Punjab Financial Corporation vs Pretty Cycle Pvt. Ltd. and Others

M.M. Kumar and Jaswant Singh, JJ.—This appeal filed u/s 483 of the Companies Act, 1956 (for brevity ''the Act'') is directed against order dated 23.7.1999 passed in C.A. No. 341 of 1996 in C.P. No. 79 of 1995 alongwith CA Nos. 343 and 344 of 1999. The C.A. No. 341 of 1996 was filed by the auction purchaser-respondent No. 2 with a prayer for modification of order dated 21.3.1996 passed by learned Company Judge. A further prayer for issuance of directions to the Punjab Financial Corporation (for brevity ''the Corporation'') was also made to get the resumed plot restored (which was sold to the applicant- auction purchaser. Thereafter the plot was transferred in the name of auction- purchaser). The Company Judge has vide impugned order set aside the earlier order of confirmation of sale passed on 21.3.1996 in C.P. No. 79 of 1995 in favour of the auction purchaser.

Brief facts of the case necessary for disposal of the controversy raised in the instant appeal may first be noticed. On 9.6.1972 a plot measuring 6556 sq. yds situated at C 70 focal Point, Ludhiana was allotted to M/s Pretty Cycles (P) Ltd. ( for brevity ''the company in liquidation''). The said company mortgaged the plot to the Punjab Financial Corporation (for brevity ''the Corporation'') in lieu of the term loan vide mortgage deed dated 3.6.1975. The instalments in respect of the plot allotted by Punjab Urban Development Authority (for brevity ''the PUDA'') to the company in liquidation were not paid. On account of non payment of the price of the plot, the Estate Officer, P.U.D.A. resumed the plot on 15.10.1976. On an appeal filed before Secretary, PUDA, a conditional order dated 12.11.1979 was passed against the order of assessment passed by the Estate Officer. However, the appeal was dismissed on 28.11.1980 because the conditional order dated 12.11.1979 was not complied with. The possession however continued to be with company in liquidation On 15.6.1980 the company illegally leased a part of the property to another firm known as M/s Engineer Continental (P) Ltd.- respondent No. 3 (for brevity ''Engineer Continental''). The Corporation filed a petition u/s 31 of the State Financial Corporation Act, 1951 which was accepted on 15.3.1983 by the Addl. District Judge, Ludhiana. A second lease deed was executed by the company in liquidation on 30.5.1984 in favour of Engineer Continental for an additional area of 3120 sq. feet. On 24.9.1984, the Corporation filed an execution petition against M/s Pretty Cycle (P) Ltd. (in liquidation) seeking possession of the land.

The Company Petition No. 10 of 1986 against Company in Liquidation was filed by M/s Modula Hatreats and the company was ordered to be wound up on 19.2.1987 and possession was taken over by the Official Liquidator. The Corporation filed C.P. No. 141 of 1987 u/s 446 of the Act against the company in liquidation for obtaining leave of the Court to continue with the execution proceedings before the Executing Court (A/17) and vide order dated 10.2.1989, the permission was granted by rejecting all the objections raised by the Official Liquidator. The Official Liquidator filed an application being C.P. No. 79 of 1995 with a prayer for permission to sell the property of Company in liquidation by placing on record all the facts. It was also pointed out that a portion of the property is on lease with ''Engineer Continental''- respondent No. 3. On 2.2.1996, the Corporation filed the status report giving value of the property in question and also disclosed the fact that in a part of property Engineer-Continental -respondent No. 3 was in possession. The Corporation sought permission to sell the property and also sought directions to the Engineer-Continental - respondent No. 3 to hand over vacant possession. Accordingly vide order dated 8.2.1996, the learned Company Judge granted permission to sell the property. The order of the learned Company Judge dated 8.2.1996 reads as under:

Learned Counsel for respondent No. 2 has filed a schedule of sale of properties which also indicates the assessed value of the property of the concern.

On consideration of the matter, I direct respondent No. 2 to go ahead with the sale of the property. However, the date for calling of the tenders is changed from 28.2.1996 to 29.2.1996 and the tenders shall be opened by the Committee in the presence of the Official Liquidator, who is present in Court and undertakes to attend the meeting, on 29.2.1996 at 3.00 P.M. It will be open to respondent No. 2 to accept or reject any tender or the offer made to come to the conclusion as to whose tender or offer is to be accepted but final letter of acceptance will be given to the successful party only after bringing this fact to the notice of the Court.

Adjourned to 7.3.1996. Copy of the order be given dasti on payment of usual charges.

On 16.2.1996, the Corporation issued an advertisement (A.6) in the English daily ''The Tribune'' clearly stipulating that the Corporation has invited offers in respect of various industrial units for sale on '' as is where is'' basis with the note that the sale was subject to confirmation by the Hon''ble High Court regarding the property of the Company in Liquidation ( M/s Pretty Cycles (P) Ltd.). It was also clarified that total area is 6556 sq. yds and it was on lease. The notice mentioned reserved price to be Rs. 80.21 lacs. On 29.2.1996 negotiations were held between the highest bidder including Engineer Continental- respondent No. 3- and eventually M/s Leisure Wear Fashions - respondent No. 2 was found to be the highest bidder for Rs. 1,32,00,000/-. The aforesaid fact is evident from the minutes of the proceedings of the Sale Committee headed by one Mr. Sudhir Mittal, IAS, Managing Director in the presence of the Official Liquidator. These proceedings deserves to be read in extenso:

