Research › Search › Judgment

Telangana High Court · body

2025 DIGILAW 833 (TS)

K. BALAKRISHNA v. Official Liquidator

2025-06-09

K.LAKSHMAN

body2025
ORDER : K. LAKSHMAN, J. Heard Mr. Alladi Ravinder, learned Senior Counsel representing Sri Bandar Srikanth, learned counsel for the petitioner, Sri J.Srinadh Reddy, learned counsel appearing for Official Liquidator and Sri D.Narender Naik, learned counsel appearing for 2 nd respondent. 2. This application is filed under Section 457 (1) (c) of the Companies Act, 1956 , to direct the Official Liquidator to take 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 Cents in Sy.No.100P, Ac.0.50 Cents, Ac.2.70 Cents in Sy.No.98P (total extent of Ac.11.58 Cents) situated at Kosini Village Sivar of Kaghaznagar Mandal, Komaram Bheem Asifabad District for 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, 1 st respondent Company went into liquidation. This Court appointed Official Liquidator to take over the assets and liabilities of the Company under liquidation. Pursuant to the said order, Official Liquidator has taken possession of the assets and liabilities of the 1 st respondent Company in the year 2001. 4. By order dated 04.12.2008, in C.P.No.57 of 1999, this Court appointed M/s Servel Associates as the valuator to value the vacant/ unencroached property of the 1 st respondent company in liquidation and directed the Official Liquidator to sell 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 this Court to put unencroached company’s land admeasuring 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 Official Liquidator. Thereafter, Official Liquidator put the properties for sale by issuing auction notice. He has received 33 tenders in respect of the said 8 lots. 5. In respect of lot 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 minimum of said price. In 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.4.26 cents in Sy.No.77 contending that the said extent does not belong to the company in liquidation and it is his exclusive property. In 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.4.26 cents in Sy.No.77 contending that the said extent 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 title deeds etc. The said application is pending. 6. 2 nd 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 meeting with the Managing Partner of 2 nd 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.182.11 cents under lot No.6 excluding to an extent of Ac.4.28 cents. 8. Vide his letter dated 20.01.2011, the Official Liquidator requested 2 nd respondent to pay balance sale consideration of Rs.2,58,20,000/- (excluding EMD of Rs.24 Lakhs) in respect of land admeasuring Ac.182.11 Cents. Accordingly 2 nd respondent has paid the said amount by way of Demand Drafts towards balance sale consideration in respect of the aforesaid land. 2 nd respondent requested the Official Liquidator to deliver physical possession of the said land admeasuring Ac.182.11 and to execute registered sale deeds. Vide letter dated 09.08.2017, Official Liquidator informed 2 nd respondent with regard to shortfall of land to an extent of Ac.25-25 cents in lot No.6 and enclosed a cheque bearing No.025604 dated 08.08.2017 for Rs.39,13,750/-. On 23.03.2015, this Court also directed the Official Liquidator to return the said amount to the 2 nd respondent. 2 nd 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.11.58 Cents. He has also placed reliance on the survey report dated 27.05.2014 of Assistant Director, Survey and Land Records, Hyderabad. He has also placed reliance on the letter dated 23.01.2018 of Official Liquidator, the proceedings dated 31.01.2022 of the District Collector, Certificate issued by the Mandal Revenue Officer. Thus, according to the petitioner, he is in possession of the land admeasuring Ac.11.48 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. Thus, according to the petitioner, he is in possession of the land admeasuring Ac.11.48 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 aforesaid lines. He further stated that the petitioner is claiming that he is in possession of the property belongs to the company in liquidation illegally and therefore, he cannot claim a direction to the Official Liquidator to execute a registered sale deed in his favour. He cannot contend that he will pay the market value. 11. 2 nd 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 physical possession of the said land and also execute a registered sale deed in favour of 2 nd 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 2 nd respondent. The petitioner who is in illegal possession/encroachment of the land belongs to company in liquidation 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 dated 26.04.2001 in C.P.No.57 of 1999 and by the said order, M/s 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. 2 nd respondent emerged as successful bidder in respect of Ac.186.39 cents in respect of lot No.6 falling in various survey numbers of Kosini village, Sirpur Khagaznagar Mandal, Adilabad. Vide order dated 08.03.2011 in C.A.No.150 of 2011, this Court confirmed the said sale in favour of the 2 nd respondent. Vide common order dated 23.02.2017, this Court also directed the Official Liquidator to execute sale deeds in favour of 2 nd respondent with regard to land which is free from all encumbrances and liabilities. Vide order dated 08.03.2011 in C.A.No.150 of 2011, this Court confirmed the said sale in favour of the 2 nd respondent. Vide common order dated 23.02.2017, this Court also directed the Official Liquidator to execute sale deeds in favour of 2 nd respondent with regard to land which is free from all encumbrances and liabilities. In compliance with the said order, Official Liquidator has executed registered sale deeds as per the sketches provided by the 2 nd respondent and that the 2 nd respondent agreed for execution of the said sale deeds in his favour. 