((-1-)) MST IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY APPLICATION NO.75 OF 2007 IN COMPANY PETITION NO.412 OF 1985 Midland Bank Plc. Petitioner versus The Official Liquidator and others Respondents and ICICI Bank Limited Applicants Simil Purohit i/by Little & Co. for Applicants. Deputy Official Liquidator Mr.S.Ramakant present for Respondent no.1. R.J.Mane, AGP for Respondent no.2. Anilkumar Patil for respondent no.3. CORAM : A.M.KHANWILKAR, J. DATE : 30th November 2007. PC : 1. Heard counsel for the parties. The subject application has been taken out by an Auction Purchaser M/s.Sangli Bank Limited (predecessor of the Applicant herein) for the following reliefs:- ((-2-)) MST "a) The Respondent No.1 be directed to pay the arrears of land revenue and the taxes to the Respondent Nos.2 and 3 from the sale proceeds of the properties without any interest in respect of the properties purchased by the Applicants for the period prior to the confirmation of sale in favour of the Applicant; b) that the Applicant be permitted to pay the revenue tax and the local tax to the Respondent Nos.2 and 3 for the period commencing from the date of confirmation of the sale of the properties, without any penalty in respect of the properties purchased by the Applicants; c) that the Respondent Nos.2 and 3 be directed to enter the name of the Applicant in the revenue and other record maintained by them in respect of the properties purchased by the Applicant; d) that the time to execute Deed of Conveyance be extended from 26th January, 2007 for a further period of 6 months; e) Cost of the Application be provided for; f) Such other and further reliefs as the nature and circumstances of the case may require." 2. Briefly stated, Company Petition No.412 of 1985 was filed in this Court praying for winding up of Madhavnagar Cotton Mills Limited. This Court by order dated 16th January 1997 directed winding up of the said company. Pursuant to the order of the Company Judge, the Official ((-3-)) MST Liquidator, High Court, Bombay came to be appointed, who in turn, took over the possession of all the assets, and submitted report on 19th February 2002 for sale of some of the assets of the company. It appears that the Company Judge accepted the recommendation of the Official Liquidator and permitted sale of the said assets. The sale process was completed by the Official Liquidator and placed before the Company Judge for confirmation of sale, which was done on 22nd August 2003. However, that order was questioned in an appeal by the Auction Purchaser M/s.Sangli Bank Limited before the Division Bench of this Court being Appeal No.386 of 2004. In the said appeal, the sale process confirmed by the Company Judge, came to be set aside on 22nd March 2004. Instead, the Division Bench directed resale of the self-same assets on certain conditions. As per the said direction, a public notice for sale of the stated properties was issued specifying the terms and conditions of sale and notifying the place of auction at Sangli on 5th June 2004. Besides the Auction Purchaser M/s.Sangli Bank Limited, there were other participants. In the present application, we are concerned with the auction sale only of following assets of the company in liquidation namely :- ((-4-)) MST (I) Lot No.III :- Manager’s Bungalow situated at Gurwarpeth, Madhavnagar, Sangli; (ii) Lot No.IV : Immovable Property : Sub Lot No.3 :- Survey No.203(4), Sangli-Tasgaon Road, Madhavnagar, Sangli; Sub Lot No.5 :- Land bearing S.No.197, 198, 199(1-4), 201(1-5), 202(1) and 203(1), Madhavnagar- Tasgaon Road, Madhavnagar, Sangli. 3. The Auction Purchaser M/s.Sangli Bank Limited turned out to be the highest bidder in the said auction conducted by the Official Liquidator on 5th June 2004. Accordingly, a report was placed before the Company Judge by the Official Liquidator for confirmation of the said sale, which recommendation was accepted by the Company Judge on 30th July 2004 on usual conditions referred to in the said order. Consequent thereto, the Official Liquidator handed over possession of the above said immovable properties to M/s.Sangli Bank Limited on 6th September 2004 after receiving the entire consideration. 