Case: United Bank of India Vs. Official Liquidator

with the option of renewal for a further 99 years for the migrant of Rs 1200 per annum can be said to be land burdened with onerous covenants. We do not think that the High Court was justified in debating and holding in proceedings under Section 535 that the lease of the said land had been validly terminated so that the Official Liquidator became liable to pay mesne profits to the Trust, and that this coupled with arrears of rent, in five figures made the lease onerous. We are also of the view that the Banks offer t o pay the arrears of rent to the Trust should have been accepted by the High Court. The Bank to protect and keep alive its security, had put Official Liquidator in funds in regard to other matters and was eager to meet this liability. Had this been done valuable property of the company in liquidation could have been retained so that its undertaking, which stood on the said land, could have been sold as a running concern, as has been done upon intervention of this Court, for the benefit of its creditors. 12. We now consider the contempt proceedings on the one hand and the application on behalf of Triputi on the other for diminution of the sale price by reason of the fact that, according to Triputi, the Official Liquidator had not been able to hand over to Triputi possession of certain properties that were sold by him to it, which, it is alleged, the company in liquidation did not own. The amount of Rs 1 crore 98 lakhs having been paid, what this really boils down to is whether Triputi should be made liable to pay interest at the rate of 15% per annum thereon.13. In our view, the complete answer to Triputis allegation in regard to the failure of the Official Liquidator to hand over to it possession of certain properties which were sold to it, which, according to it, the company in liquidation did not even own, is contained in clause 2 of the Terms and Conditions of Sale upon the basis of which the property and assets of the company in liquidation were sold by the Official Liquidator to Triputi under the orders of this Court. Clause 2 reads thus: "2. The sale will be as per inventory list on as is where is basis and subject to the confirmation of the Honble Supreme Court of India. The Official Liquidator shall not provide any guarantee and/or warranty in respect of the immovable properties and as to the quality, quantity or specification of the movable assets. The intending purchaser must satisfy themselves in all respect as regards the movable and immovable assets, as to their title, encumbrances, area, boundary, description, quality, quantity, and volume etc. and the purchaser will be deemed to offer with full knowledge as to the description, area etc. of the properties and defects thereof, if any. The purchaser shall not be entitled to claim any compensation or deduction in price on any account whatsoever and shall be deemed to have purchased the property subject to all encumbrances, liens anti claims including those under the existing legislation affecting labour, staff etc. The Official Liquidator shall not entertain any complaint in this regard after the sale is over. Any mistake in the notice inviting tender shall not vitiate the sale." * (emphasis supplied) 14. When the Official Liquidator sells the property and assets of acompanyin liquidation under the orders of the Court he cannot and does not hold out any guarantee or warranty in respect thereof. This is because he must proc eed upon the basis of what the records of the company in liquidation show. It is for the intending purchaser to satisfy himself in all respects as to the title, encumbrances and so forth of the immovable property that he proposes to purchase. He cannot after having purchased the property on such terms then claim diminution in the price on the ground of defect in title or description of the property. The case of the Official Liquidator selling the property of a company in liquidation under the orders of the Court is altogether different from the case of an individual selling immovable property belonging to himself. There is, therefore, no merit in the application made on behalf of Triputi that there should be a diminution in price or that it should not be made liable to pay interest on the sum of Rs 1 crore 98 lakhs. 15. It is true, as was pointed out by Mr A.K. Sen, learned counsel for Triputi, that on August 27, 1992, this Court had said that the question of interes t on the sum of Rs 1 crore 98 lakhs would be decided with the main case. What must also be noted is the unequivocal undertaking given on October 21, 1992 by Triputi to Court, which the Court accepted, wherein it was stated, "Balance amount of Rs 98, 00, 000 would be paid together with interest due on the total amount Rs 1, 98, 00, 000 @ 15% p.a. with effect from January 1, 1989 in 12 equal monthly instalments". We have already referred to the various orders of this Court which indicate quite clearly with what reluctance and over what span of time Triputi paid the sum of Rs 1 crore 98 lakhs;that itself makes the payment of interest thereon appropriate. Coupled therewith is the undertaking aforemen tioned. We are, therefore, of the view that Triputi must pay interest upon the amount of Rs 1 crore 98 lakhs at the rate of 15% per anum from January 1, 1989 till payment. Such payment shall be made within 12 weeks from today. We make it clear that i n the event that the amount of interest as aforementioned is not paid within 12 weeks from today, it shall be open to one or more of the aggrieved par-ties to take appropriate proceedings against Triputi and its Directors.