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2025 Supreme(Ker) 1241
IN THE HIGH COURT OF KERALA AT ERNAKULAM
T.R. RAVI, J.
Asian Steel Traders, represented by its Proprietor, M.A. Khadar Mohideen – Applicant
Versus
Official Liquidator, High Court of Kerala and Ors. – Respondents
Company Application No.86 of 2022 in C.P.No.2 of 1996
Decided On : 02-05-2025
Sri P.B. Krishnan (Sr), Sri P.B. Subramanyan, Sri Sabu George, Sri Manu Vyasan Peter, Sri.K.Moni, Sri H.Ramanan
The principle of Caveat Emptor does not protect sellers from liability for latent defects, especially when goods do not match the auction description.
Headnote:
(A) Sale of Goods Act, 1930 - Sections 15 and 16 - Company Law - Sale of assets on 'as is where is' basis - Successful bidder discovered that goods were not as described, leading to a demand for refund - Court held that latent defects not discoverable upon inspection can invalidate the sale - Official Liquidator cannot rely on 'as is where is' clause when misdescription is evident. (Paras 10-18)
(B) Caveat Emptor - Principle does not absolve seller from liability for latent defects - Seller must disclose defects not discoverable by buyer - Court emphasized the need for accurate descriptions in auction sales. (Paras 12-18)
Facts of the case:
The applicant participated in a tender for purchasing Copper Ingots from a company in liquidation, but upon inspection, the goods were found to be obsolete lead scrap instead. The applicant sought a refund after the Official Liquidator insisted on delivery despite the misdescription.
Findings of Court:
The court found that the goods did not match the description in the auction notice and that the defects were latent, thus ruling in favor of the applicant.
Issues: The main issues were whether the sale could be upheld under the 'as is where is' clause and the implications of latent defects in the context of the Sale of Goods Act.
Ratio Decidendi: The court ruled that the misdescription of goods and the presence of latent defects invalidated the sale, emphasizing that the seller cannot escape liability under the 'as is where is' clause when the description is inaccurate.
Result: Application allowed; sale set aside and refund directed.
ORDER :
(T.R. Ravi, J.)
The prayer in this application is to set aside the sale conducted under Annexure A tender notification, to set aside the rejection of the request as per Annexure I, and for a direction to the Official Liquidator to refund the amounts deposited by the applicant towards sale consideration as per Annexure E.
2. The 1st respondent issued Annexure A notification inviting sealed tenders for purchasing Copper Ingots (5670 KG) belonging to M/s.Premier Cable Company Ltd. (in liquidation), kept in the main office building of UCO Bank, Chennai Main Branch, Tambu Chetty Street, Chennai, on an “as is where is and whatever there is” condition. The 1st respondent had also specified the terms and conditions of sale of movable assets of the Company in Company Petition No.2 of 1996, published on 1.6.2022, a true copy of which has been produced as Annexure B. The applicant participated in the tender and was the successful bidder. He deposited the entire sale consideration. Annexure C is the temporary receipt issued on 22.6.2022, evidencing the remittance of the amount. Annexure D is the communication dated 22.7.2022 issued by the Official Liquidator to the applicant, and Annexure E is the receipt issued for Rs.32,51,800/- paid vide demand draft dated 4.8.2022. The 1st respondent sent Annexure F letter dated 18.8.2022 directing the applicant to be present on 22.8.2022, for receiving the Copper Ingots. On 22.8.2022, when the goods were tested, it was noted that they were obsolete lead scrap and not copper. Annexure G is the mahazar.
3. Since the materials that were available to be delivered were not consistent with what had been advertised for sale, the applicant demanded a refund of the amount. Annexure H is the request made by the applicant to the Official Liquidator. However, by Annexure I letter dated 22.9.2022, the 1st respondent directed the applicant to take delivery of the assets, stating that the sale was on an “as is where is and whatever there is” condition, made on the assumption that the tenderers have inspected the assets and know what they are tendering for. It was contended that the principle of Caveat Emptor will apply and no complaint of any defect or a default in the said properties, or any claim thereon, for the reason of any error or fault in the description or deficiency in the particulars thereof shall be entertained. The applicant has hence preferred this application.
4. Heard Sri P.B.Krishnan, Senior Advocate instructed by Sri Sabu George on behalf of the applicant, Sri K.Mony, Standing Counsel for the 1st respondent and Sri H.Ramanan, Counsel for Bank.
5. The Senior Counsel appearing for the applicant submitted that the Company in liquidation was wound up vide order dated 18.6.1998. It is submitted that there were 8 bidders and the applicant's bid was found to be the highest. It is stated that the 3rd respondent ascertained the value, purity, and weight of the assets on the request of the 1st respondent. The valuation report obtained has been produced as Annexure R2. Annexure R2 shows that the total weight of ingots was 4796.10 KG, which was 873.9 KG less, and the realizable value and the liquidation value of the Cu Alloy ingots based on the test result were stated to be Rs.26,40,294/- and Rs.20,84,443/- respectively. A Copy of the tender proceedings has been produced as Annexure R3. It is submitted that all the bidders included in Annexure R3 submitted quotations after inspecting the Copper Ingots put for sale.
6. The additional 3rd respondent has filed a counter-affidavit stating that the applicant had inspected the asset on 22.6.2022. It is contended that the principle of Caveat Emptor will apply, and that the sale was on an “as is where is and whatever there is” condition.
7. The Senior Counsel pointed out that Annexure R2 would show that the item valued was Copper Alloy Ingots. Annexure R2 states that the purpose of the inspection was to assess the value of Copper Alloy Ingots. Annexure R2 states the