4. The issue raised in the present application, according to the applicant, is whether the order passed by the Tahsildar, Miraj dated 18th March ((-5-)) MST 2005 directing taking over possession of the above said properties, which have been purchased by M/s.Sangli Bank Ltd. in an auction conducted by the Official Liquidator and confirmed by this Court, was legal and valid? According to the applicant, the Revenue Officer, without giving notice to them (M/s.Sangli Bank Ltd) proceeded to take possession of the immovable properties and entered the name of the Government of Maharashtra in 7/12 extract. The applicant asserts that on account of this development, the applicant was unable to lodge the Deed of Conveyance for registration. The applicant asserts that the aforesaid development came to the knowledge of the applicant only on 18th October 2006, on noticing the Mutation Entry in relation to the above said properties. As a result, the Auction Purchaser M/s.Sangli Bank Ltd. rushed to this Court on 23rd January 2007 by way of present application for the reliefs which are already reproduced in entirety in the earlier part of this order. 5. The application was moved before the Company Judge on 15th February 2007 when the application was made absolute in terms of prayer clause (d) only, by consent of the Official Liquidator. ((-6-)) MST Insofar as other prayer clauses, the same were to be considered later. It appears that during pendency of this application, the Auction Purchaser-M/s.Sangli Bank Limited was taken over by M/s.ICICI Bank Limited. As a result of that development, an amendment to the present application was necessitated. The same was granted by my predecessor on 16th June 2007. Consequent thereto, the amendment has been carried out, and the present proceedings are now pursued by M/s.ICICI Bank Limited as an applicant, who have stepped into the shoes of the original Auction Purchaser M/s.Sangli Bank Limited. 6. As mentioned earlier, on 15th February 2007, my predecessor was pleased to make the application absolute in terms of prayer clause (d). On account of that order, the applicant was expected to lodge the Deed of Conveyance for registration within six months therefrom. However, that formality was not complied. Instead, the applicant moved the application on 19th July 2007 praying for further time to execute the Sale Deed. Even that request has been accepted by my predecessor under order dated 19th July 2007, permitting the applicant to ((-7-)) MST execute the Deed of Conveyance on or before 31st December 2007. During the course of hearing of this application, the counsel for the applicant candidly accepted that even now the Deed of Conveyance has not been executed or for that matter lodged for registration. It was submitted on behalf of the applicant that even if this Court were to reject other reliefs of the applicant, the Court may consider granting further time to the applicant for execution and registration of the Deed of Conveyance in relation to the above said properties. 7. Before I proceed to deal with the submissions made on behalf of both the sides, I think it apposite to advert to the averments made in the affidavit in support of the application. For considering the points in issue in this application, it will be apposite to refer to paragraphs 4 to 9 of the affidavit in support of the motion, which spells out the basis on which the applicant seeks reliefs claimed in this application. The same reads thus:- "4. I say that after receiving possession the Applicant started levelling of the land. During the process of the work, the Grampanchayat, Madhavnagar obstructed the land levelling and took objection on the ((-8-)) MST ground that the Madhavnagar Cotton Mills Ltd. (Liquidation) has not paid the taxes from 1994 onwards. The Applicant thereafter stopped the work. I say that the winding up proceedings of the Company commenced pursuant to an order dated 16th January, 1997 and is not yet completed. Sections 529(a) and 530 of the Companies Act, 1956 provide for the distribution and priorities of claims. I say that taxes which have become due and payable during the winding up will be payable out of the sake proceeds in priority to other claims. The Respondent Nos.2 and 3 have already lodged their claims with the Official Liquidator. I say that the liability of the Company in liquidation should not be passed on to the purchaser of the assets of the company and the purchaser will be liable for the payment of taxes for the period commencing from the date of the confirmation of sale of the properties. 5. I say that though the Respondent Nos.2 and 3 have lodged their claim with the Official Liquidator, High Court, Bombay and the Official Liquidator by their letter dated 23rd March, 2005 have issued a notice under Rule 159 of the Companies (Court) 1959, it appears that no details have been provided by the Respondent no.2. 6. I say that Tahsildar Miraj with the knowledge of Respondent No.1 has passed an order on 18th March, 2005 and directed their office to take possession of the land and enter the name in the 7/12 extract of the Government of Maharashtra. Accordingly, when the Applicant obtained 7/12 extract on 18th October, 2006 they learned about the change of the name that in place of Madhavnagar Cotton Mills Ltd. (Liquidation) the name of Government of Maharashtra has been entered. 