Government of Tamil Nadu, Department of Industries and Commerce v. The Official Liquidator, As the Official Liquidator of M/s. Pulsar Electronics Limited, (In Liquidation) & Ors

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 19.08.2009CORAMTHE HONOURABLE MR.JUSTICE M.CHOCKALINGAMANDTHE HONOURABLE MR.JUSTICE R.SUBBIAHO.S.A.Nos.175 and 176 of 2009and M.P.No.1 and 1 of 2009Government of Tamil Nadu,Department of lIndustries and Commerce,rep.by its Commissioner and Director,Chennai- 600 005... Appellant in both the O.S.As./3rd PartyVs.1. The Official Liquidator, As the Official Liquidator of M/s. Pulsar Electronics Limited, (In Liquidation)2. K.Dhanalakshmi, No.47, Spartan Nagar, Mogappair, Chennai – 600 037... Respondent in both the OSAs./AppellantR2 impleaded as party respondentvide order of Court dt.11.8.09 andmade in M.P.2/09.These appeals have been preferred under Clause 15 of the LettersPatent and Order XXXVI Rule 11 of O.S. Rules against the orderdated (i)4.3.2009 and 24.10.2008 made in C.A.No.662 of 2007 inC.P.No.5 of 1994 by the learned Single Judge of this Court.For Appellant : Mr.P.S.Raman,Advocate Generalassistant byMrs.V.Bhavani Subburayan,Spl.G.P(C.S.)For Respondent : Mr.K.Latha Parimala Vandana Asst. Official Liquidator for R1 Mr.V.Prakash, Senior Counsel for Mr.J.Nithyanandan for R2. https://hcservices.ecourts.gov.in/hcservices/ COMMON JUDGMENT(The judgment of the Court was delivered by M.CHOCKALINGAM, J.)These two appeals have arisen at the instance of the Statechallenging the two orders dated 24.10.2008 and 4.3.2009 made by thelearned Single Judges of this Court in C.A.No.662 of 2007 inC.P.No.5 of 1994 whereby confirmation of sale was made by the formerorder, while a direction was issued to the Official Liquidator toexecute the sale deed jointly along with the Department of Industriesand Commerce of the Government of Tamilnadu in favour of thepurchaser or her nominees by the latter order.2. The Court heard the learned Advocate General for the State,Mr.V.Prakash, learned Senior counsel for the 2nd respondent and theOfficial Liquidator. The Court perused all the materials availableincluding the orders under challenge.3. The application was made on the following facts andcircumstances.M/s. Pulsar Electronics Limited was allotted a plot in theElectrical Industrial Estate at Kakkalur vide allotment orderNo.107857/EL1/86-1 dated 16.6.1987. The extent of land was 5 acresat Rs.30,000/- per acre subject to the condition that the cost of theland is liable to upward revision and the land allotted should beused for the purpose which was specifically allotted. On a furtherrequest made by the appellant dated 2.6.1988 seeking for allotment ofa further extent f 0.8 acres which was continguous to the aforesaid 5acres of land and the request was favourably considered and theallotment of the additional extent was made as per letter dated1.7.1988. thus the extent of 5 acres and 80 cents of land wasallotted to the applicant. Subsequently, an assignment deed wasexecuted in favour of M/s. Pulsar Electronics Limited videassignment deed dated 24.9.1987 containing so many clauses interalia, if any there is violation of any one of the conditionstipulated therein, the assignment is liable to be cancelled and thesaid plot should vest absolutely with the Government free fromencumbrance after forfeiture of the earnest money deposit. Byissuing reasonable notice notwithstanding anything found in theClauses of assignment, the Director of Industries and Commerce mightcancel the assignment and repossess the same. The department alsoapproved the building plan for construction of office premises in theallotted plot and the same was approved by the SuperintendingEngineer, Industrial Estate, Guindy. The final cost of the developedplots have not been arrived at and collected from the assignee atthe time of allotment. While the matter stood thus, the AssigneeCompany went on liquidation. C.P.No.5 of 1994 was filed . TheOfficial Liquidator, pursuant to the orders of the Court, tookpossession of all the assets of the Company under liquidation. Oncoming to know about the steps taken by the Official Liquidator, theDepartment filed an application before the Court to grant permissionto repossess the land assigned to the Company under liquidation. Theapplication was returned. In the meanwhile, the OfficialLiquidator/first respondent effected publication by way of sale https://hcservices.ecourts.gov.in/hcservices/ notice, pursuant to the order passed by the Court on 24.3.2007 forthe sale of the immovable property namely 5.8 acres of land with apartly finished building measuring an extent of 18,862 sq.ft. fixingthe reserved price for the land and building at Rs.1.5 crores.After following the procedural formalities by calling for tenders inrespect of the assets belonging to the Company in liquidation, thehighest offer came from one Dhanalakshmi, Madras for a sum of Rs.3.40crores since the same was found to be the highest offer, the samewas accepted and the same made in her favour was confirmed inApplication No.662 of 2007 by order dated 24.10.2008 andconsequential orders were also made therein. Following the same,further orders came to be passed on 4.3.2009 whereby a direction wasissued to the Official Liquidator to hand over possession and thedocuments