IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 19.08.2009 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE R.SUBBIAH O.S.A.Nos.175 and 176 of 2009 and M.P.No.1 and 1 of 2009 Government of Tamil Nadu, Department of lIndustries and Commerce, rep.by its Commissioner and Director, Chennai- 600 005. .. Appellant in both the O.S.As./ 3rd Party Vs. 1. The Official Liquidator, As the Official Liquidator of M/s. Pulsar Electronics Limited, (In Liquidation) 2. K.Dhanalakshmi, No.47, Spartan Nagar, Mogappair, Chennai – 600 037. .. Respondent in both the OSAs./ Appellant R2 impleaded as party respondent vide order of Court dt.11.8.09 and made in M.P.2/09. These appeals have been preferred under Clause 15 of the Letters Patent and Order XXXVI Rule 11 of O.S. Rules against the order dated (i)4.3.2009 and 24.10.2008 made in C.A.No.662 of 2007 in C.P.No.5 of 1994 by the learned Single Judge of this Court. For Appellant : Mr.P.S.Raman, Advocate General assistant by Mrs.V.Bhavani Subburayan,Spl.G.P(C.S.) For Respondent : Mr.K.Latha Parimala Vandana Asst. Official Liquidator for R1 Mr.V.Prakash, Senior Counsel for Mr.J.Nithyanandan for R2. https://hcservices.ecourts.gov.in/hcservices/ COMMON JUDGMENT (The judgment of the Court was delivered by M.CHOCKALINGAM, J.) These two appeals have arisen at the instance of the State challenging the two orders dated 24.10.2008 and 4.3.2009 made by the learned Single Judges of this Court in C.A.No.662 of 2007 in C.P.No.5 of 1994 whereby confirmation of sale was made by the former order, while a direction was issued to the Official Liquidator to execute the sale deed jointly along with the Department of Industries and Commerce of the Government of Tamilnadu in favour of the purchaser or her nominees by the latter order. 2. The Court heard the learned Advocate General for the State, Mr.V.Prakash, learned Senior counsel for the 2nd respondent and the Official Liquidator. The Court perused all the materials available including the orders under challenge. 3. The application was made on the following facts and circumstances. M/s. Pulsar Electronics Limited was allotted a plot in the Electrical Industrial Estate at Kakkalur vide allotment order No.107857/EL1/86-1 dated 16.6.1987. The extent of land was 5 acres at Rs.30,000/- per acre subject to the condition that the cost of the land is liable to upward revision and the land allotted should be used for the purpose which was specifically allotted. On a further request made by the appellant dated 2.6.1988 seeking for allotment of a further extent f 0.8 acres which was continguous to the aforesaid 5 acres of land and the request was favourably considered and the allotment of the additional extent was made as per letter dated 1.7.1988. thus the extent of 5 acres and 80 cents of land was allotted to the applicant. Subsequently, an assignment deed was executed in favour of M/s. Pulsar Electronics Limited vide assignment deed dated 24.9.1987 containing so many clauses inter alia, if any there is violation of any one of the condition stipulated therein, the assignment is liable to be cancelled and the said plot should vest absolutely with the Government free from encumbrance after forfeiture of the earnest money deposit. By issuing reasonable notice notwithstanding anything found in the Clauses of assignment, the Director of Industries and Commerce might cancel the assignment and repossess the same. The department also approved the building plan for construction of office premises in the allotted plot and the same was approved by the Superintending Engineer, Industrial Estate, Guindy. The final cost of the developed plots have not been arrived at and collected from the assignee at the time of allotment. While the matter stood thus, the Assignee Company went on liquidation. C.P.No.5 of 1994 was filed . The Official Liquidator, pursuant to the orders of the Court, took possession of all the assets of the Company under liquidation. On coming to know about the steps taken by the Official Liquidator, the Department filed an application before the Court to grant permission to repossess the land assigned to the Company under liquidation. The application was returned. In the meanwhile, the Official Liquidator/first respondent effected publication by way of sale https://hcservices.ecourts.gov.in/hcservices/ notice, pursuant to the order passed by the Court on 24.3.2007 for the sale of the immovable property namely 5.8 acres of land with a partly finished building measuring an extent of 18,862 sq.ft. fixing the reserved price for the land and building at Rs.1.5 crores. After following the procedural formalities by calling for tenders in respect of the assets belonging to the Company in liquidation, the highest offer came from one Dhanalakshmi, Madras for a sum of Rs.3.40 crores since the same was found to be the highest offer, the same was accepted and the same made in her favour was confirmed in Application No.662 of 2007 by order dated 24.10.2008 and consequential orders were also made therein. Following the same, further orders came to be passed on 4.3.2009 whereby a direction was issued to the Official Liquidator to hand over possession and the documents pertaining to the property and execute necessary conveyance/sale deed jointly with the Department of Industrial and Commerce, Government of Tamil Nadu in favour of the purchaser or her nominees. Challenging the above orders, these two appeals have arisen. 