7. I say that the Applicant is ready and willing to pay the land revenue as well as local tax from the date of the purchase i.e. date of the order dated 30th July, 2004 confirming the sale. ((-9-)) MST 8. I say that time to execute Deed of Conveyance be extended further from 26th January, 2007 due to the changed circumstances. I say that further time of about 6 months will be required since the name of Government of Maharashtra has been entered on records of rights and for determining and payment of the taxes by the Applicant from the date of purchase of the property, completing registration of conveyance deed etc. 9. I therefore submit that the Respondent No.1 be directed to pay the arrears of land revenue to the Respondent Nos.2 and 3 from the sale proceeds of the properties without any interest and the Respondent Nos.2 and 3 be directed to enter the name of the Applicant in the revenue and other records maintained by them." 8. The Official Liquidator has filed an affidavit dated 14th March 2007 placing on record as to how the auction of the properties in question was progressed and came to be confirmed by the Company Judge. In paragraph 16 of the reply affidavit it is stated that the claim of the applicant that it is not liable to pay all the taxes and dues in respect of the properties purchased by it in the auction sale conducted by the Official Liquidator through this Court, is ill-advised. For, it is not open to the applicant to raise such plea which is against the terms and conditions of sale duly notified by the Official Liquidator and the applicant along with ((-10-)) MST other participants offered its bid on those terms and conditions. Besides, it is stated that at no point of time the applicant raised any objection of this nature at the time of auction or at the time of confirmation of sale by this Court. The Official Liquidator has also placed on record that after the sale consideration became available, he has already declared the dividend to the workers and secured creditors as per their entitlement out of the sale proceeds of the assets of the company. The Official Liquidator has also acknowledged the fact that the Tahsildar and Sarpanch, namely, respondent no.2 and 3 have lodged their claims with the Official Liquidator for an amount of Rs.41,840/- and Rs.19,40,673=70 Ps. respectively, but have not provided the break-up of the dues upto the date of confirmation of sale and thereafter. 9. Besides the Official Liquidator, the Tahsildar, Miraj has also filed reply affidavit sworn on 21st June 2007 asserting that the respondent nos.2 and 3 were entitled to recover the outstanding dues in relation to the above said properties as arrears of land revenue. It is stated that the claim in that behalf is now in the sum of Rs.19,93,175/- (including interest) as ((-11-)) MST arrears of rent (N.A.Tax) and land revenue in relation to the said properties of the company in liquidation. It is the case of respondents 2 and 3 that since 1994-95, their offices had been continuously sending notices for arrears of N.A.Tax and land revenue to the Manager of the company in liquidation as well as later on to the Official Liquidator from 2002 but the dues are still unpaid. 10. The counsel appearing for the applicant has mainly argued that the reliance placed by the Official Liquidator on Clause-14 of the terms and conditions of the sale is misplaced. According to the applicant, Clause-14 pertains to sale of movable properties and cannot have any application to the present case which relate to sale of some of the immovable properties. According to the applicant, in the present case, Clause-21 of the conditions will have application. On plain reading of Clause-21, however, it is seen that no liability is fastened upon the auction purchaser in relation to the outstanding dues pertaining to the immovable properties prior to the date of auction. It was argued that the expression "all other charges" occurring in Clause-21 will have to be read ((-12-)) MST ejusdem generis along with the requirement to pay stamp duty, registration charges and cannot be construed as covering arrears, taxes or dues. 11. It is next contended that even if Clause-14 was to be attracted, which creates liability on the auction purchaser to discharge the dues in respect of the immovable property purchased in the auction, that liability, however, would commence only from the date of auction and/or confirmation of sale and not in respect of the liability with regard to the said properties which is in anterior point of time. In other words, no dues relating to retrospective period can be recovered