IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated: 08.09.2009 Coram: The Honourable Mr.Justice M.CHOCKALINGAM and The Honourable Mr.Justice R.SUBBIAH Original Side Appeal Nos.85 to 88 of 2009 and M.P.No.1 of 2009 M/s.TCI Distribution Centres Ltd., having its Regd.Office at No.10, Ram Bagh, Old Rohtak Road, New Delhi-110 007 and Having Chennai Office at No.92 GEE GEE Crystal, 1st Floor, R.K.Salai, Mylapore, Chennai-600 004, rep.by its Authorised Signatory. .. Appellant in all OSAs. ..vs.. 1. The Official Liquidator, High Court, Madras as the Liquidator of M/s.Fidelity Industries Ltd., (in liquidation). 2. IDBI (Industrial Development Bank of India), No.115, Anna Salai, Chennai-15. 3. First Leasing Company of India Ltd., No.749, Anna Salai, Chennai-600 002. .. Respondent in all OSAs. Original Side Appeals filed under Order XXXVI Rule 9 of Original Side Rules read with section 483 of the Companies Act and Clause 15 of the Letters Patent, against the common order dated 13.04.2009 passed by a learned single Judge of this Court in in C.A.No.1953 to 1956 of 2008 in C.A.No.1983 of 2007 in in C.P.No.526 of 2000. For Appellants : Mr.P.S.Raman, Senior Counsel for Mr.S.R.Rajagopal https://hcservices.ecourts.gov.in/hcservices/ For Respondents : Mr.Arvind P.Datar, Senior Counsel for Official Liquidator (R1) Mr.R.Senthil Kumar for R3 COMMON JUDGMENT (Judgment of the Court was delivered by M.CHOCKALINGAM, J.,) All these appeals challenge a common order of the learned single Judge of this Court dated 13.04.2009 made in C.A.No.1953 to 1956 of 2008 in C.A.No.1983 of 2007 in C.P.No.526 of 2000. 2. Pending the winding up proceedings in the matter of M/s.Fidelity Industries Limited (in liquidation) in c.P.No.526 of 2000, the Official Liquidator, High Court Madras, made C.A.No.1983 of 2007 for the following reliefs: (a) To open the valuation report and fix the reserve price for the vacant land at Sriperumpudur and to permit the Official Liquidator to sell the property through this Hon'ble Court; (b) to permit the Official Liquidator to sell the property at Gandhi Nagar, Adyar by taking the earlier reserve price already fixed by this Hon'ble Court as the present upset price for sale of the same; (c) to permit the Official Liquidator to invite sealed tenders through advertisement in the newspapers specified in para 9 of this report, and to pay the expenses of the advertisement from & out of the funds to the credit of the company in liquidation; (d) to approve the Draft Sale Notice, Tender Form and terms and conditions marked as 'ANNEXURE-A' to this report; (e) to direct that the expenses incurred for the sale will come out of the assets of the company in liquidation; (f) to direct that the cost of this application do come out of the funds of the company in liquidation" 3. The appellant/applicant filed C.A.Nos.1953 to 1956 of 2008 in C.A.No.1983 of 2007 seeking the following reliefs. (a) To direct the Official Liquidator to trace the balance original documents pertaining to the property and hand over https://hcservices.ecourts.gov.in/hcservices/ the same to the purchaser; (b) to direct the Official Liquidator to engage the services of the concerned revenue officials to locate the lands, survey and to fix the boundaries and to lay revenue stones and deliver possession thereof; (c) to direct the Official Liquidator not to disburse the sale proceeds to the creditors till handing over of balance documents, surveying of lands and laying of boundary stones; and (d) to direct the Official Liquidator 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 fixed by this Hon'ble Court. 4. All the applications came to be filed under the following circumstances. The applicant in all those applications, who is the appellant herein, namely, M/s.TCI Distribution Centers Limited, was the purchaser, in view of the highest bid made by him in the auction conducted by this Court on 06.02.2008, in respect of 41.12 acres of free hold land belonged to M/s.Fidelity Industries Limited (under liquidation). The said auction following a publication effected by the Official Liquidator, High Court, Madras, in respect of those lands, which are situate in two villages, namely, Kilai and Ulundai. The auction conducted on 06.02.2008. The appellant/applicant, who was the highest bidder ,purchased the land for a sum of Rs.15.20 crores. The sale was also confirmed by the Court in favour of the applicant/appellant. When a direction was issued for the payment of difference of the earnest money deposit and the balance of sale consideration within 90 days in two instalments, after remitting the balance of earnest money deposit, the applicant/appellant made a request for furnishing the title deeds and the field map relating to the property. The Official Liquidator was also directed to collect the documents from the