P. Gupta, M/s. Gupta Refectories, Gwalior. No other person was called excessive bid against such highest bid, therefore this bid was confirmed as last and final. A cheque of rupees thirteen lakhs, i.e., one-fourth of the last bid (rupees fifty two lakhs) was deposited." 24. The Nazir, Tehsil Mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake into consideration the intention of the parties (sic party) when it decided to embed the machinery, whether such embedment was intended to be temporary or permanent. A careful perusal of the agreement of sale and the conveyance deed along with the attendant circumstances and taking into consideration the nature of machinery involved clearly shows that the machinery which have been embedded in the earth to constitute a fertilizer plant in the instant case, are definitely embedded permanently with a view to utilise the same as a fertilizer plant. The description of the machines as seen in the schedule attached to the deed of conveyance also shows without any doubt that they were set up permanently in the land in question with a view to operate a fertilizer plant and the same was not embedded to dismantle and remove the same for the purpose of sale as machinery at any point of time. The facts as could be found also show that the purpose for which these machines were embedded was to use the plant as a factory for the manufacture of fertilizer at various stages of its production. Hence, the contention that these machines should be treated as movables cannot be accepted." 27. The sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be moved from the place where it is erected as it is, and if it becomes necessary to move it, it has first to be dismantled and then re-erected at another place. This factual position was also accepted by the adjudicating authority. The technical member, however, held that the aforesaid decision was of no help to the appellant inasmuch as a leading international manufacturing firm had offered such machines for export to different parts of the world. He further observed that though on account of their size and weight, it may be necessary to shift or transport them in parts for assembly and erection at the site in the steel plant, they must nevertheless be deemed as individual machines having specialised functions. We are not impressed by this reasoning, because it ignores the evidence brought on record as to the nature of processes employed in the erection of the machine, the manner in which it is installed and rendered functional, and other relevant facts which may lead one to conclude that what emerged as a result was not merely a machine but something which is in the nature of being immovable, and if required to be moved, cannot be moved without first dismantling it, and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have earlier noticed the processes involved and the manner in which the equipments were assembled and erected. We have also noticed the volume of the machines concerned and their weight. Taking all these facts into consideration and having regard to the nature of structure erected for basing these machines, we are satisfied that the judicial member of CEGAT was right in reaching the conclusion that what ultimately emerged as a result of processes undertaken and erections done cannot be described as 'goods' within the meaning of the Excise Act and exigible to excise duty. We find considerable similarity of facts of the case in hand and the facts in Mittal Engineering Works P. Ltd. v. Collector of Central Excise [1997] 106 STC 201 ; [1997] 1 SCC 203 and Quality Steel Tubes P. Ltd. [1995] 2 SCC 372, and the principles underlying those decisions must apply to the facts of the case in hand. It cannot be disputed that such drilling machines and mudguns are not equipments which are usually shifted from one place to another, nor is it practicable to shift them frequently. Counsel for the appellant submitted before us that once they are erected and assembled they continue to operate from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not a case of sale of specific property in a deliverable state. However, in the present case, there was no agreement that M/s. Gupta Refractories would remove from the factory premises of the company in liquidation, any property other than that which was already in a movable state. The auction sale was not in respect of the equipment, machinery and structures which were not a movable state. Similarly, the decision of the Supreme Court in P. Udayani Devi v. V. V. Rajeshwara Prasad Rao [1995] 3 SCC 252 has no relevance to the facts of the present case. This case pertained to the scope of the power of the High Court under section 115 of the CPC. It was held that what was sold in execution of a decree is a question of fact and the High Court's interference in exercise of revisional jurisdiction under section 115 with findings of fact of the lower court is not called for. 31. Reliance placed upon CIT v. Bhurangya Coal Co. [1958] 34 ITR 802 (SC), also appears to be misplaced. In that case there were two agreements. First pertained to immovable property, described in Part-I of Schedule and the second pertained to movable properties described in Part-II of the Schedule. It was argued th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t either the report of M/s. Pathak and Associates is way off the mark, or it does not include the plant and machinery and pertains only to the bare movables. 33. So far as the challenge to the report of the Tehsildar that M/s. Gupta Refractories have removed all the movables and that nothing further remains to be removed by them is concerned, the applicant M/s. Gupta Refractories have not made any submission in support of this contention. This issue has been raised by them before the Madhya Pradesh High Court in a separate writ petition. In any event, the directions that I propose to issue would address this concern of the applicant M/s. Gupta Refractories. 34. Under the orders of this court dated October 13, 2006, M/s. Chadha and Associates prepared a valuation report of the factory premises including the plant and machinery, land and building dated December 4, 2006. In this report, the valuer reports : "1.02 We had physically verified and inspected the machines together with the rep. of the court (Mr. Khurana), Shri B. L. Chadha of M/s. Chadha and Associates again on December 1, 2006. No plant and machinery is in complete form. The removable parts of the entire plant and machi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es started removing the articles for the first time. The local commissioner shall record the claims made by one or the other party present at the time of inspection with regard to any item found at the site. The local commissioner shall also associate with him an independent mechanical engineer of at least five years experience, who shall visit the factory site along with the local commissioner. The local commissioner shall record the opinion of the mechanical engineer, with regard to each of the items of plant and machinery and other movable/immovable properties found at the site in his report, and also his opinion with regard to the missing machinery, parts of machinery, if any, which according to the accompanying expert would have been an essential part/item of the plant and machinery. He shall co-relate the same with the inventories of the items removed by M/s. Gupta Refractories. The local commissioner shall also take the assistance of a professional photographer and shall take photographs of all the properties found at the site. The local commissioner shall also estimate with the help of the expert mechanical engineer, the scrap value of the parts/machinery, if any, found mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises, which includes movables, if any. M/s. Cosmos has not been able to use and exploit the asset purchased by it in court auction for Rs. 6.15 crores since April 26, 2007. Therefore, I direct that soon after the conclusion of the inspection, M/s. Cosmos would be entitled to deal with all the properties found on the factory premises of the company in liquidation, irrespective of the fact that there may be some items at the factory premises of the company in liquidation over which M/s. Gupta Refractories may lay their claim. The claim of M/s. Gupta Refractories for such items, if found admissible, would be met from out of the sale proceeds deposited by M/s. Cosmos, or adjusted from the value of any immovable property, i.e., machinery/parts of machinery (which is classified as immovable property), and which may have been already removed by it. This arrangement would enable M/s. Cosmos to deal with the asset for which it has paid a substantial amount of Rs. 6.15 crores some time after April, 2007 and they would not have to further await the adjudication of the claims/liabilities, if any, of M/s. Gupta Refractories. 39. I further direct the official liquidator to execute the conve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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