TaxTMI 
TaxTMI 
2024 (4) TMI 306
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....009 entered into between the parties. These applications have been moved by the various applicants/stakeholders in the context of a Sale Deed executed by the company (in liquidation) on 30.01.2013, in respect of the property situated at LGG-116, The Laburnum Condominium Complex, Block-A, Sushant Lok, Sector-28, Gurgaon. FACTUAL BACKGROUND: 2. It would be expedient to consider the conspectus of facts out of which the present applications arise before adjudication of the respective applications. Briefly stated, the present company petition was preferred before this Court on 22.08.2012 and was first taken up on 17.09.2012 and notice was issued to the respondent company (in liquidation) vide order dated 09.10.2012. Thereafter, on 15.01.2013 the respondent company (in liquidation) entered appearance in the matter through its counsel. 3. It is stated that the Official Liquidator was appointed as a Provisional Liquidator to the company (in liquidation) vide order dated 15.07.2013 and was directed to take over the assets, books of accounts and the records of the company (in liquidation). However, in the interregnum, the company (in liquidation) executed a Sale Deed on 30.01.2013 w....
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....P. No. 67(ND), seeking impleadment in the petition and praying for vacation of the status quo with respect to the property in question and also seeking permission to take steps with regard to the mortgaged property so as to recover its dues. The following order, dated 03.12.2012, was passed by the CLB in respect of the above noted application: "The Applicant Bank moved an application to vacate the status quo order dated 13.07.2010 with respect to the mortgaged property LGG-116J Garden Greens, Laburnum Condominium Complex, Block-A, Sushant Lok; Sector-28, Gurgaon, as the property has been mortgaged with the bank by the company. To which the Applicant counsel has conceded that he has no grievance if the bank exercises right over the property as per law. In pursuance of the submissions of either side, CA 574/12 is hereby disposed of holding that bank is at liberty to take action against the mortgaged property as per law, but whereas the status quo order will remain as it is as to the other Respondents in this case." 6. With regard to the above noted order of the CLB and in view of the facts, it has been urged on behalf of the Official Liquidator as also the other ....
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.... out of which they arise and the prayers sought therein: CO. APPL. 340/2016 9. This application has been moved on behalf of the Official Liquidator stating that the sale of the property in question vide Sale Deed dated 30.01.2013 is void ab initio and liable to be set aside. It is further stated that the sale of the property was not in the ordinary course of business and has resulted in loss to the workers and creditors of the company (in liquidation) thereby causing grave prejudice to their interests. In view of the same, the following prayers have been made in the application: "(i) Cancel the sale deed dated 30.01.2013; (ii) Cancel the current mutation in favour of Ms. Pranjali Khanna and direct R-3 to enter mutation in favour of the company (in prov. Liquidation); (iii) Direct SDM, Gurgaon to modify the revenue records & show the Company as the owner of property bearing No. LGG-116, The Laburnum Condominium Complex, Block - A, Sushant Lok, Sector 28, Gurgaon." 10. Reply to the aforesaid application has been filed by the respondent No. 2/Ms. Manju Kanwar. While opposing this application moved by the Official Liquidator, it is submitted that the....
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....he sale of the mortgaged property by way of a private treaty involving the Bank, the company (in liquidation) and the bona fide purchaser, and that there is no mandate in the law providing that in order to realise its debt the Bank must only and only proceed under the SARFAESI Act, or that auction course is the only way for the property to have been sold. 13. It is also stated that although the market value of the property was Rs. 7,60,85,000/-, its distress value was Rs. 6,46,72,250/-. While the evaluators assessed the value of the property at Rs. 9,01,00,000/- as on 15.03.2010. However, due to recession in the market, it was eventually sold at the best available price of Rs. 7,75,00,000/-. CO. APPL. 1868/2013 14. This application has been moved on behalf of the applicant - Ms. Pranjali Khanna through her mother Smt. Vandana Khanna, who is stated to be the bona fide purchaser of the property in question. 15. It has been stated in the application that subsequent to the passing of the winding up order, the Official Liquidator visited the various properties of the company (in liquidation) as reflected in the Balance Sheet. As regards the factory premises of the company (i....