M/s Pretty Cycles, Ludhiana

The Corporation in response to the advertisement for sale of the properties of the captioned concern in terms of orders of the Hon''ble High Court received 7 offers. Before the tenders could be opened at 3.45 PM two bidders namely M/s Surpal Cycles Ltd. and M/s Anand Industries requested to withdraw their tenders. Accordingly, the members and official liquidator accepted their request and their tenders were returned to them. Then other 5 tenders were opened in the presence of members of the sale committee, Mr. M.K.Kapoor, Official Liquidator from Hon''ble High Court of Punjab and Haryana and also in the presence of bidders whose names are mentioned as under:

Sh. Vijay Kumar Jain Rs. 89.00 lacs 2. M/s Surya Industries Rs. 38.00 lacs 3. M/s Engineers Continental (P) Ltd. Rs. 58.00 lacs 4. Sh. Jaswinder Singh Rs. 80.25 lacs 5. M/s Leisure Wear Fashions Rs. 89.30 lacs

Sh. Vijay Kumar Jain submitted the tender for Rs. 89.00 lacs alongwith earnest money of Rs. 10,000/-. As his tender was incomplete for want of proper earnest money hence official liquidator offered him to deposit the earnest money within 24 hrs., but he showed his inability and hence his tender was withdrawn.

M/s Engineers Continental (P) Ltd. represented by Shri S.M. Taneja did not raise his offer beyond Rs. 50.00 lacs and did not participate in the open bid.

Thereafter only 2 tenders remain effective as both the bidders were prepared to enhance their offer, hence open bid was also held as per the bid sheet attached to the minutes. M/s Leisure Wear Fashions (P) Ltd. offered to purchase the properties for a price of Rs. 132.00 lacs whereas Sh. Jaswinder Singh offered his highest final bid of Rs. 130.00 lacs.

The bid of M/s Leisure Wear Fashions (P) Ltd., being the highest was accepted by the Committee. The official liquidator also gave his consent for the same. Hence the final bid of M/s Leisure Wear Fashions (P) Ltd., was accepted subject to confirmation of Hon''ble High Court of Punjab and Haryana.

Before the tenders were opened all the bidders were made clear about the terms and conditions. It was brought to their notice that the sale shall be confirmed by orders of Hon''ble High Court of Punjab and Haryana and that about 40% of the premises had been occupied by the tenant. Though the tenant had no right to remain therein and the Committee members assured them that the Corporation shall make all efforts to get the vacant possession and get vacated the tenants whose status in the premises is like tress passers because the company was not competent to lease out the factory without the consent of the Corporation and there was no consent given by the Corporation for leasing out the premises. The official liquidator also explained the position about the status of the tenants and assured that all efforts in legal terms shall be made to get the vacant possession.

Decision was also taken by the Sale Committee on the advise of official liquidator that payment of outstanding amount, if any, against the land shall be made by the Corporation and not by the purchaser out of the sale proceeds, to the Govt. Agency which had allotted plot of land to the promoter.

The learned Company Judge in his order dated 21.3.1996 has noticed that the Official Liquidator did not have any objection to the confirmation of sale and also recorded his submission that the amount fetched in auction is over and above the dues of the Corporation, who was a secured creditor. It was indicated that the amount deserved to be paid to the Corporation. Accordingly the learned Company Judge confirmed the sale. He also issued directions to the Civil Judge (Jr.Division), Ludhiana to dispose of the suit seeking ejectment of Engineer Continental respondent No. 3 as expeditiously as possible and preferably within six months. The order dated 21.3.1996 of the learned Company Judge confirming the sale deserves to be read in extenso which reads thus:

After hearing learned Counsel for the parties and perusing the record I am of the opinion that the sale that took place on 29.2.1996 in favour of Leisure Wear Fashions (P) Ltd. deserves to be confirmed and it is so ordered subject to the payment of the amount as agreed in negotiations and in terms of the advertisement. As already noticed the purchaser has already deposited a sum of Rs. 4,01,500/- as 5% of the tender price i.e. 8.30 lacs with the Financial Corporation. Under the terms and conditions of the sale the prospective purchaser is required to pay the balance of 25% of the bid amount of 132 lacs with interest after the confirmation of sale. The Financial Corporation is permitted to adjust the entire amount of Rs. 33.00 lacs against the amount due to it from the company (in liquidation). The Financial Corporation shall further adjust one third of the balance amount alongwith interest thereon from each of the instalment of the balance amount of the purchase price payable by the purchaser in equated quarterly instalments a period of three years and remit the balance amount with interest every quarter to the Official Liquidator in the account of company (in liquidation).

For what has been stated above this petition stands disposed of. Company application No. 68 of 1996 moved by the Financial Corporation for confirmation of sale also stands disposed of in terms of the above order.

The other prayer made by the learned Counsel for the Financial Corporation regarding expeditious disposal of suit filed by it against respondent No. 3 also deserves to be sympathetically considered. Prospective purchaser purchased the unit of the company (in liquidation) in the sum of Rs. 132 lacs against the reserved price of about Rs. 109.1 lacs as assessed by the second valuer. After giving thoughtful consideration I am of the opinion that in the facts and circumstances of this case a direction deserves to be given to the learned trial Court to dispose of the suit as expeditiously as possible preferably within six months. The Official Liquidator who is defendant No. 1 in the suit and M/s Engineers Continental respondent No. 3 in this petition and represented by Mr. J.S. Narang, is defendant No. 5 in the suit. These respondents through their counsel have been directed to appear

before the trial Court on 4.4.1996 for which date the case is fixed in the Court of Sh. B.R. Garg, Civil Judge, Junior Division, Ludhiana.

