Judgment:
ORDER
1. This order will dispose of two Company Petitions 59 and 220 of 1993 both of which have been filed for the setting aside of the sale made by the Haryana Financial Corporation (for short, 'the Corporation') of the properties belonging to M/s. Haryana Electro Steel Limited (now in liquidation and referred to hereinafter as 'the Company') in favour of one Shri D. R. Wadhwa. The official liquidator in his petition (C.P. 59 of 1993) has prayed that directions be given to the respondents for delivering possession of the properties of the Company to him. The other petition has been filed by an ex-Director of the Company under Rule 9 of the Companies (Court) Rule's, 1959 to set aside the sale by this Court in exercise of its inherent powers.
2. The Company took a loan of Rupees 24,50,000/- from the Corporation in the year 1975 and in order to secure this amount a mortgage deed was executed by the Company. Its plant and machinery along with the building and land stood mortgaged with the Corporation. Three Directors of the pom-pany including Shri Pardeep Gupta also executed several personal guarantees in favour of the Corporation. The mortgage deed was registered on March 5, 1975 and the first charge of the Corporation over theproperties of the Company was registered with the Registrar of Companies. The Company defaulted in the repayment of the loan and interest due thereon as a result whereof the Corporation filed a petition before the District Judge, Sonepat under Section 31 of the State Financial Corporations Act, 1951 (1951 Act for brevity) for an order for the recovery of Rs. 26,41,992.77 ps. with future interest. The petition was allowed by the District Judge on 27-2-1980 and the Corporation was held entitled to recover the aforesaid amount with future interest @ 13.5% by putting the mortgaged properties to sale. It is common case of the parties that the Corporation made several attempts to sell the property in execution of the order passed by the District Judge and despite a number of auctions fixed through the Court Auctioneer, no proper bid was received. The Corporation ultimately abandoned the idea of getting the order executed.
3. In the meantime, by an order passed on January 16, 1986 in Company Petition 36 of 1985, the Company was ordered to be wound up and the official liquidator attached to this Court was appointed its liquidator. Thereafter on a petition filed by the ex-management under Section 466 of the Companies Act, 1956 (hereinafter called 'the Act') the winding up proceedings were stayed on 4-3-1986 and this stay order was vacated after two years on 11-3-1988.
4. Since the amount due to the Corporation had not been paid and the same had swollen to more than Rs. 115 lacs, the Corporation took possession of the mortgaged properties sometime in June, 1989 in accordance with the terms of the mortgage deed and also in exercise of its power under Section 29 of the 1951 Act. According to sub-section (5) of Section 29 when a Financial Corporation takes action against a industrial concern under sub-section (1), the Financial Corporation is deemed to be the owner of that concern. Further, Section 46-B, inter alia, provides that the provisions of 1951 Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force which includes theCompanies Act. It expressly says that the 1951 Act is not in derrogation of any other law for the time being applicable to an industrial concern. It is pertinent to mention here that the Corporation also attempted to recover the amount due to it by getting a recovery certificate issued under the Haryana Public Monies Recovery of Dues Act, 1979 through the Collector as arrears of land revenue. This certificate was subsequently withdrawn and the Corporation took possession in exercise of its powers under Section 29 of the 1951 Act. With a view to sell the mortgaged properties, the Corporation filed Company Petition 13 of 1989 to seek permission of this Court because by then the Company had gone into liquidation. It was stated that the Corporation being a secured creditor would stay outside the winding up. The prayer made was that the Corporation or its agents be permitted to sell the properties of the Company through open public auction after due advertisement and to appropriate the sate proceeds thereof against the dues of the Corporation. The petition was allowed by the then learned Company Judge on 26-5-1989 when the following order was passed:--
'This application is ordered as prayed. The auction be conducted through Court Auctioneer after publication in the 'Daily Tribune' and 'Dainik Tribune.''
5. The aforesaid petition was purportedly filed under Section 446 of the Act though counsel for the parties are agreed that permission of this Court for the sale of properties was not necessary under the said section but it was required under Section 537 of the Act. The order granting permission to the Corporation to sell the properties would, therefore, be deemed to be one under Section 537 of the Act because a mere wrong mention of the section in the petition will make no difference when the power to grant permission vested in this Court.
6. After obtaining permission the Corporation sold the properties on 24-7-1989 to one Shri D. R. Wadhwa (hereinafter called 'the auction purchaser') for a sum of Rupees 38,40,000/-. The sale is said to have been conducted after giving wide publicity butadmittedly the auction was held by the Corporation itself and the property was not sold through a Court Auctioneer as was directed by this Court in the order dated 26-5-1989 granting permission to sell, The official liquidator was, however, associated with the sale and his representative was present at the time when the property was sold. The Corporation then filed Company Application No.216 of 1989 informing the Court that the property had been sold to the auction purchaser for the aforesaid amount after associating the official liquidator. There is no requirement of law that such an application had to be filed but nevertheless it was filed by the Corporation. When this application came up for hearing before the then learned Company Judge, the following order was passed on October 20, 1989:
'Concededly the sale has not been effected in terms of the order of the Court dated 26-5-1989 whereby the property was directed to be sold through the Court Auctioneer. This application is dismissed as infructuous.'
