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Kirit Morzaria Versus International Coach Builders Ltd., Karnataka State Industrial investment and Development Corporation Ltd., Mis. Himadri Enterprises Pvt Ltd., Karnataka State Financial Corpn., Anriya Project Management Services Pvt. Ltd.,

2008 (12) TMI 784 - KARNATAKA HIGH COURT

Appeal No.6/2007 - Dated:- 19-12-2008 - Mr. V. Gopaia Gowda And Mr. Arali Nagaraj, JJ. Sri Slirfyas Jay asimha, Adv for the appellant. Sri Deepak, R. Ramesh, Ajoy Kumar Patil, S.G. Pndit And A.C. Chetan for the Respondent. JUDGMENT The appellant who is a shareholder and Ex-Director of the first respondent-Company has preferred this appeal seeking setting aside of the order dated 29.1.2007 passed in CA 18/2007 in CA No.1719/06 in Company Petition No.131/88 on the file of the learned Company Judge .....

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idator and the 2nd respondent - Karnataka State Industrial Investment Development , Corporation (KFSC' in short). The Court has observed in the said Order that protection of pari-pasu in favour of workmen will be passed at the time of confirmation of the bid when the amount is deposited by the bidder. (b) In pursuance of the said order, KSFC, along with official liquidator, issued sale notification for the sale of the land and building of the first respondent company bearing Sy.No.85 of KIAD .....

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the aforesaid newspapers. Its offer was ₹ 700 lakhs. (C) The appellant herein filed CA 18/2007 in CA 1719/2006 that was filed by the KSFC in Co.P 131/88 seeking to implead himself as respondent No.4 in CA 1719/06 in the aforesaid Company Petition alleging several material irregularities in the conduct of the sale of the property i.e., the land and building of the first respondent-liquidated company. The learned Company Judge, passed the impugned order dated 29.1.2007 and thereby allowed C. .....

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s Ja_vasimha, learned counsel for the appellant has questioned the correctness of the order contending that the learned Company Judge failed to appreciate Rule 273 of Companies (Court) Rules, 1959 (in short the Rules'). He contends that the discretion to choose the mode of sale of the assets of the liquidated company is not vested in the official liquidator and therefore the Official liquidator ought to have approached this Court before conducting the sale by inviting the sealed tenders. The .....

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- vs-Karnataka State Financial Corporation reported in AIR 2003 SC 2012, that 'in any event, the official liquidator cannot act himself to sell the assets without seeking directions from company court and under its supervision', therefore, when there was no direction in the said order as to the manner in which sale of the said properties was to be conducted, it was incumbent upon the official liquidator to seek specific directions from the Company Court with regard to mode of conduct of .....

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rection issued by the learned Company Judge and therefore, the sale of the assts question suffers from material irregularity and hence the sale is liable to be seta side. Further, it is urged by the learned counsel for the appellant that KSIIDC initiated insolvency proceedings against the appellant as he was a guarantor for the loan amount of ₹ 3,33,75,488/- availed by the first respondent - Company and the said amount could have been easily realised by the official liquidator from if the .....

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liquidated company the possession whereof was taken by the official liquificior as per the detailed inventory drawn at the time of taking possession of the assets of the liquidated company by the official liquidator; the learned Company Judge ought to have examined as to whether the assets of the company were taken possession by the official liquidator after the winding up order was passed as the same were nor. sold. Therefore, he has submitted that this is another material irregularity which ca .....

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A 18/2007 filed before the learned Company Judge, it could be seen that the plant and machineries mortgaged to KSFC had been listed and the same were in fact not sold and therefore, it amounts to material irregularity. Further, placing reliance upon the decision of this Court reported in AIR 1995 (83) Company Cases 687 (Karnataka $ in the case of Syndicate Bank -vs - Field Star Cycle Industries Pvt.4td., & another he 'urged that notice ought to have been issued to the creditor who initia .....

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s. from the KSFC on 14.2.2007; letter dated 21.2.2007 was written by the KSFC to the KIADB requesting the Board to execute the necessary sale deed in favour of third respondent in respect of the schedule property as per the order of this Court. Subsequently, as per the terms of the sale, this respondent was asked by the KIAD to remit a sum of ₹ 33,23,757/- toward the allotment consideration for the leasehold rights in respect of the schedule property and the respondent remitted the same on .....

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t has commenced implementation of the project for which the schedule property was purchased and completed levelling and cleaning of the schedule property and the process of marking boundaries and fencing the schedule property has also been completed." While contending so, He urged that in view of these facts, the order of the learned Single Judge, impugned herein, does not call for any interference. 7. It is further stated that, the learned Company Judge has confirmed the sale by rejecting .....

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ng leasehold rights in respect of-plot No.6 KIADB Area of Hoskote Taluk at the instance of KSFC with certain conditions that it should implement the project within one year from the date of issuance of possession certificate and execute a fresh lease-emu-sale agreement with the KIADI3 within a period of two years. He further submits that the possession certificate dated 18.6.198.3 is given to the 3r1 respondent M/s. Himadri Enterprises Pvt. Ltd. vide endorsement dated 12.3.2007 issued by the Chi .....

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e same has been confirmed in favour of third respondent by the learned Company Court Judge as its offer of sale consideration amount was highest. He further submits that all the necessary documents in respect of the property in question are handed over to the third respondent and possession of -the property is also delivered to it and the 3rd respondent has spent huge amount of ₹ 700 lakhs and has incurred other expenses towards BESCOM and other incidental expenditure and therefore no subs .....