from the auction purchaser. It is then contended that the Official Liquidator having taken possession of the above said properties in March 1997 coupled with the fact that the respondent nos.2 and 3 had lodged their claim regarding outstanding dues as early as in May 2002, the Official Liquidator was under obligation to discharge that liability, as at the relevant point of time, the Official Liquidator had sufficient funds to pay the outstanding dues. Even in equity, therefore, the auction purchaser-applicant should not be fastened with the liability to pay the outstanding dues in ((-13-)) MST relation to the said immovable properties for the period prior to the date of auction or confirmation of sale in its favour. 12. It was next contended that the dues in respect of the said immovable properties constitute charge on the property. The auction purchaser had no knowledge about the said charge and was a bona fide purchaser without notice. In that case, the charge in respect of the immovable properties which have now been purchased by the auction purchaser, cannot be enforced against them. It is then contended that as per the Municipal Law, the primary liability of paying taxes or charges in relation to the immovable properties, was that of the original owner, namely, the company in liquidation. For that reason, the Official Liquidator is responsible to discharge the said liability and it cannot be fastened upon the auction purchaser-applicant herein. It is then contended that at any rate, the question of paying any interest and penalty on the outstanding dues after winding up order was passed on 16th January 1997 by the Company Judge, does not arise. Whereas, the respondents 2 and 3 have included such claim which is being enforced in relation to the immovable property. ((-14-)) MST It is submitted that atleast to the extent of such amount representing interest and penalty charges after the claim for the period after the order of winding up dated 16th January 1997, the respondents 2 and 3 will have to forebear and are disentitled from demanding such amounts. At the end, it is submitted that inspite of time having been extended by this Court for execution of the Conveyance Deed, the same has not been possible. In the interest of justice, therefore, this Court may consider of granting further time to the applicant for completion of the formalities in respect of execution and registration of the Conveyance Deed. 13. Counsel for the applicant relied on following decisions to buttress the above submissions viz. :- i) The Ahamedabad Municipal Corporation of The City of Ahamedabad Vs. Haji Abdulgafur Haji Hussenbhai reported in 1971(1)SCC-757; ii) Anchor Health and Beuty Care Ltd. Vs. Municipal Corporation of Greater Bombay and others reported in 2006(1)-Mh.L.J.-619; iii) Vimalchandra Manikchand Gandhi Vs. Jawahar Shivlal Shah and others reported In 1995(4)-Bom.C.R.-231; iv) D.Senthil Kumar and others Vs. ((-15-)) MST Commercial Tax Officer, Erode and another reported in (2006)3-M.L.J.-1019; v) Mattoor Chits and Finance (P) Ltd. Vs. Mrs.Mary Baby reported in (1998)5-Comp.L.J.-383 (Ker). 14. In the first place, I shall revert back to the nature of reliefs claimed in the present application. Insofar as prayer clause (a) is concerned, to the extent that the applicant is seeking directions against respondent no.1 to pay the arrears of land revenue and tax to respondents 2 and 3 from the sale proceeds of the properties which have been purchased by the applicant for the period prior to the confirmation of sale in favour of the applicant is concerned, that issue can be considered by the Company Court. In my opinion, the question whether the arrears of land revenue and tax in respect of the said immovable properties should be paid along with interest or without any interest, which is the further relief claimed by the applicant, is an issue which will have to be addressed in appropriate proceedings arising out of demand made by the revenue authorities. If such proceedings are resorted to, it will be open to the applicant to raise that plea, which, indeed, will have to be decided by the competent ((-16-)) MST authority keeping in mind all the provisions of law and the settled legal position in that behalf. In my opinion, it will be inappropriate for the Company Judge to dwell upon those questions in the present proceedings. 15. In other words, in the present order, I would confine the claim of the applicant as to whether the applicant is entitled for directions against respondent no.1 requiring the respondent no.1 (Official Liquidator) to pay the arrears of land revenue and the taxes to the respondents 2 and 3 from the sale proceeds of the said immovable properties for the period prior to the confirmation of sale in favour of the applicant. 