company under liquidation and furnish the same along with the field map and on 20.03.2008, the appellant/applicant remitted the first instalment of the sale consideration. When the matter came up for hearing on 24.03.2008, the appellant/applicant made a request to furnish copies of documents and to order survey of lands. But, there was a direction to the appellant/applicant to remit the balance of sale consideration as per the schedule. The appellant/applicant paid the second and last instalment on 30.04.2008 though the due date for second instalment was on 05.05.2008. On the said date, the company under liquidation handed over some documents pertaining to the property and on 30.04.2008, there was a direction to hand over possession of the property and https://hcservices.ecourts.gov.in/hcservices/ also the documents and conveyance. The IDBI handed over only 26 documents covering an extent of 20 acres and the other documents were not delivered. When the appellant/applicant made a request on 03.06.2008, the Official Liquidator handed over 26 documents. The date of handing over possession was fixed on 12.06.2008. When the applicant was present for taking possession the property, it was found that it was a barren land and there were no boundary stones. The Official Liquidator had also prepared the minutes for handing over physical possession on the said date but he has not handed over physical possession of the properties with boundaries. However, the appellant/applicant has taken possession of the property in full faith. On a perusal of the documents, the appellant/applicant was not able to identify the correct location of the lands. He approached the Official Liquidator, requesting for handing over of documents and surveying of lands and also requested not to disburse the sale consideration to any secured creditors. Though the appellant/applicant has paid the full sale consideration, he was unable to take possession of the entire property and also the original documents were not available. Under these circumstances, the appellant/applicant filed all the above applications for the said directions to the Official Liquidator. 5. The learned single Judge, on scrutiny of the materials available, took a view that all those applications were misconceived and there was absolutely no ground to interfere with the sale, which was confirmed by the Court, and hence, made an order of dismissal of all those applications. Hence all these appeals at the instance of the applicant. 6. Advancing the arguments on behalf of the appellant/applicant, Mr.P.S.Raman, learned senior counsel would submit that the common order under challenge is contrary to the provisions of the Companies Act and Rulesu, more particularly when it conferred absolute powers on the Official Liquidator, sanctifying any illegality committed by him and removing all obligations cast on him under Section 455 of the Companies Act; that the Official Liquidator appointed in respect of the company in liquidation is required to submit a statement or a preliminary report of the company under liquidation to the court in and whereby the affairs, assets, etc.are required to be investigated and verified and hence, the finding recorded by the learned single Judge that it was not possible for the Official Liquidator to investigate into the title of the properties brought to auction was liable to be set aside since it is contrary to the provisions and the objects of the Companies Act; that the discrepancies as stated by the appellant in the affidavit dated 8th September, 2008 were found by the appellant subsequent to the payment of entire sale amount; that it is pertinent to note that the same goes to the root of the matter, amounting to misrepresentation thereby vitiating the same; that therefore, the Court should have set aside the sale and directed the https://hcservices.ecourts.gov.in/hcservices/ refund of the amount with interest, damages and costs to the appellant; that there was a positive assertion by way of annexure to the tender terms and conditions as regards the description of the immovable property and that the same was admittedly erroneous and on the basis of the same, an offer was made by the appellant and therefore, the auction sale was liable to be set aside. 