Haryana Financial Corporation and Hada Steel Products Ltd. (In Liquidation) Vs. Official Liquidator and ors. - Court Judgment

Excerpt:
- sections 100-a [as inserted by act 22 of 2002], 110 & 104 & letters patent, 1865, clause 10: [dr. b.s. chauhan, cj, l. mohapatra & a.s. naidu, jj] letters patent appeal order of single judge of high court passed while deciding matters filed under order 43, rule1 of c.p.c., - held, after introduction of section 110a in the c.p.c., by 2002 amendment act, no letters patent appeal is maintainable against judgment/order/decree passed by a single judge of a high court. a right of appeal, even though a vested one, can be taken away by law. it is pertinent to note that section 100-a introduced by 2002 amendment of the code starts with a non obstante clause. the purpose of such clause is to give the enacting part of an overriding effect in the case of a conflict with laws mentioned with the non obstante clause. the legislative intention is thus very clear that the law enacted shall have full operation and there would be no impediment. it is well settled that the definition of judgment in section 2(9) of c.p.c., is much wider and more liberal, intermediary or interlocutory judgment fall in the category of orders referred to clause (a) to (w) of order 43, rule 1 and also such other orders which poses the characteristic and trapping of finality and may adversely affect a valuable right of a party or decide an important aspect of a trial in an ancillary proceeding. amended section 100-a of the code clearly stipulates that where any appeal from an original or appellate decree or order is heard and decided by a single judge of a high court, no further appeal shall lie. even otherwise, the word judgment as defined under section 2(9) means a statement given by a judge on the grounds of a decree or order. thus the contention that against an order passed by a single judge in an appeal filed under section 104 c.p.c., a further appeal lies to a division bench cannot be accepted. the newly incorporated section 100a in clear and specific terms prohibits further appeal against the decree and judgment or order of a single judge to a division bench notwithstanding anything contained in the letters patent. the letters patent which provides for further appeal to a division bench remains intact, but the right to prefer a further appeal is taken away even in respect of the matters arising under the special enactments or other instruments having the force of law be it against original/appellate decree or order heard and decided by a single judge. it has to be kept in mind that the special statute only provide for an appeal to the high court. it has not made any provision for filing appeal to a division bench against the judgment or decree or order of a single judge. no letters patent appeal shall lie against a judgment/order passed by a single judge in an appeal arising out of a proceeding under a special act. sections 100-a [as inserted by act 22 of 2002] & 104:[dr. b.s. chauhan, cj, l. mohapatra & a.s. naidu, jj] writ appeal held, a writ appeal shall lie against judgment/orders passed by single judge in a writ petition filed under article 226 of the constitution of india. in a writ application filed under articles 226 and 227 of constitution, if any order/judgment/decree is passed in exercise of jurisdiction under article 226, a writ appeal will lie. but, no writ appeal will lie against a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - 2. the company, which had failed to meet its obligation, was ordered to be wound up by this court on may 14, 1987, in c. 137 of 1994, this court, vide its order dated march 30, 1995, permitted the corporation to sell the mortgaged property of the company in liquidation provided the official liquidator attached to this court as well as the punjab national bank are associated with the sale. 218 of 1995 has contended that the sale in favour of auction purchaser, namely, precision tools and knives, is not liable to be confirmed as in terms of clause 3 of the terms and conditions of the auction, the auction purchaser has failed to deposit 25 per cent. 171 of 1995, can be allowed only if this court is satisfied that the sale took place in accordance with the terms and conditions of sale. on failure of the auction purchaser to make deposit within the time prescribed, the earnest money was liable to be forfeited. 1 fail to understand the justification of permitting the auction purchaser to deposit the balance 75 per cent. 15,000 towards the expenses already incurred as well as for due publicity to be given in the newspapers for sale of the property by public auction.v.k. jhanji, j. 1. this order shall dispose of two applications. one application, bearing no. c. a. no. 171 of 1995, has been filed by the haryana financial corporation (hereinafter referred to as 'the corporation') for the confirmation of the sale of the property belonging to hada steel products limited (in liquidation) (hereinafter referred to as 'the company') in favour of precision tools and knives, faridabad, by tender dated august 23, 1995. the other application, bearing c. a. no. 218 of 1995, has been filed by anil hada, ex-director of the company under rule 9 of the companies (court) rules, 1959, for setting aside the sale by this court in exercise of its inherent powers. 2. the company, which had failed to meet its obligation, was ordered to be wound up by this court on may 14, 1987, in c. p. no. 32 of 1987.3. its plant and machinery along with the land and building stood mortgaged to the corporation. in c. p. no. 137 of 1994, this court, vide its order dated march 30, 1995, permitted the corporation to sell the mortgaged property of the company in liquidation provided the official liquidator attached to this court as well as the punjab national bank are associated with the sale. it was also noted in the order that as and when the official liquidator is approached for inspection of the property of the company (in liquidation), he would permit the same. the auction sale was subject to confirmation by this court. 