JUDGMENT Honble Sunil Ambwani, J.—Heard Shri Navin Sinha assisted by Shri Somesh Khare on behalf of M/s Cristina Vinimay Pvt. Ltd. (the auction purchaser from Recovery Officer, DRT, Kolkata) in the matter of Company Petition No. 77 of 1999, M/s Khetan Overseas and Finance Ltd. (In Liq.) (KOFL), Somdatt Plaza, 11th Floor, the Mall, Kanpur, for recalling the order dated 27.9.2007 passed by the Court and for directions to the Debts Recovery Tribunal, Kolkata to issue sale certificate of the assets of M/s K.H.S.L. Pvt. Ltd. at Nawabganj, Bareilly in favour of the applicant. Shri K.L. Grover appears for Dena Bank. Shri Rajnath N. Shukla and Shri Arnab Banerji appear for the Official Liquidator, U.P. Allahabad. 2. By an order dated 27.9.2007, the Court had held that the sale made by the Recovery Officer, DRT, Calcutta of the assets of the company (In Liq.) at Bareilly in favour of M/s Cristina Vinimay Pvt. Ltd. is illegal and inoperative and directed to proceed for sale afresh and after obtaining the orders of the High Court at Allahabad in the pending winding up petition against Khaitan Hostombe Spinels Ltd. (KHSL). 3. Brief facts giving rise to this application as stated in the order dated 27.9.2007 are reproduced as follows : “It is alleged by the Official Liquidator that Khaitan Hostombe Spinels Ltd. (KHSL) was directed by this Court to be amalgamated with Khetan Overseas and Finance Ltd. (KOFL). The order of amalgamation was made on 25.7.1997 approving the ‘Scheme of Amalgamation’, in pursuance to which KHSL was dissolved. A Company Petition No. 77 of 1999 was filed by Dhandhania Brothers Pvt. Ltd. and Company Petition No. 78 of 1999 by M/s R.D. Fan Ltd. against KOFL. The KOFL was wound up by this Court on 15.10.2003. The ex-directors have not filed statement of affairs and are not traceable. The summons sent to them have returned back unserved. The Court was not informed that KHSL was indebted to Dena Bank for about 40 crores and that the entire fraudulent scheme adopted was to first amalgamate KHSL into KOFL and thereafter get KOFL wound up to defeat the creditors. Since the statement of affairs of KOFL was not filed, it is not possible to ascertain other dues. In the meantime, Dena Bank filed an application in Debts Recovery Tribunal (DRT), Calcutta for realisation of its debts on the properties of KHSL. Since the statement of affairs of KOFL was not filed, it is not possible to ascertain other dues. In the meantime, Dena Bank filed an application in Debts Recovery Tribunal (DRT), Calcutta for realisation of its debts on the properties of KHSL. No one placed these facts before the DRT. The claim was decreed ex parte. No one informed the DRT that KHSL had amalgamated with KOFL on 25.7.1997 and further no one informed the DRT that KOFL was wound up by this Court on 15.10.2003. In pursuance of the recovery certificate the property of KHSL at Bareilly were sold on 30.7.2004 and property at Tanakpur were sold on 23.10.2005. The Bareilly property was purchased by M/s Christina Vinimay Pvt. Ltd.. With regard to property at Bareilly sale certificate has not been issued and by an order dated 25.6.2007 of this Court the Recovery Officer, DRT was directed not to confirm the sale. M/s Christina Vinimay Pvt. Ltd. took the matter to the Calcutta High Court. When the Calcutta High Court was informed by the Official Liquidator, U.P. through Shri Arnab Banerji, Advocate that the Official Liquidator was not involved in the sale, the writ petition was dismissed. Dena Bank has filed objections stating as follows : “That before giving para wise reply to the application, hereinafter referred to as ‘Application’ at the outset, it is humbly submitted that Dena Bank, Respondent No. 3, had given financial assistance to KHSL Industries Limited having its registered office at Kolkata from the Industrial Finance Branch, Mumbai. M/s KHSL Industries Limited could not deposit the due installments in time and defaulted payment inspite of repeated requests; and the Bank, having left with no other option, filed a Recovery Suit in Debt Recovery Tribunal, Kolkata as O.A. No. 237 of 1995 which was decreed in favour of the Bank, and recovery proceedings were started on 17.1.1997 before Recovery Officer, Debt Recovery Tribunal, Kolkata by Execution Case No. 12 of 1997. That the Recovery Officer took possession of the manufacturing Units of the Company at Tanakpur (Champawat) and Nawab Ganj, Bareilly on 26.9.1997 and Receiver was appointed. That the Recovery Officer also posted Security Guard in the said Units for protection of the Property cost of which was borne by Dena Bank, Respondent No. 3. That the Recovery Officer took possession of the manufacturing Units of the Company at Tanakpur (Champawat) and Nawab Ganj, Bareilly on 26.9.1997 and Receiver was appointed. That the Recovery Officer also posted Security Guard in the said Units for protection of the Property cost of which was borne by Dena Bank, Respondent No. 3. That the properties in