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.... decided differently in the case of the factory premises situated at A-137, Sector 63, Noida, where it chose to not seal the property on the basis of being presented with relevant documents of ownership by Mr. Manohar Lal. 20. In view of the facts and contentions espoused, it has been prayed by the applicants that the property in question be de-sealed and that possession of the same be handed over to the applicant. CO. APPL. 1540/2016 21. Briefly stated, this application has been moved on behalf of the applicant - Mr. Prageet Sharma, who is an Ex-Director of the company (in liquidation). The applicant herein was appointed as an Additional Director of the company (in liquidation) on 07.04.2010, pursuant to allotment of shares worth Rs. 5 lacs, which was done in lieu of a debt owed by the company (in liquidation) to the applicant. 22. It is stated that apart from the property in question and other assets of the company (in liquidation), the applicant had mortgaged his personal property (certain agricultural village land in Gautam Buddha Nagar, Uttar Pradesh) to Andhra Bank as collateral security, and on 18.01.2010, the Bank increased the Packing Credit Limit of the respon....
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....y him bearing CO.APPL. 1540/2016, it is brought to the fore that out of the sale consideration for the property in question i.e., Rs. 7.75 crores, curiously only a sum of Rs. 6.50 crores was received by Andhra Bank. It is further stated that the remaining amount of Rs. 1.25 crores was taken by Ms. Manju Kanwar, and the Bank was aware that out the said amount of Rs. 1.25 crores, a sum of Rs. 88 lacs was transferred by Ms. Manju Kanwar to M/s. VNS Accessories Pvt. Ltd. and VK International, while the remaining amount appears to have been retained by Ms. Manju Kanwar. 27. In this regard it is stated that since the sale of the property in question as also the transfer of Rs. 1.25 crores to third parties was done at the behest of Ms. Manju Kanwar during the pendency of the present winding up petition, it is but evident that the entire transaction was a preferential/fraudulent transaction. Further, that the amount has been taken out of the company and paid to certain third parties in preference over the creditors of the company (in liquidation). 28. In light of these facts being brought out, it is prayed on behalf of the applicant that the beneficiaries who have received the sum Rs....
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.... on behalf of the applicant that it may be allowed to exercise the option to realise the mortgaged assets on its own and further that the Official Liquidator be directed to not take possession of the mortgaged/hypothecated assets that have been secured by the respondent company in favour of the applicant/Andhra Bank. ANALYSIS & DECISION 33. I have given my thoughtful consideration to the elaborate submissions advanced by the learned counsels for the rival parties at the Bar. I have also perused the relevant record of the case including the documents placed on the record by the respective parties. No case law has been cited at the Bar as such. 34. First things first, the issues that have been racked up by the applicant Mr. Prageet Sharma are ex facie beyond the purview and scope of inquiry or proceedings before this Court. Quite apparently, the applicant Mr. Prageet Sharma is making an attempt to wriggle out of the financial mess created by the company (in liquidation) while he was one of the Ex-Directors. His main plea that the resolution by the Board of Directors dated 15.01.2013, authorizing Ms. Manju Kanwar to execute the sale deed in favour of the buyer was not consent....
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....er of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by [the Tribunal] or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator." 37. A careful perusal of the aforesaid provision would show that transfer of an immovable property made by a company, which is not made in the ordinary course of its business and not done in good faith and lacking an element of not being made for valuable consideration, within a period of one year before the presentation of a petition for winding up, may be held to be void against the Liquidator. As regards the disposition of any property/assets of the company in liquidation, after commencement of a winding up petition, the following provisions have to be considered: "Section 536. Avoidance of transfers, etc., after commencement of winding up (1) In the case of a voluntary winding up, any transfer of s....
