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TMI Blog2013 (4) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... Coach Builders Limited was ordered to be wound up by this Court. In the process of liquidation, the assets belonging to the Company-in-liquidation was to be realised. At the same time, the second respondent- Karnataka State Financial Corporation ('KSFC for short) claimed right under Section 29 of the SFC Act as a secured creditor. Though the KSFC was not permitted to stand outside the process of winding up, they were permitted to sell the property in association with the Official Liquidator and KSIIDC. In that regard, C.A.No.394/2004 was allowed on 14.07.2006. On securing valuation of the property, the sale of assets of the Company-in-liquidation was advertised in the Newspapers on 02.11.2006. The applicant was one among the 12 bidders. In the inter se auction held on 11.12.2006, the applicant offered the highest price of Rs.700 lakhs in addition to which the dues to KIADB and BESCOM was agreed to be paid by the applicant. The entire amount was deposited by the applicant pursuant to which the KSFC filed C.A.No.1719/2006 seeking confirmation of the sale in favour of the applicant. The said application was allowed on 29.01.2007 confirming the sale. 3. The applicant was thereafter pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the person who is representing the applicant to prosecute the instant application is also called in question. 6. The Official Liquidator has also filed the objection statement wherein the entire sequence of events have been referred including the order which resulted in the setting aside of the sale. Subsequent to the same, the events with regard to the refund of the auction sale price amount and the sale of the scrap material by the KSFC has also been referred. The thrust of the case on behalf of the Official Liquidator is that the sale of the property belonging to the Company-in-liquidation was permitted to be carried out by the KSFC and they have carried out the sale. Hence, insofar as the claim of the applicant, it is contended that keeping the said aspects in view suitable orders be passed by this Court. 7. In view of the rival contentions urged and the claim put forth by the applicant being disputed, the matter had been set down for evidence. Sri D.Y. Muralidhar Rao, the Power of Attorney holder ('POA holder' for short) on behalf of the applicant was examined as P.W.1 and the documents at Exhs.P1 to P64 have been marked. The said witness has been cross-examined at great ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. The decision in the case of State Bank of Travancore v. M/s. Kingston Computers (I)(P) Ltd. [2011] 107 SCL 377 (SC) relied on by the learned counsel for the KSFC is in the case where a Director was representing based on resolution which had not been proved. In the instant case, POA was executed by a competent person representing the applicant company favour of the Donee of the power. In fact the said person is not representing the applicant for the first time in this proceedings. To the knowledge and acceptance of KSFC, the POA holder has been representing the applicant from the stage of auction and also in the earlier Court proceedings relating to confirmation of sale and the appeal thereof. Hence, the contention that the POA has been fabricated to file the application which he is not authorised cannot be accepted. In fact the tenor of the cross-examination and the answers given would indicate that the said witness had personal knowledge of all facts due to the representation on behalf of the company from the beginning. In any event, the claim made in the instant application is on behalf of the company and the POA holder is the Vice-President of Reliance Retail Limited, one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the applicant is for the improvement of the property and use it for their business purpose. As such the applicant is entitled to the expenses incurred as they have been denied the benefit of the property and would not be able to recover the investment made as a business proposition. 14. On noticing the rival contentions, I am of the opinion that the issue requires to be examined from two different facets. Firstly, the question as to whether an auction purchaser with notice of the Court proceedings against the sale can be considered as a bona fide purchaser or not would arise only in a circumstance when the auction sale of the property made for recovery of the money is subsequently set aside and in such circumstance/if the auction purchaser seeks to resist the restitution of the property to its original owner and contends that he is entitled to retain and continue in possession of the property. In my opinion in such a case, the question as to whether he was a stranger purchaser or as to whether he had notice of the objections raised against such sale or whether any other proceeding was pending would become relevant. 15. The other facet is, the way in which it shall be deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court would indicate that in appropriate proceedings and in appropriate facts, a claim for the recovery of expenditure can be maintained. If that was not the intention, the prayer made would have been rejected outright by the Hon'ble Supreme Court at that stage itself. Further guidance is also available in the subsequent proceedings relating to the same case of Allahabad Bank v. Bengal Paper Mills Co. Ltd. [2004] 55 SCL 368 (SC). The said proceeding in the same case would indicate that the auction purchaser had subsequently filed an application seeking clarification of the order passed earlier wherein refund was ordered and leave was granted to seek for expenditure. The clarification sought was that on the sale amount refunded, interest also be paid. The said application was no doubt rejected by the Hon'ble Supreme Court. But, a perusal of the said order at para-5 would indicate that pursuant to the liberty given by the Hon'ble Supreme Court in the earlier order, the auction purchaser had filed an application before the High Court seeking payment of the amount expended for the revival of the company and the said application was allowed and was pending in appeal. 