IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 13/04/2009 CORAM THE HON'BLE MR. JUSTICE P.JYOTHIMANI C.A.Nos.1953 to 1956 of 2008 in C.A.No.1983 of 2007 in C.P.No.526 of 2000 ORDER The applicant in all these cases M/s.TCI Distribution Centers Limited is the purchaser, pursuant to the publication effected by the Official Liquidator, High Court, Madras, in respect of 41.12 Acres of freehold land belonging to M/s.Fidelity Industries Limited (in liquidation). The said lands are situated in two villages, viz., Kilai and Ulandai. The applicant was the highest bidder in the auction conducted by this Court on 6.2.2008 for an amount of Rs.15.20 Crores and the sale was confirmed in favour of the applicant. 2. This Court has directed the payment of difference of EMD amount and balance sale consideration within ninety days, in two installments. It is stated that the applicant has remitted the balance EMD. On a request by the applicant for furnishing the title deeds and field map relating to the property, the Official Liquidator was directed to collect the documents from IDBI and the field map was also directed to be furnished. 3. It is stated that, on the due date of the first installment of the sale consideration, viz., on 20.3.2008, the said amount has been remitted by the applicant. When the matter came up on 24.3.2008, the applicant is stated to have requested the Court to furnish copies of documents and to order survey of lands, however, there was a direction to remit the balance sale consideration as per the schedule. The due date for second installment was on 5.5.2008. However, the petitioner has paid the second and last installment on 30.4.2008 itself. It is stated that, on the said date, the IDBI has handed over some of the documents pertaining to the property and on 30.4.2008 there was a direction to hand over possession of the property, documents and for conveyance. 4. It is the case of the applicant that thereafter, IDBI has handed over only 26 documents covering an extent of 20 acres and the other documents were not delivered. When a request was made on 3.6.2008, the Official Liquidator handed over 26 original document and the date of handing over of possession was fixed on 12.6.2008. It is stated that the applicant was present on the said date for taking possession and the applicant found that it was a barren land and there were no boundary stones. It is stated that the Official Liquidator has also prepared minutes for handing over physical possession on the said date. It is the complaint of the applicant that the Official Liquidator has not handed over the physical possession of the properties with boundaries. However, it is stated that the applicant has taken possession of the property in full faith. 5. It is the case of the applicant that on a perusal of the documents submitted, the applicant was not able to identify the correct location of the lands. It is stated that the applicant has approached the Official Liquidator requesting for handing over of documents, survey of lands and requested not to disburse the sale consideration to any secured creditors. It is the complaint of the applicant that having remitted the full sale consideration, the applicant is unable to take possession of the entire property and the original documents are also not available. 6. Under these circumstances, the applicant has filed the present applications for the purpose of directing the Official Liquidator: (i) to trace the balance original documents pertaining to the property and hand over the same; (ii) to engage the services of concerned Revenue Officials to locate the lands, survey and to fix the boundaries and to lay revenue stones and deliver possession thereof; (iii) not to disburse the sale proceeds to the creditors till handing over of balance documents, suverying of lands and laying of boundary stones; and (iv) to return the sale consideration with interest in the event of non compliance of handing over of balance documents, surveying and laying of boundary stones within the time stipulated by this Court. 7. In the report filed by the Official Liquidator, it is stated that after the initial efforts taken for the sale of the property by the notification failed, ultimately, the auction was held on 6.2.2008, in which the applicant as well as GATI were present with EMD amount. The applicant has quoted Rs.15.20 Crores and the sale was confirmed by this Court. It is also stated that for the auction dated 6.2.2008, there was no sale notice published. That was due to the reason that as per the earlier sale notice, the date of auction was fixed as 4.1.2008, on which date there was only one bidder and therefore, the auction was cancelled and the matter was posted to 22.1.2008, directing the Official Liquidator to affix the sale notice at the site. However, on 24.1.2008, when the matter was in the list, the Official Liquidator has reported compliance of affixing the sale notice at the site, and the counsel for the purchaser submitted that he is having Rs.1.5 Crores in demand draft being the EMD. As there were two more prospective buyers, who showed interest in purchasing the property, the matter was posted on 1.2.2008, to enable all the three intending purchasers to bring the EMD amount. However, on 1.2.2008, one of the purchasers, viz., GATI of Hyderabad and the present applicant were present with EMD amount. Since the third purchaser, viz., Universal Cable's counsel has informed that the Company's representative met with an accident, the matter was adjourned to 6.2.2008. It was by virtue of the said fact the matter stood posted to 6.2.2008 and not by virtue of publication. 