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1995 Supreme(Cal) 83
High Court Of Calcutta
BABOO LALL JAIN
MAHENDRA KUMAR ROONGTA - Appellant
Versus
OFFICIAL LIQUIDATOR - Respondent
COMPANY APPLICATION 211 Of 1994
Decided On : 03/16/1995
A mistake of fact essential to the agreement renders the agreement void and entitles the mistaken party to restitution of any benefits conferred under the agreement.
Headnote:
COMPANY - SALE OF ASSETS - BOUNDARY WALL - INJUNCTION - SHORTFALL IN LAND AREA - MISTAKE OF FACT - VOID AGREEMENT - RESTITUTION - REFUND OF PURCHASE PRICE - RESALE OF ASSETS - COMPANY ACT, 1956 - SECTION 58B(2) - TERMS AND CONDITIONS OF SALE - CLAUSE 11.
Fact of the Case:
The Official Liquidator of a company in liquidation sought to set aside the sale of the company's assets to the respondent purchaser, Mahendra Kumar Roongta, and to direct the refund of the purchase price. The purchaser had been directed to take possession of the assets and to raise a boundary wall around the property. However, the construction of the boundary wall was obstructed by a third party, Noor Mohammad Mondal, who claimed a right of way over a portion of the land. The purchaser also discovered that the land area was short of what was advertised for sale.
Finding of the Court:
The court found that the purchaser had made a mistake of fact as to the existence of the pending litigation and the claims made by Noor Mohammad Mondal. The court also found that the purchaser was not aware of the shortage in the land area. The court held that the agreement for sale was void due to the mistake of fact and that the purchaser was entitled to restitution of the purchase price.
Issues: 1. Whether the purchaser was entitled to set aside the sale due to a mistake of fact. 2. Whether the purchaser was entitled to restitution of the purchase price. 3. Whether the Official Liquidator was entitled to resell the assets of the company.
Ratio Decidendi: 1. The court held that the purchaser was entitled to set aside the sale due to a mistake of fact. The court relied on Section 20 of the Contract Act, which provides that a contract is void if it is caused by a mistake of fact essential to the agreement. The court found that the purchaser's mistake as to the existence of the pending litigation and the claims made by Noor Mohammad Mondal was essential to the agreement, as the purchaser would not have made the same offer if he had known about these matters. 2. The court held that the purchaser was entitled to restitution of the purchase price. The court relied on Section 65 of the Contract Act, which provides that when an agreement is discovered to be void, any person who has received any advantage under such agreement is bound to restore it or to make compensation for the same to the person from whom he received it. The court found that the purchaser had paid the entire purchase price and was entitled to restitution of the same. 3. The court held that the Official Liquidator was entitled to resell the assets of the company. The court relied on Clause 11 of the terms and conditions of sale, which provided that the High Court may set aside the sale in favor of the purchaser and resell the assets of the company.
Final Decision: The court set aside the sale of the company's assets to the purchaser and directed the Official Liquidator to refund the purchase price to the purchaser. The court also directed the Official Liquidator to resell the assets of the company.
( 1 ) TWO applications have been made in the above matter, the first application has been made by the Official Liquidator, inter alia, praying that the respondent purchaser that is Mahendra Kumar Roongta be directed to take over possession of the movable and immovable assets of the company in liquidation upon payment of the costs and expenses incurred by the official Liquidator from the date of sale till the date of taking over possession of the assets in question, after adjusting the apportioned value of the land measuring four kathas and nine chataks. The Official Liquidator has further prayed that in default the -sale in favour of the said Mahendra Kumar Roongta be set aside and leave be given to the Official Liquidator to take steps for resale of the assets of the company (in liquidation) by forfeiting the money deposited by the respondent. The Official Liquidator has also prayed for leave to encash the sum of Rs. 9,00,000/ - invested in fixed deposit with the bank and for the disbursement of the amount.
( 2 ) THE second application has been made by the said Mahendra Kumar Roongta, inter alia, praying that the sale of movable and immovable assets of the company in liquidation in favour of the applicant be set aside and the Official Liquidator be directed to refund the sum of Rs. 9,00,000,- together with interest to the applicant.
( 3 ) BY an order dated April 24, 1985 the company namely Lord Plastics and Glass Works Pvt. Ltd. was directed to be wound up. On 12th December, 1986 a sale notice was issued by the Official Liquidator for sale of shed, building, machinery and equipment etc. and land measuring approximately three bighas 0. 8 cottachs of Lord Plastics Glass' Works Pvt. Ltd. (In Liquidation) lying at Bhasa P. O. and P. S. Bishnupur District -- 24 Parganas, on 19-12-86. On 19th December, 1986 an order was made by the learned Company Judge, wherefrom it appears that the said Mahendra Kumar Roongta gave an offer for Rs. 9,00,000 / which was the highest offer and the Court accepted his offer. The said Mahendra Kumar Roongta was directed to deposit 25% of the sum by 22nd December, 1986 and the balance amount by 15th January, l 987 with the Official Liquidator. It was also directed that the matter will appear in the list on 16th January, 1987 for confirmation of sale. It is apparent that though the terms and conditions of sale required a prior deposit of 10% of the offered amount by the 18th December, 1986, the said Mahendra Kumar Roongta did not make any prior deposit as required by the terms and conditions of the sale.
( 4 ) ON 16th January, 1987 an order was made by the learned Company Judge extending the time to make payment of the balance purchase price by a month from date. It was also recorded that the intending purchaser wishes to raise a boundary wall in respect of property at his own cost. It was further ordered that in the event the sale is not concluded in his favour, he will not raise any claim in respect of the expenses for that purpose. Liberty was given to the intending purchaser to raise the boundary wall in the presence of the representative of the Official Liquidator. It appears from the annexure to the affidavit affirmed on behalf of the Official Liquidator that on 20th February, 1987 the Official Liquidator wrote a letter to the Officer-in-Charge, Bishnupur Police Station, inter alia, stating that liberty had been given by Court to the purchaser, Mahendra Kumar Roongta, to raise boundary at his own cost. It was further stated in the said letter that it was reported that Mr. Nur Mohammad was creating obstruction at the time of erecting the boundary wall of the land of the company in liquidation and that complaint had been lodged at the police station on 8th February, 1987. It was also stated that on 17th February, 1987 the Hon'ble Court had given leave to the Official Liquidator to seek police help if there is any resistance from the local inhabitants at the time of raising bound
