Company Application No. 232 of 2021 · The High Court · 2025

Order

Heard Mr. Alladi Ravinder, leamed Senior Counsel representing Sri Bandar Srikanth, leamed counsel for the petitioner, Sri J.Srinadh Reddy, leamed counsel appearing for Official Liquidator

and Sri D.Narender Naik, teamed counsel appearing for 2nd respondent

2. This application is filed under Section 457 (l) (c) of the Companies Act, 1956, to direct the Official Liquidator ro rake necessary steps to transfer the lands admeasuring Ac.0.34 cents in Sy.No.91P, Ac.0.94 Cents in Sy.No.92P, Ac.7.00 Cenrs in Sy.No.100P, Ac.0.50 Cents, Ac.2.70 Cents in Sy.No.9SP (total exrent of Ac.l1.58 Cents) situated at Kosini Village Sivar of Kaghaznagar Mandal, Komaram Bheem Asifabad District lor Rs.2.5 Lakhs to Rs.3 Lakhs per acre in favour of the Applicant/Petitioner herein.

3. By order dated 26.04.2001 in C.P.No.57 of 1999, I't respondent Company went into liquidation. This Court appointed Ofhcial Liquidator to take over rhe assets and liabilities of the i i I 2 KLJ coMPA_212,?02I IN cP 57 t99 Company under liquktation' Pursuant to the said order' Official Liquidator has taken possession of the assets and liabilities of the 1$ respondent Company in the year 2001'

4. By order dated 04'12'2008' in C'P'No'57 of 1999' this Court appointed IWs Servel Associates as the valuator to value the vacanti unencroached property of the 1" respondent company in liquidation and directed the official Liquidator to setl the properties of company except the quarters of the said company' The Official Liquidator has filed an application vide C'A'No'343 of 2009 seeking Permission of company's land admeasuring this Court to Put unencroached Ac.456.37 cents and building situated (except company's quarters) for public auction duly dividing into eight lots as per valuation report' This Court accorded permission to the Officiat Liquidator' Thereafter' Offrcial Liquidator put the properties for sale by issuing auction notice.Hehasreceived33tendersinrespectofthesaid8lots.

5. In respect of tot Nos'2' 3' 5' 6'7 and 8' this Court confirmed the sale, considering the fact that price quoted by the bidder is higher than the minimurn ol said price ln respect of lot No'6' Mr' Ravi Ram Mohana Rao filed an application vide C'A'No'662 of 2009 claiming an extent of Ac.4.26cents in Sy.No-77 contending that the said extent J KIJ coMPA 212-2021 IN cP 57 1999 does not belong to the company in liquidation and it is his exclusive property. He is claiming right over the said property basing on the assignment deed and he has pattadar passbooks and titte deeds etc. The said application is pending.

6. 2nd respondent is the highest bidder in respect of lot No.6 i.e. land admeasuring Ac.186.39 cents.

7. Official Liquidator, IDBI, Creditor had convened meetlng with the Managing Partner of 2nd respondent i.e. Sri B.Venkata Narayana Rao, the highest bidder in respect of lot No.6 and he has accepted to purchase the land admeasuring Ac. i 82. I I cents under lot No.6 excluding to an extent of Ac.4.28 cents.

8. Vide his letter dated 20.01.2011, the Officiat Liquidator requested 2nd respondent to pay balance sale consideration of Rs.2,58,20,000/- (excluding EMD of Rs.24 Lakhs) in respecr of land adrneasuring Ac.l82.1l Cents. Accordingly 2"d respondent has paid the said amount by way of Demand Drafts towards balance sale consideration in respect ofthe aforesaid land. 2"d respondent requested the Official Liquidator to deliver physicat possession of the said tand admeasuring Ac.l82.ll and to execute registered sale deeds. Vide letter dated 09.08.2017 , Official Liquidator inlormed 2nd respondenr ! 5 i I j : 4 KLJ coMPA 212-2021 TN cP 57 1999 with regard to shortfall of land to an extent of Lc'25-25 cents in lot No.6 and enclosed a cheque bearing No'025604 dated 08'08'2017 for Rs.39,13,750/- . Ort 23'03'2015' this Court also directed the Official Liquidator to retum the said amount to the 2nd respondent' 2"d respondent did not accept the said money'