4. pursuant to the order passed in c. p. no. 137 of 1994, the corporation got the advertisement inserted in economic times, the tribune, dainik tribune, steel town (a local newspaper of mandi gobindgarh) and nai rashtriya dhara (the local newspaper of faridabad). this advertisement was published on july 26, 1995, july 23, 1995, july 23, 1995, august 5, 1995, and august 3, 1995, respectively. vide this advertisement, sealed tenders were invited for sale of the industrial unit. the description of the property to be sold was given in the advertisement. it was also mentioned in the advertisement that the property for sale could be inspected on august 8, 9 and 10, 1995, from 11 a.m. to 4.30 p.m. the tenders were to be received by 11 a.m. on august 23, 1995, and to be opened on the same day at 3 p.m. the tender was to be accompanied by a bank draft of rs. 5 lakhs drawn on any scheduled bank in favour of the corporation payable at chandigarh as earnest money. in regard to terms of payment, it was stated that 25 per cent. (inclusive of earnest money) was to be paid within 30 days from the acceptance of the offer and the balance 75 per cent. in one and a half years in quarterly instalments with prevailing rate of interest from the date of acceptance of offer by the high court. the committee constituted by the corporation reserved the right to reject any or all tenders without assigning any reason or negotiate with the tenderers for improving upon their offers. 5. in response to the aforesaid advertisement, tenders were received and they were opened by the committee headed by the managing director of the corporation on august 23, 1995 at 3 p.m. in all seven tenders were received. the tender of vinod kumar of faridabad for rupees one crore four lakhs was the highest. precision tools and knives, faridabad, had given an offer of rupees one crore two lakhs. the committee was of the view that the highest bid of rupees one crore four lakhs given by vinod kumar was not enough and decided to have inter se bidding amongst thewilling tenderers in terms of condition no. 7 of the tender notice. three participants, namely, precision tools and knives, j. k. sales corporation and indcon boilers limited, participated in open inter se bidding and the highest bid of rupees one crore forty-one lakhs was given by precision tools and knives, faridabad. the committee found the offer reasonable and decided to accept the offer. this is how the application has been filed by the corporation for confirmation of the sale. 6. c. a. no. 218 of 1995 has been filed by anil hada, ex-director of the company (in liquidation), challenging the sale on the grounds that the corporation did not issue any notice to the guarantors in respect of the sale, neither the corporation has given any detail of the built-up area nor it has given any detail of the machinery. in his objection, he has also stated that the value of the land alone would come to rs. 5 crpres approximately, whereas the property has been proposed to be sold for rupees one crore forty-one lakhs. the other objection taken is that the corporation did not get the valuation of the property done from any approved valuer before inviting tenders. the last objection is that no proper publicity was done. 7. mr. a. c. jain, advocate, counsel for the petitioner in c. a. no. 218 of 1995 has contended that the sale in favour of auction purchaser, namely, precision tools and knives, is not liable to be confirmed as in terms of clause 3 of the terms and conditions of the auction, the auction purchaser has failed to deposit 25 per cent. of the amount within 30 days of the acceptance of offer. in this regard, he has placed reliance upon the judgment in manilal mohanlal shah v. sardar sayed ahmed sayed mahmad, air 1954 sc 349. he contended that the objector being the ex-director and also the guarantor was a necessary party, but no notice in regard to the proposed sale was sent to him by the haryana financial corporation. he also contended that in this case, the sale was by tenders and the highest price which was to be accepted was to be intimated to the objector and this having not been done, the sale on this score too is liable to be set aside. during the course of his arguments, counsel has given an offer that his client is ready to bear the expenses incurred in regard to the sale already conducted and also for the sale, if ordered by this court by way of public auction. against this, counsel for the haryana financial corporation has contended that the objector, guarantors and directors were informed of the tender notice prior to the sale but no action was taken by these persons. he also contended that the prospective buyer had already deposited 10 per cent. of the amount and he is willing to deposit thebalance amount and, therefore, the sale in his favour be confirmed. mr. m. k. kapoor, official liquidator, contended that when the committee decided to accept the highest bid of precision tools and knives, it was done in the presence of the authorised representative of the said company and the acceptance of the bid was conveyed to the representative. mr. g. s. sandhawalia, counsel for the auction purchaser, has contended that the company by negotiations had given the highest offer of rupees one crore forty one lakhs but the company was never informed with regard to acceptance of its offer. he contended that the company came to know about its bid being the highest only on october 19, 1995, when counsel for the auction purchaser appeared in company applications nos. 171 and 218 of 1995. he contended that the company was always under the impression that 25 per cent. of the amount is to be deposited after confirmation of sale by this court. he further contended that the company is willing to deposit the amount even now. 8. the sale being subject to confirmation by this court, the prayer made by the haryana financial corporation, to confirm the sale, in company application no. 171 of 1995, can be allowed only if this court is satisfied that the sale took place in accordance with the terms and conditions of sale. vide annexure r-1, sealed tenders were invited for sale of the industrial unit. it contained the terms and conditions for sale of the property. the terms and conditions relevant for the purpose of decision of this petition are as follows : '2. the tender should be accompanied by a bank draft of rs. 5 lakhs drawn on any scheduled bank, in favour of the corporation payable at chandigarh towards earnest money. 