7. It may be mentioned that the Corpoartion could only recover a sum of Rs. 38.40 lacs and for the balance amount they issued recovery notices against the Ex-Directors of the Company who have challenged those notices in Civil Writ Petition 1278 of 1993 which is said to be pending in this Court. After the dismissal of the aforesaid application whereby the Corporation informed this Court about the sale in favour of the auction purchaser, the Corporation understood the order of 20-10-1989 to mean that the sale conducted by it had not been confirmed by this Court. Accordingly, the Corporation issued notices dated 4-1-1990 and 19-1-1990 to the auction purchaser stating therein that the sale of the properties of the Company put to auction on 24-7-1989 was subject to the confirmation of this Court and since this Court had not confirmed the same, the auction purchaser was required to deliver possession of the properties to the Corporation failing which it was threatened that police help would be resorted to. On receipt of these notices, the auction purchaser filed Civil Writ Petition 940 of 1990 in this Court impugning the two notices. The Company was notimpleaded as a respondent therein. Notice of motion was issued in the writ petition and when it came up for hearing on 19-3-1990 the counsel for the Corporation conceded before the Bench that the notices impugned therein be quashed and the following order was passed:
'The counsel for the parties are agreed that Annexures P9 and P10 be quashed and a direction be issued that the petitioner should pay the amount in terms of the auction held on 24-7-1989. Order accordingly.
The writ petition is disposed of in the aforesaid terms.
Sd/-
(G. C. Mital)
Sd/-
(Amarjeet Chaudhary)'
8. An application for recalling this order is said to be pending before Amarjeet Chaudhary, J.
9. When all this had happened, the Official Liquidator on behalf of the Company filed the present petition on 12-5-1993 under Sections 456, 468 and 477 of the Act read with Rule 9 of the Companies Court (Rules) 1959. The Corporation and Shri Pardeep Gupta, Ex-Managing Director of the Company were impieaded as respondents. The prayer made in the petition is that the respondents be summoned, examined and directed to hand over the properties of the Company to the Official Liquidator. By an order dated 3-6-1993 passed in Company Application No. 173 of 1993 the auction purchaser was impleaded as a respondent. During the pendency of this petition Shri Pardeep Gupta also filed Company Petition No. 220 of 1993 with a prayer that this Court should take into its actual possession the properties of the Company which were auctioned in favour of the auction purchaser on 24-7-1989 and that the said auction be cancelled. It has also been prayed that the Corporation be directed to refund the amount of Rs. 38.40 lacs to the auction purchaser.
10. The Corporation and the auction purchaser have strenuously opposed thesepetitions. The only stand taken by the Corporation in its written statement is that the sale was conducted with the leave of this Court and that the order passed by the Division Bench in Civil Writ Petition 940 of 1990 had the effect of confirming the sale in favour of the auction purchaser and therefore, the petition filed by the Official Liquidator deserved to be dismissed. Apart from controverting the averments made in the petitions the auction purchaser has primarily contested them on the ground of limitation. It is submitted that the auction took place on 24-7-1989 and the present petition was filed in May, 1993 after a lapse of more than three years and even if these petitions were treated as suits for challenging the sale, it could not be set aside after a period three years.
11. Mr. Anand Chhibbar, appearing on behalf of the Official Liquidator, challenged the sale in favour of the auction purchaser on the following three grounds:
(i) That the sale of the properties was not given wide publicity in the newspapers nor was it held through a Court Auctioneer as was directed by this Court while granting permission for the sale on 26-5-1989.
(ii) The sale has been conducted without obtaining leave of this Court under Section 537 of the Act and the same is, therefore, void.
(iii) The Corporation played a fraud with the Court in connivance with the auction purchaser inasmuch as in pursuance of the order dated 20-10-1989 the Corporation issued notices to. the auction purchaser requiring him to deliver possession of the property back to the Liquidator and in the writ petition filed by the auction purchaser, the Corporation was instrumental in getting the notices quashed by conceding before this Court.
12. Mr. Hemant Gupta, on the other hand, raised the plea of limitation and submitted that the petitions deserved to be dismissed on that ground alone.