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....ed only by the general principles which apply to every kind of judicial discretion; and that . 3. The Court must have regard to all the surrounding circumstances and if from all the surrounding circumstances it comes to the conclusion that the transaction should not be void, it is within the power of the Court under Sec. 536(2) to say that the transaction is not void; and lastly that 4. If it be found that the transaction was for the benefit of and in the interests of the company or for keeping the company going or keeping things going generally, it ought to be confirmed." 39. In the above-noted judgment of this Court, reference was also invited to a decision by the Gujarat High Court in the matter of the Sidhpur Mills Company Limited, (1987) 1 Comp. L.J. 71 (Guj.) wherein it was held as under:- "12. It is trite position in law that the commencement of winding-up proceedings relates back to the presentation of the petition (see: section 441 of Companies Act, 1956). It should be recalled that the winding-up petition in which the order was made was company petition No. 9 of 1979 which was presented on 22.2.1979. The winding-up order was made by this Cour....
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....e premise that the transaction was void merely for the reason of having been effected after the order of winding up. It is contended that it was incumbent upon the company judge to record a finding whether Smt. Anita Jain was a bona fide creditor of the company or not and that the preference shown to Smt. Anita Jain as a creditor could have been held to be bad only if found to be fraudulent and of which there is no finding. It is contended that the subject transaction is in good faith and for valuable consideration within the meaning of sections 531A and 536(2) of the Companies Act, 1956 and is not a nullity. It is further argued that the appellant had paid the then prevalent market price for the flat. The appellant in this regard has also filed an additional affidavit along with documents being the sale deeds of the other flats and valuation reports with respect to the property. 10. The purported transfer of the flat aforesaid in the present case is admittedly after the order of winding up and appointment of provisional liquidator. Upon such happening the ex-management of the company which is alleged to have transferred the flat, lost any right to act on behalf of the com....
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....mpany". Similarly in Reserve Bank of India v. Crystal Credit Corporation Ltd., [2006] 132 Comp Cas 363 (Delhi); [2005] 121 DLT 375, the following principles for exercise of the powers under section 536(2) were laid down (page 367 of 132 Comp Cas): "(i) Transactions bona fide entered into and completed in the ordinary course of trade must be protected. (ii) If the disposition is made for the purpose of preserving the business as a going concern, then also the discretion of the court must be exercised. (iii) A disposition must not be validated merely because the party bona fide entered into the transaction. (iv) Knowledge of the presentation of the winding up is immaterial." 42. In light of the aforesaid proposition of law, reverting back to the instant matter, the first and foremost issue that arises in the present matter is whether Andhra Bank, which had the first charge over the property in question and is evidently a secured creditor, could have effected a sale of the property in question by way of a private treaty. In consideration of the same, this Court has gone through the relevant provisions of the SARFAESI Act, 2002 as also the Compani....
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.... to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. [(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate [within fifteen days] of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower: Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A.] (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:- (a) take possession of the secured assets of the b....
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....secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. (7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests. [(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any tim....
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....may retain the sale proceeds of the secured assets after depositing the amount of such estimate dues with the liquidator: Provided also that in case the secured creditor deposits the estimated amount of workmen's dues, such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator: Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen's dues, if any. Explanation.-For the purposes of this sub-section,- (a) "record date" means the date agreed upon by the secured creditors representing not less than [sixty per cent.] in value of the amount outstanding on such date; (b) "amount outstanding" shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor. (10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner a....
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....officer. (2A) [ All notices under these rules may also be served upon the borrower through electronic mode of service, in addition to the modes prescribed under sub-rule (1) and sub-rule (2) of rule 8.] [Inserted by Notification No. G.S.R. 1046 (E), dated 3.11.2016 (w.e.f. 20.9.2002).] (3) In the event of possession of immovable property is actually taken by the authorized officer, such property shall be kept in his own custody or in the custody of any person authorized or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would, under the similar circumstances, take of such property. (4) The authorized officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold or otherwise disposed of. (5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the f....