question for sale were situated within the jurisdiction of the Allahabad High Court, hence permission was sought from this Hon’ble Court for disposing of the property in pursuant to the decree passed in favour of the Bank by Debt Recovery Tribunal, Kolkata; and by order dated 10.2.1999 the Hon’ble Company Judge permitted the same. A photo copy of the order dated 10.2.1999 is enclosed as Annexure-CA1 to this affidavit. That thereafter the Recovery Officer, Debt Recovery Tribunal-II Kolkata issued notice for auction of the properties of M/s KHSL Industries Ltd. which was published in Economic Times, Kolkata, New Delhi and Mumbai editions; and in Amar Ujala, Lucknow (in Hindi) on 26.6.2004. Thereafter the properties in question at Tanakpur (Champawat) were auctioned by public auction on 30.7.2004 in favour of Atique Mallik for Rs. 10.70 lakhs and the property at Nawab Ganj, Bareilly in part (Plant and Machinery only) was sold to M/s Umang Enterprises for Rs. 94.75 lakhs. That subsequently M/s Cristina Vinimay Private Limited, preferred an appeal before the Presiding Officer against the aforesaid sale of plant and machinery of M/s Umang Enterprises and offered Rupees Two Crores Sixty Lakhs for the entire Unit (movable and immovable) and subsequently the aforesaid sale was confirmed by order dated 24.1.2006 and possession was handed over to M/s Cristina Vinimay Private Limited with a direction to appropriate the money by Bank. That the present application has been filed by the Official Liquidator for setting aside the sale confirmed by order dated 24.1.2006, as the movable and immovable properties of M/s KHSL Industries Limited situated at Nawab Ganj, Bareilly have been sold for Rs. 2.60 crores in favour of M/s Cristina Vinimay Pvt. Ltd. That the sale of the properties at Tanakpur (Champawat) which were sold in favour of Atique Mallik had already been confirmed and the sale certificate had also been issued in his favour. 2.60 crores in favour of M/s Cristina Vinimay Pvt. Ltd. That the sale of the properties at Tanakpur (Champawat) which were sold in favour of Atique Mallik had already been confirmed and the sale certificate had also been issued in his favour. That the present application has been filed by the Official Liquidator on the basis of some old amalgamation held on 27.5.1997 by which M/s KHSL Industries Limited have been amalgamated with M/s Khetan Overseas and Finance Limited along with two other companies, information of which has neither been received by the answering Bank from M/s Cristina Vinimay Private Limited nor from M/s KHSL Industries Limited; and the amalgamation has been held without knowledge of the Bank; and without taking into consideration the decree which was passed by Debt Recovery Tribunal Calcutta and recovery proceedings were started by Execution Proceedings dated 17.1.1997. Subsequently it was auctioned by due publication in accordance with law on 30.7.2004. That it is noteworthy to mention here that the alleged amalgamation proceedings were held without knowledge of the answering respondent Bank and the properties were auctioned after taking due permission from this Hon’ble Court by order dated 10.2.1999. That it is also pertinent to mention here that the amalgamation proceedings which were held on 25.7.1997 were set aside by order dated 4.12.2006 passed by Hon’ble Company Judge Allahabad High Court as such the present application filed by Official Liquidator for setting aside the sale of properties is not maintainable against the answering respondent/Bank and is liable to be dismissed.” With regard to Tanakpur property the Official Liquidator submits as follows : “That in the meantime Official Liquidator has received a copy of the order dated 6.6.2005 passed by the Hon’ble High Court of Uttaranchal at Nainital on the application filed by the Auction Purchaser Shri Atiq Malik that the operation of impugned order dated 5.5.2005 (D.M. Champawat, Uttaranchal) shall remain stayed till the next date of listing. However, it is made clear that the property shall be retained by the petitioner in the form as such it is. A copy of the order dated 6.6.2005 passed by the High Court at Nainital is annexed and marked as Annexure-11.” 4. However, it is made clear that the property shall be retained by the petitioner in the form as such it is. A copy of the order dated 6.6.2005 passed by the High Court at Nainital is annexed and marked as Annexure-11.” 