TaxTMI 
TaxTMI 
2011 (10) TMI 710
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....eport, whether this Hon'ble Court would be pleased to permit the Official Liquidator to take possession of the movable and immoveable assets mentioned therein into his possession;" 2] It is stated by the Official Liquidator that notice of hearing of this report along with a copy thereof is served on the exdirectors of the petitioner, secured creditors, President of T.Maneklal Employees Union, General Secretary of Gujarat Kamgar Panchayat, Gen.Secretary of Gujarat Rajya Shramajeevi Karmachari Union, Mr.Yusuf Rarmar, Deven Patel and M/s.Tex Raj Realty Pvt. Ltd. (Purchaser). 3] Mr. J.P. Sen, learned Counsel appearing for the Official Liquidator has contended that the report proceeds on the basis that an order recommending winding up of the company in liquidation was passed on 23rd November 2000 by the Board for Industrial and Financial Reconstruction (BIFR for short). This recommendation came to be numbered and registered as a Company Petition for winding up. That was treated as being filed on 29th April 2003. It was admitted on 11th June 2004. The Official Liquidator came to be appointed as provisional liquidator on 14th March 2007 and, thereafter, on 26th July 2010 this Court ....
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....LM Maneklal Industries Ltd., whereby Texraj Reality Pvt.Ltd has acquired non agricultural land bearing Survey No.323 admeasuring about 6273 sq.mtrs situated at Moje Vinzol, Taluka Daseroi, Ahmedabad - 5, (Narol), were sold in favour of Texraj Reality Pvt. Ltd on 4th June 2007 for a total consideration of ₹ 44,48,888/-; 4. By a sale deed dated 4th June 2007 between Texraj Reality Pvt Ltd and M/s.SLM Maneklal Industries Ltd whereby Texraj Reality Pvt Ltd has acquired non agricultural land bearing Survey No.321/1 to 321/12 admeasuring about 31971 sq.mtrs situated at Moje Vinzol, Taluka Deseroi, Ahmedabad 5 (Narol) had been sold in favour of Texraj Reality Pvt Ltd on 4th June 2007 for a total consideration of ₹ 2,26,72,038/-; 5. By a sale deed dated 4th June 2007 between Texraj Reality Pvt Ltd and M/s.SLM Maneklal Industries Ltd whereby Texraj Reality Pvt Ltd has acquired all that piece or parcel of non agricultural land bearing Survey No.320 Paiki admeasuring about 4047 sq.mtrs as per revenue record. Actual land area at site is 4309 sq.mtrs along with construction stranding thereon admeasuring about 800 sq.mtrs situate, lying and being at Moje Vinzol, Taluka Dascroi, in....
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....ident Fund Commissioners has adjudicated the dues of the workers of the company and has directed the company to deposit further amount an ₹ 27 lacs approximately. I say that as aforesaid the company has already deposited the sum of ₹ 1 crore with the Provident Fund Department towards the dues of the workers. I say that after the disbursement of the amount of ₹ 27 lacs the company is entitled to the refund of ₹ 73 lacs from the Provident Fund Department; I say that the said company arrived at a One Time Settlement (OTS) with four of its secured creditors i.e Bank of Baroda, Bank of India, Dena Bank and Banque Nationale De Paris, Consortium Partners (hereinafter referred to as the said Banks). I repeat that the company has received and paid over to the Banks, labour and statutory creditors the entire total amount of ₹ 19,22,53,098/-. Out of that amount paid to the Banks is ₹ 10,59,43,855/- plus other dues cleared like:-Ahmedabad Municipal Corporation = ₹ 1,99,99,411/-, to Land Revenue Taxes = ₹ 30,19,033.65 + Bank of Baroda Debenture Holders = ₹ 80,00,000/- + Torrent Power Limited = ₹ 24,00,000/- + PF Department = ₹ 1,....