4. Advancing the arguments on behalf of the appellant /State, the learned Advocate General inter alia would submit, what was made was only an assignment and the very title of the land was retained by the State and it continues to be so. The title of the land was never transferred to M/s. Pulsar Electronics Ltd. The appellant is the owner of the land measuring 5.8 acres. When the conveyance of sale has not taken place conveying the title of the land to M/s. Pulsar Electronics Ltd., the respondent cannot bring the land for auction. While making the order dated 24.10.2008, the learned single Judge has failed to see that the appellant was the owner of the property and they were not made as a party in the application seeking confirmation of sale. Hence, the said application should have been dismissed for non-joinder of necessary party. The confirmation of sale to the third party by the Official Liquidator was contrary to the agreement dated 24.9.1987. The Company has not complied with the terms and conditions of the assignment deed and hence, the final cost could not be fixed by the Government, as a result of which, the sale deed in favour of the second respondent could not be executed. When the appellant has not executed any sale in favour of the first respondent, the first respondent had no right to convey the land to the third party even though the company is under liquidation as the liquidator merely steps into the shoes of the owner of the company and he could not have a better title to the properties in possession of the company than the owner himself. Equally, the order passed by the the learned Single Judge dated 4.3.2009 directing the appellant to execute necessary conveyance/sale deed jointly in favour of the purchaser or her nominees is erroneous. There was a direction issued to the Official Liquidator to execute necessary conveyance/sale deed jointly along with the Department of Industries and Commerce, which would indicate that the title of the property remains with the Government otherwise there was no need for issuing a direction to the Official Liquidator to convey the property jointly with the Government to the third party. By order dated 24.10.2008 and 4.3.2009, the learned Single Judge failed to see that no opportunity was given to the appellant to putforth their defence while confirming the sale though the land belongs to the Government till date and no https://hcservices.ecourts.gov.in/hcservices/ conveyance had taken place in favour of the 2nd respondent. The Official Liquidator who has taken out an application for confirmation of sale ought to have made the appellant as necessary party who is the owner of the land. Merely because the Official Liquidator has taken possession of the land, it did not confer any title or right to seek confirmation of sale of the land which belongs to the appellant. It was an express contention of the liquidator that the proceeds of the sale of the land would be appropriated to pay off the debits of the secured creditors and if at all any amount was left proportionate payment would be made to the Government towards the cost of the land. Under such circumstances, both the orders are erroneous, infirm and illegal and hence, they are liable to be set aside. 5. The Court heard Mr.V.Prakash, the learned Senior Counsel for the 2nd respondent on the above contentions. 6. The learned counsel would submit, in the instant case, the allotment was made in the year 1987. Though it was urged by the State that only tentative cost was fixed, the final cost was neither fixed nor recovered. The Government should have taken steps for cancellation of the allotment as per the terms. But no steps were taken all along for two decades for the cancellation of the said allotment. At this distance of time, the Company had been put under official liquidator by orders of the Court and the Official Liquidator has also taken steps to realise the due to pay to the creditors. The paper publication was also made calling for tenders which has been procedurally taken place. Pointing to the order made in Company Application No.1060 of 2007 dated 20.4.2007, the learned counsel would urge that it was an application for stay made by the State where the very same contentions were raised. The learned Single Judge, after hearing the contentions, negatived the same by holding that if the respondent/ assignee failed to make payment or default in any of the conditions, the State can take steps for cancelling the allotment but no steps were taken. At the distance of time, the Company was under liquidation and the Official Liquidator has taken possession by orders of Court and has also taken steps to realise the dues to pay to the creditors The application filed for stay by the Government cannot be granted at that juncture. At best, the Government could make their claim settled with the Official Liquidator in accordance with law and that order has become final since it was not appealed against. Thus, the Government would now be barred under the principles of acquiescence from contending so. In support of his contention, the learned counsel for the respondent relied on the decision reported in (2008) 10 Supreme Curt Cases 723 (Khoday Distilleries ltd. v. Scotch Whisky Association). 