4. An application was filed by the Official Liquidator, U.P. and Uttaranchal attached to the Court in Company Petition No. 77 of 1979, in the matter of KOFL (In Liq.) for setting aside the sale of the assets of KHSL in favour of the applicant M/s Cristina Vinimay Pvt. Ltd. The Court found that on 10.2.1999 KHSL was amalgamated with KOFL by order dated 25.7.1997. Shri Pankaj Bhatia appearing for KHSL had made a statement that he had no objection if the receiver appointed by the Debts Recovery Tribunal is permitted to dispose of the assets of the company. The order dated 17.8.1998 was modified and that the receiver appointed by the Debts Recovery Tribunal was allowed to dispose of the assets of the company. The Court had observed on 10.2.1999 : “I have heard Shri K.L. Grover, learned counsel for the applicant Bank and Shri Pankaj Bhatia, learned counsel appearing for the petitioner in this case. Shri Bhatia has submitted before the Court that the main prayer of the petitioner in the application (A-14) was for the appointment of a provisional Liquidator. However, he has no objection if the Receiver appointed by the Debt Recovery Tribunal is permitted to proceed for disposing of the assets of the company which has already been valued and is under attachment but the restraint order against the respondent company from disposing of its assets may continue. In view of the statement made by the learned counsel for the petitioner the Court is of the view that the order dated 17.8.1998 would be modified to the said extent. Consequently, this Court hereby modifies its order dated 17.8.1998 to the effect that the Receiver appointed by the Debt Recovery Tribunal could proceed for disposing of the assets of the company and the restraint order dated 17.8.1998 passed by this Court is hereby modified accordingly. Copy of this order shall be issued to the learned counsel for the parties within three days on payment of usual charges.” 5. The Official Liquidator was not associated with the sale. Copy of this order shall be issued to the learned counsel for the parties within three days on payment of usual charges.” 5. The Official Liquidator was not associated with the sale. In Rajasthan State Financial Corporation v. Official Liquidator, (2005) 8 SCC 190 the Supreme Court held that once the Official Liquidator is appointed, he has statutory right and obligation to represent the workmen’s dues before the Recovery Officer, DRT and that sale should not be held without impleading him as a party. The Court then found on the request of Dena Bank that their efforts to recover their dues through DRT are bonafide, that a fraud was played by the ex-director of KHSL. The KHSL was heavily indebted. They first got the company (KHSL) amalgamated with KOFL, a company having very small asset base, and then get KOFL wound up. The Court discovered the fraud and recalled the order of amalgamation dated 3.4.2007, on the ground that the ex-directors of both the companies played fraud with the Court. The order dated 3.4.2007 recalling the order of amalgamation has not been challenged. In the changed circumstances, the Recovery Officer, DRT proceeding with recovery of the dues of Dena Bank against KHSL, was required to associate the Official Liquidator, U.P. conducting the sale. The Court also observed that by that date the sale was not confirmed. 6. It is stated that a Special Appeal No. (1023) of 2007 filed by the Dena Bank was disposed of on 20.11.2007 with liberty to the petitioner to file recall application. The amount lying with the Dena Bank was permitted to be in deposit with the bank. 7. This Court has by its order dated 3.12.2007 in Company Petition No. 17 of 2001 allowed Company Petition No. 17 of 2001 connected with Company Petition Nos. 25 of 1996, 34 of 1996, 35 of 1996, 36 of 1996, 37 of 1996, 43 of 1996, 45 of 1997, 63 of 1997, 69 of 1997, 46 of 1998, 48 of 1999 and 77 of 1999 and has wound up KHSL with the observations : “Through these company petitions prayer for winding up of M/s Khaitan Hostombe Spinels Ltd. (hereinafter referred to as “KHSL”) has been sought. In the year 1997 through order of this Court dated 27.5.1997 KHSL and two other companies i.e. Khaitan Dairy & Allied Industries Limited (hereinafter referred to as “KDAIL”) and Khaitan Supermag Limited (hereinafter referred to as KSL) were amalgamated with M/s Khaitan Overseas and Finance Limited (hereinafter referred to as KOFL). Thereafter winding up order of the amalgamated companies (i.e. of KOFL) was passed on 15.10.2003. However, by order dated 14.12.2006 order dated 27.5.1997 sanctioning Amalgamation has been recalled. Accordingly KHSL has again become an independent company. In spite of sufficient service no one has appeared on behalf of KHSL even though the case has been taken up in the revised list. In the Company Petition No. 17 of 2001 it is mentioned that KHSL owed an amount of about Rs. One crore to the petitioner-company. At present the said amount may have swelled to about Rs.1.5 crore. As in spite of sufficient service no one has appeared on behalf of KHSL hence allegations made in the company petition are taken to be correct and it is held that KHSL is unable to pay the debts of the petitioner, hence, liable to be wound up under Section 433 (e) of the Companies Act. As a result, this company petition (No. 17 of 2001) is allowed. Let the respondent company M/s Khaitan Hostombe Spinels Ltd. having its registered office at Somdutt Plaza (11th Floor), the Mall Kanpur be wound up and the Official Liquidator, High Court, Allahabad is appointed the Liquidator to carry out the said proceedings. Learned counsel for the petitioner shall take steps under Rule 113 of the Rules of the Court for getting the winding up order published in accordance with the said Rules. The Registrar is directed to take requisite steps under Rule 109 and Rule 111 of the Companies Court Rules. I order accordingly. As winding up order passed in one company petition on behalf of one creditor accrues to the benefit of all other creditors, hence there is no need to pass any separate order in the other company petitions.” 