8. It is also stated by the Official Liquidator in the report that the applicant has not sought for any inspection and no tender form was issued by the Official Liquidator and it was based on the bidding by the applicant in the Court on 6.2.2008 the sale was confirmed. It is stated that after the full sale consideration was paid and before execution of the sale deed, the applicant has raised some queries by letter dated 1.9.2008, for which a report was filed on 13.10.2008 based on various information and revenue records. 9. In respect of a query regarding the nature of lands in certain survey numbers, raised by the applicant, the same was taken up to the Valuer (ITCOT), who has also given a reply. It is the report of the Official Liquidator that in respect of a query with regard to the lands in Ulandai Village, viz., that the sale notice shows an extent of 13.28 Acres, while the documents produced only relate to 13.25 Acres, and therefore, there is a shortage of 0.03 Acres, it is stated that the Official Liquidator has sold only on "as is where is and whatever there is basis", and the buyer was aware of the terms and further, it is the buyer, who has voluntarily offered to purchase the property and he has never asked for physical inspection or verification of the documents. 10. In respect of a query regarding high tension electric tower, which is stated to have been constructed in Survey No.375/11 and the high tension wire crossing in the middle of Survey Nos.375/9 and 375/10 to the total extent of 0.59 Acres, it is stated the applicant was a voluntary purchaser and he was presumed to be aware of the physical nature of the property and could have also verified the property. 11. In respect of a query regarding land in Survey No.353/9 relating to 0.09 Acres, on the basis that a Government allotted house, a water tank and a TV room are situated, the report stated that the said land stands in the name of the Company in liquidation. 12. Likewise, in respect of various small extents of land, the queries raised by the applicant were replied by the Official Liquidator in his report. In respect of the production of original documents, it is stated that all the documents that the IDBI has handed over to the Official Liquidator have been given to the applicant and in respect of the other properties in Ulandai Village, it is stated that in respect of the properties, for which title deeds have been handed over, patta can be obtained by the purchaser and in respect of the other portions, the copies of the documents are available. 13. Similarly, in respect of lands in adjacent Kilai Village, it is the complaint of the applicant that as per the sale notice the extent advertised was 27.84 Acres, while as per the documents, the property is available to an extent of 30 Acres. It is also complained that only 18 documents covering an extent of 15.715 Acres were handed over. For the said query, the Official Liquidator has stated that whatever documents the IDBI, which has been secured creditor of the Company in liquidation, has given, the same were handed over to the applicant. 14. It is also stated in the report that there was no mistake of fact or misrepresentation by the Official Liquidator either in the notification or in the newspaper publication and the buyer should have been more diligent. It is also stated that the Official Liquidator has not made any false representation and in all these cases, the Official Liquidator goes by the report of the Valuer appointed by the Court. It is the further case of the Official Liquidator in the report that, after the payment of the first installment and before the final installment was due, there was sufficient time available and therefore, it cannot be said that no opportunity was given to the applicant to verify the nature of the lands and the title deeds relating to the lands. It is also reiterated that inasmuch as the offer made by the applicant was a voluntary one, not pursuant to the notification, they are expected to be more vigilant and by applying the principle "buyer beware", there cannot be any responsibility on the part of the Official Liquidator. 15. It is also stated that the Official Liquidator acts only based on the documents, which are received from the Company in Liquidation and not by scrutinizing the correctness or otherwise of the documents, and in liquidation proceedings, this has been the practice contemplated under the Companies (Court) Rules, 1959 for the past 50 years. It is denied that there has been fraud played for the purpose of setting aside the sale and stated that Order 21 Rule 90 of the Code of Civil Procedure has no application. 16.1. It is the submission of Mr.S.R.Rajagopal, learned counsel appearing for the applicant that the following discrepancies are found, on fact, viz., (i) that the description of the lands, as set out in the valuation report and the application filed by the Official Liquidator in C.A.No.1983 of 2007, does not match with the lands; (ii) that several survey numbers shown to have been in Kilai Village are actually not in Kilai Village, but in Ulandai Village and vice versa; (iii) that the extent of land shown for each survey numbers does not match with the extents stated in the documents that were furnished; (iv) that 50% of the property does not have documents; (v) that the land is not contiguous; (vi) that the land does not have entrance from the village road and between the land and the village more than an acre belongs to Animal Husbandry Department and whereby the property cannot be assessed; (vii) that there is a channel, which is running in the land; (viii) that Survey No.330/7 in Kilai Village, measuring 2.15 acres in the middle of the property is classified as 'Cherri Natham' and allotted to Adi Dravida Community and pattas were issued; (ix) that insofar as the property in Survey No.339/2, the company is not the owner of the property and it is the land locked amongst the land belonging to the Company and the ownership vests with some other person; (x) that there is high tension wire running over Survey Nos.375/9, 375/10 and 375/11 to an extent of 59 cents in and whereby the land cannot be used; (xi) that in the land in Survey No.353/9, a TV room and a house are constructed by a Villager for the common use and a portion of the land belonging to the Company is used for the TV room access; (xii) that insofar as Survey Nos.370/6, 371/4 and 371/7 measuring an extent of 27 cents, there are disputes in title and revenue records reveal that certain other persons are the owners, and therefore, the ownership of the land itself is in question and hence, the sale stands vitiated. 