7. The Official Liquidator also putforth his submissions to sustain the orders made by the learned Single Judges. The Court heard the learned counsel on either side and paid its anxious consideration on the submissions made. 8. On scrutiny of the available materials and on consideration of the submissions made, the Court is afraid whether it could sustain https://hcservices.ecourts.gov.in/hcservices/ the orders of the learned Single Judges since both the orders are found to be infirm and defective for more reasons than one. It is not in controversy that the assignment was made in the year 1987 in favour of M/s. Pulsar Electronics Limited in respect of 5 acres of land and thereafter, further request was made for 0.8 acres of land which was also made. The clauses of assignment would clearly indicate that only the tentative cost was fixed and the final cost was not fixed. It is not the case of the respondent that final cost was fixed and recovered. There is a specific clause stating that if there is violation of any one of the conditions stipulated therein, there is all possibility of repossession of the land by the State. 9. It is true that the company went on liquidation and winding up proceedings were initiated and at that juncture, the Official Liquidator took possession of the land in question and also the machineries therein. It is pertinent to point out that mere taking of possession by the Official Liquidator by itself would not confer any right on him to sell the property. The official Liquidator was permitted to make publication calling for tender and thereafter, tenders were received and he moved the Court for auctioning the property and by the order dated 24.10.2008, the highest bid was accepted and the sale was ordered. By the second order dated 4.3.2009, the learned Single Judge has directing the Official Liquidator to execute the sale deed jointly with the Director of Industries and Commerce. At this juncture, it is pertinent to point out that the final cost has not been paid and the ownership of the land all along vested with the Government and the title continues to be in the hands of the Government. The only contention putforth by the respondent side was that no steps were taken for two decades and neither final cost was fixed nor it was recovered. Learned counsel pointing to the order made by the learned Single Judge in Application No.1060 of 2007 would submit that after long lapse of time, no steps were taken to recover the final cost and no steps were taken for cancellation of assignment. Emphasising the order, the learned counsel for the respondent would submit that it was a case where doctrine of acquiescence has got to be applied. The Court cannot agree with this contention made by the learned counsel for the respondent for the simple reason that in the application for stay, the claim of title was not taken up for consideration by the Court. It is a matter of surprise to note that while divesting the title from the State, the Liquidator cannot have a better interest in the property than the one in the hands of the winding up company. When the first application was made, an order of confirmation of sale was made and in the second application, there was a direction issued to the Official Liquidator to execute the sale deed in favour of the third party, but it remains to be stated that in both the applications, the Government was not a party and it was not heard. 10. It is further to be pointed out that at that time when final order was passed on 4.3.2009, a direction was issued to the Official Liquidator to execute the sale deed in favour of the auction purchaser along with the Director of Industries and Commerce jointly. Neither the Official Liquidator nor the Court felt that without giving opportunity of being heard the State, no such orders could be https://hcservices.ecourts.gov.in/hcservices/ passed. When there is a complaint by the State that possession has got to be taken by the State for the violation of conditions made by the assignee and the State has got title and it continues to be in the hands of the State, no order of confirmation of sale or direction to execute a sale deed could be passed, that too, in the absence of necessary party. Thus, the Court is of the opinion that both the orders are defective and infirm and they are liable to be set aside. Accordingly, the orders dated 24.10.2008 and 4.3.2009 made in C.A.No.662 of 2007 in C.P.No.5 of 1994 are set aside. 11. The learned counsel for the respondent brought to the notice of the Court that pursuant to the orders, sales have taken place in favour of three nominees. The Court is of the opinion that such situation cannot disturb the order passed by this Court setting aside the orders of the learned Single Judges. 12. In the result, both the appeals are allowed. No costs. Consequently, connected M.P.No.1 and 1 of 2009 are closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar vsi 1. THE SUB ASSISTANT REGISTRAR ORIGINAL SIDE HIGH COURT,MADRAS 2. THE OFFICIAL LIQUIDATOR AS THE OFFICIAL LIQUIDATOR OF M/S PULSAR ELECTRONICS LTD IN LIQUIDATION. + 1 CC to the Spl. Government Pleader SR NO 39698 3 ccs To Mr.J.Nithyanandan, Advocate, SR.39553 OSA.Nos.175 & 176 of 2009 NG(CO) SRA(20/08/2009) https://hcservices.ecourts.gov.in/hcservices/