8. Shri Navin Sinha, learned counsel appearing for the applicant submits that the DRT decreed the claim petition filed by Dena Bank on 17.12.1996. Shri Navin Sinha, learned counsel appearing for the applicant submits that the DRT decreed the claim petition filed by Dena Bank on 17.12.1996. The possession of the assets at Bareilly and Tanakpur were taken over by the Recovery Officer, DRT on 26.9.1997 and that the Court granted permission to Dena Bank on 10.2.1999 to proceed with the recovery on an application filed by Shri K.L. Grover appearing for Dena Bank. The application was not opposed by Shri Pankaj Bhatia appearing for a creditor of the company. The property initially proposed to be sold for Rs. 2,60,00,000/- (Rupees two crores sixty lacs) was later on sold in favour of the applicant M/s Cristina Vinimay Pvt. Ltd. for Rs. 6,86,00,000/- (Rupees six crores eighty six lacs). The Recovery Officer, DRT, Kolkata has confirmed the sale on 24.1.2006 and that possession was delivered to the applicant on 24.1.2006. It is alleged that on the date, when the sale was made in execution proceedings of the recovery certificate issued in favour of Dena Bank, there was no embargo on the sale. The Dena Bank had taken permission of the Court on 10.2.1999. The order of amalgamation was recalled on 3.4.2007, on the ground that the ex-director of both the companies namely KHSL and KOFL have played fraud with the Court. The KOFL was wound up, thereafter, on 15.10.2003 and KHSL has been wound up on 3.12.2007. It is contended that fraud vitiates all the actions and that on the making of the order recalling amalgamation the possession of the assets of KHSL and KOFL were restored as independent companies. These companies were wound up in the year 2003 and 2007. The Official Liquidator had knowledge of the proceedings and that the sale held bonafide in favour of the applicant could not be set aside by this Court. Shri K.L. Grover appearing for Dena Bank had supported the application of M/s Cristina Vinimay Pvt. Ltd. It is stated that entire amount was appropriated towards loan and that the loan of the Dena Bank was satisfied. It is stated that on the dates when the Recovery Officer had taken possession and sale was made, there was no embargo or ban upon the sale and that since the KHSL was not wound up by them, there was no question of associating the Official Liquidator in the sale proceedings. 9. It is stated that on the dates when the Recovery Officer had taken possession and sale was made, there was no embargo or ban upon the sale and that since the KHSL was not wound up by them, there was no question of associating the Official Liquidator in the sale proceedings. 9. Shri Rajnath N. Shukla and Shri Arnab Banerjee appearing for the Official Liquidator would submit that the amalgamation order dated 27.5.1997 was not stayed. By order dated 27.5.1997 further action in pursuance of amalgamation was stayed by this Court in Special Appeal. The amalgamation order, therefore, was effective and that KHSL was not in existence on the date, when the notices were published and auction sale was confirmed by DRT on 26.6.2004 and 24.1.2006 respectively. They submit that the entire proceedings were collusive. The directors of KHSL was fully aware of the amalgamation and the stay order, as they had applied for amalgamation and were defending recovery suits at DRT, Calcutta. The Directors of KOFL and KHSL are absconding. They have not filed the statement of affairs. When they were facing recovery proceedings from Dena Bank in DRT, Calcutta in which recovery certificate was issued on 17.12.1996, they were also busy in getting Khaitan Dairy & Allied Industries Ltd. (Transferor Company No. 1); KHSL (Transferor Company No. 2); Khaitan Supermag Limited (Transferor Company No. 3) amalgamated with KOFL (Transferee Company). In the order dated 14.12.2006 by which the order of amalgamation dated 25.7.1997 was recalled and that Company Application No. 19 of 1996 and Company Petition No. 44 of 1996 were dismissed, it was observed on the basis of annual financial statement of the companies sought to be amalgamated with KOFL, that KHSL was the biggest of all the three companies. Whereas KOFL had subscribed and paid up share capital of Rs. 2 crores and unsecured loans of Rs. 64.68 lacs, Khaitan Supermag Ltd. had authorised share capital of only Rs. 2.5 lacs of which the subscribed share capital was Rs. 7000/- only and secured loans from the companies of Rs. 55.82 lacs, and from the Director of Rs. 3850/- only. As compared to these companies KHSL had subscribed and paid up capital of Rs. 57.05 crores and debts of Rs. 31.45 crores. The company was in debts of Rs. 106.30 crores. In the meetings the creditors representing 57.09 crores were present. 