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....lic auction or public tender may be effected on such terms as may be settled between the secured creditor and the proposed purchaser in writing. Although, in terms of sub-Section (2) to Section 13 of the SARFAESI Act, there was no specific declaration as to the account of the company in liquidation having become a Non-Performing Asset, such recourse was definitely on the cards. 46. Therefore, this court finds substance in the plea advanced by the learned counsel for Andhra Bank, that by virtue of the order dated 03.12.2012 passed by the CLB, whereby liberty was granted to the Bank to take action against the mortgaged property as per law, the sale of the property in question by way of a private treaty with the borrower and the purchaser was squarely included and envisaged. In other words, it was not incumbent upon Andhra Bank to resort to the long run procedure of enforcing its 'security interest' in the manner laid down under the SARFAESI Act, which involves the publication of a notice, carrying out an e-auction, inviting tenders and thereafter finalizing the deal by execution of a registered sale deed. 47. Having said that, the issue that begs a question - whether the sale o....
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.... part of the sale consideration was siphoned off or misappropriated by anyone connected with the company (in liquidation). 50. Accordingly, the company application bearing CA No. 340/2016 is hereby dismissed. The application bearing CA No. 1868/2013 moved by applicant Ms. Pranjali Khanna through her mother Ms. Vandana Khanna is hereby allowed and the Official Liquidator is directed to de-seal the property bearing No. LGG-116, The Laburnum Condominium Complex, Block-A, Sushant Lok, Sector-28, Gurgaon within 15 days from today. 51. All other applications are also disposed of accordingly. CO.PET. 436/2012 & CRL.O.(CO) 2/2014 52. List on date already fixed i.e., 09.05.2024. --------------------- Notes : 1. (f) "borrower" means ^1[any person who, or a pooled investment vehicle as defined in clause (da) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) which,] has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution ^2[and includes a p....
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....financial institution or any consortium or group of banks or financial institutions holding any right, title or interest upon any tangible asset or intangible asset as specified in clause (l); (ii) debenture trustee appointed by any bank or financial institution; or (iii) an asset reconstruction company whether acting as such or managing a trust set up by such asset reconstruction company for the securitisation or reconstruction, as the case may be; or (iv) debenture trustee registered with 5 [the Board and appointed] for secured debt securities; or (v) any other trustee holding securities on behalf of a bank or financial institution, in whose favour security interest is created by any borrower for due repayment of any financial assistance.] 5. [2(zf) "security interest" means right, title or interest of any kind, other than those specified in section 31, upon property created in favour of any secured creditor and includes- (i) any mortgage, charge, hypothecation, assignment or any right, title or interest of any kind, on tangible asset, retained by the secured creditor as an owner of the property, given on hire or financial lease or ....
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....hat no case had arisen to authorise the sale, or that due notice was not given, or that the power was otherwise improperly or irregularly exercised; but any person damnified by an unauthorised or improper or irregular exercise or the power shall have his remedy in damages against the person exercising the power. (4) The money which is received by the mortgagee, arising from the sale, after discharge of prior encumbrances, if any, to which the sale is not made subject, or after payment into Court under section 57 of a sum to meet any prior encumbrance, shall, in the absence of a contract to the contrary, be held by him in trust to be applied by him, first, in payment of all costs, charges and expenses properly incurred by him as incident to the sale or any attempted sale; and, secondly, in discharge of the mortgage-money and costs and other money, if any, due under the mortgage; and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorised to give receipts for the proceeds of the sale thereof. (5) Nothing in this section or in section 69A applies to powers conferred before the first day of July, 1882. 7. 69A. Appointm....
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....ate of five per cent. on that gross amount, or at such other rate as the court thinks fit to allow, on application made by him for that purpose. (7) The receiver shall, if so directed in writing by the mortgagee, insure to the extent, if any, to which the mortgagee might have insured, and keep insured against loss or damage by fire, out of the money received by him, the mortgaged property or any part thereof being of an insurable nature. (8) Subject to the provisions of this Act as to the application of insurance money, the receiver shall apply all money received by him as follows, namely:- (i) in discharge of all rents, taxes, land revenue, rates and outgoings whatever affecting the mortgaged property; (ii) in keeping down all annual sums or other payments, and the interest on all principal sums, having priority to the mortgage in right whereof he is receiver; (iii) in payment of his commission, and of the premiums on fire, life or other insurances, if any, properly payable under the mortgage-deed or under this Act, and the cost of executing necessary or proper repairs directed in writing by the mortgagee; (iv) in payment of the interest f....