Company application seeking validation of property transfer from a liquidated company against the Official Liquidator was dismissed. Court held DRT orders creating rights against banks do not bind the Liquidator.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY APPLICATION NO.387 OF 2010 IN
COMPANY PETITION NO.771 OF 2005
Sunanda Textiles Engineers Pvt.Ltd. and another. ..Applicants -VersusThe Official Liquidator of Matushree Textiles Limited (in liquidation). ..Respondents -AndBoard of Industrial and Financial Reconstruction. ..Petitioner
Mr.D.D.Madon, Senior Counsel a/w Cyrus Ardeshir i/b Apex Consillic, for the Applicants.
Mr.V.P .Sawant, for the Respondents. Dr.T.Pandian, Official Liquidator, present in person.
CORAM : S.C.DHARMADHIKARI, J. DATE : 10th January, 2011.
P.C.
1 By this Company Application, the Applicants are seeking the following reliefs:-
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2 It is stated in the affidavit in support of this application by the Applicant No.2 who is Director of the Applicant that the application is made for validation of the transfer and assignment of the immovable property of the company in liquidation effected prior to passing of the winding up order but after the filing of the company petition in which the winding up order was passed.
3 It is submitted that the transfer and assignment is bonafide and genuine for valuable consideration and it is in the best interest of the company in liquidation and is also beneficial to the creditors of the Company in liquidation. The Applicants are bonafide purchasers of the property for value and that the MIDC is owner of the plot of land which is a immovable property and which by virtue of lease deeds dated 16.09.1983, 21.08.1987, the transfer order dated 27.07.1987 certain rights in respect thereof accrue in favour of the company in liquidation.
4 It is stated that the company in liquidation obtained certain financial assistance from the Indian Overseas Bank and the Central Bank of India. In order to secure the amount advanced under the diverse facilities, the Company in liquidation mortgaged the above property in favour of the Bank. There was default and therefore, the Indian Overseas Bank and the Central Bank of India filed suits in this Court which were eventually transferred to the Debts Recovery Tribunal for adjudication.
5 In or around 1993 the Company in liquidation made reference to the BIFR and the BIFR by opinion dated 07.09.2000 recommended that it was just and equitable to wind-up the company. No appeal was filed to the AAIFR. Once the opinion of the BIFR was forwarded to this Court, by order dated 29.09.2005 the said opinion has been treated as a petition for winding up and the Court admitted the same and that is how the liquidator became party to the pending proceedings
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before the Debts Recovery Tribunal. It is alleged that on 24.12.2008 the Debts Recovery Tribunal disposed of the Original Application No. 1843/2000 on the basis that a sum of Rs.1,49,50,000 was accepted by the Indian Overseas Bank as full and final settlement of all its dues. Similarly, in Original Application No.109/2000 filed by the Central Bank of India, which was pending before the Debts Recovery Tribunal, a joint application was made wherein it was recorded that the compromise proposal to pay sum of Rs.2.3 crores has been accepted by the Bank. The Applicant No.2 before me had agreed to purchase immovable property which was mortgaged with the Central Bank of India and that on Rs.2.23 Crores being handed over the Bank would transfer the immovable property in favour of the Applicant No.2.
6 Since heavy reliance is placed on the order passed by the Debts Recovery Tribunal, it would be convenient to reproduce the same at this stage itself:-
“O.A.109/2000 Central Bank of India. ..Applicant vs.
Matushree Textiles & ors. ..Defendants
Joint Application of Applicant & Defendants/ Consent terms.
1. The Applicant Bank has filed O.A. No.109/2000 in this Hon’ble Tribunal against the Defendants for recovery of Rs.2,92,32,337.78.
2. The defendants have submitted a compromise proposal for Rs.230 lacs as full and final settlement the Applicant’s dues and the said proposal has been accepted by the Applicant.
3. Under the said compromise proposal, one Mr.Rajendra Kumar Pacheriwala has agreed to buy the immovable property mortgaged with the Applicant and being Plot Nos.F1/ and F1/1 (part) together with the building thereon situated at Dadlapur for Rs.230 lakhs. The said Mr.Rajendra Kumar Pacheriwala has already
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deposited the said sum of Rs.230 lakhs in a current account No.3042670566 with the Applicant and has no objection to the said sum of Rs.230 lakhs being transferred to the Applicant as and when this Joint Application is filed in this Hon’ble Tribunal and the Hon’ble Tribunal passing an order in terms of this Application.
4. The Applicant shall execute all necessary documents necessary for the transfer of the abovementioned property located at MIDC Dadlapur to the said Mr.Rajendra Kumar Pacheriwala of the nominee.