9. Now the petitioner is claiming that he is in possession of the company's land admeasuring Ac' 1 I '58 Cents' He has also placed reliance on the survey report dated 27 '05 '2014 of Assislant DirecSor' Survey and Land Records' Hyderabad' He has also placed reliance on the letter dated 23'Ol'20I8 of Offrcial Liquidator' the proceedings dated 31.01'2022 of tlq District Collector' Certificate issued by the Mandal Revenue Officer' Thus' according to the petitioner' he is in possession of the land admeasuring Ac' t l '48 cents in company liquidation and he is ready to pay the market value' Therefore' he seeks a direction to Official Liquidator to execute a registered sale deed in favour of the petitioner in respect of the said land' 10' Official Liquidator filed report in the afbresaid lines' He further stated that the petitioner is ctaiming that he is in possession of the property belongs to the company in liquidation itlegally and therefore, he cannot claim a direction to the Oflicial Liquidator to -3 /i 5 KL,J coMPA,232 2021 IN cP 57 1999 execute a registered sale deed in his favour' He cannot contend that he wilt pay the market value. 1 I . 2nd respondent filed counter contending that it has purchased the aforesaid land in open auction and paid the entire sale consideration and it is the duty of the Official Liquidator to hand over the physicat possession of the said land and also execute a registered sale deed in iavour of 2nd respondent. It is the duty of the Official Liquidator to request the revenue officials including the District Collector, Tahsildar , RDO, to evict the illegal encroachers of the land belongs to the company in liquidation, then hand over physical possession of the same to the 2nd respondent' The petitioner who is in illegal possession/encroachment of the land belongs to company in Iiquidation cannot file the present application.

12. In the light of the aforesaid facts, there is no dispute with regard to order passed by this Court dated26'04'2001 in C P No 57 ol lg99 and by the said order, Iws Sirsilk Limited went into liquidation. This court also appointed official Liquidator and directed him to take over the assets and liabilities of the said company' There is also no dispute that pursuant to the order granted by this Court, the Official Liquidator has conducted auction on 09.06.2009. 2nd respondent 6 KL.] coMI,A 212 2021 IN cP 57 r 999 emerged as successful bidder in respect of Ac.186.39 cents in respect of lot No.6 falling in various survey aurnbers of Kosini village, Sirpur Khagamagar Mandal, Adilabad. Vide order dated 08.03.2011 in C.A.No.l50 of 201 l, this Court confirmed the said sale in favour of the 2nd respondent. Vide common order dated 23.02.2017, this Court also directed the Offrcial Liquidator to execute sale deeds in favour of 2nd respondent with regard to land which is free lrom all encumbrances and liabilities. ln compliance with the said order, Official Liquidator has executed registered sale deeds as per the sketches provided by the 2nd respondent and that the 2nd respondent agreed for execution ofthe said sale deeds in his favour.

13. Thus, according to the 2nd respondent, the Officiat Liquidator has executed registered sale deeds in respect of Ac.l82.l t cents. 2nd respondent is still entitled for balance land.

14. As discussed supra, vide order dated 23.03.20t5, this Court directed the Official Liquidator to retum an amount of Rs.39, I3,750/- to the 2nd respondent towards costs ol shorttall of the land admeasuring Ac.25.25 Cents. According to the Official Liquidator, he has returned the said money by way of Demand Drafts. 2nd respondent i i I I ! I : i t '! 7 7 KL,J coMPA_212 2o2t tN cP 51 t999 has rejected to receive the same. This is altogether a separate dispute between the respondent Nos.l and2. 15, In the present application, the petitioner is claiming that he is in possession o[Ac. I 1.58 cents. He is seeking a direction to offrciar Liquidator to execute registered sale deeds in his favour and he is ready to pay the market value.

16. It is also apt to note that during the course of hearing Sri Alladi Ravinder, leamed Senior counsel appearing for the petitioner placing reliance on Secrion 457 (l) (c) of the Companies Act, 1956, would submit rhat the Official Liquidator has to negotiate with the petitioner and the petitioner is ready to negotiate with the Official Liquidator and pay the consideration/market value in respect of the aloresaid nropen) in his possession.