On 29.3.1996 the auction purchaser- (M/s Leisure Wear Fashions) was asked to deposit 25 percent of the auction proceeds. Accordingly a total amount of Rs. 33.00 lakhs was paid on 30.3.1996. On 7.5.1996 an agreement to sell was executed between the auction purchaser and the Corporation with the stipulation that dues of the Estate Officer, PUDA were to be paid out of the sale consideration. The auction- purchaser ( M/s Leisure Wear Exports- respondent No. 2) was given possession of the vacant property on 14.5.1996 which obviously excluded the portion under the occupation of Engineer- Continental respondent No. 3. The auction purchaser then started raising various demand which were not within the four corners of the conditions of auction. On 24.7.1996 it was represented that proportionate interest be charged from them by the Corporation in proportionate to possession of land area delivered. On 25.7.1996 they made another representation for payment of balance instalment after physical possession of the remaining property was delivered. A request was also made for payment of balance amount in instalments on 26.8.1996. The demand appears to be accepted. On 27.9.1996, first instalment of Rs. 8 lakhs was demanded by the Corporation and similar demand was raised on 28.10.1996.

It is in the background of the aforesaid facts and circumstances that application bearing CA No. 341 of 1996 was filed on 3.12.1996 with a prayer for modification of order dated 21.3.1996 passed by learned Company Judge. A further direction was sought to the Corporation to ensure restoration of resumed plot which has been sold to the auction purchaser and for its transfer to them. The applicant- auction purchaser also claimed compensation in respect of the covered area falling short from the one stated in the advertisement dated 16.2.1996 and a request was made for re-scheduling of payment of instalments from the date of complete delivery of possession. A further direction was sought to the Corporation restraining them from charging any arrears/dues/charges and to charge in the ratio of covered area passed on to the auction purchaser as it was given possession of only 5013 sq. ft out of total covered area of 12138sq. ft. The area measuring 7125 sq. ft was in unauthorised possession of Engineer Continental- respondent No. 3. Another prayer made in the application was for issuance of directions to the trial Court to decide the civil suit seeking ejectment of Engineer Continental respondent No. 3 within a period of six months.

The Corporation contested the application by filing reply dated 27.1.1997. The Company Court vide its order dated 20.2.1997 sought the explanation of the trial Court for not disposing of the suit. On 5.5.1998, the trial Court passed a decree in favour of the Corporation and the auction purchaser who was a co-plaintiff.

Engineer Continental Respondent No. 3 filed an appeal and the Company Court directed the appellate Court to decide the appeal and notice was issued on 21.8.1998 to the Estate Officer, Ludhiana for restoring the plot to the Corporation. On 7.1.1999, the Managing Director of the Corporation and Chief Administrator of PUDA were directed to iron out the differences with regard to restoration of the plot. On 29.1.1999, PUDA agreed to sell the property to the Corporation @ Rs. 600/- per square yard and the plot was transferred to them on payment of approximately Rs. 40.00 lakhs. The aforesaid order dated 29.1.1999 passed in C.A. No. 341 of 1996 reads thus:

Mr. Prabhakar states that PUDA has agreed to sell the plot in question to Punjab Financial Corporation instead of restoring it to the original allottee, at a price of Rs. 600/- per sq. yd. The rate offered by PUDA has been accepted by Punjab Financial Corporation. Mr. Prabhakar has placed two photo copies of letters in that behalf, which are taken on record.

Mr. Prabhakar seeks three weeks time to complete the formalities.

Adjourned to 26.2.1999.

On 3.6.1999 the learned Company Judge directed the auction purchaser to appear before the Managing Director of the Corporation for reconsideration of the whole issue.

On 9.6.1999 auction purchaser -respondent No. 2 filed a representation for refund of Rs. 33.00 lakhs and requested for cancellation of sale in their favour. On 6.7.1999 the request of the auction purchaser-respondent No. 2 was declined by the Managing Director. However, respondent No. 2 applied for re-schedulement of instalments and it was to put up the same with some concrete proposal.

On 12.7.1999, Company Application Nos. 343 and 344 of 1996 were filed with a prayer for amendment of the Company application No. 341 of 1996to substitute the prayer to cancellation of lease deed and grant cost of shed raised upon the plot in question. A further prayer for staying the demand raised by the Corporation was also made. On 20.7.1999 the Corporation opposed the amendment application by filing reply. On 23.7.1999 vide impugned order the amendment application was allowed and the learned Company Judge directed the refund of Rs. 33.00 lakhs alongwith 12% compound interest.