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....T Mumbai on 18th June 2001. That Original Application bearing No.652 of 2001 was allowed by DRT on 25th November 2005. There was a recovery certificate issued in furtherance of the judgement and order on 29th December 2005. A Receiver was appointed by the DRT on 28th November 2006. It is stated that in execution of this recovery certificate an application was made seeking clearance for sale of the property. The sale proclamation was drawn on 9th January 2007. The receiver issued a letter to the Liquidator on 10th January 2007 that physical possession may be taken on 16th January 2007. Prior thereto, an application was made for postponement of sale on 13th January 2007 and reliance is placed on Rule 66 of Schedule II of The Recovery of Debts due to Banks and Financial Institution Rules (Rules for short). It was stated that the applicant had found out a buyer and, therefore, enabling postponement of sale by virtue of Rule 66 that it came to be postponed. 10] Reliance is then placed on several proposals which came to be forwarded by the Company in liquidation. In that regard, what has been stated in the affidavit dated 30th June 2011 of M/s.Tex Raj is that an application was made on ....
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....j, yet, it is by DRT. Once the request was made to the Recovery Officer to postpone the sale by and the relief that was sought is traceable to Rule 66, then, the powers under section 536(2) of the Companies Act, 1956 be exercised to confirm the sale and the transaction in favour of M/s.Tex Raj. More so, when M/s.Tex Raj has disbursed the amounts towards the claims of the workmen, State Bank of India and all banks have released the properties and assets from their charge and mortgage. Further, the statutory dues have also been paid. Reliance is placed upon an order passed by the Recovery Officer, a copy of which is at Exh.C to the affidavit of M/s.Tex Raj dated 30th June 2011. That order records thus:- "1 As per the compromised settlement among the Bankers, Defendant No.1 has to pay an amount of ₹ 10,57,86,320/- inclusive of earned interest and interest of ₹ 1,57,535/-. The break-up of this amount is given below: Bank of Baroda Rs.5,72,31,124/- Bank of India Rs.2,28,29,131/- BNP Paribas ₹ 65,87,065/- Dena Bank Rs.1,91,39,000/- 2 After paying this amount, the liability of the defendant No.1 company will be fully satisfied and there will be no other claim....
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....e which can be attributed to anybody inasmuch as when the sale took place, there was no provisional liquidator also. When the applications were made before the DRT, there was no order passed by this Court appointing Official Liquidator as provisional Liquidator, far from winding up the affairs of the company under liquidation. Therefore, there is no attempt to over-reach the Company Court nor perpetrate any fraud on parties or on the Court. All Unions have accepted the amount. They have now filed false affidavits and their whole version is false. The Official Liquidator does not allege fraud, malice with regard to the one time settlement with the Bank or other creditors but only brings to the notice of the Court certain provisions of Companies Act, 1956. There is no allegation in the report that the sale is not in the interest of secured creditors. Assuming without admitting that the sale by the company under liquidation is dishonest, but there is no allegation that the purchaser Tex Raj had knowledge of this dishonesty or it is a party to the fraud. This Court is considering the Official Liquidator's report and the workmen cannot expand the scope of the proceedings. For all th....
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....of appointment of provisional Liquidator. The submission and averments of the company in liquidation in that affidavit are identical to that of M/s.Tex Raj in the present case. The issue of so called payment to the workers by way of settlement has been raised even earlier. However, once the parties viz., the company in liquidation and M/s.Tex Raj avoided public auction and the sale also not protecting the rights of the employees, then, this Court should not uphold the same. Further, the rights of the workers in terms of section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act (for short RDB Act) has not been protected and rather defeated by the sale. There is no rateable distribution in terms of statutory provisions. For all these reasons, this company application be dismissed. 16] Then, there is another affidavit which has been filed by Gujarat Rajya Shramajeevi Karmachari Union. Therein, they have stated that the settlement provides for payment of only gratuity to the workmen and no other payment. It is denied that the alleged settlement Exh.D to the affidavit is fraud on the workmen being a fabricated document. It is stated that the alleged settlement ....