17. In rhe tight olthe said submission, Section 457 (l) ( c) ol the Act, is rele vant and the same is extracted below:_

457. Powers of Liquidator- (l) Thc L.iquidator in a winding up by the [Tribunal] shall have po\\cr, with the sanction of the Tribunal (c) to scll thc inrmovable and movable property and actionable clainrs of the company by public auction or i.irit" *i,f, po\\er to transfi:r the whole thereof to any pe6on or body corporate. or lo sell the same in parcels; ""nou"i 8 KL,J coMPA 212-2021 IN cP 57 1999

18. Ptacing reliance on the proceedings of the District Collector' dated31.0l.2022.Letterdated23.0l.2018oftheofficialLiquidator, and also letter of Tahsildar, petitioner is claiming that he is in possession of land admeasuring Ac'11'58 guntas belongs to the company in tiquidation. In all the aforesaid letters' there is specific mention that the petitioner herein is in possession of the said property' 19. Except stating that he is in possession of the aforesaid property, the petitioner is not in position to establish his claim over the said property. He is not filed any documents in support of his contention/ownership of the said property' Thus, the petitioner herein is an iltegal encroacher of the said property belongs to the company in liquidation. He is seeking a direction to l't respondent to negotiate with him in terms Section 457 (l) (C) of the Act'

20. In Haryana and Steel Centre vs' Lakshmi Parcelains Limited I erstwhile High Court of Andhra Pradesh in paragraph No' I 7 and l8 held as follows:- 17- ............It is significant to note that the words employed in Section 457(l)(c; oithe ect are ""' by public auction or privatc contract...". Conferring power to do something is something dilferent from exercisiig'the said power' [t is no doubt true that salc by private contract ilso is permiued, but ho.wever' in vicu' of th" p.-in"ipl" that in a Cornpany Court sale endeavour should be ' (2003 ) 5 ALT 66s i ! t I I I I I I I I ; I I l : l i t I i i I I I i I i l I I I I I I ! j I i I t I I I I 9 KLJ coMPA 232_2021 IN cP-57 _t999 made to get the best possible price, sale by public auction should be the normal rule and sale by private contract should be an exception- only under inevitable circumsl,ances.........

18. The formation of cartel and peventing outsiders from participating in the process of public auctions, definitely'is an unhealthy trend. Tactics to monopolize the participation in the auctions so as to avoid outsiders from participating should be definitely deprecated since it will have an impact on securing the reasonable market value by sale of the assets of the Company in liquidation. The trend of monopolizing purchases at Company Court sales definitely may have to be deprecated to maintain healthy competition at auction sales or even at sales by private contract, as the case may be. Suffice for us to state that the power of sale by private contracr is to be exercised sparingly. The decision to be taken in this regard shoutd be based on sound discretion and rcasons and dehnitely it cannot be a fanciful one. In the decision rettrred in Divya Mlg. Co. (p.) Ltd.,,s case (supra), the Apex Court while dealing with setting aside of Company sale on offers received subsequent to confirmation of sale, when higher offer was received before possession was handed over or sale deed was executed. held that an application to set aside the sale can be permitted. The Apcx Court, in lact had stated: "The Courr is thc custodian of the interest of the Company and its creditors. Hencc. ir is the duty of the Court to see that the price fetched at thc auction is an adequate price even though there is no suggestion ol irregularity or tiaud_ Confirmation of the sale by a Court at erosslr inadequate price, whether or not it is a consequcncc of'anv irregularity or fraud in the conduct of sale could be scr asidc on the ground that it was not just and proper exercisc ol'iudicial discrction "

21. In Gordhan Das Chunnil-al vs. Kanthimathinathapillai2, the Madras High Court held as lbllows:- Section I 4.1 ol thc ('ornpanies Act makes the Official Liquidator,s power to scll. w,hethor by auction or private contract, conditional on the sancrion o[ thc Court; and this is obviously a sanction to be exercised u'ith.iudicial discretion having regard to the interest of the Companv and its crcditors. Wherever property is authorised to be sold by privarc conrracr it is rhe duty of the Court to satisfu itself '? eIR t92 t Mad ztr, 10 K!,J coMPA-?12 2021 IN cP 57 1999 $ "ffered. that the price fixed is the best that could in human probability be Unless satisfied of this the onlv safe and ;;;J; b. proper course is an auction sale 22. In the light of the same, it is relevant to note that in the report of the Official Liquidator filed in the present application' in paragraph No.l3, he has refened the survey report dat€d 27'05'2014 andmentionedthedetaitsofthelandbelongstothecompanyin tiquidation, the same is relevant and it is extracted below:- sl. No Sy No Roa d Land of the company a Quarters Ac.Cts Total Ext. of by the compan v (in I-iqn) Ac.CIs Balanc e land of the ny (in Liqn) Ac.Cts Remaini ng Lnad th€ company (in Liqn) occupied Applican t l,and regiterc favour Bataji Compa ny by OL Total Land occup ie Applica Land oi Balaj i Compa occu- pied by APPI- Ac.Cts. Ac.Cts Ac.Cts (l) ). 4 5 (r 9l- P 92- P 97- P 98- J I 15