Mr. G.S. Sandhawalia, learned Counsel for the Corporation has submitted that the impugned order dated 23.7.1999 passed by the learned Company Judge is vitiated and it is patently illegal. His first submission is that the advertisement dated 16.2.1996 (A.6) in a unmistakable terms announced that the sale of the property in question was to be made on ''as is where is'' basis. There was an express note that the property was on lease and the sale was subject to confirmation by this Court. He has also submitted that during negotiation on 29.2.1996 the auction purchaser was apprised that the outstanding amount against the plot would be paid by the Corporation out of the sale proceeds to PUDA and not by the auction purchaser. In that regard he has drawn our attention to the minutes of the Sale Committee meeting dated 29.2.1996 ((A.9). He has also argued that the shifting and opportunistic stand of the auction purchaser does not match with the fulfillment of the promises by the Corporation. According to the learned Counsel in the unamended CA No. 341 of 1996 the prayer was that the resumed plot be transferred to the auction purchaser. The application was awaiting disposal after issuance of notice to the Estate Officer, Ludhiana since the plot was earlier resumed on 15.10.1976. The aforesaid shifting stand of the auction purchaser is evident from the order dated 29.1.1999 which shows that this Court has prevailed upon the Estate Officer, PUDA which has agreed to resale of the plot to the Corporation @ Rs. 600/- per sq. yd and the total amount comes to approximately about Rs. 40 lakhs. The amount was paid out of the sale proceedings of only Rs. 33 lakhs and the balance was met by the Corporation out of its funds in anticipation of payment of balance amount of 75% of the auction purchaser as per stipulated schedule.

Mr. G.S. Sandhawalia has further submitted that vide sale agreement dated 7.5.1996 (R 2/1 with reply of the Corporation before Ld. Company Judge at page 85 of the paper book) it was stipulated between the Corporation and the auction purchaser that the transfer was to be effected only after the receipt of full consideration as is evident from clause 5(i). the Corporation has also undertaken to pay the outstanding dues as per the minutes of the Sale Committee which have been noticed in the order dated 21.3.1996 confirming the sale.

Mr. G.S.Sandhawalia has also attacked the reasoning adopted by the learned Company Judge concerning possession of M/s Engineer Continental- respondent No. 3 and ignorance of the auction purchaser with regard to delay in obtaining full possession. He has argued that the aforesaid line of reasoning is against the record because of the following facts.

i) In Company Petition No. 79 of 1995 filed by the Official Liquidator, the presence of the tenant M/s Engineers Continental Pvt. Ltd.- respondent No. 3 was specially mentioned and he was arrayed as respondent No. 3.

ii) In the status report dated 2.2.1996 filed by the corporation giving value of the property it was specifically mentioned that M/s Engineers Continental Pvt. - respondent No. 3 was a tenant of the company in liquidation, inducted without written consent of the Corporation with whom the property was mortgaged and prayer was made that the tenant should deliver possession of the property to the auction purchaser.

iii) In the advertisement dated 16.2.1996 it was mentioned ''as is where is; basis and that the sale was to be confirmed by this Court and the property may be inspected with prior permission from the concerned district office.

iv)During bidding on 29.2.1996, the tenant- respondent No. 3 was also one of the bidders and it was specifically brought to the notice that his possession was of a trespasser and efforts were being made to get vacant possession as per law.

v) C.P. No. 68 of 1996 was filed by the Corporation on 6.3.1996 for confirming the sale and also for a direction against the tenant- respondent No. 3 to hand over vacant possession to the auction purchaser, which was disposed of on 21.3.1996 alongwith CP No. 790 of 1995 with a direction to the trial Court to decide the suit jointly filed by the Corporation and the auction purchaser and the tenant was to stop using portion of property No./C-70. The suit was decreed on 5.5.1998.

vi) C.A. No. 341 of 1996 was filed on 3.12.1996 by the auction purchaser with a prayer that trial Court be directed to decide the suit in which it was mentioned that only 2200 square yards was in possession of the tenant out of 6556 square yards.

Learned Counsel has then submitted that the reasoning adopted by the learned Company Judge concerning that possession of the remaining portion may not be delivered to the auction purchaser on account of litigation is also against the record as the learned Judge fails to take into account the following facts:

(a) Learned Company Judge has failed to take into account clause 1, clause 5(i) and 5(v) of the Agreement dated 7.5.1996 (at page 85) of the paper book. Relevant clauses for ready reference are extracted and reproduced as under:

In consideration of the said sum of Rs. 132.00 lacs (Rupees One Crore thirty two lacs only) hereinafter referred to the said sum'' the transferor hereby agrees to transfer to the purchaser all the property described in the schedule hereto TO HAVE TO HOLD the same to the transferee as absolute owners on the terms and conditions hereinafter specified. Till payment of full consideration ownership will remain with the transferor and purchaser shall hold the same as a trustee. Till the payment of entire sale consideration in terms of this agreement. The purchaser shall hold on the said property as trustee on behalf of the transferor and shall be liable for criminal breach of trust if the purchaser fails to pay the balance sale consideration and also to recovery the property in the same good condition to the transferor.

5(i) The deed of transfer shall be executed by the transferor after receipt of full consideration as agreed upon above and also obtain N.O.C. from Estate Officer, Punjab Urban Development Authority. But dues if any of Estate Officer, Punjab Urban Development Authority/the department which allotted Plot No. C-80 to Pretty Cycles (P) Ltd.: Ludhiana, shall be paid out of the sale consideration.