55.82 lacs, and from the Director of Rs. 3850/- only. As compared to these companies KHSL had subscribed and paid up capital of Rs. 57.05 crores and debts of Rs. 31.45 crores. The company was in debts of Rs. 106.30 crores. In the meetings the creditors representing 57.09 crores were present. The KHSL did not disclose that it had received demand notice from the creditor companies, which were pursuing the remedies in the Court in winding up petitions. The audited balance sheet of KHSL as on 31.12.1994 disclosed secured loan of Rs. 50 crores to be paid to debenture holders against present and future fixed assets on pari pasu basis; Rs. 11.30 lacs from other companies; Rs. 3.76 crores of other companies; Rs. 6.75 crores of Chemical Beneficiation Projects; Rs. 2 crores of Air Force Group Insurance Society; Rs. 75 lacs of Air Force Novel Housing Board; Rs. 5 crores of Dena Bank and Rs.4.5 crores of Bank of Madura. 10. It was only after 10 years that this Court could discover the fraud played upon by the director of KHSL. They were not in position to meet their liabilities, and thus they first got amalgamation of the KHSL and two small companies with KOFL in 1997, and having succeeded in obtaining the amalgamation order got KOFL wound up on 15.10.2003. 11. The fraud could only be discovered in the year 2006 and that by the order dated 14.12.2006 the order of amalgamation was recalled. The creditors except Dena Bank were all deceived by the directors of KHSL, who are not traceable, and now both KHSL and KOFL have been wound up by the Court. Even if nothing adverse is found against Dena Bank and M/s Cristina Vinimay Pvt. Ltd., the Company Court is under duty to protect the interest of creditors and workmen. The Court may not allow one of the creditors, who was also party to the proceedings in the order of amalgamation and had notice of the order of amalgamation, and the stay order obtained by Bank of Madura, in special appeal to allow the recovery certificate to be executed by defeating the claims of the others. The Court may not allow one of the creditors, who was also party to the proceedings in the order of amalgamation and had notice of the order of amalgamation, and the stay order obtained by Bank of Madura, in special appeal to allow the recovery certificate to be executed by defeating the claims of the others. In the winding up proceedings secured creditors and workmen stand on the same footing and that creditors’ claim their debts in order of priority, whereas secured creditors in the order of their securities on the assets claim priority over each other. The unsecured creditors may get their claims only if something is left after the claims of secured creditors, workmen and government and other statutory dues are settled and dividend is declared under Section 529, 530 and 530A of the Companies Act, 1956. 12. Shri K.L. Grover appearing for Dena Bank asserts that under Art.134 of the Limitation Act, the limitation to set aside the sale is only three years, and has relied upon JT 2005 (12) SC 156 in support of his submission. The Court find that it will be inequitable, unjust and illegal to allow the applicant to deny sale certificate of the assets put to sale by DRT. 13. The Court is not aware as to whether there were any other assets held by the KHSL, as no statement of affair has been filed. The Court is also not aware about the steps taken by other creditors for recovery. Almost all the creditors had filed winding up petitions, which were pending since 1996. It would thus be unfair to other creditors to allow the ex-directors of KHSL to take benefit of sale and to get away from the liability of payment to the bank in preference to other creditors. The Court would also like to clear the doubts raised by the Official Liquidator as to whether ex-directors of KHSL have any interest in M/s Cristina Vinimay Pvt. Ltd. 14. The applicant-company is as such called upon to make a fair disclosure of the names and addresses of their directors and their assets and liabilities. They are also called upon to disclose to the Court the names of the original promoters and to annex the copies of the amendments and memorandum of association of the company and all the amendments, which may have been made in it. They are also called upon to disclose to the Court the names of the original promoters and to annex the copies of the amendments and memorandum of association of the company and all the amendments, which may have been made in it. They are also called upon to file annual reports of the applicant-company from the date it was incorporated within a month. ————