3. terms of payment.--25 per cent. (inclusive of earnest money) within 30 days from the acceptance of the offer and the balance 75 per cent. in one and a half years in quarterly instalments with prevailing rate of interest from the date of acceptance of offer by the high court. the title to land and building and ownership of plant and machinery shall be given to the successful purchaser only after the full sale consideration has been paid. 4. the properties mortgaged to the corporation are offered for sale on an 'as is where is basis'. the tenderers shall quote for land, building and plant and machinery as a compact unit . . . 6. if the tender is accepted and the tenderer fails to comply with any of the conditions of sale, the earnest money deposited shall be forfeited. 7. the committee constituted by the corporation reserves the right to reject any or all tenders without assigning any reason or negotiate with the tenderers for improving upon their offers. 8. the sale of the unit will be confirmed subject to its approval by the punjab and haryana high court.' 9. it is apparent from a reading of the aforementioned conditions that the tenders were to be accompanied by a bank draft for rupees five lakhs. 25 per cent. of the amount (inclusive of earnest money) was to be paid within 30 days from the date of acceptance of offer and the balance 75 per cent. in one and a half years in quarterly instalments with prevailing rate of interest from the date of acceptance of the offer by the high court. on failure of the auction purchaser to make deposit within the time prescribed, the earnest money was liable to be forfeited. 10. in order to determine whether the sale took place in accordance with the terms and conditions of sale, a reference is required to be made to the proceedings of the committee. the committee was headed by the managing director of the haryana financial corporation, the official liquidator, general manager, punjab national bank, nit, faridabad and manager, haryana financial corporation. in all, seven tenders were received. on acceptance of these tenders, the committee was of the view that the highest bid of rupees one crore four lakhs given by vinod kumar was not enough and decided to have inter-se bidding amongst the willing tenderers in terms of condition no. 7 of the tender notice which provided that the committee constituted by the corporation reserved the right to reject any or all tenders without assigning any reason or negotiate with the tenderers for improving upon their offers. three participants, namely, precision tools and knives, j. k. sales corporation and indcon boilers limited (auction purchasers) participated in open inter se bidding and the highest bid of rupees one crore forty-one lakhs was given by precision tools and knives, faridabad. the committee found this offer reasonable and decided to confirm the sale. this has been so recorded in the minutes of the meeting with regard to opening of tenders and has been annexed as annexure r-2. although mr. sandhawalia has made reference to the affidavit dated february 12, 1996, of vinod goyal, the proprietor of precision tools and knives, for submitting that the auction purchaser was told by the officials of the corporation that he would be informed of the decision of the committee accepting or rejecting his tender, the same was not conveyed to him and he came to know about this only on october 19, 1995, when an application was filed for confirmation of sale in his favour,but in the presence of the minutes of the meeting recorded by the committee and signed by mr. sudhir verma, additional general manager of the corporation, and the statement of mr. m. k. kapoor, official liquidator at the bar, that inter se bidding was done in his presence and on finding the bid of precision tools and knives being the highest the committee there and then informed regarding acceptance of the same to the auction purchaser, i am of the view that the contention of mr. sandha-walia that the auction purchaser had no knowledge of the acceptance of the bid cannot be accepted. in terms of clause 3, on acceptance of the offer the auction purchaser was required to deposit 25 per cent. of the amount, inclusive of earnest money, within 30 days and this admittedly was not done and accordingly, this court has no option but to declare that the auction was not held in accordance with the terms and conditions of sale. the apex court in manilal mohanlal shah v, sardar sayed ahmed sayed mahmad, air 1954 sc 349, in reference to order 21, rule 85 of the code of civil procedure, which provides 'full amount of purchase money payable shall be paid by the purchaser into court before the court closes on the fifteenth day from the sale of property' has held that 'the rules do not contemplate that there can be any sale in favour of a purchaser without depositing 25 per cent. of the purchase money in the first instance and the balance within 15 days. when there is no sale within the contemplation of these rules, there can be no question of material irregularity in the conduct of the sale. non-payment of the price on the part of the defaulting purchaser renders the sale proceedings a complete nullity. the very fact that the court is bound to resell the property in the event of a default, shows that the previous proceedings for sale are completely wiped out as if they do not exist in the eye of law.' in this case too, nonpayment of price on the part of the auction purchaser has rendered the sale proceedings a complete nullity. 