5(v) In the event, the purchaser failing to make the balance payment of Rs. 99.00 lacs (Rupees Ninety nine lacs only) or any part thereof together with interest in the manner mentioned above to the transferrer within the said stipulated period or in case of breach of any of the above convenants, the amount of Rs. 33.00 lacs (Rupees Thirty three lacs only) and other amounts already paid to the transferor shall stand forfeited and further the purchaser shall vacate the premises and redeliver the vacant possession of the said property in good and working condition as described in schedule forthwith. In case the purchaser fails to redeliver the possession as aforesaid, the transferor shall be entitled to have recourse to law for getting back the possession of the said property at the cost of the purchaser including recovery of expenses to be incurred for the watch and ward of the properties, if resumed and other legal action in terms of this agreement including criminal breach of trust. (emphasis supplied)

Agreement dated 7.5.1996 was entered into by the auction purchaser- respondent No. 2 with its eyes wide open and as per Sub clause (v) of Clause 5 of the Agreement, it is evident that the earnest money was liable to be forfeited and the purchaser was liable to vacate the premises and re-deliver the vacant possession of the plot in case of default of payment of balance 75% of the consideration money towards the purchase of the auction plot as per the schedule provided in the clause 4(i) of the Agreement. It is thereafter that the auction purchaser was put in possession of the property in dispute except the occupied portion on 14.5.1996 (as is clear from Certificate annexed as A.12 at page 125).

(b) Initial request dated 24.7.1996 was to charge interest as per ratio of delivery of the portion of covered area which was 60% as per the representation itself. However, the said request was utilised to delay the payment of balance instalments as the date to pay the first instalment was 1.8.1996 and the demand was made by the Corporation on 26.8.1996 and 28.10.1996.

(c) Similarly initial prayer in CA 341 of 1996 was that resumed plot be transferred, covered area was falling short, direction for deciding the civil suit regarding ejectment of Engineer Continental- respondent No. 3 from the occupied portion and for re-scheduling payment of instalments, which was acceded to by calling explanation of the trial Court vide order dated 20.2.1996. The Corporation was restrained from taking possession in terms of clause 5(v) of agreement dated 7.5.1996 from the auction purchaser. The civil suit for possession by ejectment was decided ion 5.5.1998. It is relevant to notice that auction purchaser- respondent No. 2 was a co-plaintiff in this suit in possession seeking ejectment of Engineering Continent.

(d) Even a direction was given by the learned Company Judge on 21.8.1998 to the Appellate Court to decide the appeal filed by Engineering Continental with respect to the aforesaid decree dated 5.5.1998 at the earliest, preferably on the next date of hearing. Further direction was issued to the Estate Officer Urban Estate, Ludhiana to ensure the release of the resumed plot at an early date.

That in pursuance of directions dated 21.8.1998, the Estate Officer, PUDA agreed to sell the resumed plot to the Corporation instead of restoring it, at a current market price of Rs. 600 per sq. yard.

(e) That before the learned Company Judge on 3.6.1999, grievance was made by the auction purchaser that he is handicapped to develop his unit as the entire possession of the auction plot had not been given to him and, therefore, a prayer for re-schedulement of the payment of the due instalments. The learned Company Judge vide its order dated 3.6.1999 directed the Managing Director of the Corporation to reconsider the issue sympathetically so as to safeguard the interest of both auction purchaser and the Corporation. However, contrary to his earlier stand in CA No. 341 of 1996 before the Court on 3.6.1999, purchaser made another representation dated 9.6.1999 prayed for refund of Rs. 33 lacs (25% of earnest money), which was never the prayer before the Court till then in the un-amended CA No. 341 of 1996. Accordingly, the request was declined by the Managing Director vide order dated 6.7.1999 and the applicant was given liberty to apply for re-schedulement of instalment and come up with a concrete proposal as was the issue before the learned Company Judge.

(f) Thereafter, the auction purchaser filed an application bearing CA No. 343 of 1999 seeking certain amendments to be incorporated in CA No. 341 of 1996 to the effect that the sale deed be cancelled and the amount of Rs. 33.03 lacs as earnest money be ordered to be refunded alongwith interest @ 18%. Further prayer was also sought to be incorporated seeking a direction for payment of Rs. 15.75 lacs towards the construction and renovations made by the auction purchaser on the area in possession with him. Said application was opposed by the Corporation by filing a reply.

However, in spite of aforesaid facts, learned Company Judge vide impugned order dated 23.7.1999 felt persuaded to allow the amendment application and set aside the sale in favour of auction purchaser- respondent No. 2 and directed the Corporation to refund the amount of Rs. 33.03 lacs alongwith interest at the rate of 12% with quarterly rests from the date of deposit till the date of payment within a period of two months from the date of passing of the order. However, no price/cost was awarded towards the construction raised by auction purchaser- respondent No. 2 being offset towards the use and occupation of 60% of the area of the plot by auction purchaser which remained in his possession w.e.f. 14.5.1996.

On further appeal to this Court, vide present petition, the operation of the judgement dated 23.7.1999 was stayed on 1.10.1999 and the appeal was admitted on 14.8.2000 by confirming the interim order. The auction purchaser-respondent no2. filed CA No. 5 of 2009 on 15.12.2009 for withdrawal of Company Application No. 343 and 344 of 1999 with liberty to pursue CA No. 341 of 1996 which was opposed by the Corporation by filing reply on 28.1.2009. It is quite amusing to note that despite stay order granted by this Court, the auction purchaser has failed to deposit till date any of the due instalments and enjoying the property by paying a paltry amount of 25% earnest money alone.

It is pertinent to mention that the appeal of the unauthorised occupant of Engineers Continental -respondent No. 3 filed against ejectment decree dated 5.5.1998 has been consigned to the record room by the Addl. District Judge, Ludhiana on account of their non appearance on 27.7.2009.

