THE HON’BLE Ms. JUSTICE G. ROHINI COMPANY APPLICATION No.650 OF 2010 IN COMPANY PETITION No.83 OF 1997 DATED: 19.04.2011 Between : M. Chiranjeevi … Applicant And M/s. Commercial Agro Products Pvt. Ltd. (In liqn.) Rep. by the Official Liquidator, High Court of Andhra Pradesh, Hyderabad., and Two others. .. Respondents THE HON’BLE Ms. JUSTICE G. ROHINI COMPANY APPLICATION No.650 OF 2010 IN COMPANY PETITION No.83 OF 1997 ORDER : This application is filed seeking a direction to the Official Liquidator attached to this Court representing M/s. Commercial Agro Products Private Limited, the company in liquidation to receive the balance sale consideration of Rs.1,05,00,000/- in respect of Lot No.6 of the immovable properties of the company in liquidation and to execute the registered document in favour of the applicant. The facts, in brief, are as under: By order dated 24.07.1997 made in C.P.No.83 of 1997 this Court appointed the Official Liquidator attached to this Court as the provisional liquidator of M/s. Commercial Agro Products Private Limited. Subsequently, by order dated 1.11.2006 the said company was wound up and the Official Liquidator was appointed as its Liquidator. In the meanwhile, in terms of the orders passed by this Court, dated 13.04.2006 in Company Application No.1416 of 2004 the Official Liquidator divided the immovable properties of the company into 10 lots and put the same to sale by inviting sealed tenders. The sale proceedings were held by the Official Liquidator on 15.7.2006. Subsequently, after notice to all the participants, open auction by way of further negotiations in respect of all the 10 lots was held in this Court on 1.8.2006 and by order dated 4.8.2006 this Court confirmed the sale in favour of the highest bidders of the respective lots. So far as Lot No.6, comprising of Ac.215-43 cents of Anantapuram Village, Nellore District is concerned, the offer of the applicant herein for a sum of Rs.1,10,00,000/- was accepted by this Court. Accordingly, the Official Liquidator by letter dated 8.8.2006 informed the applicant to remit the sale consideration within 30 days from 4.8.2006 i.e., the date on which the sale was confirmed by this Court. The applicant claims that the said letter of the Official Liquidator dated 8.8.2006 was received by him only on 24.08.2006. He also came to know that the cheque dated 15.07.2006 given by him for Rs.22,00,000/- towards 20% of the price offered soon after he was declared as the highest bidder was presented by the Official Liquidator for encashment after the acceptance of the sale by this Court and the same was returned by the Bank on the ground of ‘insufficient funds’. It is claimed that the applicant had immediately made a representation before the Official Liquidator explaining the reasons and stating that he was prepared to deposit the said amount of Rs.22 Lakhs by way of demand draft within 10 days. Since the applicant was advised that the Official Liquidator was not competent to grant any extension, the applicant filed Company Application No.1267 of 2006 on 4.9.2006 seeking extension of time for depositing the sum of Rs.22 Lakhs towards 20% of the price offered. While so, Company Application No.1416 of 2004 came up before this Court on 7.9.2006 for further orders and the Official Liquidator filed a report bringing to the notice of the Court the subsequent developments, including that the Cheque dated 15.7.2006 given by the applicant herein towards 20% of the price offered was dishonoured. Having considered the report of the Official Liquidator, this Court on 7.9.2006 made an order as under: “A report is filed by the Official Liquidator with reference to the sale of the asses of the company conducted by the Official Liquidator, which were later considered in the open Court and finally confirmed in favour of the highest bidders. It is stated that with reference to items (lots) 2, 8 and 10, the highest bidders have paid the entire sale consideration. But with reference to the other items, the parties have sought for extension of time. Therefore, it would be appropriate to the Official Liquidator to give necessary replied to them to approach this Court, if they seek extension of time. Otherwise, appropriate action would be taken with reference to those highest bidders, who have not paid the sale consideration. In respect of the items, where the full amount was paid already, the Official Liquidator is permitted to hand over the possession of the properties as and when the parties approached him. Even in case of Lot-6, where the cheque was bounced, in respect of which party had sent a letter seeking permission of the Official Liquidator for payment of the amount, the Official Liquidator is directed to send a letter to the said party direction him