11. faced with this situation, mr. sandhawalia contended that the objector has not raised such an objection in his petition and as such, this objection ought not to have been entertained. i find no merit in this contention. the sale being subject to confirmation by this court, a duty is cast on the court to re-sell the property in the case of non-compliance with the terms and conditions of sale, irrespective of the fact that no such objection has been made by any party to the proceedings to challenge the sale. once there has been default in the payment of balance of the amount, the sale proceedings become a nullity and the court is bound to put the property to re-sale.12. it was next contended by mr. sandhawalia that the provisions of the code of civil procedure do not apply to this case. in this regard, he made reference to the judgment in haryana electro steel ltd. v. haryana financial corporation, air 1995 p & h 37. when it was put to counsel as to which procedure would apply, he was unable to bring to the notice of this court any provisions in the companies act, 1956, or in the companies (court) rules, 1959, regulating the sale or confirmation of sale and, therefore, as provided in rule 6 of the 1959 rules, the provisions of the code of civil procedure so far as applicable, would apply to all proceedings under the act and the rules. the judgment cited by counsel has no application to the facts of this case as it was decided on its own facts. i am further of the view that since the present petition has been filed for confirmation of sale of the property belonging to the company in liquidation, the court is under an obligation to satisfy itself that the sale has been effected according to the terms and conditions of sale and shall not remain a mute or helpless spectator to an obvious or manifest illegality in conducting the sale. 13. it was also contended by counsel for the objector that the property had not been sold in consonance with the guidelines laid down by the apex court in mahesh chandra v. u. p. financial corporation [1993] 78 comp cas 1 ; air 1993 sc 935. he contended that the property ought to have been sold by public auction instead of by inviting tenders. in mahesh chandra's case, [1993] 78 comp cas 1 ; air 1993 sc 935, the apex court has held that the corporation being an instrumentality of the state is bound to act reasonably and fairly in dealing with the property of the debtor. the exercise of powers or discretion in its dealing would be subject to the same constitutional or public law limitation as the government. the corporation also equally must conform in its actions to the same standards that meet the test of justness, fairness, reasonableness and relevance. in the present case, as per clause 3 of the terms and conditions of sale the auction purchaser was permitted to deposit 25 per cent. of the amount, inclusive of earnest money, within 30 days from the date of acceptance of offer by the committee and the balance 75 per cent. in one and half years, in quarterly instalments with prevailing rate of interest, from the date of confirmation of sale by this court. 1 fail to understand the justification of permitting the auction purchaser to deposit the balance 75 per cent. in one and half years and that too in quarterly instalments. this clause is totally unfair as the maximum period in this regard ought not to have been more than two or three months from the date of confirmation of sale by this court. as regards the sale by private negotiation,the apex court in mahesh chandra's case [1993] 78 comp cas 1; air 1993 sc 935, has held that the sale by private negotiation should be permitted only in very large concerns where investment runs into huge amounts for which ordinary buyers may not be available or the industry itself may be of such nature that normal buyers may not be available. it also held that before taking such steps, there should be advertisements not only in daily newspapers but business magazines and papers. the very fact that the sale fetched rupees one crore forty-four lakhs, the concern in this case, to my mind, is not a big one and, therefore, the property ought to have been sold by public auction. 14. accordingly, company application no. 171 of 1995, shall stand dismissed. the sale of property being not in conformity with the terms and conditions of sale is set aside. as undertaken by counsel for the objector in c. a. no. 218 of 1995, to deposit the expenses incurred on the sale and also for the sale to be held, the petitioner in company application no. 218 of 1995 is directed to deposit with the haryana financial corporation a sum of rs. 15,000 towards the expenses already incurred as well as for due publicity to be given in the newspapers for sale of the property by public auction. the amount be deposited within two months. the haryana financial corporation is further directed to modify clause 3 of the terms and conditions of sale so as to limit the period to pay the balance 75 per cent. of the amount within three months from the date of confirmation of sale by this court. as regards the earnest money deposited by the auction purchaser, no prayer has been made by the corporation for forfeiting the amount and, as such, the amount of earnest money either shall be refunded to the auction purchaser or the same shall be taken to be the earnest money in case the auction purchaser chooses to participate in the auction. 15. in view of the order passed in company application no. 171 of 1995, company application no. 218 of 1995 has become infructuous. accordingly, the same shall stand disposed of as such.