Validity of Power of Attorney for Property Enhancement Expenses Recovery. Bona Fide Purchaser Entitled to Reimbursement

The court found the Power of Attorney (POA) holder's authority valid, allowing the applicant to recover expenses incurred in enhancing the property's value. The applicant, deemed a bona fide purchaser, was entitled to reimbursement of expenses totaling Rs. 29,55,010/-. The court held both respondents liable for payment but directed the second respondent, KSFC, to pay the amount within six weeks, failing which 12% interest would apply.

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Issues Involved:
1. Validity of the Power of Attorney (POA) holder's authority.
2. Bona fide status of the applicant as a purchaser.
3. Entitlement of the applicant to recover expenses incurred.
4. Determination of payable expenses and responsible party for payment.

Issue-wise Detailed Analysis:

1. Validity of the Power of Attorney (POA) holder's authority:
The second respondent, KSFC, challenged the authority of the POA holder representing the applicant-company, claiming discrepancies in the POA document. The POA dated 16.07.2009 referred to a resolution dated 31.03.2009, while the name change to Reliance Prolific Traders Pvt. Ltd. occurred on 23.04.2009. The court found that the POA was valid as it was executed after the name change and the resolution date referred to the former name, Himadri Enterprises. The POA holder, being the Vice-President of Reliance Retail Limited, a sister concern, had the authority to represent the applicant.

2. Bona fide status of the applicant as a purchaser:
The KSFC argued that the applicant was not a bona fide purchaser without notice, as they were aware of the pending litigation by an erstwhile director opposing the sale. The court determined that the applicant acted in good faith based on the initial confirmation of the sale by the Company Court. The applicant's investment in the property was made under the belief that the sale was valid. The court noted that the issue of bona fide status is relevant only when the purchaser seeks to retain the property, not when seeking reimbursement of expenses.

3. Entitlement of the applicant to recover expenses incurred:
The court referred to precedents, including the Supreme Court's decision in Allahabad Bank v. Bengal Paper Mills Co. Ltd., which allowed auction purchasers to claim expenses incurred in good faith. The court concluded that the applicant was entitled to reimbursement for expenses that enhanced the property's value or protected it, as these expenses would benefit the company-in-liquidation and the secured creditor.

4. Determination of payable expenses and responsible party for payment:
The court examined the evidence presented by the applicant, including receipts and invoices for various expenses such as borewell charges, civil works, security services, and other improvements. The court allowed claims for expenses that added value to the property, such as borewell charges, civil works, and security services, totaling Rs. 29,55,010/-. Expenses for electricity, water consumption, liaison charges, and legal fees were disallowed as they did not benefit the company-in-liquidation or were incurred for the applicant's own interest.

Responsibility for Payment:
The court held both respondents liable but directed the KSFC to pay the amount since they had sold the dismantled structures for Rs. 21,00,000/- and had not taken steps to re-auction the property. The KSFC was instructed to pay the amount within six weeks, failing which interest at 12% p.a. would apply.

Order:
1. The application was allowed in part.
2. Respondents 1 and 2 were held liable to pay Rs. 29,55,010/- to the applicant.
3. The second respondent, KSFC, was directed to make the payment.
4. Payment to be made within six weeks, failing which interest at 12% p.a. would apply.
5. Parties to bear their own costs.

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