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....tors and workers and to defraud the shareholders of the company. 18] Mr.Bharadwaj was at pains to clarify that these 353 workers are not part of the said 1300 and more workers, who have consented to the sale. The said 353 workers and 14 office staff members have not settled their claims with the company nor have they taken any amount from the company. Most of these workers belong to Sarvodaya Labour Union, who left the union after their leaders unauthorisedly signed the settlement agreement with the company. This agreement cannot be said to be a settlement in accordance with the I.D.Act, 1947 and the Rules framed thereunder. For all these reasons and since the workers have a definite stake in the matter, their objections be accepted and the sale be declared void. 19] There is another objection and that is sought to be raised by Sarvodaya Labour Union and on its behalf, one Mediapally appeared before the Court and stated that the claims of the workers be settled as expeditiously as possible or else the whole attempt to postpone the settlement thereof is successful. The workers are now frustrated and, therefore, this Court should rule upon the controversy as expeditiously as possib....
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....that the no dues certificate from GIIC is necessary. Therefore, in the event, the sale is not set aside, then, the purchaser should be directed to clear all the liabilities of GIIC. Mr.Dhond, has invited my attention to two affidavits filed on behalf of GIIC and a copy of the plaint filed in the civil suit in the Court of Principal Civil Judge, Ahmadabad (Rural) at Mirzapur against the company in liquidation, the official liquidator and the auction purchaser, so also the purchasers of plant and machinery. He submits that the claim of GIIC in the civil suit is crystalised and, therefore, no order adjudicating the claim be passed. 22] Mr.Oza, learned Senior Counsel appearing on behalf of M/s.Tex Raj sought to repeal each of the above objections by contending that the parties have woken up belatedly inasmuch as the sale is of 2007 whereas the affidavits and the objections are raised as an after thought in the year 2011. Apart from they being belated in the affidavits that have been filed by auction purchasers it has been categorically stated that all claims of workers have been settled voluntarily and peacefully, each of these workers came forward and executed affidavits on their own....
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....h is entitled "Recovery of debt determined by the Tribunal". The modes of recovery are by attachment and sale of immovable or immovable property of the defendant, by arrest of defendant and his detention in prison and by appointing Receiver for management of the immovable property or movable properties of the defendants. In this Chapter section 28 appears which provides for other modes of recovery. Section 29 of the RDB Act is relevant and reads as under:- "29. Application of certain provisions of Income Tax Act.- The provisions of the Second and Third Schedules to the Income Tax Act, 1961 (43 of 1961) and the Income Tax (Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply with necessary modifications as if the said provisions and the rules referred to the amount of debt due under this Act instead of to the income-tax: Provided that any reference under the said provisions and the rules to the "assessee" shall be construed as a reference to the defendant under this Act." 27] Mr.Oza has placed strong reliance on these provisions to contend that the provisions of these sections and schedules to the Income Tax Act, 1961 (Act 43 of 196....
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....re, an order made thereon would necessarily mean that the sale conducted in this case in favour of M/s.Tex Raj, although private, is under the RDB Act and, therefore, the Official Liquidator need not be informed nor his consent is necessary before effecting the sale in terms of this rule. 30] It is not possible to accept this contention of Mr.Oza for more than one reason. The documents produced on record would go to show that the company in liquidation made an application on 16th March 2007 in which what it has stated that a recovery certificate has already been granted; recovery proceedings have commenced bearing No.1 of 2006. During the pendency of this O.A., itself certain financial institutions and banks were approached by the company in liquidation with a request to consider a proposal for full and final settlement of their dues under one time settlement scheme (OTS). To enable the company in liquidation to give concrete proposal and to finance payments under the OTS, certain financers were approached, but they were not able to bring any monies/ finance within the stipulated time. The finance was obtained from fresh financiers, viz., Tex Raj, a partnership firm having its add....