16.2. It is his contention that in the absence of specific rules under the Companies (Court) Rules, 1959 and in the absence of any methodology for sale to be effected by the Company Court, the provisions of the Code of Civil Procedure will apply and according to him under Order 21 Rule 90 of the Code of Civil Procedure, in case of material irregularity, such sale is liable to be set aside. 16.3. It is his submission that since the description is erroneous, the sale certificate cannot be issued and therefore, the sale has to be set aside. It is his case that the statements made by the Official Liquidator, during the course of negotiation, were misleading and the Official Liquidator is duty bound to disclose about the above said vital points before the sale and he should have investigated the title before filing of report. It is also stated that the court sale is not merely creating a commercial relationship, but it is one of trust and confidence and therefore, if the representations made are found to be false or untrue and the information furnished is incorrect, the sale is vitiated and his contention is that the Official Liquidator stands in fiduciary relationship and the contract is Uberrimae fidei. 16.4. The learned counsel for the applicant's attack on the sale is also on the basis that it is mis- description and mistake. He submits that the mistake as to the title, description and ownership would vitiate the sale by applying Order 21 Rule 90 of the Code of Civil Procedure. He would also rely upon Rule 6 of the Companies (Court) Rules, 1959 to show that the provisions of the Code of Civil Procedure are applicable to the proceedings under the Companies Act, especially in the circumstances that under Rule 272 of the Companies (Court) Rules, 1959 there is no procedure contemplated for effecting the sale. 16.5. The customary practice of the Official Liquidator in not allowing access to documents prior to confirmation of sale makes it abundantly clear that the relationship is of good faith. It is his submission that even in the notification there is no reference about the non-availability of documents in respect of the property. It is also his contention that the applicant, being auction purchaser, cannot be thrust with the properties, which do not belong to the Company at all. 16.6. It is also stated by the learned counsel for the applicant that the proposal made during the course of arguments that alternative lands should be taken in consultation with the Tahsildars, especially for the purpose of giving access to the property, was also not acceptable and it is only thrusting on the applicant the property to cover up the lacunae created by the Official Liquidator and the contract is vitiated by fraud, misrepresentation and mis-description. 16.7. It is also his case that the third respondent/ secured creditor has no locus standi to oppose the applications, especially in the circumstances that the third respondent/secured creditor has not given the documents. It is his contention that the applicant had to borrow amounts from financial institutions to pay the consideration and in that regard, he has incurred huge loss due to misrepresentation. 16.8. The learned counsel for the applicant would rely upon the judgments in (i) AIR 1971 SC 374; (ii) 1971 (II) MLJ 59; (iii) Full Bench decision of the Punjab and Haryana High Court in 1975 (100) ITR 496; and (iv) AIR 1996 Calcutta 146, to substantiate his contentions and vehemently contended for the purpose of setting aside of the sale. 17.1. On the other hand, the learned senior counsel appearing for the Official Liquidator, Mr.Arvind Datar, would submit that the duty of the Official Liquidator, on a company being wound up, is to take into custody all the properties of the company in winding up. It is his submission that unlike in the case of insolvency proceedings, where, on declaration of insolvency, the property automatically vests with the Official Assignee, the property does not vest with the Official Liquidator and the Official Liquidator can only act as per the records of the Company. 17.2. He submitted that, while selling such properties, the Official Liquidator cannot hold any guarantee or warranty, relying upon the judgment of the Supreme Court in United Bank of India v. Official Liquidator [1994] 1 SCC 575. His further submission is that in case of auction sale, there is no warranty of title. Issuing of notification by the Official Liquidator does not amount to making an offer, but it is only an invitation to treat and in fact, the offer is made only by the bidder and acceptance is by the auctioneer, viz., the Official Liquidator and only after the acceptance, the contract concludes. Therefore, the purchaser, while making offer, of course, based on an advertisement, is expected to investigate the title before making such offer. There is no deception played by the Official Liquidator at any point willingly. It is his contention that only in a case where the Official Liquidator has willingly made certain false statement, there can be any interference by the Court and not in cases, where the Official Liquidator makes a report based on the available records of the company under liquidation. His contention is that there is absolutely no deception made by the Official Liquidator on the facts and circumstances of the case and there is absolutely no intention to deceive anyone, which is also not the case of the applicant. 