7. Added further the learned senior counsel that there was a breach of duty on the part of the Official Liquidator under the provisions of the Companies Act in so far as to the identification of the properties and making representations as to the company in liquidation's interest therein, which was evident from the fact that the description of the property mentioned in the tender terms and conditions were erroneous and prepared without application of mind and without any basis and hence, the offer made in furtherance of the same by the appellant and accepted by the Court was liable to be recalled and set aside; that the words 'as is where is and whatever there is basis' cannot apply to the facts of the case or to a sale made by the Court in exercise of the powers conferred under the provisions of the Companies Act, more particularly to immovable properties and sanctify the act of the Official Liquidator in mis- describing the property or including the survey numbers of lands which admittedly cannot or never belonged to the company under liquidation and thereby exposing the auction purchaser, i.e. the appellant, to loss; that subsequent to the acceptance of the bid of the appellant and payment of the amount representing the earnest money deposit, the appellant had moved a memo seeking for verification of the title deeds, which was opposed by the Official Liquidator that the same could be done only after remittance of the entire amount and therefore, holding that the appellant had ample time prior to the remittance of the amount to investigate title, was contrary to the facts and the same cannot be the reason for dismissing the applications or denying the relief to the appellant and that the learned single Judge has not appreciated the series of orders passed in C.A.No.1983 of 2007 by the court subsequent to the confirmation and prior to passing of the order under challenge. 8. Added further the learned senior counsel that ITCOT Consultancy and Services Limited was entrusted with the work of valuation and preparation of the report; that the said agency has been paid amount towards their services; that based on their report, the Official Liquidator has brought the properties for sale and fixed the upset price and thus, the order of the learned single Judge that in so far as holding that the Official Liquidator could not investigate into the title of the property was factually incorrect and the dismissal of the applications is liable to be set aside on this ground; that in the valuation report prepared by ITCOT Consultancy and Services Limited, they have categorically stated that the valuation of the said property was arrived without any land https://hcservices.ecourts.gov.in/hcservices/ documents and the ownership of the land was determined from the previous owners, which was suppressed by the Official Liquidator in the tender terms and conditions and hence, the sale was vitiated; that the statement made by the Official Liquidator in the terms to tender were misleading and based on the same, the appellant had offered to purchase the property; that when admittedly the representations made by the Official Liquidator during negotiations which had led to the contract were not true, the sale was void; that the Official Liquidator was duty bound to disclose the interest of the company in liquidation to the properties brought for auction; that the Statute imposes and casts an obligation on the part of the Official Liquidator to verify the title of the company in liquidation to the property brought for sale; that in the absence of the same, any sale made in furtherance of any such representation, that is found to be untrue, is void entitling the offerer or purchaser to rescind the sale at any point of time; that subsequent to tendering of the entire sale amount and after handing over symbolic possession, the boundaries were sought to be fixed by the purchaser i.e.the appellant pursuant to the orders passed by the Court and that during the same, several mis-discrepancies, as set out in the memo and extracted in the order, were found rendering the sale void and those discrepancies were well within the knowledge of the Official Liquidator, who did not bring it to the notice earlier; that even prior to the completion of the sale and remittance of the amount, the appellant had sought for fixing of boundary stones as there was no demarcation of the property, which was opposed by the Official Liquidator on the ground that the relief sought for at that point of time was luxurious; that having opposed the memo filed for fixing boundary stones and furnishing title deeds, it was not open to the Official Liquidator to oppose the applications; that the duty is cast upon the Official Liquidator to disclose the every aspect, more particularly when the said disclosure, if not done, would affect the judgment of the bidders; that any sale by the court is one on good faith, trust and confidence and classified as Contract of Uberrimae fidel and therefore, when the auction purchaser reposes confidence and faith on the representations made in the court sale and the same being ipso facto, accepted as true and no opportunity, whatsoever, provided to the purchaser to scrutinize the title and when the representations found to be false, the sale was liable to be set aside. 