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.... be purchased by M/s.Tex Raj on "as is where is" and "as is whatever there is" basis. By itself, the execution of this deed in favour of Tex Raj would not prove that the sale, which was a private one was under the aegis of DRT or under the control, supervision and monitoring of DRT/ its Recovery Officers. 32] Then, Mr.Oza made a reference to another document, Annexure C to the affidavit of the purchasers dated 30th June 2011 and contended that Recovery Petition No.1 of 2006 and 411 of 2004 stand fully satisfied to the extent of claims of Bank of Baroda and Bank of India and these proceedings will be continued against the remaining defendant Nos. 17 to 19 in accordance with the terms and conditions as per the Recovery Certificate dated 29th December 2005. The Recovery Proceedings before the DRT initiated by BNB Paribas will be withdrawn and DRT Receiver would stand discharged. This is what the Recovery Officer of DRT Mumbai stated in the Recovery Proceedings. It was very vehemently contended that this would make the sale under the aegis, supervision and control of DRT. In fact the argument is that, M/s.Tex Raj has purchased the properties under the Recovery proceedings initiated by ....
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.... raise the amount. There is no such order of the Recovery Officer nor are the affidavits placed on record indicating that such an order came to be passed. Rule 66 must be read in its entirety namely, with the sub-Rule and provisos, and if so read and perused, it would be clear that the Recovery Officer is not only required to make an order postponing the sale but is required to grant certificate to defaulter authorising him within a period mentioned in the certificate and notwithstanding anything contained in the schedule, to make the proposed mortgage, lease or sale. Then, there are two provisos which require that all monies payable under the arrangement viz., mortgage, lease or sale, is required to be paid not to the defaulter but to the Recovery Officer. Second proviso below Rule 66(1) provides that no mortgage, lease or sale under rule 66 shall become absolute unless it has been confirmed by the Recovery Officer. Therefore, a private sale to be termed as being under the aegis or control or supervision in terms of this rule, must satisfy all the requirements of Rule 66. A private sale of attached immovable properties is permitted only if the requirements specified by the Rule a....
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....j in this case provided on facts it was proved that the sale was under the RDB Act and during the course of execution of the recovery certificate. The facts necessary to prove a private sale in terms of Rule 66 of the Second Schedule to the Income Tax Act, 1961 are not placed on record. By relying upon certain applications made by the Company in liquidation to the Recovery Officer and based on certain statements therein, it is not possible to hold that the private sale was one recognised by Rule 66 and was in terms thereof. Therefore, the decision in the case of Allahabad Bank (supra) reported in (2000) 4 SCC 406 is of no assistance to the purchaser. 33] Once this is the position, then, the judgement of the Supreme Court in the case of Rajasthan State Financial Corporation and Anr. Vs. Official Liquidator and Anr., reported in (2005) 8 SCC 190 also cannot be of any assistance. The judgement of the learned Single Judge dated 14th January 2005 on Official Liquidator's report in the case of M/s.Divya Chemicals Ltd, M/s.N.N.Dyechem (I) Ltd and M/s.Agritech Hatcheries and Foods Limited, (Company Petition No.215 of 1997 & other companion matters), is also of no assistance, because, ....
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....010 was received from one Mukeshbhai Parmar giving details of the properties sold by the company in liquidation. There is another affidavit dated 9th September 2010 affirmed by Mr.Bipin J. Patel, President of the T. Maneklal Employees Union along with copies of sale deeds and other documents, relating to the sale of assets of the company in liquidation and there is affidavit of Ramubhai Patel, General Secretary dated 9th September 2010 containing detailed information of Company's properties along with copies of sale deeds and documents. It is from these affidavits that the Official Liquidator states that the movable properties of the company in liquidation have been sold in favour of Mr.Yusufbhai I. Parmar and Mr.Deven Rameshbhai Patel in January 2007 and various immoveable properties have been sold to M/s.Tex Raj in June 2007. The report of the Official Liquidator states that the sale was in the year 2007 and it became void as the same is after presentation of the winding up petition i.e. On 29th April 2003. 37] Thus, the argument is that BIFR recommended winding up of the Company in liquidation on 23rd February 2000, the present petition was filed on 29th April 2003. It was ....