6.97

1.28

6.66

17.70 100 -P Total Exteod Cts 4 0.0 t.1 )

2.2 9 04 05 5 0-25 6 t.14

0.80

4.92

3.9E t.zt

6.6 t.28

6.66

15.41

8.41 o.25

29.41

21.13 l0

0. i0

0.50 9 0.34

0.94

0.50

0.50

7.00 r 1.48 i.20

0.34 o.94

7.O0

8.28

23. Ref-erring to the same' leamed Senior Counsel appearing lor petitioner would contend that the petitioner is ready to negotiate with KL) cot tP^':232 202t IN cP 57 t999 the Official Liquidator in respect of the land admeasuring Ac.g.2g cents and a direction may be given to the Official Liquidator to negotiate with the petitioner. On instructions, he has submiffed that the petitioner will pay the consideration as per the said private negotiation.

24. As discussed supra, the petitioner is an illegal encroacher. He is claiming that he is in possession of the said property. As discussed supra, he is not filed any documents to satis$z that he is the owner of the said property. Thus, he is an illegal encroacher. He cannot seek a direction to l.,respondent to negotiate with him by way of private negotiation. He cannot also contend that he is ready to pay the market value to the Of flcial Liquidator in respect of the land admeasuring AC.g.2g gunras and seek a direction to Offrcial Liquidator to execute registered sale deed in his f-avour. The said contentions and claim madc by rhe pctitioner in the present application is contrary to the principle laid down in the aforesaid judgments and Section 457 (l) (c) of the Act. Olliciat Liquidator has to consider the claim of 2nd respondent and thereafter, he has to conduct auction in respect of the aforesaid proper"ty. petitioner has to participate in the open auction. FIe cannot encroach the land belongs to the company in l2 KI,J @MPA-232 2021 IN cP 5? 1999 liquidation and seek a direction to the Official Liquidator to conduct private negotiations with him' That is not the Purport and object of Section a5 7( 1) (c) of the Act' This Court is custodian of the interest of the company and its creditors' Thus, petitioner is not entitled for any relief much less the relief sought in the present applioation' Therefore' this apptication is liabte to be dismissed'

25. In the light of the aforesaid discussion' this application is dismissed. However, the petitioner is directed to hand over the aforesaid tand which is in his possession to the offrcial Liquidator within four (4) from the date of receipt of copy of this order' to enable the Official Liquidator to conduct open auction' Liberty is granted to the petitioner herein to participate in the open auction' Liberty is also granted to the 2nd respondent to claim land over the said property- Sd/- K, SRINIVASA RAO JOINT REGISTRAR To, //TRUE COPY'/ CTION OFFICER I I l i

1. The Official Liqurdator, Sirsilk Limited , Office at 1st floor' Corporate thawan' Bandlaguda Nagole, Hyderabad -500068' Z. ine n."gistra oi Co.ianies, Ministry of Corporate Affairs' Government of - f no', ifr ftoo, Corporate Bhawan, Nagole, Bandlaguda' Thattiannaram Village Hayathnagar Mandal, Ranga Reddy District' Telangana State Pin Code 500 680 3, The Regional Director, South Eastern Region, Ministry of Corporate " n*airs, l7o floor Corporate Bhawan, Nagole, Bandlaguda' Thatti'rnnaram Vittrg" Hayathnagar Mandal, Ranga Ceddy District Telangana State' Pin Code 500 680' 4 i;;ab o S Section, High court at Hyderabad, for the state of Telangana. to sn ..r. Srinadrr'Reddy, Counset for official Liquidator, High court ;. il;C for at HYderabad IOPUCI

6. Two CD CoPies DL/PSL HIGH COURT DATED:09/06/2025 ORDER COMPANY AP PLICATION No.232 ot 2021 IN COMPANY PETITION NO: 57 OF 1999 lHE S14 ( o ? 25JUL2U25 z .P * DISMISSING THE COMPANY APPLICATION .ea(nb .Y{ €