pertaining to the property and execute necessaryconveyance/sale deed jointly with the Department of Industrial andCommerce, Government of Tamil Nadu in favour of the purchaser or hernominees.Challenging the above orders, these two appeals have arisen.4. Advancing the arguments on behalf of the appellant /State, thelearned Advocate General inter alia would submit, what was made wasonly an assignment and the very title of the land was retained by theState and it continues to be so. The title of the land was nevertransferred to M/s. Pulsar Electronics Ltd. The appellant is theowner of the land measuring 5.8 acres. When the conveyance of salehas not taken place conveying the title of the land to M/s. PulsarElectronics Ltd., the respondent cannot bring the land for auction.While making the order dated 24.10.2008, the learned single Judge hasfailed to see that the appellant was the owner of the property andthey were not made as a party in the application seeking confirmationof sale. Hence, the said application should have been dismissed fornon-joinder of necessary party. The confirmation of sale to the thirdparty by the Official Liquidator was contrary to the agreement dated24.9.1987. The Company has not complied with the terms andconditions of the assignment deed and hence, the final cost couldnot be fixed by the Government, as a result of which, the sale deedin favour of the second respondent could not be executed. When theappellant has not executed any sale in favour of the firstrespondent, the first respondent had no right to convey the land tothe third party even though the company is under liquidation as theliquidator merely steps into the shoes of the owner of the companyand he could not have a better title to the properties in possessionof the company than the owner himself. Equally, the order passed bythe the learned Single Judge dated 4.3.2009 directing the appellantto execute necessary conveyance/sale deed jointly in favour of thepurchaser or her nominees is erroneous. There was a direction issuedto the Official Liquidator to execute necessary conveyance/sale deedjointly along with the Department of Industries and Commerce, whichwould indicate that the title of the property remains with theGovernment otherwise there was no need for issuing a direction to theOfficial Liquidator to convey the property jointly with theGovernment to the third party. By order dated 24.10.2008 and4.3.2009, the learned Single Judge failed to see that no opportunitywas given to the appellant to putforth their defence while confirmingthe sale though the land belongs to the Government till date and no https://hcservices.ecourts.gov.in/hcservices/ conveyance had taken place in favour of the 2nd respondent. TheOfficial Liquidator who has taken out an application for confirmationof sale ought to have made the appellant as necessary party who isthe owner of the land. Merely because the Official Liquidator hastaken possession of the land, it did not confer any title or right toseek confirmation of sale of the land which belongs to the appellant.It was an express contention of the liquidator that the proceeds ofthe sale of the land would be appropriated to pay off the debits ofthe secured creditors and if at all any amount was leftproportionate payment would be made to the Government towards thecost of the land. Under such circumstances, both the orders areerroneous, infirm and illegal and hence, they are liable to be setaside.5. The Court heard Mr.V.Prakash, the learned Senior Counsel forthe 2nd respondent on the above contentions.6. The learned counsel would submit, in the instant case, theallotment was made in the year 1987. Though it was urged by the Statethat only tentative cost was fixed, the final cost was neither fixednor recovered. The Government should have taken steps forcancellation of the allotment as per the terms. But no steps weretaken all along for two decades for the cancellation of the saidallotment. At this distance of time, the Company had been put underofficial liquidator by orders of the Court and the OfficialLiquidator has also taken steps to realise the due to pay to thecreditors. The paper publication was also made calling for tenderswhich has been procedurally taken place. Pointing to the order madein Company Application No.1060 of 2007 dated 20.4.2007, the learnedcounsel would urge that it was an application for stay made by theState where the very same contentions were raised. The learned SingleJudge, after hearing the contentions, negatived the same by holdingthat if the respondent/ assignee failed to make payment or default inany of the conditions, the State can take steps for cancelling theallotment but no steps were taken. At the distance of time, theCompany was under liquidation and the Official Liquidator has takenpossession by orders of Court and has also taken steps to realise thedues to pay to the creditors The application filed for stay by theGovernment cannot be granted at that juncture. At best, theGovernment could make their claim settled with the OfficialLiquidator in accordance with law and that order has become finalsince it was not appealed against. Thus, the Government would now bebarred under the principles of acquiescence from contending so. Insupport of his contention, the learned counsel for the