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.... Raj has filed number of affidavits and in reply to the affidavit of Gujarat Kamgar Panchayat dated 25th July 2011, what has been stated by Tex Raj in its affidavit dated 3rd September 2011 is this:- "(4) I say that purchasers have purchased the property under the proceedings of Recovery of Debt Due to Banks and Financial Institutions Act, 1995 initiated by banks before Debt Recovery Tribunal-I, Mumbai, who have remained outside the winding up proceedings. I say that the sale of immovable properties under the RDB Act is a statutory sale which came to be purchased by purchasers under the proceedings of DRT-I, Mumbai. I say that the purchaser is a bona fide purchaser of the immovable properties who has paid entire consideration before the Recovery Officer which came to be distributed amongst the secured creditors under the orders passed by DRT. (5) I say that I have perused the reply affidavit dated 25.07.2011 sworn by one Ramubhai Somnath Panchal who has identified himself as General Secretary of Gujarat Kamgar Panchayat Union and information supplied by him by communication dated 16.08.2011. I say that the averments made in affidavit reply are incorrect to the knowledge of the ....
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....at Shramajeevi Union is concerned, M/s.Tex Raj replied to the same and referred to the settlement with this Union. It is stated that no inspection was given by the Union of the documents which have been relied upon. In fact it is stated that the statements made in the affidavits are false inasmuch as the workmen have been paid the amounts by way of account payee cheques and each one of them has accepted the same. The Union is party No.4 to the agreement, a copy of which is annexed as Exh.A to this affidavit. 41] As far as the reply to the affidavit filed by the President of Gujarat Kamgar Panchayat Union, dated 3rd August 2011, it is stated that the company has produced the statement before the labour court Ahmadabad in Recovery application No.445 of 2007. The names of the workers mentioned in the application are fictitious and not of the workmen of the company. Mr.Bharadwaj stated that the basis upon which such statements are made and the documents that are available to support them may be made available for inspection. In para 6 of the said affidavit dated 3rd September 2011, running page 167-168 this is what is stated:- "6) I say and submit and in para 11 of the reply affidav....
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....bmit that over and above the affidavit and resignation filed by Mr.Bipin J. Patel, he has also suppressed material facts to the effect that he had also represented T. Maneklal Employees Union in the proceedings before Regional PF Commissioner and Regional PF Commissioner passed an order dated 26.3.2008 after hearing him representing the Union." 42] It is stated that the deponent Bipin Patel has suppressed material facts to the effect that he represents the employee of the Union in the proceedings before the Regional Provident Fund Commissioner and he passed an order on 26th March 2008 after hearing him. The purchaser M/s.Tex Raj has annexed to all these affidavits necessary documents evidencing receipt of diverse amounts by the workmen. On the contrary the Liquidator has referred to the affidavits of this very Union filed with him in August/ September 2010 and from a perusal of his report, it is apparent that the Unions are taking a contrary stand. If individual workmen have any claims or even unions have any disputes with regard to the terms and conditions of the agreement/ settlement, they are free to raise appropriate pleas by instituting appropriate proceedings before the appr....
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....so also fraud of the company in liquidation. Even Mr.Sen appearing for Official Liquidator sought to argue that it is not a case of private sale under Rule 66. Once it is not so and the procedure was unfair and unjust, there were no bids invited, no valuation made, no safeguards as in the case of public auction or open bid, then, the sale will be void unless ordered otherwise is the submission of the Official Liquidator. The emphasis of arguments of all parties opposing M/s.Tex Raj was that this is not a statutory sale or a sale in terms of Rule 66. I have already dealt with that aspect of the matter. All that is then argued is that 353 workmen have not accepted any payment, they are not party to any settlement and today there is collusion between the company in liquidation and auction purchasers. There is also doubt raised about the settlement dated 12th April 2007. Some argument is raised about the stamp paper being not genuine. To my mind, some sweeping allegations without necessary proof either to show that there was a under valuation or that the property was sold at throw away price or that the workers and creditors were de-frauded, cannot be accepted. Neither the secured cred....