to remit the amount immediately. Of course, for beyond the period of 30 days, the successful bidders are liable to pay the interest. Post on 09.10.2006.” In the meanwhile, the Ex. Managing Director of the company in liquidation filed O.S.A.No.30 of 2006 assailing the order dated 13.04.2006 passed by this Court in Company Application No.1416 of 2004 permitting the Official Liquidator to effect the sale of the assets of the company in liquidation. The Ex. Managing Director also filed O.S.A.No.45 of 2006 against the confirmation of sale ordered on 4.8.2006. Two other appeals being O.S.A.Nos.3 & 28 of 2007 were also filed against the winding up order dated 1.11.2006 and the order dated 17.11.2006 directing delivery of property covered by Lot Nos.3 & 8 respectively were also filed by the Ex. Managing Director. Pending O.S.A.No.30 of 2006, the Division Bench by order dated 13.09.2006 ordered stay of confirmation of sale and thereafter by order dated 1.2.2007 Division Bench stayed the operation of the winding up order dated 1.11.2006 pending O.S.A.No.3 of 2007. However by common judgment dated 2.7.2010 all the Appeals were dismissed. The applicant claims that he came to know about the order dated 7.9.2006 in C.A.No.1416 of 2004 only on 10.08.2010 i.e., after the dismissal of the Appeals and immediately thereafter he obtained demand drafts for Rs.1,00,05,000/- towards bid amount by deducting Rs.5,00,000/- already paid towards EMD. Hence the present application seeking a direction to the Official Liquidator to receive the said amount and to execute the registered sale deed in his favour. In the report dated 23.08.2010 filed by the Official Liquidator vide OLR No.385/2010, none of the facts noticed above are disputed. Subsequently this Court by order dated 02.09.2010 directed the Official Liquidator to file a report as to the assets sold and yet to be sold. Accordingly the Official Liquidator filed a report vide OLR No.402 of 2010, dated 3.9.2010 furnishing the status of the assets sold and yet to be sold. Again by report dated 1.10.2010 the Official Liquidator furnished the Sub-Registrar value and prevailing market value of the land covered by Lot No.6. The Ex. Managing Director of the company in liquidation, who got himself impleaded as respondent No.2, filed a counter-affidavit opposing the directions sought by the applicant. It is contended in the counter-affidavit that as per the Terms and Conditions of the Auction, the applicant had to pay the balance sale consideration on or before 3.9.2006 and since he failed to deposit the said amount within the stipulated time and moreover the 20% of the offer paid by him by way of cheque was returned by the Bank due to insufficient funds, he is a defaulter and as per Clause-20 the amount deposited by him towards EMD is liable to be forfeited by the Official Liquidator. It is also contended that the present application filed seeking a direction to the Official Liquidator to receive the balance sale consideration and to register the sale deed in his favour, being contrary to the Terms and Conditions of Sale, is not maintainable and therefore on that ground itself it is liable to be dismissed. It is also contended that since Review Application Nos.892 to 895 of 2010 filed by him to review the common judgement dated 2.7.2010 in O.S.A.No.30 of 2006 and etc., are pending, the direction as sought for cannot be granted at this stage. It is further pleaded that he being the major shareholder of the company in liquidation in the interest of the shareholders and creditors of the company had identified a prospective purchaser, who expressed his willingness and readiness to purchase the properties covered by Lot No.6 for a sum of Rs.1,00,60,000/- against the offer of Rs.1,10,00,000/- made by the applicant. M/s. Commercial Agro Products Sheep Unit Holders Welfare Association, represented by its Secretary N.V. Murthy also got itself impleaded as respondent No.3 and filed a counter-affidavit stating that the said association was formed by 44,000 unit holders who had invested the sum of Rs.3,000/- per each unit in the company in liquidation. It is contended that as the applicant failed to comply with the Terms & Conditions of Auction, the applicant cannot be granted any relief. It is also pleaded that the present registration value of the land in question is Rs.60,000/- per acre and if the property is put to auction afresh in view of the default committed by the applicant it would fetch more than Rs.2 Crores and that the members of the association who are all the depositors and they deposited their hard earned money would be benefitted if a fresh auction is conducted. I have heard Sri K. Ratangapani Reddy, the learned Counsel appearing for the applicant; as well as Sri B. Adinarayana