2023 (7) TMI 1247 - HC - Companies Law

Sale of Kolkata premises declared null due to non-payment, Official Liquidator directed to take possession

The court declared the sale of premises in Kolkata a nullity due to the applicant's failure to pay the full purchase consideration, leading to the ... Removal of unauthorised occupants from Premises - seeking to ensure a clear passage of 20 feet from the front portion of the main road so to enable the entry of vehicles into premises - HELD THAT:- In terms of the order dated 25 April, 1990, the applicant was directed to pay the balance purchase consideration in quarterly instalments over a period of 18 months. The applicant has only paid an aggregate amount of only Rs. 40,25,000/-. Admittedly, there remains an amount of Rs. 17,25,000/- due and payable. The obligation of any purchaser to ultimately pay the entire purchase consideration within the prescribed time period is a necessary pre-condition to any sale. To this extent, the confirmation of sale is in one sense incohate. There is a shortfall in the sale consideration even after a period of 33 years. The applicant is solely responsible for such default. The duty to timely pay the entirety of the purchase consideration in terms of the order dated 25 April, 1990 was squarely on the applicant. Non-payment of the entire consideration in terms of the order dated 25 April, 1990 renders the sale a nullity. On a plain reading of section 54 of the Transfer of Property Act, 1882, the time of payment of price is not necessarily a sine qua non to the completion of the sale. However, the order dated 25 April, 1990 provided for a stipulated time period for payment which assumes significance in cases of sale by Courts. The exercise of any discretion must be in good faith, fairly, for the purpose for which the power is being conferred and without exceeding the limits of such power. No discretion should be legally unfettered. The exercise of any discretion cannot be arbitrary, vague and fanciful; but legal, regular and according to reason. The Rule of Law requires that no discretion should be unconstrained so as to be potentially arbitrary - Section 457 of the Companies Act, 1956 read with Rule 272 of the Company Court Rules, 1959, govern sales by the Official Liquidator. The duty of the Company Court while conducting a sale under Rule 272 is a more onerous task than an ordinary sale conducted by Court in executing a decree. In a sale by the Company Court, the Court holds a fiduciary duty position protecting the interests of all stakeholders. On the other hand, in sales in execution of a decree the sale is rarely held without notice to the judgment debtor. Ordinarily, the judgment debtor in such sales is present to protect its interests. There has been a conscious effort to perfect the so very imperfect marketable title of the applicant and the original owners vis-a-vis the premises. There are no grounds either pleaded nor which exist which warrant condonation of the inordinate delay in the applicant being unable to make payment of the balance consideration after a period of 33 years. There is no question either in law or equity to permit the applicant to pay the shortfall in price after a delay of 33 years. The benevolence and magnanimity shown to the applicant must end. There are no substance in the contention that the application is not maintainable since there is a permanent stay of the winding up proceedings. The order of permanent stay does not completely obliterate the winding up order. Company petitions even when dismissed on merit are traditionally not regarded as dismissed or disposed of but as permanently stayed - the sale in terms of the order dated 25 April, 1990 is declared to be a nullity. Application dismissed. Issues Involved:1. Execution and Registration of Deed of Conveyance2. Payment of Balance Purchase Consideration3. Removal of Unauthorized Occupants4. Legal Ownership and Rights of the Applicant5. Maintainability of Application Post Permanent Stay of Winding Up ProceedingsSummary:Execution and Registration of Deed of Conveyance:The applicant sought the court's direction for the respondent to execute and register the Deed of Conveyance for premises Nos. 232, 232/2, 235, 237, 239, 242, 243, and 244 Picnic Garden Road, Kolkata. The court noted that the sale of these premises was confirmed in favor of the applicant by an order dated 25 April 1990, and the applicant was put in actual physical possession of the premises. However, the applicant failed to pay the full purchase consideration, which rendered the sale a nullity.Payment of Balance Purchase Consideration:The applicant admitted to having paid Rs. 40,25,000 out of the total Rs. 57,50,000, leaving a balance of Rs. 17,25,000 unpaid. The court emphasized that the obligation to pay the entire purchase consideration within the prescribed time was a necessary pre-condition to the sale. The applicant's failure to pay the balance amount, even after 33 years, was deemed a default, rendering the sale invalid.Removal of Unauthorized Occupants:The applicant requested the removal of unauthorized occupants from the premises and the clearing of a 20-feet passage for vehicle entry. The court acknowledged that the Official Liquidator was directed to remove unauthorized occupants as per the order dated 25 April 1990. However, due to the applicant's failure to pay the full purchase consideration, the court declared the sale a nullity and directed the Official Liquidator to take possession of the premises.Legal Ownership and Rights of the Applicant:The applicant contended that diverse orders recognized them as the lawful owner of the premises. However, the court found that the applicant's failure to pay the full purchase consideration invalidated their claim to ownership. The court also noted that the applicant had enjoyed the benefits of ownership, including compensation from acquisition proceedings, without fulfilling their payment obligations.Maintainability of Application Post Permanent Stay of Winding Up Proceedings:The Official Liquidator argued that the application was not maintainable due to the permanent stay of winding-up proceedings. The court rejected this contention, stating that a permanent stay does not obliterate the winding-up order but keeps it in suspended animation. The court found the application maintainable and proceeded to address the issues raised.Conclusion:The court declared the sale in terms of the order dated 25 April 1990 a nullity due to the applicant's failure to pay the full purchase consideration. The Official Liquidator was directed to take possession of the premises, and the part consideration paid by the applicant was forfeited. The application CA/13/2021 was dismissed.