5. The parties submit that the original title deed of the said property are with the Defendant No.5 Indian Overseas Bank, Kalbadevi Branch. The Applicant has no objection to the said Defendant handing over the original deed to the said Mr.Rajendra Kumar Pacheriwala upon the filing of the application.
6. Defendant represents a) That there are no suit or any other legal proceedings filed by them against the Applicant in any Court or Tribunal.
b) There is no account belonging to the Defendants which is in default with any branch of the Applicant.
c) There is no CDI case pending against the Defendants.
7. The applicant hereby agrees and confirm that there are no further claim against any of the Defendants.
8. In the above circumstances, the parties humbly pray that the original application be disposed off as withdrawn. Central Bank of India
-sd-
Applicant -sd-
Santosh Kumar Poddar (Defendant No.2)
-sd-
-sd-
Mulla & Mulla C & B.C. Vimal Kumar Poddar Advocate for the Applicant (Defendant No.4)
-sd-
M.Dhurav & Co. Advocate for the Defendant.”
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“O.A. No.109/2000, 31.03.2009.
In this matter, compromise has arrived at between the Applicant Bank and Defendant Nos.2 to 4. In terms of the compromise/consent terms a sum of Rs.230 Lakhs has been agreed to be paid by the third party purchaser of the mortgaged property on behalf of Defendant Nos.2 to 4 as full and final settlement, as against the claim of Rs. 2,92,32,337.78 with future interest and cost. The same was accepted by the Applicant Bank. The purchaser has agreed to transfer the amount of Rs.230 lakhs which is kept in Account No.30426670566 to the Applicant after the consent terms are taken on record. The Defendant No. 1 company was represented by the Official Liquidator. The counsel for the Applicant Bank has also filed affidavit apart from the consent terms stating that they are standing outside liquidation and they have not filed any claim affidavit before the O.L. Notice of this counsel terms was served on O.L. also. However none has appeared for O.L.. The Defendant Nos.2 & 3 were also present alongwith the officers of the Applicant Bank. Ms.Bindu Grover for the Applicant Bank i/b M/s Mulla and Mulla and the counsels for Defendant Nos.2 and 4 and counsel for Defendant No.3 were also present at the time of passing this order. The O.A. 109/2000 stands withdrawn in terms of the consent terms filed today. Further, the Applicant Bank to appropriate the amount in the Current Account No.30426670566 which has been kept by the third party, purchaser. With this observation O.A. stands disposed of. No order as to costs. Exh.143-Application filed by Applicant. Exh.14-Consent terms filed by Defendant Exh.145-Affidavit in support of service filed by Defendant Nos.2 & 4.”
7 It is relying on this document and stating that the liquidator was aware of the orders, that it is prayed that he should execute the necessary documents and transfer the property in favour of the Applicants.
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8 Mr.Madon, learned Senior Counsel appearing on behalf of the Applicants, submitted that the Government registered valuer gave a report in which the market value of property has been duly reflected. The transaction, therefore, cannot be said to be under valued. Further, the liquidator has not received any claims. For all these reasons and when the Applicants have paid Rs.2,84,91,659/- and the liquidator was given the notice and well aware of the payments, that he is bound and liable by the orders and directions reproduced above; therefore, the company application be made absolute.
9 On the other hand, Mr.Sawant, learned counsel appearing on behalf of the Official Liquidator, submitted that the company application is not maintainable as no relief can be granted in favour of the Applicants and against the official liquidator. It is submitted that the official liquidator held several meetings and pursuant to the order of winding up, the date was fixed to take possession of the premises/ immovable property. In presence of the ex-directors and representatives of both banks, the liquidator proceeded to take possession and has appointed security guards to protect the immovable property. The valuation of assets was done and the Official Liquidator obtained the valuation report of the properties. Although there is reference made to the correspondence by the Banks with the liquidator, yet, it has been pointed out that the matter has been referred by the BIFR for winding up vide its order dated 07.09.2000, that was the date of its opinion recommending that it is equitable that the company be wound up. This Court had admitted the petition on 29.09.2005 but going by the wording of Section 441 of the Companies Act, 1956 and subsequent provisions, it is clear that presentation of the winding up petition is on 07.09.2000. The alleged transactions have taken place after commencement of the winding up proceedings, therefore, they
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do not bind the liquidator. The liquidator has to safeguard the interest of workers and all other creditors including the secured creditors. Unless and until the claims are invited and adjudicated, there is no question of property being handed over to the Applicants.