Rao, and Sri T. Surya Sathish, the learned counsel appearing for the respondents 2 and 3 respectively. I have also heard Sri M.Anil Kumar, the learned counsel representing the Official Liquidator. The learned Counsel for the applicant while submitting that the delay in remittance of the sale consideration was only on account of the interim orders passed by the Division Bench in O.S.A.No.30 of 2006 contended that there was no default on the part of the applicant at any stage of the proceedings. While contending that the cheque dated 15.07.2006 was dishonoured since it was presented by the Official Liquidator without informing the applicant about the confirmation of sale, the learned counsel submitted that had the Official Liquidator communicated the sale confirmation to the applicant before presenting the cheque in the Bank, the applicant would have made the required funds available. The learned counsel also contended that by virtue of the order dated 7.9.2006 made by this Court in Company Application No.1416 of 2004 permitting the applicant to pay 20% of the bid amount, the default, if any, shall be deemed to have been condoned by this Court and therefore it is not open to the respondents now to contend that the petitioner should be treated as a defaulter on the ground that the cheque dated 15.7.2006 was dishonoured by the Bank. To show the bona fides of the applicant, the learned counsel has placed before this Court the copies of the demand drafts taken in the month of August, 2010 itself towards the sale consideration of Rs.1,05,00,000/-. On the other hand, the learned counsel appearing for the respondents 2 and 3 vehemently contended that having failed to pay the 20% of the price quoted apart from the balance sale consideration on or before 3.9.2006 as stipulated under the Terms & Conditions of Sale, the applicant cannot take advantage of the interim stay dated 13.09.2006 granted by the Division Bench. It is also contended that since the applicant had failed to pay the 20% of the price offered within the time granted, he is a defaulter and thus not entitled to any relief. In support of his submissions, the learned counsel for the 2nd respondent relied upon the decisions of the Supreme Court in FCS SOFTWARE SOLUTIONS LIMITED v. LA MEDICAL DEVICES LIMITED[1], UNION BANK OF INDIA v. OFFICIAL LIQUIDATOR[2], DIVYA MANUFACTURING COMPANY (P0 LIMITED v. UNION BANK OF INDIA[3], LICA (P) LIMITED v. OFFICIAL LIQUIDATOR[4]; ALLAHABAD BANK v. BENGAL PAPERS CO. LIMITED[5] and IFCI LIMITED v. VISHNU KANT GUPTA[6]. The material available on record shows that the applicant had participated in the auction conducted by the Official Liquidator on 15.7.2006 and offered to purchase Lot No.6. It is not in dispute that he paid the EMD of Rs.5,00,000/-. It is also not in dispute that he was declared as the highest bidder in respect of Lot No.6. As per Clause- 16 of the Terms & Conditions of Auction, the highest bidder shall give a cheque for 20% of the amount offered after being declared as the highest bidder. The said cheque would be sent subsequently for encashment on acceptance of the offer by this Court. Clauses 17 and 20 which provided for the subsequent steps to be taken and the consequences of the default, if any, are as under: “17. The final offers so received will be placed before the Hon’ble High Court of A.P. for sanction or otherwise and the intimation of acceptance, if sanctioned by the Hon’ble Court shall be given to the offerers within one week from the date of sanction of sale of the assets/properties. The offerers shall pay balance purchase consideration within 30 days or within such time as the Hon’ble High Court may stipulate, from the date of final acceptance of the particular offer by the Hon’ble Court. 20. If the purchaser does not pay the balance amount of purchase consideration to the Official Liquidator, as directed by the Hon’ble High Court in time, the Official Liquidator, High Court of A.P. shall terminate the sale and forfeit the deposit lying with Official Liquidator. The intending purchasers shall not retreat from a bid made by them after the Official Liquidator accepts it” In the instant case, the applicant after being declared as the highest bidder had given a cheque on 15.7.2006 for Rs.22 Lakhs towards the 20% of the amount offered. The said cheque was presented in the Bank for encashment by the Official Liquidator after this Court accepted the sales by order dated 4.8.2006. It is true that the said cheque was dishonoured on the ground of ‘insufficient funds’, however there is no reason to disbelieve the plea of the applicant that sufficient funds could not be made available in his account since he was not aware of the acceptance of the sale by this Court on 04.08.2006 and the presentation