18. In that reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its claim for the expenses incurred and that would depend on facts of each case keeping in view the benefits derived by each of the parties, which has to be determined and quantified in terms of money and any order can be made only after undertaking that exercise. Keeping in view the said guidance, it is seen that in the case on hand, the applicant was put in possession of the property on 14.02.2007 and the sale was set aside on 19.12.2008. During the said period, the applicant was in possession of a property which was not maintained and consisted of dilapidated structure. Though the learned counsel for the KSFC relied on Mahazar dated 14.02.2007 (Ex.R-1) to contend that handing over possession does not show it was a dilapidated structure, the fact that the winding up order was passed on 30.11.1990 and the sale was on 29.01.2007 will speak volumes about the property devoid of maintenance. It is towards carrying out improvement of the property, the applicant claims to have invested the amount in the property. The status quo order was passed on 07.08.2007. Therefore, the applicant has not put the property to use so as to derive benefit or advantage from the same. On the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by JB Security and Housekeeping services 'confirming that the security services was provided by them from 21.01.2007 to 31.08.2009 with the break up details, and acknowledging receipt of Rs.10,90,535.07ps. Ex.P38 is the invoice dated 08.06.2007 of Geo Engineering Pvt. Ltd. amounting to Rs.68,539/- for the work indicated therein and the payment of the same is as per the demand draft dated 25.06.2007 at Ex.P39. By Ex.P40 dated 25.07.2007 and Ex.P41 dated 11.09.2007, the applicants are claiming the amount of Rs.1,50,000/- paid to Sri B.N. Shekar towards liaison charges for obtaining power supply. Ex.P42 dated 03.07.2007 and Ex.P43 dated 16.07.2000 are for claiming Rs.22,000/- paid to Sri M. Yogish towards professional charges for obtaining approval of the sanctioned plans from K1ADB. The Ex.P44 dated 23.05.2007 and Ex.P45 are towards claiming Rs. 20,807.90ps for carrying out topographical survey of the property. Ex.P46 is also in this regard and Ex.P47 is the counterfoil of the demand draft which includes the payment towards topographical survey. The receipts of the Registrar's office for registering the cancellation deed and the expenses thereto is as per Ex.P48 and 49. The payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty which would be beneficial to the company and creditor, irrespective of the pendency of the litigation, the refund can be sought on establishing it as a fact. The mere pendency of litigation was not a bar but certainly no fresh investments if made after the interim order can be claimed. The Court notice at Ex.P-9 and 10 will disclose the appeal was filed belatedly and notice was received by the applicant towards end of May 2007and status quo was ordered only on 07.08.2007. The exhibits noticed with reference to the dates will indicate that the process of work had commenced earlier though payment in some cases is subsequent. The said amount in any event had become payable. With regard to the bills being raised in the name of Reliance Industries Ltd and Reliance Retail Ltd and the demand drafts for payment having been issued in the name of Reliance Retail Ltd, it is explained that the applicant company as also the Reliance Retail Ltd are wholly owned subsidiaries of the Reliance Industries Ltd., and they were concerned with project implementation. Further as seen from the counterfoils of the demand drafts, more particularly at Ex.P16, P18, P20, client references made is to Himadri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges is for six borewells. Keeping the above aspects in view, the amount indicated against the following exhibits are payable to the applicants: Exhibits Rupees (i) Ex.P13 Borewell charges paid to KIADB for permission 20,000.00 (ii) Ex.P14 Water divining charges 2,000.00 (iii) Ex.P15 & 16 Civil works as detailed therein 6,12,010.00 (iv) Ex.P17 &18 Groundwater investigation 32,943.00 (v) Ex.P19 & 20 Civil works-final bill-as detailed therein 8,90,256.00 (vi) Ex P37 (with Ex.P59) Security charges 10,90,535.00 (vii) Ex.P38 and 39 Geo Technical Investigation 66,984.00 (viii) Ex.P21, 22 and 58 submersible pumps and pipes 2,21,763.00 (ix) Ex.P44, 45a & 46 Topographical survey 18,519.00 Total 29,55,010.00 25. Though the Exhs.P23 to P35 indicate the expenses incurred by the applicant towards electricity charges and water consumption charges, the same is spent during the period when the applicant was in occupation and has been consumed for their purpose which would not be of benefit to the Company-in-liquidation. Hence, the said amount in any event would have to be borne by the applicant and would not be recoverable. The amount claimed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any amount is held to be payable. 27. In that regard, it cannot be in dispute that though the property was sold by the KSFC, the same was in association with the Official Liquidator and when such responsibility is cast on the Official Liquidator also to ensure the sale be conducted in accordance with law and when the Division Bench has found fault with the procedure, there would be joint responsibility. However, in the instant case, the undisputed position is that the dismantled steel structures and other materials which was available in the property due to the work of dismantling carried out by the applicant, which would in a normal circumstance have enured to the benefit of the applicant has been subsequently sold for Rs.21,00,000/- by the KSFC. The said amount is available with the KSFC. Further, when the property is re-auctioned, it would fetch a higher value and the liability of the KSFC in any event would be recoverable. The said amount with accrued interest will cover the major portion of the amount which is held as payable to the applicant. The balance amount shall also be borne by the KSFC for the present since no steps have been taken so far to sell the property despi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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