Liquidation sale on an "as is where is" basis bars price reduction claims for title defects and supports interest on delay.

The Supreme Court explained that disclaimer power under section 535 of the Companies Act is meant to protect creditors in liquidation and must be exercised cautiously; a long-term lease at nominal rent with renewal rights does not by itself prove onerous covenants, so disclaimer was unwarranted on that basis. It also stated that where sale of liquidator-managed property is expressly on an "as is where is" basis, the purchaser cannot seek reduction of price for alleged defects in title, description, or encumbrances. An undertaking to pay interest on the unpaid balance was enforceable, making interest payable on delayed consideration.

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Issues: (i) Whether the leasehold land was burdened with onerous covenants so as to justify disclaimer under section 535 of the Companies Act; (ii) Whether the purchaser was entitled to reduction of the sale price and whether interest at 15% per annum was payable on the unpaid sale consideration.

Issue (i): Whether the leasehold land was burdened with onerous covenants so as to justify disclaimer under section 535 of the Companies Act.

Analysis: The power of disclaimer under section 535 is intended to protect the creditors of a company in liquidation and must be exercised with due care and circumspection. A long-term lease at a nominal rent, with renewal rights, does not by itself establish that the property is burdened with onerous covenants. The lease could not properly have been treated as terminated for the purpose of fastening mesne profits on the company in liquidation, and the offer by the secured creditor to clear arrears of rent ought to have been accepted.

Conclusion: The finding that the land was onerous and liable to disclaimer was not sustained, and the appellant succeeded on this issue.

Issue (ii): Whether the purchaser was entitled to reduction of the sale price and whether interest at 15% per annum was payable on the unpaid sale consideration.

Analysis: The sale was expressly on an "as is where is" basis, without warranty as to title, description, quantity, or encumbrances, and the purchaser was deemed to have bought with full knowledge of the property and its defects, if any. In such a sale by an official liquidator, no diminution in price could be claimed on the ground of alleged defects in title or delivery. The purchaser had also undertaken to pay interest on the unpaid balance, and the delayed payment made interest appropriate.

Conclusion: The claim for diminution in price was rejected, and the purchaser was directed to pay interest at 15% per annum on the unpaid amount from 1 January 1989 until payment.

Final Conclusion: The appeal was allowed, the disclaimer order was set aside, the trust was awarded Rs. 10 lakhs in full and final settlement of its claim in respect of the land, and the purchaser was held liable for interest on the unpaid sale consideration; the connected contempt proceedings were disposed of with directions.

Ratio Decidendi: In liquidation sales conducted on an "as is where is" basis, the purchaser cannot seek reduction of price for alleged defects in title or description, and disclaimer under section 535 is justified only where the court is satisfied that the property is truly subject to onerous covenants.

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