THE HON’BLE Ms. JUSTICE G. ROHINI COMPANY APPLICATION No.849 OF 2010 In R.C.C.No.22 OF 2000 Dated: 19.04.2011 Between : Smt. Y. Vijayalakshmi Devi … Applicant And The Official Liquidator, M/s. Tungabhadra Industries Limited (In liqn.) High Court of AP, At Hyderabad. … Respondent THE HON’BLE Ms. JUSTICE G. ROHINI COMPANY APPLICATION No.849 OF 2010 In R.C.C.No.22 OF 2000 ORDER : The applicant herein claims title and possession in respect of 11.56 cents of vacant site forming part of Ac.0.56 cents covered by Sy.No.560/2A and 560/2B of Kurnool town having purchased the same from K. Somalinga Reddy and sons, represented by its partner K.Manjunadha Reddy under a Registered Sale Deed, dated 13.03.2006. The applicant’s vendor is the decree-holder in O.S.No.122 of 1996 on the file of the Court of Principal Senior Civil Judge, Kurnool filed against M/s. Tungabhadra Industries Limited and he purchased the land in question in court auction on 1.8.2002 in E.P.No.74 of 2001. In respect of the very same land, the Official Liquidator representing M/s. Tungabhadra Industries Limited executed a sale d e e d dated 15.12.2005 in favour of M/s. Srilakshmi Estates. Contending that the sale effected by the Official Liquidator is illegal, the present application has been filed to cancel the Sale Deed, dated 15.12.2005 or in the alternative, to direct the Official Liquidator to allot some other land to the same extent in the same survey number or adjacent survey number to the applicant to meet the ends of justice. The facts, in brief, are as under : M/s. Tungabhadra Industries Limited became a sick industrial company and a reference was made to the Board for Industrial and Financial Reconstruction (BIFR) in terms of the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, ‘SICA’) the BIFR. After due enquiry the BIFR opined that the company cannot be revived. In pursuance of the recommendation of the BIFR, winding up proceedings were registered on the file of this Court as R.C.C.No.22 of 2000. By order dated 9.7.2001 this Court wound up M/s. Tungabhadra Industries Limited and appointed the Official Liquidator attached to this Court as its Liquidator. Thereupon the Official Liquidator took possession of the assets of the company in liquidation and put the same to public auction. The land admeasuring Ac.0-11.56 cents situated in Sy.No.560/2A and 560/2B of Kurnool town was included as Item No.5 in the sale notice dated 4.5.2005 and M/s. Srilakshmi Estates was declared as the successful bidder in the public auction. Accordingly sale deed dated 15.12.2005 was executed in its favour by the Official Liquidator. Having come to know about the said proceedings, the vendor of the applicant herein i.e., M/s. K. Somalingareddy and Sons represented by its partner K. Manjunadha Reddy filed Company Application No.561 of 2005 to delete the same from Item No.5 of the sale notification and not to confirm the sale effected by the Official Liquidator so far as the said property is concerned. The said application was dismissed by this Court by order dated 29.6.2006 observing that by virtue of the winding-up order dated 9.7.2001 all the assets of the company vest in the Company Court and therefore no sale either in execution of a decree or otherwise can be effected without the permission of the Company Court. Thus it was held that the sale effected in E.P.No.74 of 2001 in favour of the vendor of the applicant was void and he did not get any title out of the same. The said order dated 29.6.2006 in C.A.No.561 of 2005 became final. In the present application filed on 13.9.2010 the sale deed dated 15.12.2005 is sought to be cancelled on the very same grounds i.e., that the Official Liquidator had erroneously included the property in question in the sale notification dated 4.5.2005 and that since the applicant’s vendor was an auction purchaser in whose favour the sale certificate was issued on 22.10.2002 itself, the subsequent sale deed dated 15.12.2005 executed by the Official Liquidator was not valid. While submitting that a large extent of surplus land belonging to the company in liquidation is available, and that the proceedings for division of the surplus land are in progress and moreover RCC.No.22 of 2000 is still pending before this Court, the applicant seeks an alternative direction for allotment of some other land out of the same survey number or adjacent survey number. I have heard Sri Y. Rama Rao, the learned counsel for the applicant and Sri M. Anil Kumar, the learned counsel for the Official Liquidator representing the company in liquidation. The learned counsel for the applicant submitted that the applicant being a bona fide purchaser for a valid sale consideration from an auction purchaser through the Court, he cannot be deprived of the rights acquired. In the report filed by the Official Liquidator vide OLR No.463/2010, it is stated that the possession of the land in question was handed over to the purchaser-M/s. Sri Lakshmi Estates on 15.12.2005 after executing a sale deed in its favour. In the second report filed by the Official Liquidator vide OLR No.44 of 2011, it is stated that the winding up order, dated 9.7.2001 in RCC.No.22 of 2000, was published as required under Rule 113 of the Companies (Court) Rules, 1959 in Form No.53 in ‘Deccan Chronicle’ and ‘Vaartha’ dated 9.1.2002 and the winding up order was also filed before the Registrar of Companies, A.P., Hyderabad. In the light of the above said facts borne out of the record, the learned counsel representing the Official Liquidator contended that the sale of the land in question in favour of the applicant’s vendor on 1.8.2002 was null and void and therefore the applicant’s vendor cannot be said to have acquired any title much less the applicant herein. State Bank of India, Kurnool Branch- the secured creditor of the company in liquidation got itself impleaded as a respondent to this application stating that O.A.No.412 of 2001 filed by the Bank against the company in liquidation for recovery of debt of Rs. 52,85,32,512.36 ps. together with costs and interest is pending on the file of the Debts Recovery Tribunal, Hyderabad. It is