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]the aforesaid direction will dispose of the appeal, we would like to say, having heard counsel on the merits of the appeal, that we are not satisfied that the Division Bench appreciated the purpose of the provisions of Section 535 of the Companies Act. Thereunder the High Court may give leave to the Official Liquidator to disclaim land of any tenure which is part of the property of the company in liquidation if it is burdened with onerous covenants. The intention of Section 535 is to protect the creditors of the company in liquidation and not mulct them by reason of onerous covenants. The power under Section 535 is not to be lightly exercised. Due care and circumspection have to be bestowed. It must be remembered that an order permitting disclaimer, while it frees the company in liquidation of the obligation to comply with covenants, puts the party in whose favour the covenants are, to serious disadvantage. The Court must therefore, be fully satisfied that there are onerous covenants, covenants which impose a heavy burden upon the company in liquidation, before giving leave to disclaimare of the view that the High Court ought to have appreciated that it was rather unlikely that the party who had the benefit of onerous covenants would apply for disclaimer and ought to have viewed the Official liquidators application to disclaim made pursuant to the Trusts letter to him in that behalf, in that light. We find it difficult to see how such a large area of land leased to the company in liquidation for 99 years with the option of renewal for a further 99 years for the migrant of Rs 1200 per annum can be said to be land burdened with onerous covenants. We do not think that the High Court was justified in debating and holding in proceedings under Section 535 that the lease of the said land had been validly terminated so that the Official Liquidator became liable to pay mesne profits to the Trust, and that this coupled with arrears of rent, in five figures made the lease onerous. We are also of the view that the Banks offer t o pay the arrears of rent to the Trust should have been accepted by the High Court. The Bank to protect and keep alive its security, had put Official Liquidator in funds in regard to other matters and was eager to meet this liability. Had this been done valuable property of the company in liquidation could have been retained so that its undertaking, which stood on the said land, could have been sold as a running concern, as has been done upon intervention of this Court, for the benefit of itsnow consider the contempt proceedings on the one hand and the application on behalf of Triputi on the other for diminution of the sale price by reason of the fact that, according to Triputi, the Official Liquidator had not been able to hand over to Triputi possession of certain properties that were sold by him to it, which, it is alleged, the company in liquidation did not own. The amount of Rs 1 crore 98 lakhs having been paid, what this really boils down to is whether Triputi should be made liable to pay interest at the rate of 15% per annum thereon.13. In our view, the complete answer to Triputis allegation in regard to the failure of the Official Liquidator to hand over to it possession of certain properties which were sold to it, which, according to it, the company in liquidation did not even own, is contained in clause 2 of the Terms and Conditions of Sale upon the basis of which the property and assets of the company in liquidation were sold by the Official Liquidator to Triputi under the orders of this Court. Clause 2 readsThe sale will be as per inventory list on as is where is basis and subject to the confirmation of the Honble Supreme Court of India. The Official Liquidator shall not provide any guarantee and/or warranty in respect of the immovable properties and as to the quality, quantity or specification of the movable assets. The intending purchaser must satisfy themselves in all respect as regards the movable and immovable assets, as to their title, encumbrances, area, boundary, description, quality, quantity, and volume etc. and the purchaser will be deemed to offer with full knowledge as to the description, area etc. of the properties and defects thereof, if any. The purchaser shall not be entitled to claim any compensation or deduction in price on any account whatsoever and shall be deemed to have purchased the property subject to all encumbrances, liens anti claims including those under the existing legislation affecting labour, staff etc. The Official Liquidator shall not entertain any complaint in this regard after the sale is over. Any mistake in the notice inviting tender shall not vitiate the sale."n the Official Liquidator sells the property and assets of acompanyin liquidation under the orders of the Court he cannot and does not hold out any guarantee or warranty in respect thereof. This is because he must proc eed upon the basis of what the records of the company in liquidation show. It is for the intending purchaser to satisfy himself in all respects as to the title, encumbrances and so forth of the immovable property that he proposes to purchase. He cannot after having purchased the property on such terms then claim diminution in the price on the ground of defect in title or description of the property. The case of the Official Liquidator selling the property of a company in liquidation under the orders of the Court is altogether different from the case of an individual selling immovable property belonging to himself. There is, therefore, no merit in the application made on behalf of Triputi that there should be a diminution in price or that it should not be made liable to pay interest on the sum of Rs 1 crore 98is true, as was pointed out by Mr A.K. Sen, learned counsel for Triputi, that on August 27, 1992, this Court had said that the question of interes t on the sum of Rs 1 crore 98 lakhs would be decided with the main case. What must also be noted is the unequivocal undertaking given on October 21, 1992 by Triputi to Court, which the Court accepted, wherein it was stated, "Balance amount of Rs 98, 00, 000 would be paid together with interest due on the total amount Rs 1, 98, 00, 000 @ 15% p.a. with effect from January 1, 1989 in 12 equal monthly instalments". We have already referred to the various orders of this Court which indicate quite clearly with what reluctance and over what span of time Triputi paid the sum of Rs 1 crore 98 lakhs;that itself makes the payment of interest thereon appropriate. Coupled therewith is the undertaking aforemen tioned. We are, therefore, of the view that Triputi must pay interest upon the amount of Rs 1 crore 98 lakhs at the rate of 15% per anum from January 1, 1989 till payment. Such payment shall be made within 12 weeks from today. We make it clear that i n the event that the amount of interest as aforementioned is not paid within 12 weeks from today, it shall be open to one or more of the aggrieved par-ties to take appropriate proceedings against Triputi and its Directors.