TUNGABADRA SUGAR WORKS MAZDOOR SANGH Vs. SUBHASH KATHURIA SOLE PROPRIETOR ANITHA INTERNATIONAL INDUSTRIAL AREA NEW DELHI

JUDGEMENT

(1.) ALL these appeals challenge a common order of the learned Single Judge of this Court made in C.A.Nos.1811 of 2005, 854 of 2006 and 2740 to 2742 of 2007 in C.P.Nos.170 of 1995.

(2.) ALL the above appeals have been filed under the following facts and circumstances:(a) One M/s. Dev Sugars Limited was ordered to be wound up in C.P.No.170 of 1995 and C.P.No.35 of 1997 by an order dated 16.9.1999. An Official Liquidator was appointed who took possession of the assets of the company on 28.9.1999. State Bank of Mysore who extended financial assistance to the said company, in order to secure the outstanding dues, filed O.A.No.440 of 1997 before the Debt Recovery Tribunal (DRT), Bangalore, for recovery of a sum of Rs.22,31,78,558.55. After the decree was made in the said O.A., the Recovery Officer issued an official notice for the sale of the properties in various newspapers fixing the date of auction as 11.8.2005. Since the said company was ordered to be wound up, the Official Liquidator of the company raised his objections before the Tribunal at Bangalore. The auction was directed to be held by the Debt Recovery Tribunal. The applicant in C.A.No.1811/2005 a third party, participated in the auction and his offer of Rs.10.25 crores being the highest was accepted by the Recovery Officer. The applicant deposited 25% on the same day, and the balance amount was also deposited in time as directed by the Tribunal. The said auction sale was confirmed by the Recovery Officer on 12.9.2005, and a letter of confirmation was also issued to the applicant. (b) The State Bank of Mysore obtained prior permission from the Court for selling the properties of the company. After the issuance of the sale confirmation letter, the applicant approached the Official Liquidator to hand over possession of the property of the company in liquidation. Since no action was taken by the Official Liquidator, the DRT by letter dated 26.10.2005 also wrote to the Official Liquidator directing him to withdraw the security personnel appointed by him to enable the DRT to hand over possession of the property. The Recovery Officer also wrote a letter on 23.9.2005 to the Chief Secretary, Government of Karnataka, to provide securities for the properties of the company in liquidation. A receiver was also appointed by the Recovery Officer to hand over possession. In such circumstances, the auction purchaser of the property filed C.A.No.1811/2005 seeking for a direction to the Official Liquidator to remove the Security Guards and hand over possession of the property.(c) While the matter was pending, C.A.No.250 of 2006 was filed by M/s.Thungabadra Sugar Works Mazdoor Sangha, represented by its President to implead them as a party in C.A.No.1811/2005 alleging that State Bank of Mysore approached the Court for permission, and the Company Court in C.A.Nos.1251 to 1253 of 1999 permitted the applicant/Bank on 10.3.2000 in O.A.Nos.440 and 1300 of 1997 by imposing a condition that the leave granted was subject to the condition that the Official Liquidator was impleaded, and no coercive steps were taken against the assets of the company during or after the conclusion of the proceedings before the Tribunal that the members of the Sangh were appointed as Security men by the Official Liquidator to protect the assets of company with effect from 1.8.2001 on a monthly salary basis that the DRT, Bangalore, passed a decree in 2001 and ordered for sale by auction of the assets of the company on 1.10.2004 that the Worker's Union objected to the sale and filed a writ petition before the High Court of Karnataka seeking stay of the sale by auction proceedings as their salary and provident fund dues to the extent of Rs.15 crores were due from the company that the High Court of Karnataka by an order dated 27.9.2004 made an interim order to the effect that the sale was subject to the result of the writ petition that in view of the said order, the Recovery Officer of the DRT postponed the auction proceedings to be held on 1.10.2004 but, again the DRT called for the auction of the property by fixing the date as 11.8.2005 that the Sangh filed a fresh affidavit before the High Court, Karnataka, in W.P.No.37991 of 2004 objecting to the methods adopted by the DRT that apart from that, M/s.Tapti Machinery who are the petitioners for winding up of the company and also a creditor of the company objected to the sale and filed objections separately before the Official Liquidator and also before the DRT, Bangalore that all the objections were rejected by the DRT and the sale was conducted and confirmed in favour of the applicant in C.A.No.1811/2005 who was the successful bidder that the successful bidder filed a petition before the High Court of Karnataka to implead them as a party in the writ petition and the same was allowed that after getting himself impleaded in the writ petition, the applicant herein filed a petition to quash the writ petition, but the High Court by order dated 2.12.2005 dismissed that petition filed by the auction purchaser, and under the circumstances, the Sangh is a necessary party. (d) The said application was allowed as prayed for, and thus the Sangh has become a party. On being impleaded, the Sangh filed a counter affidavit opposing the said application that the property was sold in total violation of the procedures and also interim orders passed by the Court.(e) Another application in C.A.No.253 of 2006 was filed by M/s.Tapti Machineries (P) Ltd., to implead them as a party in C.A.No.1811 of 2005. The same was allowed by the Court on 1.3.2006 as prayed for. On being impleaded it has filed a counter affidavit stating that they filed C.P.No.35 of 1997 for winding up of the company and C.P.No.170 of 1995 was filed by M/s.Simcom Ltd. that by order dated 16.9.1999, the Court ordered winding up of the company, and the Official Liquidator was appointed to take possession of the property of the company in liquidation that the properties were sold for a meagre value of Rs.10.25 crores while it was valued based on Government valuation at Rs.57 crores that the respondent also filed a writ petition in W.P.No.26564 of 2005 before the High Court of Karnataka challenging the sale proceedings, and the same was also pending that they were also taking steps for revival of the company that an application was also filed to that effect before this Court that the proper and necessary procedure was not followed by the Recovery Officer while selling the property in auction sale which is in the custody of the Official Liquidator that under the circumstances, the sale had no legal sanctity and hence the application was to be dismissed. (f) The Official Liquidator filed a report on 31.1.2006 wherein he has stated that he took possession of the available assets of the company on 28.9.1999 that after taking possession, the premises were locked and sealed that he also appointed the Mazdoor Sangh to safeguard the assets of the company in liquidation with effect from 28.9.1999 that they withdrew their services in the month of December 1999 for the non-payment of the security charges that on 30.7.2001, a meeting was conducted, and it was decided to appoint M/s.Tungabadra Sugar Works Mazdoor Sangh to safeguard the premises with effect from 1.8.2001 and to make the payment out of the rent amount collected from the Central Warehousing Corporation that he filed his objections before the DRT, Bangalore, on 1.10.2004, in response to the sale proclamation issued by the DRT that when the DRT issued a proclamation of sale of property for the second time fixing the date of auction as 11.8.2005, again objections were filed by the Official Liquidator putting forth his objections to the sale that the valuation of the property has been made on 24.3.2003 by a valuer without the knowledge of the official liquidator that the inventory report dated 25.11.2004, also revealed that the valuation of the property has been done without the knowledge of the Official Liquidator that in view of the order passed by the Company Court on 10.3.2000 in C.A.Nos.1251 to 1253 of 1999, the sale conducted by the DRT, Bangalore, without the participation and presence of the Official Liquidator is vitiated that he has also received the copies of the letters addressed to the CBI by the ex-shareholders/directors/promoters of the company in liquidation wherein certain allegations against the Recovery Officer have been made that under the circumstances, the Official Liquidator sought for a fresh sale by the DRT with the association of the Official Liquidator, and the sale proceeds should be deposited with this Court.(g) Apart from filing the above report, the Official Liquidator has also made an application in C.A.No.854 of 2006 to set aside the sale confirmed by the DRT and to direct the third respondent Central Warehousing Corporation to remit the arrears of rent to the Official Liquidator and also to permit the Official Liquidator to sell the assets of the company in liquidation afresh. (h) The first respondent Bank filed a counter questioning the maintainability of C.A.No.854 of 2006.(i) The learned Single Judge heard the Counsel on either side, allowed C.A.No.1811 of 2005 and dismissed C.A.Nos.854 of 2006 and 2740 to 2742 of 2007. Hence these appeals at the instance of the respective parties.