Mr. Amit Rawal, learned Counsel for the auction purchaser-respondent No. 2 has supported the order passed by the learned Company Judge and has argued that categorical findings have been recorded by the learned Company Judge and there was no valid title with the corporation at the time of execution of sale agreement in favour of the auction purchaser and admittedly a part of the premises was in possession of tenant-respondent No. 3 namely M/s Engineers Continental and that litigation was pending for the last three years. He has also pointed out that there was huge delay in delivery of possession with remote possibility of ejectment of tenant- respondent No. 3 which is proved by the fact that the matter is still pending before the Appellate Court. Therefore, the learned Counsel for the auction purchaser has emphasised that C.M. No. 5 of 2009 filed by the auction purchaser- respondent No. 2 under Order XXIII Rule 1 read with Section 151 CPC for withdrawal of C.A. No. 343 and 344 of 1999 which was filed in CP No. 79 of 1995. According to the learned Counsel his prayer in the original application CA No. 341 of 1996 is for permitting him to withdraw CA Nos. 343 and 344 of 1999. The aforesaid application has been opposed by the Corporation by filing reply. The stand taken is that the relief prayed in the original application CA No. 341 of 1996 and thereafter amended by CA No. 343 of 1999 is contradictory. In CA 341 of 1996 the prayer was made for modification of the order dated 21.3.1996 and for issuance of directions to the Corporation to get the resumed plot restored and transfer the same in the name of the auction purchaser. Another prayer made was for re-scheduling the payment of instalments. Whereas in CA No. 343 of 1999 prayer was made for setting aside the sale/auction by way of amendment of CA No. 341 of 1996 and the same amendment was allowed by the learned Company Judge vide impugned order and auction purchaser now cannot be permitted to withdraw the application.

Mr. Amit Rawal has further submitted that the petitioner has raised construction and has incurred expenses amounting to Rs. 14-15 lakhs and it is prepared to surrender the possession provided the part payment of Rs. 33 lakhs made by the auction purchaser- respondent No. 2 be refunded.

Having heard the learned Counsel for the parties and perusing the record with their able assistance, we are amazed regarding the conduct adopted by the auction purchaser- respondent No. 2. It is unbelievable that the auction purchaser has been permitted by the Corporation to behave in a totally unfair manner. The series of application engaging the Corporation and the Official Liquidator moved by the auction purchaser- respondent No. 2 would show that the litigation has been used as an engine of suppression with a view to avoid payment of balance amount of the sale price. Before we conclude our comments on the auction purchaser-respondent No. 2 it would be interesting to notice the operative part of the impugned order dated 23.7.1999 which reads thus:

...

On consideration of the matter, I find that it is the conceded position that PFC did not have a valid title to the property at the time of execution of the sale agreement in favour of the applicant, the auction purchaser. It is also the admitted case that a major portion of the property sold to M/s Leisure Wear Exports Ltd. is in possession of M/s engineers Continental, allegedly a tenant on a part of the premises. As per the minutes of the meeting of the sale committee held on 29.2.1996, it was given out to the intending purchasers that about 40% of the premises is in occupation of the tenant though it has no legal right therein and the committee members assured the intending purchasers that the PFC shall make all efforts to get the vacant possession by evicting the tenant whose status in the premises was like that of a trespasser as the Company was not competent to lease out the factory without the consent of the PFC. The Official Liquidator also explained the position about the status of the tenant and assured that all efforts shall be made to get vacant possession. It was perhaps in this situation the property was purchased by M/s Leisure Wear Exports. From the assurance given by the sale committee, it can safely be inferred that its intention was clear that possession will be delivered to the auction purchaser within a short interval. A period of more than three years has already elapsed and the litigation is still pending in the High Court which is again likely to take a long time. May be, further litigation is also by the alleged tenant. There is thus, in my opinion, no immediate chance of the auction purchaser getting possession of the property. The intention of the auction purchaser was not and could not be to buy litigation but was clear and it will set up a unit after getting possession of the property. It also cannot be said with certainty that the appeal filed by the alleged tenant and pending in the High Court shall be decided in favour of the PFC. It can well be that the appellant may get status of a tenant and if that be so, the auction purchaser will not get possession of the property which was assured to it. The question about the delivery of possession may well take a decade or two.

Even despite the directions and monitoring the suit by this Court, it took about three years to have it expedited in the trial Court and, therefore, I am clearly of the view that the purchaser will not be able to get possession of the major portion of the plot for a pretty long time. In the situation, I find that the things cannot be allowed to remain unsettled for such a long time and the interest of justice of the parties would be better served if the order dated 21.3.1996 is recalled and CA 341 of 1996 is allowed.