10 My attention is also invited by Mr.Sawant to the order that has been passed by the Debts Recovery Tribunal in Miscellaneous Application No.33/2000 in Original Application No.109/2000, a copy of which is annexed to the rejoinder affidavit. For all these reasons, he submits that the application be dismissed.
11 With the assistance of the learned counsel appearing for the parties, I have perused the application and annexures thereto, so also, the affidavits on record. To my mind, no relief can be granted on this company application. Firstly, if the order passed by the Debts Recovery Tribunal is perused in its entirety, it is clear that what has been recorded is a compromise between the Bank and the borrowers, so also, those who have been making payments on their behalf. There is no direction to the liquidator to transfer the property or create any interest in favour of the Applicants in that behalf. The clear direction in the order of the Debts Recovery Tribunal is to the bank. To my mind, such an order cannot bind the official liquidator. May be his presence is recorded in the appearance of the parties but the basis or foundation on which the Applicant Bank before the Debts Recovery Tribunal and all parties including the Applicants before me, proceeded is that the Bank had sought a decree or recovery certificate against the borrowers in a specified sum. The immovable property is mortgaged in favour of the Bank to secure its dues. The Bank had agreed, on payment of sums in full and final settlement, to transfer the property and that is the rights under the mortgage created in its favour. There was no question of any further rights being transferred
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because the borrower was fully aware that it was a company in liquidation and that certain proceedings for winding up have already been instituted against it. Therefore, reliance placed by Mr.Madon on the joint application/consent terms is misplaced insofar as seeking relief against the liquidator is concerned. The Applicants may have certain rights in their favour but they can assert them only against the Bank as is clear from the joint application. What the joint application states is that the Applicant before the Debts Recovery Tribunal namely the Central Bank of India will execute all documents necessary for the purpose of transfer of property in favour of Rajendra Kumar Pacheriwala and his nominee. The original title deeds are with the Indian Overseas Bank and it is recorded that the Central Bank of India will have no objection if the Indian Overseas Bank hands over the original title deeds to the Applicants before me. The Applicants can go ahead and enforce and execute whatever has been executed as a joint compromise proposal or any order made in furtherance thereof by the Debts Recovery Tribunal. Therefore, merely because none appeared on behalf of the Official Liquidator when the order dated 31.03.2009 was passed does not mean that this Company Application can be allowed as against the Official Liquidator. The order must be understood in the light of the joint proposal and the application made. That it is so understood is clear because Misc. Application No. 33/2000 was moved by the Applicant No.2 before me in the Debts Recovery Tribunal on which the order has been made on 16.09.2010. That Misc. Application prayed that the Respondent No.1 Bank namely Central Bank of India should hand over the title deeds and other related documents so as to enable the transfer and assignment in Applicant No.2’s favour. On this application as well the Debts Recovery Tribunal passed an order and directed the Respondent No.1 Central Bank of India to execute
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the transfer/ assignment deed either in favour of the Applicants or their nominees within four weeks from the date of receipt of the order. The Debts Recovery Tribunal disposed of the Misc. Application by observing that as far as return of original title deeds are concerned, the Applicants can deal separately with the Indian Overseas Bank. This can hardly be said to be an enforceable order much less binding the Official Liquidator. At the most it creates certain rights in favour of the Applicants against the Banks.
12 In these circumstances, the Company Application is misconceived and it is accordingly dismissed. Any larger issue need not to be decided at this stage. Reliance is placed by Mr.Madon on the judgment of the Hon'ble Supreme Court reported in 2000(4) SCC 406 (Allahabad Bank vs. Canara Bank and another) and particularly the conclusions therein that the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 are inconsistent with the Companies Act, 1956 and latter has to be yield to the provisions of the former. That controversy could have been gone into if the order passed by the Tribunal is issuing any directions to the liquidator, in absence thereof this decision is of no assistance to Mr.Madon. In the result, the Company Application fails and is dismissed.
(S.C. Dharmadhikari, J)
2 issues framed by the court
Whether the Official Liquidator was bound to execute the transfer of mortgaged property based on orders passed by the Debts Recovery Tribunal in suits filed by secured creditors.
Whether a compromise agreement between secured creditors and borrowers regarding the transfer of assigned property binds the Official Liquidator.
Colour shows how this judgement treated each authority
Allahabad Bank vs. Canara BankReferred¶12
2000(4) SCC 406 · Who else cites this
Sunanda Textiles Engineers Pvt. Ltd.
The Official Liquidator of Matushree Textiles Limited
S.C. DHARMADHARI
As recorded by the court registry
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