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ondent - Official Liquidator herein, Sri Puttige R. Ramesh, learned counsel for 2' respondent, Sri S.G. Pandith, learned counsel for 4th respondent and Sri A.C. Chetan, learned counsel for 5th. respondent have adopted the .submission of Sri Uday Ho112,.. the learned counsel for 3rd respondent. 10. With reference to the above said rival legal contentions, the following substantial questions of law would arise for our consideration: a) Whether the impugned order is vitiated In not noticing the .....

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order? 11. Both the substantial questions of law are required to be answered Lu the aff1i watIve in: favour of appellant for the following. REASONS 12. As could be seen from the order dated 14.7.2006 passed by the learned Company Court Judge at the instance of KSFC the Court permitted KSFC to sell the assets of the liquidated company in association with the official liquidator and the second respondent KSIIDC. But as could be seen from the sale notification published in the Deccan HerEid newspap .....

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dustrial Area Hoskote, Bangalore Rural District, are available for sale on As Is where Is and whatever there LS basis . Land: 40401 Sq. Mtrs allotted by KIADB on lease-cumsale basis. Building & Civil Works: Main Building (41310 sq.ft) with Meznine Floor, DG Set Room (798 sq.fL), Weigh Bridge Room (200 sq.ft.) and Tool. Room Inside the main building. The above entire assets will be sold as One Lot . Those interested in the purchase of the above assets may inspect the assets on 15.11.2006 betw .....

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ngalore The date of Sale Negotiation Meeting will be informed to the tenderers by way of letter separately. The tenderers would be given opportunity to improve upon their offer by way of participating in inter e bidding immediately after opening the tender/s. The sale Is subject to confirmation by he Hon ble High Court of Karnataka. The Hon ble High Court of Karnataka/ KSFC/QL reserve s) the right to cancel or reject or negotiate any offer without assigning any reason thereof, The purchaser has .....

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te is leased, subject to certain term and conditions, in favour of the 1st respondent liquidated company vide lease-cum -sale agreement dated 29.6.1983 executed by the KIADI3. Tue loan was raised by the liquidated company from the KSFC and KSIIDC to manage the leasehold rights. It is an undisputed fact that, it is not specifically mentioned in the sale notification that leasehold rights in respect of immovable property i.e., Plot No.6 in Sy. No.65 allotted by KIADB had been mortgaged in favour o .....

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ought for sale in public auction by notifying the same. Further, Sec.29 of the SFC Act confers right upon the KSFC that where am industrial concern, which is under a liability to the Financial. Corporation under an agreement, makes any default hi repayment of arty loan o. advance or any instalment thereof, the KSFC shall have right to take over the management and possession of such industrial concern and i shall also have the right to transfer by way of lease or sale and realise the property ple .....

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therein, the KSFC has to tile an application under the above provision to the jurisdictional) district Judge seeking reliefs mentioned in clauses (a) (aa), (b) and (e) of sub-section (1) of Sec,3 1 of the SFC Act namely for an order of sale of the property pledged, mortgaged or hypothecated or assigned to the financial Corporation. In the instant ease, such a procedure is not followed b the KSFC. Therefore, the leasehold rights of liquidated company in respect of Plot No.6 of KIADB Industrial a .....

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perty belonging to KJADB is totally impermissible under the provisions of the Companies Act. Accordingly, we answer the above substantial questions of law in favour of the appellant. 15. The framed Company Judge, vide order dated 14.7.2006 permitted the .KSFC to sell the assets of the first respondent - liquidated Company in association with the Official Liquic1Jand the 2d respondent. KSIIDC with a further observation that protection of parl pasu charge in favour of the workman will be passed at .....

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viting sealed tenders or in such manner as the Juò.ge may direct. 16. In the instant case, the procedure is laid down at para Nos. 3 and 4 of the order dated 14.7.2006 in CA No.a94/2004 in Co.P.131f 1988 for conducting sale of assets and the said paras read thus, 3. In view of the findings of the Supreme Court in the appeal referred above? between the same parties, it is clear that the question of permitting the KSFC b to staid outside the winding up proceedings does not arise and in view .....

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In view of the above direction, it is clear that there is a violation of condition incorporated in the order dated 14 07.2006 Further, as could be seen from the paper publication vide Annexure-C referred to supra, the movable assets of the liquidated company as listed in the inventory and possession whereof was taken by the official liquidator after the winding up order is passed by this Court in the aforesaid company petition are not specifically mentioned in the sale notification. Further, th .....

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73 of the said Rules. 18. Further, the sale of leasehold rights of the liquidated company pursuant to sale notification in respect. of the aforesaid plot of KIADB by the official liquidator and KSFC is bad in law as it could not have been notified by the KSFC as it has not followed the procedure laid down in Sec.32 of the SFC Act, 1951 md the official liquidator could not have sold the leasehold rights in respect of immovable property of Plot No6 of Sy.No.85 of KIADB of KIADB property as it is n .....

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and confirmation of the property Is not legal and valid in law. Therefore, for the reasons stated supra, we are of the view that the appellant must succeed in this appeal 19. Further, the sale of leasehold rights of liquidated company in respect of Plot No.6 in Sy.No.85 belonging to KIAÐB along with the entire plot itself pursuant to the said sale notification by the official liquidator and KSFC is brought under sale without any authority inasmuch as the liquidated company was not the absolu .....

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