2022 (1) TMI 1183 - HC - Companies Law

Court voids fraudulent sale certificate, rejects report, finds claims not maintainable. Applicant's rights upheld.

Reserve Bank of India Versus Laxman Mahadeo Devare (The Liquidator) Bank of Karad Limited (in Liquidation) & Ors. Dilip Parulkar

The court set aside the order dated 24th December 2013, rejected Report No.168 of 2013, and declared the Sale Certificate dated 11th April 2014 as null ... Validity of sale certificate issued by the Official Liquidator - valid sale of property or not - right to ownership and possession - whether the applicant was the owner and this is a fact that none of the respondents have disputed? - time limitation - HELD THAT:- The applicant has made out a good case on merits. He has explained the various steps that he undertook right from the outset. After purchasing the property and having been put in possession, he applied on 20th May, 1990 requesting the Talathi to enter his name in the 7/12 extracts. Copy of his application is annexed at Exhibit C. None of the respondents have assailed this document. While this remains pending, he has explained that in 1992 he was unaware of the suit. He learnt of the attachment which was obviously incorrectly levied after the suit was filed in January 1990, since by then the property had already been sold to the applicant. The order of attachment of this property would obviously have been incorrect since late Chudasama was divested of all right title and interest upon execution of the Sale Deed in 1989. The attachment was allowed only on 16th January, 1991 and it is in those circumstances, apparently unknown to the applicant vide mutation entry dated 15th February, 1992 against the bank’s name to be entered in the 7/12 extract under the column of “other rights”. There is no wanton delay in approaching this court. The objections on the basis of the application being time barred, raised by Mr. Narvekar and Mr. Salunke cannot deprive the applicant of his rights. A suit must not necessarily be filed in view of Section 31 of the Specific Relief Act in the facts and circumstances of the case. The transaction as between late Chudasama and respondent nos.3 to 5 has its foundation in a classic case fraud viz. “suppressio veri” and “suggestio falsi”. Late Chudasama suppressed the truth of having sold the plot to the applicant for the respondent nos.3 to 5 and probably the liquidator. He falsely suggested that he was competent to sell the plot and he acted in this false statement by consenting to the sale. The fraud not only misled the Liquidator but also the court. The court was not appraised true set of facts. The Liquidator sought to rely upon the orders passed in other Liquidator’s Reports whereby in order to arrive at a settlement of the claims against the company, a comprise proposed was accepted by the court. The very foundation of the Sale Certificate was the order of this court passed on the Liquidator’s Report. If that order is set aside as having been obtained by fraud, the principles culled out in the various judicial pronouncements such as those in Chengalvaraya Naidu [1993 (10) TMI 315 - SUPREME COURT] and that line of judgments will apply - On the aspect of limitation, even the suit will be time barred if the period of three years is computed from the date of knowledge or if this application appears barred by limitation, fraud permeates this transaction and vitiates all acts. Application allowed. Issues Involved:1. Setting aside the order dated 24th December 2013.2. Declaring the Sale Certificate dated 11th April 2014 as null and void.3. Allegations of fraud and misrepresentation by late Chudasama.4. Maintainability of the application and the need for a civil suit.5. Delay and limitation in filing the application.6. Rights of bona fide purchasers for value.Detailed Analysis:1. Setting Aside the Order Dated 24th December 2013:The applicant sought to set aside the order dated 24th December 2013, which allowed the Official Liquidator's Report No.168 of 2013. The court found that the order was obtained by fraud and misrepresentation by late Chudasama, who falsely claimed ownership of the property. The court concluded that the Liquidator's report misled the court into passing the order, thus the order was set aside.2. Declaring the Sale Certificate Dated 11th April 2014 as Null and Void:The applicant also sought to declare the Sale Certificate issued on 11th April 2014 as null and void. The court held that the Sale Certificate was executed under a mistaken impression by the Liquidator, who believed the company had rights over the property. Since the property had been sold to the applicant in 1989, the Sale Certificate was declared null and void.3. Allegations of Fraud and Misrepresentation by Late Chudasama:The applicant alleged that late Chudasama perpetrated fraud by colluding with other respondents to secure the order and the sale certificate. The court found substantial evidence supporting the applicant's claim, including an affidavit by late Chudasama admitting the sale of the property to the applicant in 1989. The court held that late Chudasama's actions constituted fraud and misrepresentation, which vitiated the entire transaction.4. Maintainability of the Application and the Need for a Civil Suit:The respondents argued that the application was not maintainable and that the applicant should file a civil suit. The court, however, held that the application was maintainable, given the fraudulent nature of the transaction. The court emphasized that fraud vitiates all judicial acts, and thus, the applicant did not need to file a separate civil suit.5. Delay and Limitation in Filing the Application:The respondents contended that the application was barred by limitation, as it was filed more than three years after the impugned order. The court acknowledged the delay but found that the applicant had satisfactorily explained the reasons for the delay. The court also noted that fraud vitiates all judicial acts, and thus, the limitation period was not strictly applicable in this case.6. Rights of Bona Fide Purchasers for Value:Respondent nos.3 to 5 claimed to be bona fide purchasers for value and argued that their rights should be protected. The court, however, found that respondent nos.3 to 5 were aware of the fraudulent nature of the transaction and had colluded with late Chudasama. Therefore, the court held that their claim as bona fide purchasers could not be sustained.Conclusion:The court set aside the order dated 24th December 2013, rejected Report No.168 of 2013, and declared the Sale Certificate dated 11th April 2014 as null and void. The court found that late Chudasama had perpetrated a fraud on the court and the Liquidator, and that the respondents' claims were not maintainable due to their involvement in the fraudulent transaction. The court also addressed the issue of delay and limitation, concluding that the applicant's rights could not be denied on these grounds.