16. Insofar as prayer clause (b) is concerned, once again, that is a relief which will have to be considered in appropriate proceedings, if resorted to by the applicant, or any other party, questioning the demand made by respondents 2 and 3 for the revenue tax and the local tax for the period commencing from the date of confirmation of the sale of the properties to be paid with or without penalty. That issue is not within the domain of the enquiry to be made by the Company Judge. Once again, it will have to be reiterated ((-17-)) MST that as and when such proceedings are taken out and if pending, the applicant will be free to raise such contentions in those proceedings, which the competent authority will decide on its own merits keeping in mind all the relevant provisions of law and settled legal position in that behalf. I do not propose to dwell upon those aspects in the present proceedings. 17. Even the relief claimed in terms of prayer clause (c), I am afraid, is not within the domain of the enquiry before the Company Judge. The applicant, if so advised, may be free to take out such other proceedings as may be advised, so as to seek directions against respondents 2 and 3 to record its name in the revenue and other records maintained by respondents 2 and 3 in respect of the said immovable properties purchased by the applicant in auction sale. Thus understood, it is not open for this Court to entertain the relief in terms of prayer clause (c) of the application. 18. Indeed, insofar as relief in terms of prayer clause (d) is concerned, that is a matter which can be examined and appropriate orders passed by the Company Judge. I shall straight way deal ((-18-)) MST with this relief on merits in the first instance. Indisputably, the auction purchaser-applicant is in no way asking for setting aside the order of confirmation of sale in its favour. Instead, the applicant wants to complete the formalities of sale by executing and lodging the Conveyance Deed for registration. Insofar as relief in terms of prayer clause (d) is concerned, as is noted earlier, the same has already been made absolute in terms of order dated 15th February 2007. Later on, this Court extended the period for execution of the Deed of Conveyance vide order dated 19th July 2007, granting further time to the applicant to comply with the formality up to 31st December 2007. Obviously, the applicant has not proceeded to comply with those formalities till now, on account of pendency of the present application. Inasmuch as, if the applicant was to proceed with the formalities of lodging the Conveyance Deed for registration, it would be necessary to first clear all the dues in respect of the immovable properties. As the issue, whether the applicant is liable to discharge those dues or it is the obligation of the Official Liquidator atleast upto to the date of confirmation of sale, is pending in this Court in the form of present application, the applicant ((-19-)) MST may have been advised not to move in the matter any further. Taking over all view of the matter, irrespective of the outcome of the nature of relief that will be granted in this application, the applicant will be bound to execute the Deed of Conveyance, sooner or later, so as to consumate the order of confirmation of sale of the immovable property in favour of the applicant. In the interest of justice and by way of indulgence, although my predecessor has already shown that indulgence to the applicant in the past, by way of one more opportunity and which is the last opportunity now given to the applicant under this order, the applicant may proceed with the execution of the Deed of Conveyance and complete those formalities not later than 30th April 2008. This direction will dispose off the prayer clause (d) of the application. 19. For the opinion already expressed in the earlier part of this order, it is not open to the Company Court to consider the reliefs as prayed in terms of prayer clauses (b) and (c) of the application. The applicant may be free to pursue such remedies in appropriate proceedings, if so advised. All questions in that behalf are left ((-20-)) MST open to be decided on its own merits in accordance with law as and when occasion arises. Accordingly, even prayer clauses (b) and (c) stand disposed off on this basis. 20. The only contentious issue that remains to be considered is emanating from the relief in terms of prayer clause (a). As already observed in the earlier part of this order, further relief claimed in terms of prayer clause (a) for direction to pay the arrears of land revenue and taxes in respect of said immovable properties "without any interest" is a matter