13. I have heard counsel for the parties at length.
14. The contention of Mr. Chhibbar thatthe sale was not given wide publicity has no merit. In paragraph 7 of the written statement filed by the auction purchaser it is stated that the auction was conducted after giving wide publicity by way of advertisement in leading newspapers and that the official liquidator and the representatives of City Bank and Punjab and Sind Bank were associated with the sale proceedings. These facts have not been controverted by the official liquidator. Moreover, from the records of the Corpora-lion it is clear that the notice regarding sale was published in the Tribune, Indian Express, Hindustan Times and the Punjab Kesri-Delhi and Ja'landhar editions and the notices were published through M/s. View Point Advertisers. It is, of course, true that the sale was not held through the Court Auctioneer as was directed by this Court while granting permission for the sale. Does it mean that the sale is void or is it a mere irregularity. Before seeking leave of this Court, the Corporation had taken possession of the properties of the Company under Section 29(1) of the 1951 Act and it, therefore, became its owner. The sale made by it was like a sale by any owner of his property and it is not a Court sale which is governed by the provisions of Order 21 of the Code of Civil Procedure. No doubt, the Court while granting permission imposed a condition that the sale be conducted through Court Auctioneer but the sale had been effected by the Corporation as an owner like any other private owner and the mere fact that it was not conducted through a Court Auctioneer would not invalidate the sale. In my opinion, it was just an irregularity more so when the official liquidator had been associated with the sale and unless material prejudice is shown to any concerned party the sale cannot be set aside. All that has been stated is that the property has been sold for a pittance. There is nothing on the record to show that the value of the property at the time when it was sold was more than the price for which the sale has been effected. I cannot, therefore, infer any material, prejudice in this regard. Moreover, steps have to be taken for getting such a sale set aside within the period prescribed by law which has not been done in the present case. Even if one were to assume that the sale wasvoid and not merely irregular, it had still to be. set aside by getting a declaration from the Court which again could be done only within the period prescribed by law. In State of Punjab v. Gurdev Singh, AIR 1991 SC 2219 their Lordships have observed that 'if an act is void or ultra vires it is enough for the Court to declare it so and it collapses automatically. It need not be set aside. The aggrieved party can simply seek that it is void and not binding upon him. A declaration merely declares the existing state of affairs and does not quash so as to produce a new state of affairs. But nonetheless the impugned dismissal order has at least a de facto operation unless and until it is declared to be void or nullity by a competent body or Court.' Again, in para 8 of the judgment, it has been observed as under:--
'The party aggrieved by the invalidity of the order has to approach the Court for relief of declaration that the order against him is inoperative and not binding upon him. He must approach the Court within the prescribed period of limitation. If the statutory time limit expires, the Court cannot give the declaration sought for.'
In the circumstances, the sale cannot, therefore, be set aside merely because it was not conducted through the Court Auctioneer.
15. There is no merit in the second contention either. It has already been noticed earlier that the Corporation filed an application under Section 446 of the Act and obtained leave of this Court to sell the properties. Leave was not required under this section but the same was necessary under Section 537 of the Act. Sanction granted by this Court will be deemed to have been granted under the said section and mere mention of a wrong section in the application cannot invalidate the sale proceedings.
16. As regards the third contention, Mr. Chhibbar has tried to raise a suspicion about the conduct of the Corporation, but whatever may be said in this regard, it cannot be held that any fraud has been committed. After seeking permission from this Court for the sale of properties the Corporation movedan application informing the Company Court about the sale. There was no need for the Corporation to file such an application. However, when it came up before the then learned Company Judge it was dismissed as infructuous after noticing that the sale had not been effected in terms of the condition imposed in the order dated May 26, 1989. The Corporation read this order to mean that the Court had not approved the sale and accordingly issued a notice to the auction purchaser who challenged the same in a writ petition. In the writ petition, counsel for the Corporation conceded that the notice be quashed and it was on the basis of an agreed order that the notice was quashed. It was contended by Mr. Chhibbar that the auction purchaser while challenging the notice did not implead the Company as a party in the writ petition and, therefore, he too was a party to the fraud and the auction in his favour should be set aside. I do not agree with him. The Company was not a necessary party in the writ petition because the auction purchaser was impugning the action of the Corporation in asking him to deliver the property back. It appears that the Corporation by then realised that the order dated 20-10-1989 did not affect the sale and that it was not necessary for it to have even moved the application informing this Court about the same. After realising this it could have withdrawn the notice issued to the petitioner but since the matter was already pending in this Court in a writ petition, counsel for the Corporation conceded that the notice be quashed. Be that as it may, this subsequent act cannot vitiate the sale proceedings.
17. Now coming to the objection of limitation raised by the auction purchaser. It is the admitted case that the sale was conducted by the Corporation as a deemed owner of the property and the auction purchaser purchased the same. If any party wanted to get this sale set aside it had to institute a suit within the time prescribed by law. There is no specific provision in the Limitation Act prescribing time for filing such a suit. Article 127 is, however, a provision which deals with setting aside of a sale in execution of a decree which is not the case here. Therefore, resi-duary Article 137 of the Limitation Act would apply which prescribes a period of three years from the date when the right to apply accrued to the official liquidator when the sale took place on July 24, 1989. The present petition which can be treated as a suit under Section 446 of the Act had to be filed within three years but it was filed on May 12, 1993 much beyond the period of limitation. As a matter of fact, these petitions deserve to be dismissed on this ground alone. Company Petition 220 of 1993 filed by Shri Pardeep Gupta who claims to be an ex-Director of the Company deserves to be dismissed also on the ground; that he has no locus standi to file the same and challenge the sale in favour of the auction purchaser after the Company went into liquidation. It is the official liquidator who represents the Company and not the ex-Directors.
18. In the result, both the petitions are dismissed leaving the parties to bear their owncosts.
19. Petition dismissed.