17.3. His further submission is that the Official Liquidator can be called upon only in cases of negligent misstatement. In the circumstances that the Official Liquidator has no relationship with the auction purchaser, nor he holds out as a professional adviser, the concept of negligent misstatement would not arise. 17.4. The learned senior counsel would also submit that under Section 460(6) of the Companies Act, in case of any such conduct of the Official Liquidator, ultimately, the aggrieved person can only approach the Court, which can either confirm, reverse or modify the conduct of the Official Liquidator. 17.5. It is his submission that Order 21 of the Code of Civil Procedure, which applies to the execution proceedings, does not apply to the auction by the Official Liquidator and he would also rely upon the judgment of the Division Bench of this Court in A.R.Ramanuja Mudaliar v. L.C.Sundaravaradachariar, AIR 1938 Madras 176. He would also further submit that even in a case where there is fraudulent sale, the purchaser can at the best refund the purchase money for that part of the property, in respect of which there is deficiency. He would submit that, even if Order 21 Rule 90 is applied, there is no material irregularity in the sale, which has been carried out only as per the Companies (Court) Rules, 1959. The Official Liquidator is only a custodian of the property and his submission is that, at the best, the sale can be set aside, if the Company has no saleable interest, but, in the facts and circumstances of the case, that is not the case of the applicant. 17.6. It is his submission that any substantial injury, if the same has been incurred by the applicant, must be proved, but in the case on hand, no evidence has been adduced to substantiate the plea of substantial injury. Moreover, when an alternative proposal was made during the course of the argument for the purpose of providing access, the same was also rejected by the applicant. 17.7. It is his further submission that many of the deficiencies stated are per se discoverable by due diligence, if the auction purchaser acted in a reasonable prudent manner. In the absence of pleadings to show that steps were taken by the applicant for verification of title, inspection of site, etc., his submission is that the applicant is only taking advantage of the falling real estate prices and the applicant really wants to back out from the offer made by him and the same cannot be permitted. 17.8. It is also his contention that even in the original advertisement notification issued by the Official Liquidator, it was clearly stated that the sale was intended to be effected "as is where is and whatever there is basis" and also in clause 12 of the terms and conditions, it is clearly stated that the buyers were to satisfy themselves about the condition of the property. 17.9. The learned senior counsel would also rely upon Section 18 of the Indian Contract Act to show that there is no misrepresentation or fraud committed by the Official Liquidator in any of the proceedings before sale was effected. He would also submit that there is absolutely no mistake and even assuming there are some mutual mistakes regarding the nature of the lands, the same will not affect the assent, unless the mistake is by both the parties. It is his submission that it is well established legal principle that mistake as to the quality will not generally avoid the contract. 17.10. It is his submission that out of total 41 Acres of land, two acres were reserved lands and that cannot be treated as mistake as to the substance of the transaction. It is stated that the Official Liquidator is looking after 450 companies situated in the State of Tamil Nadu under the direct control and supervision of the Madras High Court and he has to dispose of assets, viz., movable and immovable, of all these companies and it would be practically impossible for the Official Liquidator to scrutinise the correctness of title, measurement of properties, defects, if any, in all these assets. The Official Liquidator has no personal knowledge about the properties at all and he takes control of the properties only after the winding up order is passed. 17.11. Therefore, according to the learned senior counsel, the submissions of the applicant, as such, are not maintainable and the defects pointed out by the applicant do not merit cancellation of sale and mistakes of trivial nature do not cause any prejudice. As far as the overhead tank, TV room, etc., they are visible to any human eye and it is not open to the applicant to complain about the same. As far as the non-availability of the documents is concerned, it is his submission that the Official Liquidator will only have the original documents, which are available with the company and in respect of other cases, were documents are not available, the certified copies of the documents have been furnished. 17.12. He also brought to the notice of this Court that in respect of some of the extents of properties, documents and revenue records were not available and his submission is that out of 41 acres of land, the documents are not available only in respect of 0.27 cents, which is extremely minimal. In respect of the complaint that the land in Survey No.330/7 is classified as Cheri Natham, it is his submission that, even though the 'A' Register shows like that, the revenue records as on 2003 indicate the land as agricultural land and in 2007, it was classified as residential area and not as a Cheri Natham. It is stated that even if 2.15 acres of cheri