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I have also considered the equities while ordering cancellation of the sale so as to cause least inconvenience to the parties to this litigation. M/s Leisure Wear Exports had deposited a sum of Rs. 33.03 lacs being 25% of the sale consideration, more than three years back. This amount deserves to be refunded to the auction purchaser on its surrendering possession of the portion which was delivered to it under the court sale. As regards interest, it could not be much disputed that the PFC is charging interest on the loans granted by it at the rate of more than 18% per annum with quarterly rests. The PFC enjoyed the amount of Rs. 33.03 lacs for a period of about three years as also the interest thereon, but keeping in view the other circumstances hereinafter noticed, I allow the auction purchaser the interest on the amount deposited by it, at the rate of 12% per annum with quarterly rests and in the same manner as is being charged by the PFC on its term loan. The reduction in rate of interest from 18% to 12% will compensate the PFC about the use and occupation of the premises by the auction purchaser. The auction purchaser also concededly raised some construction over the portion, the possession of which was delivered to it, and installed some machinery. The sale having been set aside, it will be open to the auction purchaser to remove all movable assets installed by it at its own costs but the construction, if any, raised by the auction purchaser shall vest in the PFC free of costs and it will also offset towards the amount of compensation for use and occupation. Since the interest has been allowed only at the rate of 12% on the earnest money and the construction raised also goes to the PFC, I set aside the sale and direct the PFC to refund the amount of Rs. 33.03 lacs deposited by M/s Leisure Wear Exports, being 25% of the earnest money, alongwith interest at the rate of 12% with quarterly rests, from the date of deposit till the date of payment, within a period of two months from the date of this order. It is made clear that the PFC shall be the owner of the construction raised by the auction purchaser and it shall not be liable to pay the price of the construction raised. The PFC and the Official Liquidator attached to this Court after taking physical possession of the property from the auction purchaser will be at liberty to deal with the same in accordance with law and with the permission of this Court. CA 341 of 1996 is allowed in the above terms.

In view of the above CA 344 of 1999 is rendered infructuous and is disposed of as such.

A perusal of the aforesaid order would show that the learned Company Judge has totally mis-directed himself while passing the impugned order. The reasoning adopted by him for allowing the amendment application may be summed up as under:

i) The Corporation did not have a valid title at the time of execution of sale agreement in favour of auction purchaser;

ii) part of the premises was in possession of M/s Engineers Continental allegedly a prior tenant- unauthorised occupant of the company in liquidation;

iii) Litigation was pending for the last three years between the unauthorised occupant, Corporation tenant and the auction purchaser and therefore, the purchaser might not be able to get possession of the property in question;

Having bestowed our thoughtful consideration to the submissions made by the learned Counsel for the parties we are of the view that this appeal deserves to be accepted as the learned Company Judge has not taken into account relevant and material facts while passing the impugned order. Our view is based on the following reasons;

The aforesaid line of thinking adopted by the learned Company Judge regarding title of the Corporation in respect of the land in dispute has failed to take into account the following factors;

a) As per CP 79 of 1995 and advertisement 16.2.1996 the sale was on ''as is where is'' basis with a note that the property was on lease and subject to confirmation.

b) that in the negotiations held on 29.2.1996 with the bidders including the auction purchaser it was brought to the notice of auction purchaser that the out standings instalments against the reserved plot shall be paid by the corporation out of sale proceeds and not by the purchaser.

c) Un-amended CA 341 of 1996 was filed with the prayer that resumed plot be transferred in the name of the auction purchaser in which notice was issued to the Estate Officer, Ludhiana since plot was earlier resumed on 15.10.1976 and vide order dated 29.1.1999 with the intervention of the Court, the property was agreed to be re-sold to the corporation @ Rs. 600/- per sq. yd. approximately for a sum of Rs. 40 lakhs which was paid out of the sale proceeds of only Rs. 33.00 lakhs and the balance was paid by the Corporation out of its funds in anticipation of getting the balance 75% from the auction purchaser.

d) Vide sale agreement dated 7.5.1996 the auction purchaser had agreed that the transfer will only be after the receipt of full consideration under clause5(i) (reproduced herein above) and the Corporation was to pay the outstanding dues as per the meeting of the Sale Committee and as noticed in the order of confirmation dated 21.3.1996.

That the reasoning in support of the conclusion that the Engineer Continental - respondent No. 3 was in possession and the auction purchaser-respondent No. 2 was not aware of the delay in getting full possession and he might not be able to get possession of remaining property in question due to pending litigation for the last three years is also against record and further based on conjectures and surmises. The following facts prove the aforesaid conclusion:

(a) In Company Petition No. 79 of 1995 filed by the Official Liquidator, the presence of the tenant M/s Engineers Continental Pvt. Ltd.- respondent No. 3 was specially mentioned and he was arrayed as respondentno.3.

(b) In the status report dated 2.2.1996 filed by the corporation giving value of the property it was specifically mentioned that M/s Engineers Continental Pvt. - respondent No. 3 was a tenant of the company in liquidation, inducted without written consent of the Corporation with whom the property was mortgaged and prayer was made that the tenant should deliver possession of the property to the auction purchaser.

(c) In the advertisement dated 16.2.1996 it was mentioned ''as is where is; basis and that the sale was to be confirmed by this Court and the property may be inspected with prior permission from the concerned district office.

(d)during bidding on 29.2.1996, the tenant- respondent No. 3 was also one of the bidders and it was specifically brought to the notice that his possession was of a trespasser and efforts were being made to get vacant possession as per law.

(e) C.P. No. 68 of 1996 was filed by the Corporation on 6.3.1996 for confirming the sale and also for a direction against the tenant- respondent No. 3 to hand over vacant possession to the auction purchaser, which was disposed of on 21.3.1996 alongwith CP No. 790 of 1995 with a direction to the trial Court to decide the suit jointly filed by the Corporation and the auction purchaser and the tenant was to stop using portion of property No./C-70. The suit was decreed on 5.5.1998

(f) C.A. No. 341 of 1996 was filed on 3.12.1996 by the auction purchaser inter-alia with a prayer that trial Court be directed to decide the aforesaid suit within 6 months in which it was mentioned that only 2200 square yards was in possession of the tenant out of 6556 square yards.