respondentrelied on the decision reported in (2008) 10 Supreme Curt Cases 723(Khoday Distilleries ltd. v. Scotch Whisky Association).7. The Official Liquidator also putforth his submissions tosustain the orders made by the learned Single Judges. The Court heardthe learned counsel on either side and paid its anxious considerationon the submissions made.8. On scrutiny of the available materials and on consideration ofthe submissions made, the Court is afraid whether it could sustain https://hcservices.ecourts.gov.in/hcservices/ the orders of the learned Single Judges since both the orders arefound to be infirm and defective for more reasons than one. It is notin controversy that the assignment was made in the year 1987 infavour of M/s. Pulsar Electronics Limited in respect of 5 acres ofland and thereafter, further request was made for 0.8 acres of landwhich was also made. The clauses of assignment would clearly indicatethat only the tentative cost was fixed and the final cost was notfixed. It is not the case of the respondent that final cost wasfixed and recovered. There is a specific clause stating that ifthere is violation of any one of the conditions stipulated therein,there is all possibility of repossession of the land by the State.9. It is true that the company went on liquidation and windingup proceedings were initiated and at that juncture, the OfficialLiquidator took possession of the land in question and also themachineries therein. It is pertinent to point out that mere taking ofpossession by the Official Liquidator by itself would not confer anyright on him to sell the property. The official Liquidator waspermitted to make publication calling for tender and thereafter,tenders were received and he moved the Court for auctioning theproperty and by the order dated 24.10.2008, the highest bid wasaccepted and the sale was ordered. By the second order dated4.3.2009, the learned Single Judge has directing the OfficialLiquidator to execute the sale deed jointly with the Director ofIndustries and Commerce. At this juncture, it is pertinent to pointout that the final cost has not been paid and the ownership of theland all along vested with the Government and the title continues tobe in the hands of the Government. The only contention putforth bythe respondent side was that no steps were taken for two decadesand neither final cost was fixed nor it was recovered. Learnedcounsel pointing to the order made by the learned Single Judge inApplication No.1060 of 2007 would submit that after long lapse oftime, no steps were taken to recover the final cost and no stepswere taken for cancellation of assignment. Emphasising the order, thelearned counsel for the respondent would submit that it was a casewhere doctrine of acquiescence has got to be applied. The Courtcannot agree with this contention made by the learned counsel for therespondent for the simple reason that in the application for stay,the claim of title was not taken up for consideration by the Court.It is a matter of surprise to note that while divesting the titlefrom the State, the Liquidator cannot have a better interest in theproperty than the one in the hands of the winding up company. Whenthe first application was made, an order of confirmation of salewas made and in the second application, there was a directionissued to the Official Liquidator to execute the sale deed in favourof the third party, but it remains to be stated that in both theapplications, the Government was not a party and it was not heard. 10. It is further to be pointed out that at that time when finalorder was passed on 4.3.2009, a direction was issued to the OfficialLiquidator to execute the sale deed in favour of the auctionpurchaser along with the Director of Industries and Commerce jointly.Neither the Official Liquidator nor the Court felt that withoutgiving opportunity of being heard the State, no such orders could be https://hcservices.ecourts.gov.in/hcservices/ passed. When there is a complaint by the State that possession hasgot to be taken by the State for the violation of conditions madeby the assignee and the State has got title and it continues to be inthe hands of the State, no order of confirmation of sale or directionto execute a sale deed could be passed, that too, in the absence ofnecessary party. Thus, the Court is of the opinion that both theorders are defective and infirm and they are liable to be set aside.Accordingly, the orders dated 24.10.2008 and 4.3.2009 made inC.A.No.662 of 2007 in C.P.No.5 of 1994 are set aside. 11. The learned counsel for the respondent brought to the noticeof the Court that pursuant to the orders, sales have taken place infavour of three nominees. The Court is of the opinion that suchsituation cannot disturb the order passed by this Court setting asidethe orders of the learned Single Judges. 12. In the result, both the appeals are allowed. No costs.Consequently, connected M.P.No.1 and 1 of 2009 are closed. Sd/Asst.Registrar/true copy/Sub Asst.Registrarvsi1. THE SUB ASSISTANT REGISTRARORIGINAL SIDEHIGH COURT,MADRAS2. THE OFFICIAL LIQUIDATORAS THE OFFICIAL LIQUIDATOR OF M/S PULSAR ELECTRONICS LTD IN LIQUIDATION.+ 1 CC to the Spl. Government Pleader SR NO 396983 ccs To Mr.J.Nithyanandan, Advocate, SR.39553OSA.Nos.175 & 176 of 2009NG(CO)SRA(20/08/2009)