(3.) THE learned Counsel Mr. Sathish Parasaran appearing for the appellant in OSA No.82 of 2009 would submit that the auction proceedings were challenged not by one party but by several others including the Official Liquidator, Workers' Union, Central Warehousing Corporation and the appellant herein that the auction itself was hurriedly and irregularly conducted by the Recovery Officer during the pendency of the above proceedings that the valuation report and the inventory report were prepared without notice to or involvement of the Official Liquidator that the said valuation was imaginary that the impugned order is vitiated in view of the pendency of the appeals before the DRT challenging the auction that it is pertinent to note that both the conduct of the auction sale and its confirmation by the Recovery Officer himself and the illegality of the auction were yet to be determined by the DRT in the appeal preferred by the appellant that the orders of the Recovery Officer were passed subsequent to the winding up order passed by the Company Court that the auction is clearly violative of the earlier directions of this Court issued on 10.3.2000 that no notice of proclamation of sale was served on the official liquidator that the Recovery Officer rejected the objection memo dated 30.9.2004 filed by the official liquidator in a casual manner and without assigning any cogent reasons that it is pertinent to note that as per Section 456 of the Companies Act, all the properties of a company in liquidation shall be deemed to be in the custody of the High Court that the Official Liquidator has to safeguard the interest of the workmen, preferential creditors and other credits in accordance with law that in the instant case, the Recovery Officer has acted against law and in a manner detrimental to the interest of the workmen, Government and other creditors of the second respondent, and hence the order of the learned Single Judge has got to be set aside.