From the facts of this case it is evident that the auction purchaser was throughout aware of the presence of the unauthorised occupant in part of the plot in question, the status of the plot i.e. it stood resumed by PUDA and that the auction purchaser at every opportunity had used the process of Court for getting the possession of the plot. The learned Company Judge while confirming the sale vide order dated 21.3.1996 had directed the learned trial Court to dispose of the suit filed by the Corporation and auction purchaser for possession and also ejectment of unauthorised occupant from portion of the plot in question, as expeditiously as possible preferably within six months. The confirmation of sale was further subject to the payment of amount by the auction purchaser as agreed in negotiations and in terms of the advertisement. Accordingly, the auction purchaser had entered into agreement dated 7.5.1996 with the Corporation with open eyes, which provided that in case of default in payment of balance 75% of the auction money as per the stipulated time schedule, the property was liable to be resumed and possession taken by the Corporation. The auction purchaser was put in possession on the vacant part of the plot in question on 14.5.1996 subject to the terms and conditions of the agreement. It is the auction purchaser who on some pretext or the other has not fulfilled his part of the contractual obligation by not paying any due instalment. He first made a request on 24.7.1996 to charge interest as per ratio of delivery of portion of the covered area, which was 60% of the plot in question. Then he moved CA 341 of 1996 with the initial prayer that the ownership of resumed plot be transferred, direction be issued for deciding the suit for possession and ejectment and for re-scheduling the payment of instalments (as possession of the entire area had not been given). The learned Company Judge acceded to the request of the auction purchaser and directed the early disposal of the aforesaid civil suit, which was finally decreed on 5.5.1998 in favour of the auction purchaser- co plaintiff. Even the appeal against the aforesaid decree was ordered to be disposed of expeditiously. The Corporation was also directed by the learned Company Judge to sympathetically consider the request for rescheduling the payment of due instalments. However, the auction purchaser changed his prayer to refund of the 25% earnest money alongwith interest inspite of the fact that he had been put in possession of the vacant portion of the plot and had not paid the outstanding dues. When this prayer was declined by the Corporation, CA 343 of 1996 was moved for amending the prayer in CA No. 341 of 1996 to that of refund of 25% earnest money ( rupees 33 lakhs) alongwith interest. It is very strange that this shift in prayer for refund was made after the auction purchaser had used the process of the Court for getting the ownership of the resumed plot by PUDA transferred back on payment of current market price by the Corporation. The Corporation paid a sum of Rs. 40 lakhs i.e. Rs. 7 lakhs from its own funds (balance Rs. 33 lakhs from the sale proceeds) to fulfill its part of the contractual obligation. It is thereafter the auction purchaser had very cleverly pursued his claim for refund by filing an application, supported by an affidavit of Mr. Sanjeev Goyal, on 12.7.1999 for amendment of the prayer .It is thus amply clear that the reasoning adopted by the learned Company Judge that there was delay in getting the full possession and the auction purchaser may not get full possession on account of litigation could not constitute a valid basis for passing the impugned order 30.7.1999.

In our considered opinion, it appears that the learned Company Judge has allowed himself to be persuaded by completely overlooking the aforesaid discussed facts on record and the conduct of the auction purchaser amply demonstrated in various applications preferred by him despite taking possession of the vacant part of the property on 14.5.1996 after making on payment of only 25% earnest money. It is obvious that the auction purchaser has enjoyed the property for all these years without paying the outstanding 75% balance amount as per the schedule of payment. It cannot be disputed that as per the terms of the agreement dated 7.5.1996, an amount of rupees two crores was due to be paid by the auction purchaser on 20.7.1999, which had swelled to a sum of Rs. 23,67,94,369/-as on 1.11.2008.

In view of the above, we are left with no option but to accept the appeal. Accordingly, the impugned order dated 23.7.1999 is hereby set aside. The application bearing C.M. No. 5 of 2009 filed in the present appeal by the auction purchaser- respondent No. 2, praying for withdrawal of CA Nos. 343 and 344 of 1999 thus seeking to revive his initial prayer (in CA No. 341 of 1996) for re- schedulement of payment of due instalments is dismissed with costs of Rs. 50,000/- to be paid to the Corporation within a period of two months from the date of receipt of certified copy of this order. The amount calculated as on 1.11.2008 was Rs. 23,67,94,369.00. The auction purchaser is directed to pay aforesaid amount to the Corporation within four weeks from today. The Corporation is directed to intimate the auction purchaser within four weeks from today the total balance amount due to be paid by him in terms of the agreement dated 7.5.1996. The auction purchaser is further directed to pay the entire balance amount found due as intimated by the Corporation within next three months failing which the appellant- Corporation shall be entitled to resume the plot and take possession in accordance with law. The Corporation is also given liberty to take steps to recover compensation, if found due, on account of use and occupation of portion of the plot by the auction purchaser. The auction purchaser- respondent No. 2 shall be entitled to the remaining portion of the plot in question in pursuance to the decree dated 5.5.1998 subject to the payment of all outstanding dues towards the Corporation.

A copy of the order be given to the learned Counsel for the parties after due attestation under the signatures of the Bench Secretary.