of the cheque for encashment by the Official Liquidator. It is also relevant to note that though the Official Liquidator had brought to the notice of this Court on 07.09.2006 that the applicant’s cheque was dishonoured, the applicant was not declared as defaulter by this Court on that ground. On the other hand this Court directed the Official Liquidator to send a letter to the applicant also to remit the amount immediately. Admittedly, even before the further steps could be taken in terms of the order of this Court dated 07.09.2006, interim stay was granted by the Division Bench on 13.09.2006 and thereafter the Official Liquidator was not inclined to receive any amounts from the successful bidders. In the facts and circumstances noticed above, particularly in view of the fact that soon after the dismissal of the appeals by the Division Bench, the applicant obtained demand drafts for the entire balance amount of Rs.1,05,00,000/-, I do not find any substance in the contention of the respondents that the applicant should be declared as a defaulter. Even as per Clause-17 of the Terms & Conditions of Sale, the successful bidder is entitled to pay the balance sale consideration within 30 days or within such time as this Court may stipulate. It is clear from the language of Clause 17 that in appropriate cases it is always open to this Court to grant extension of the stipulated period of 30 days for payment of the balance sale consideration. Even otherwise Rule 7 of the Companies (Court) Rules, 1959 confers wide powers on this Court for enlarging the time fixed by these Rules or by an order of this court for doing any act or taking any proceedings upon such terms as the justice of the case may require. Rule 7 further empowers this Court to grant such enlargement although the application for the same is not made until after the expiration of the time appointed or allowed. It is also relevant to note that the winding up of the company in liquidation was ordered in C.P.No.83 of 1997 pursuant to the voluntary winding up proceedings at the instance of the Ex. Managing Director – the 2nd respondent herein. Strangely, the Ex. Managing Director himself filed O.S.A.No.30 of 2006 and etc., assailing the winding up order and got the proceedings stayed pending the said Appeals. The said Appeals were ultimately dismissed holding that there was no illegality or irregularity in the proceedings. Even the plea of the applicant therein (the 2nd respondent herein) that he was prepared to deposit amounts higher than the highest offers received was not accepted by the Division Bench. Hence the contention now advanced by the 2nd respondent that the land in question would fetch much higher price and that a third party is ready and willing to pay Rs.2 Crores does not appear to be bona fide. As expressed above, the applicant is a genuine bidder whose offer being the highest was accepted by this Court after holding negotiations in the open Court. Though, the Cheque towards 20% of the price offered was dishonoured and thus the amount was not received by the Official Liquidator within the time prescribed in the Terms and Conditions of Sale, it cannot be said that there is any deliberate inaction or default on the part of the applicant in performing his part of contract. Hence, I am of the opinion that the sale confirmed in his favour cannot be unsettled at this stage merely on the ground that the fresh sale may fetch a better price. However, the fact remains that the applicant had paid only Rs.5 lakhs as against the bid amount of Rs.1,10,00,000/-. May be that so far as the balance sale consideration is concerned, the applicant can be placed on par with the other successful bidders in whose favour this Court passed orders from time to time directing the Official Liquidator to execute the sale deeds, however having regard to the fact that the 20% of price offered remained with the applicant for more than 4 years, I am of the opinion that the applicant should pay interest on the said amount to meet the ends of justice. Accordingly, the applicant is hereby permitted to remit the sum of Rs.1,05,00,000/- together with interest at 9% from 04.08.2006 till the date of payment on Rs.22,00,000 i.e. 20% of the price offered by him, within four weeks from today. On such payment, the Official Liquidator shall execute the registered document in favour of the applicant or his nominees and deliver possession of the properties covered by Lot No.1 following due process of law. The Company Application is accordingly disposed of. No costs. ______________ G. ROHINI, J. Dt. 19.04.2011 gbs [1] (2008) 10 SCC 440 [2] (2000) 3 Comp. LJ 183 (SC) [3] (2000) 6 SCC 69 [4] (1996) 85 Company Cases 788 (SC) [5] (1999) 96Company Cases 804 (SC) [6] (2008) 12 SCC 777