9. The learned senior counsel would further submit that the First Leasing Company, who claimed themselves to be the secured creditors, have failed to furnish the documents of the title in respect of entire 41.12 acres and that much after the payment of the entire consideration and after directions from the court, the title deeds were given by IDBI to the Official Liquidator, that too, only in respect of 20.18 acres and, hence, there was no opportunity to verify the title deeds in the facts of the case and it cannot be put https://hcservices.ecourts.gov.in/hcservices/ against the appellant, more particularly to deny the relief; that the Official Liquidator was in a fiduciary position owing a duty to make full disclosure of all material facts known and available with him; that the fact that the non-availability of title deeds ought to have been incorporated in the statement made in the tender sale and therefore, the sale was liable to be set aside; that the relief sought for in C.A.No.1953 of 2008 was for tracing of original title deeds, which was opposed and registered by the Official Liquidator; that the property is in the custody of the court and that the Official Liquidator was bound to furnish all the documents to the purchaser; that in the absence of the same and the tender notification speaking contrary, the sale was liable to be set aside; that the learned Judge failed to note that by an order dated 13.03.2003 the company was ordered to be wound up and that as late as November 2007, the application for sale was preferred; that therefore, the Official Liquidator had ample time and should have investigated the title of the company in liquidation to the properties and prepared a report as to the properties belonging to the company in liquidation; that for the act of negligence and lethargy on the part of the Official Liquidator, the innocent purchasers, who have participated in the auction based on the representation made in the tender terms and conditions, cannot be fastened with liability or exposed to damage and loss; that it is not a case where the doctrine of caveat emptor could be applied; that it is not correct that section 55 of the Transfer of Property Act was not applicable to the sale made by the Official Liquidator; that it is also not correct that the provisions of Order 21 Rule 90 to 92 of C.P.C. were not applicable to the sale made by Official Liquidator in exercise of the powers of the Companies Act. 10. Added further the learned senior counsel that it is also not correct to state that the rough sketch submitted along with the tender terms and conditions showing the property to be contiguous and having entrance from the main road, did not amount to any representation; that based on the same, believing the land to be contiguous and having access from the main road, an offer was made by the appellant and that when the same was not true, the appellant was entitled to rescind from the sale; that the appellant, at no point of time, wanted to walk out of the sale for any reason, more particularly the reasons set out by the learned single Judge as to global recession; that it is pertinent to point out that the reliefs sought for in C.A.Nos.1953 to 1955 of 2008 seeking for curing of the defects were resisted by the Official Liquidator and therefore, the appellant was entitled for the relief of setting aside the sale; that the Official Liquidator has contended in his written statement that the sale was not in further of the advertisement and was in voluntary offer by the appellant and if to be so, the Official Liquidator could not contend that in the publication made it was mentioned that the sale was ‘as is where is and whatever there is basis’; that the https://hcservices.ecourts.gov.in/hcservices/ learned single Judge has erred in coming to the conclusion that there was no mistake in the minds of the parties which would vitiate the contract of sale and in this regard, failed to appreciate several of the representations in the tender terms and conditions were admittedly erroneous and the Official Liquidator has suppressed the same; that the pre- contractual representations in the form of tender terms and conditions were lacking good faith and amounted to willful misrepresentations and therefore, the sale was liable to be set aside; that at no point of time, the passing of high tension wire and construction of an overhead tank and T.V.room by the Government and the property has no access was ever brought to the knowledge of the appellant and hence, the sale was vitiated; that the land was vacant land without any boundaries and the Official Liquidator having engaged services of an agency to finalise the description and ownership of the property and arrive at the valuation, ought to have disclosed the existence of high tension wire,d the construction of overhead tank, TV room etc. and thus, the sale was vitiated by fraud, misrepresentation and mistake of facts and therefore, void enabling the purchaser appellant to seek for refund of the purchase money and under such circumstances, all the appeals have got to be allowed. 