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2009 Supreme(Mad) 3573
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE M. CHOCKALINGAM &
THE HONOURABLE MR. JUSTICE R. SUBBIAH
TCI Distribution Centres Ltd. New Delhi
Versus
The Official Liquidator, & Others
Original Side Appeal Nos.85 to 88 of 2009, & M.P.No.1 of 2009
Decided On : 08-09-2009
For the Appellant:P.S. Raman, Senior Counsel, for S.R. Rajagopal, Advocate. For the Respondents:R1, Arvind, Advocate. P. Datar, Senior Counsel, for Official Liquidator, R3, R. Senthil Kumar, Advocate.
Headnote:
COMPANY - WINDING UP - SALE OF PROPERTY - AUCTION SALE - MISDESCRIPTION OF PROPERTY - MATERIAL IRREGULARITY - SUBSTANTIAL INJURY - SALE SET ASIDE - INHERENT POWERS OF COURT - COMPANIES (COURT) RULES, 1959, RULE 9.
Fact of the Case:
The Official Liquidator of a company in liquidation sold a property through auction. The appellant, the highest bidder, purchased the property. However, after the sale, the appellant discovered that there were several discrepancies in the description of the property, including the survey numbers and the extent of the land. The appellant filed applications seeking to set aside the sale and refund of the purchase price.
Finding of the Court:
The court found that there were material irregularities in the sale process, including the misdescription of the property and the failure of the Official Liquidator to disclose all material facts about the property. The court also found that the appellant had suffered substantial injury as a result of these irregularities. The court held that the sale was void and ordered the Official Liquidator to refund the purchase price to the appellant.
Issues: 1. Whether there were material irregularities in the sale process. 2. Whether the appellant suffered substantial injury as a result of the irregularities. 3. Whether the sale was void.
Ratio Decidendi: 1. The court held that there were material irregularities in the sale process, including the misdescription of the property and the failure of the Official Liquidator to disclose all material facts about the property. The court relied on the following principles: * A sale by the Official Liquidator of a company in liquidation is subject to the same rules and principles as a sale by an individual. * The Official Liquidator has a duty to disclose all material facts about the property being sold. * A material irregularity in the sale process can render the sale void. 2. The court held that the appellant had suffered substantial injury as a result of the irregularities. The court relied on the following principles: * Substantial injury is not limited to financial loss. * Substantial injury can also include inconvenience, annoyance, and loss of opportunity. 3. The court held that the sale was void. The court relied on the following principles: A sale that is affected by a material irregularity is void.
Final Decision: The court allowed the appellant's appeal and set aside the sale. The court also ordered the Official Liquidator to refund the purchase price to the appellant.
M. Chockalingam, J.
All these appeals challenge a common order of the learned single Judge of this Court dated 13.04.2009 made in C.A.No.1953 to 1956 of 2008 in C.A.No.1983 of 2007 in C.P.No.526 of 2000.
2. Pending the winding up proceedings in the matter of M/s. Fidelity Industries Limited (in liquidation) in C.P.No.526 of 2000, the Official Liquidator, High Court Madras, made C.A.No.1983 of 2007 for the following reliefs:
(a) To open the valuation report and fix the reserve price for the vacant land at Sriperumpudur and to permit the Official Liquidator to sell the property through this Honble Court;
(b) to permit the Official Liquidator to sell the property at Gandhi Nagar, Adyar by taking the earlier reserve price already fixed by this Honble Court as the present upset price for sale of the same;
(c) to permit the Official Liquidator to invite sealed tenders through advertisement in the newspapers specified in para 9 of this report, and to pay the expenses of the advertisement from & out of the funds to the credit of the company in liquidation; (d) to approve the Draft Sale Notice, Tender Form and terms and conditions marked as Annexure-A to this report;
(e) to direct that the expenses incurred for the sale will come out of the assets of the company in liquidation;
(f) to direct that the cost of this application do come out of the funds of the company in liquidation"
3. The appellant/applicant filed C.A.Nos.1953 to 1956 of 2008 in C.A.No.1983 of 2007 seeking the following reliefs.
(a) To direct the Official Liquidator to trace the balance original documents pertaining to the property and hand over the same to the purchaser;
(b) to direct the Official Liquidator to engage the services of the concerned revenue officials to locate the lands, survey and to fix the boundaries and to lay revenue stones and deliver possession thereof;
(c) to direct the Official Liquidator not to disburse the sale proceeds to the creditors till handing over of balance documents, surveying of lands and laying of boundary stones; and
(d) to direct the Official Liquidator to return the sale consideration with interest in the event of non-compliance of handing over of balance documents, surveying and laying of boundary stones within the time fixed by this Honble Court.
4. All the applications came to be filed under the following circumstances.
The applicant in all those applications, who is the appellant herein, namely, M/s. TCI Distribution Centers Limited, was the purchaser, in view of the highest bid made by him in the auction conducted by this Court on 06.02.2008, in respect of 41.12 acres of free hold land belonged to M/s. Fidelity Industries Limited (under liquidation). The said auction following a publication effected by the Official Liquidator, High Court, Madras, in respect of those lands, which are situate in two villages, namely, Kilai and Ulundai. The auction conducted on 06.02.2008. The appellant/applicant, who was the highest bidder, purchased the land for a sum of Rs.15.20 crores. The sale was also confirmed by the Court in favour of the applicant/appellant. When a direction was issued for the payment of difference of the earnest money deposit and the balance of sale consideration within 90 days in two instalments, after remitting the balance of earnest money deposit, the applicant/appellant made a request for furnishing the title deeds and the field map relating to the property. The Official Liquidator was also directed to collect the documents from the company under liquidation and furnish the same along with the field map and on 20.03.2008, the appellant/applicant remitted the first instalment of the sale consideration. When the matter came up for hearing on 24.03.2008, the appellant/applicant made a request to furnish copies of documents and to order survey of lands. But, there was a direction to the appellant/applicant to remit the balance of sale consideration as per the schedule. The appellant/applicant paid the second
