TaxTMI 
TaxTMI 
2013 (4) TMI 927
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....sions of SARFAESI Act, 2002, has taken possession of the property. A publication was given on 28.08.2010 for auction of the same. M/s. United Steel Allied Industries Private Limited (Auction Purchaser) participated in the auction on 29.09.2010 and 25% of sale price was deposited. Subsequently, on 01.01.2010 S.B.I. Global Factors Limited has filed company petition for winding up as it is also a secured creditor and the petition was allowed on 18.07.2011 and the Official Liquidator was appointed to take possession of the property. After the auction a letter dated 18.10.2010 was addressed by the auction purchaser to the effect that their participation in the auction is subject to the following conditions:- 1) "Satisfactory legal due diligence and clear marketable title over land, plant and machinery free from any lien, charge, encumbrances etc., 2) Indemnity guarantee from the Indian Bank with respect to future litigation, what so ever in nature, if any, 3) Indian Bank shall put us in the peaceful possession and handling over the land, plant and machinery and smooth functioning without any obstructions, what so ever in nature, from any quarter. In this connection, we would....
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....012 giving the Bank liberty to proceed against the auction purchaser in accordance with law for recovery of the over due amounts and installments to the extent of default by the auction purchaser. As against that W.A. No. 17 of 2013 was filed and by order dated 09.01.2013 the modification ordered in W.P.M.P. No. 2850 of 2012 was deleted and the matter was directed to be dealt by this Court along with W.P. No. 33655 of 2011. That is how both the Writ Petitions were transferred to this Court. While these matters are pending the auction purchaser has filed COMP. A. No. 421 of 2013 to set aside the sale alleging several irregularities, suppression of facts and not following due process. It was also further pleaded that the properties are not properly valued and the encumbrances were not disclosed and possession was not delivered effectively. It was also pleaded that there were several claims of taxes etc., to a large sum of more than 1 Crore and as such the sale is liable to set aside. 2. The Indian Bank has denied all the allegations and supported the action taken under SARFAESI Act. The Official Liquidator claims that this sale is void under Section 446 as the leave was not obtained....
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....urt that has to deal with the validities. He also relied on a decision reported in Saroj Shivhare and Others Vs. Gaurav Enterprises and others 2012 (2) D.R.T.C. 47 (M.P.), whereunder it was held that the issue of the sale certificate itself is a completion of a sale and no registration is necessary. According to him, the correspondence and the admissions of the auction purchaser clearly goes to show that the possession was delivered. According to him, when once the possession was delivered, the subsequent interference is not the duty of the Bank to protect. He also contends that it is for the buyer to verify whether there are any encumbrances or not and if there are arrears of taxes etc., it shall be paid by the auction purchaser only in substance. According to him, neither the Official Liquidator nor the auction purchaser can question the sale before the Company Court and therefore their claims have to be rejected as the sale having been confirmed. The Registrar shall be directed to register the property. 5. On the other hand, the Official Liquidator contends that his attack on the sales is under Section 531 and 531(A) of the Companies Act and it is the exclusive jurisdiction of ....
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....s Limited, Chennai Vs. Indian Overseas Bank, Vijayawada, Krishna District and Others 2012 (6) ALD 345 (DB), whereunder the provisions of SARFAESI Act, the notion of sale and transfer have been considered and opined that the sale is not complete unless the property for which the price was paid is transferred to the buyer by a written proceedings. It was also considering the provisions of Rule 9 (2) and 9 (4) and found that the confirmation shall be by the secured creditor and not by the Authorized Officer. Incidentally, it was held that a sale certificate is not required to be registered and no registered sale deed is to be executed after the sale was confirmed by the Banks. He also relied upon a decision of the Supreme Court reported in Haryana Financial Corporation and another Vs. Rajesh Gupta (2010) 1 SCC 655, whereunder the defects in the formation of a contract can be agitated by the auction purchaser. 8. Therefore, in view of the above contentions, it is necessary now to see the provisions under Section 531, 531A and 537 of the Companies Act:- 531: Fraudulent Preference:- 1) Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act r....
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....er proper publication was given. It cannot be disputed that the S.B.I. Global is also a secured creditor, if the interest of the other creditors is not taken care of and if it is only for the benefit of single creditor even applying the principles under the Insolvency Law, the sale is a fraudulent one. The argument that the Indian Bank is prepared to place before the Court the amount realized by the sale for distribution of all the creditors does not hold good, for the reason that if at the time of the sale, if the auction purchaser is to know that there are other encumbrances on the property then the price to be quoted will be definitely different. In fact, there is no material on record as to what was the sale price quoted by the Authorized Officer and as to whether it was less or more than the price quoted by the auction purchaser. 10. There cannot be any doubt of the fact from the dates given earlier that the transfer was within a period of six months from the date of presentation of the liquidation proceedings and consequently it is statutorily invalid and the law does not recognize it. In fact, an attempt was sought to be made that there is no reference to sale in either of ....
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....oes not give any right or advantage to misuse the power of quasi judicial nature in order to convert a Non Performing Asset and realize the money by adopting improper mode. Any Authorized Officer who is conducting the sale is discharging the quasi-judicial functions and he has to follow the rules and conduct the sale according to law. There cannot be an understanding or agreement between the borrower, auction purchaser or the creditor by violating mandatory provisions, in order to get undue benefit to the Creditor Bank. 14. In this connection, it is useful to refer to Rule 9 (1) (2) (3) (4) and (5) of SARFAESI Act:- Rule 9: Time of Sale, issues of sale certificate and delivery of possession, etc.:- 1) "No sale of immovable property under these rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) or notice of sale has been served to the borrower. 2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorised officer and shall be subject to confirmation by....
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....ended by agreement in writing between both the parties, it evidently means that such an extension shall be within 15 days period stipulated under Clause 4. But, in this case no such thing has happened. 17. The tender cum bid agreement also stipulates the same, which reads as under:- 33. Sale is subject to confirmation by the Bank. Bank will confirm the sale only after ensuring that initial payment of 25% of sale price is paid/deposited (on the same date) by way of DD/BPO. 34. The EMD deposited by the successful tenderer shall be held as Security Deposit for due performance of the contract. Successful tenderer shall deposit the balance amount within 15 days of confirmation of the sale by the Bank or within the extended period as agreed between the parties. Such deposit will be made in the form of Demand Draft/Bankers' Pay Order on a Bank, payable at Hyderabad. 35. No time extension for making the payment after the stipulated period will be granted nor shall the successful tenderer be allowed to make part payments. However, the Seller may, in his discretion, entertain and consider request for extension of time for making payment provided the request has been made in writin....
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....al advantage the creditor bank has got. It is abundantly fraudulent. When once the sale fails to have any legal effect by application of Rule 9 it cannot be said to be a valid sale and neither the auction purchaser nor the creditor can derive any benefits and such sales are to be ignored. 20. Therefore, taking any view of the matter, it is quite clear the sale in this case is statutorily void under Section 531, 531-A and 537 of the Companies Act and also under Rule 9 of the SARFAESI Act, that being so the creditor cannot claim any benefits. 21. It is sought to be contended that there was no need for registration and the sale certificate itself is sufficient probably under the SARFAESI Act it appears to be so. But if the parties have contracted to the contrary, the same cannot be avoided. In this connection, it is useful to refer to Clause 42, 43 and 44 of the tender given bid documents for sale. 42) On confirmation of sale by the Bank and upon payment of the full amount of price, the Authorised Officer will execute the Sale Certificate in favour of the Purchaser. The registration charges, payment and stamp duty etc., shall be borne by the Purchaser. 43) It will be the respons....