11. Learned senior counsel appearing for the appellant took the Court to the different reports and affidavits filed by the Official Liquidator before and after the sale in question. The learned senior counsel, in support of his contention relied on a decision of the Apex Court in THE AHMEDABAD MUNICIPAL CORPORATION OF THE CITY OF AHMEDABAD ..vs.. HAJI ABDULGAFUR HAJI HUSSENBHAI (1971(1) SCC 757). 12. Contrary to the above contentions, Mr.Arvind P.Datar, the learned senior counsel representing the Official Liquidator (1st respondent) would submit, inter alia, that when the company is wound up, the duty of the Official Liquidator is to take into custody of the properties of the company; but the properties do not vest with the Official Liquidator and he could act only as per the records of the company under liquidation; that the Official Liquidator cannot hold any guarantee or warranty when he sells the properties of the company under liquidation; that in case of auction sale, there is no warranty of title and issuance of a notification by the Official Liquidator was only an invitation to treat and the offer is actually made by the bidder and the acceptance is by the auctioneer, namely, the Official Liquidator; that only on acceptance, the contract becomes complete; that the auction purchaser is expected to investigate into the title before making such offer; that in the instant case, the notification was issued and publication was also made on 16.12.2007; that after long interval of such publication, the appellant has purchased the property and that during the interregnum period, the appellant should have made necessary enquiry in respect of title and possession of the properties and if not done, it was his fault and he should not find fault with the Official Liquidator; https://hcservices.ecourts.gov.in/hcservices/ that in the instant case, the Official Liquidator has not suppressed any fact; that since at the time of publication and also notice of tender, it was specifically stated that 'as is where is and whatever there is basis' and thus, there was no deception or misrepresentation made. Placing reliance on the decision of UNITED BANK OF INDIA ..vs.. OFFICIAL LIQUIDATOR AND OTHERS (1994)1 SCC 575), the learned senior counsel would submit that the sale by the Official Liquidator did not mean that he held out a warranty or guarantee in respect of the property sold and it was distinguishable from the sale effected by the individuals selling immovable properties. 13. Added further the learned senior counsel that if the Official Liquidator has not willingly or deliberately made any false statement, the Court cannot interfere; that in the instant case, what was done by the Official Liquidator was placing a report before the Court with all available records of the company under liquidation and seeking an order of sale of the property; that it is also not in the case of the appellant that an attempt to deceive was made by the Official Liquidator; that the Official Liquidator is not the person, who is making the sale of the property; that he was only an instrument in the hands of the Court; that there was no relationship, much less, fiduciary relationship between the Official Liquidator and the auction purchaser and that even if the statements made fall under the category of negligence, that would not be sufficient to set aside the sale. 14. Added further the learned senior counsel that under section 460(6) of the Companies Act, any such conduct of the Official Liquidator can be the subject matter of the decision by the Court, if the party aggrieved approaches the Court and that when an auction sale is conducted by the Official Liquidator though pursuant to the orders of the Court, the execution proceedings, as envisaged under Order 21 of Civil Procedure Code, have no application. Placing reliance on a decision of THE AHMADABAD MUNICIPAL CORPORATION ..vs.. HAJI ABDUL GAFUR HAJI HUSSENBHAI (1971(1) SCC 757, the learned senior counsel would further add that in the instant case, the doctrine of caveat emptor (purchaser beware) is applicable and Order 21 Rule 91 of C.P.C. has no application to the present facts of the case. The learned senior counsel also pointed out that even if the judgment debtor had no salable interest at all in the property sold, the same is not covered by the doctrine of Caveat Emptor as what is contemplated in Order 21 Rule 91 C.P.C. is different; that even Order 21 Rule 90 C.P.C. cannot be applied to the present case since for application of the said provision, not only some material irregularity should be there, but also it should have caused