also explained that the company in liquidation had mortgaged all the lands and buildings including the land claimed by the applicant herein, in favour of the Bank as security for the loan facilities and the charge was also registered with the Registrar of companies. It is further contended that the decree in favour of the applicant’s vendor in O.S.No.122 of 1996 was a collusive decree which was obtained without impleading the Bank as a party in spite of the fact that the Bank was holding a charge over the property in question. Thus, it is contended that the applicant’s vendor did not acquire any valid title. It is further explained that though the company in liquidation by letter dated 17.05.1989 requested the Bank to release 12.65 cents of land situated at Kallur village, from the mortgage and the same was accepted on 11.04.1989 thereby permitting the company to sell the said 12.65 cents, the land now claimed by the applicant did not form part of the same. The material available on record shows that the applicant’s vendor K. Somalinga Reddy and sons filed O.S.No.122 of 1996 in the Court of the Additional Senior Civil Judge, Kurnool against M/s. Tungabhdra Industries Limited for recovery of a sum of Rs.11,41,858- 44 ps. During the pendency of the said suit, a compromise was entered into between the parties to the suit, under which it was agreed that the suit be decreed for Rs.5 Lakhs in full settlement of the suit claim. It was also agreed that in the event of the defendant’s failure to pay the said sum of Rs.5 Lakhs, the plaintiff would be at liberty to attach the plot admeasuring Ac.0-11.56 cents situated in Sy.No.560/2A and 560/2B and obtain a sale deed from the defendant – M/s. Tungabhadra Industries Limited directly, failing which through Court by execution of decree. The suit was accordingly decreed in terms of the said compromise, by judgment dated 1.2.2001. Thereafter as the defendant - M/s. Tungabhadra Industries Limited failed to pay the sum of Rs.5 Lakhs, the decree-holder - K. Somalingareddy and sons filed E.P.No.74 of 2001 and ultimately the plot admeasuring Ac.0-11.56 cents situated in Sy.No.560/2A and 560/2B was brought to sale through Court. The decree-holder himself purchased the said property on 1.8.2002 and on 22.10.2002 the sale was confirmed and the sale certificate was issued in favour of K. Manjunadha Reddy representing K. Somalingareddy and sons. As noticed above, M/s. Tungabhadra Industries Limited was directed to be wound up on 9.7.2001 i.e., after the compromise decree dated 1.2.2001 in O.S.No.122 of 1996 but before the sale was effected in favour of applicant’s vendor on 1.8.2002 in execution proceedings. It is true that the auction by the Official Liquidator was held long thereafter in the year 2005 and the sale deed in favour of the successful bidder was executed by the Official Liquidator on 15.12.2005. However the applicant’s contention that the sale effected by the Official Liquidator was illegal cannot be accepted. As per Section 536 (2) read with Section 537 (1) of the Companies Act, 1956, any transfer of the property without the sanction of this Court made after the commencement of the winding up shall be void. In the instant case, the sale in favour of the applicant’s vendor was admittedly affected on 01.08.2002 by which date this Court had already ordered winding up on 9.7.2001. Section 446 (1) of the Act provides that when a winding up order has been made, no suit or other legal proceedings pending at the date of winding up order shall be proceeded with against the company except by leave of the Court. Since no such leave was obtained to proceed with execution of the decree in O.S.No.122 of 1996, the auction held through the Court in E.P.No.74 of 2001 was not valid. At any rate, in view of the absolute bar under Section 536 (2) of the Act the sale in favour of the applicant’s vendor which was effected without sanction of this Court was void and the applicant’s vendor did not acquire title. Consequently no title deed can be said to have been passed on to the applicant under the Registered sale deed, dated 13.03.2006. However, the learned counsel for the applicant while relying upon the decision of the Supreme Court in NGEF LIMITED v. CHANDRA DEVELOPERS (P) LIMITED[1] vehemently contended that in view of the non-obstante clauses employed in the provisions of SICA, the BIFR alone shall have jurisdiction as regards sale of its assets as provided under sub-section (4) of Section 20 of SICA. It is true that the provisions of SICA would prevail over the provisions of the Companies Act, 1956, however so far as the jurisdiction conferred under Section 20 of SICA vis-à-vis the winding up proceedings under the Companies Act in respect of a sick company is concerned, it was made clear in NGEF LIMITED v. CHANDRA DEVELOPERS (P) LIMITED (1 supra) itself that the BIFR shall have jurisdiction as regards sale of assets of a sick company till an order of winding up is passed by a Company Court. The relevant paragraph from the above said judgment may be extracted hereunder: “It may be true that no formal application is required to be filed for initiating a proceeding under Section 433 of the Companies Act as the recommendations therefor are made by BIFR or AAIFR, as the case may be, and, thus, the date on which such recommendations are made the company judge applies its mind to initiate a proceeding relying on or on the basis thereof, the proceeding for winding up would be deemed to have been started; but there cannot be any doubt whatsoever that having regard to the phraseology used in Section 20 of SICA BIFR is the authority proprio vigore which continues to remain as custodian of the assets of the company till a winding up order is passed by the High Court.” In the instant case, since the winding up order was admittedly made on 9.7.2001, it cannot be contended that the sale effected by the Official Liquidator thereafter was illegal on any ground whatsoever. For the aforesaid reasons, the Application is devoid of any merit and the same is accordingly dismissed. ______________ G. ROHINI, J. Dt. 19.04.2011 gbs [1] (2005) 8 SCC 219