13. Thus, according to the 2 nd respondent, the Official Liquidator has executed registered sale deeds in respect of Ac.182.11 cents. 2 nd respondent is still entitled for balance land. 14. As discussed supra, vide order dated 23.03.2015, this Court directed the Official Liquidator to return an amount of Rs.39,13,750/- to the 2 nd respondent towards costs of shortfall of the land admeasuring Ac.25.25 Cents. According to the Official Liquidator, he has returned the said money by way of Demand Drafts. 2 nd respondent has rejected to receive the same. This is altogether a separate dispute between the respondent Nos.1 and 2. 15. In the present application, the petitioner is claiming that he is in possession of Ac.11.58 cents. He is seeking a direction to Official 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, learned Senior counsel appearing for the petitioner placing reliance on Section 457 (1) (c) of the Companies Act, 1956 , would submit that 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 aforesaid property in his possession. 17. In the light of the said submission, Section 457 (1) ( c) of the Act,is relevant and the same is extracted below:- 457. Powers of Liquidator- (1) The Liquidator in a winding up by the [Tribunal] shall have power, with the sanction of the Tribunal (c) to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels; 18. Placing reliance on the proceedings of the District Collector, dated 31.01.2022. Letter dated 23.01.2018 of the Official Liquidator, 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 liquidation. 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 illegal encroacher of the said property belongs to the company in liquidation. He is seeking a direction to 1 st respondent to negotiate with him in terms Section 457 (1) (c) of the Act. 20. In Haryana and Steel Centre vs. Lakshmi Parcelains Limited , [(2003 ) 5 ALT 665] erstwhile High Court of Andhra Pradesh in paragraph No.17 and 18 held as follows:- 17. …………It is significant to note that the words employed in Section 457(1)(c) of the Act are "... by public auction or private contract...". Conferring power to do something is something different from exercising the said power. It is no doubt true that sale by private contract also is permitted, but however, in view of the principle that in a Company Court sale endeavour should be 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 circumstances……… 18. The formation of cartel and preventing 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 contract is to be exercised sparingly. 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 contract is to be exercised sparingly. The decision to be taken in this regard should be based on sound discretion and reasons and definitely it cannot be a fanciful one. In the decision referred in Divya Mfg. 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 Apex Court, in fact had stated: "The Court is the custodian of the interest of the Company and its creditors. Hence, it is the duty of the Court to see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularity or fraud. Confirmation of the sale by a Court at grossly inadequate price, whether or not it is a consequence of any irregularity or fraud in the conduct of sale could be set aside on the ground that it was not just and proper exercise of judicial discretion." 21. In Gordhan Das Chunni Lal vs. Kanthimathinathapillai , [AIR 1921 Mad 286] the Madras High Court held as follows:- Section 144 of the Companies Act makes the Official Liquidator's power to sell, whether by auction or private contract, conditional on the sanction of the Court; and this is obviously a sanction to be exercised with judicial discretion having regard to the interest of the Company and its creditors. Wherever property is authorised to be sold by private contract it is the duty of the Court to satisfy itself that the price fixed is the best that could in human probability be expected to be offered. Unless satisfied of this the only safe and proper course is an auction sale 22. Wherever property is authorised to be sold by private contract it is the duty of the Court to satisfy itself that the price fixed is the best that could in human probability be expected to be offered. Unless satisfied of this the only safe and 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.13, he has referred the survey report dated 27.05.2014 and mentioned the details of the land belongs to the company in liquidation, the same is relevant and it is extracted below:- Sl.No SyNo TotalExt. of landowned by thecompany (inLiqn) Ac.Cts RoadArea Ac.Cts Land of thecompanyunder Quarters Ac.Cts. Balance landof thecompany (in Liqn) Ac.Cts. Landsoldandregitered infavourofBalajiCompany by OL Ac.Cts. Remaining Landof the company(in Liqn) occupied byApplicant Ac.Cts. TotalLand occupied byApplicant Land ofBalajiCompanyoccupied byApplicant Ac.Cts. (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 1 91-P 1.15 0.01 -- 1.14 0.80 0.34 0.34 -- 2 92-P 6.92 1.75 0.25 4.92 3.98 0.94 0.94 -- 3 97-P 1.28 -- -- 1.28 1.28 -- 0.50 0.50 4 98-P 6.66 -- --- 6.66 6.66 -- 0.50 0.50 5 100-P 17.70 2.29 -- 15.41 8.41 7.00 7.00 -- TotalExtend 33.71 04.05 0.25 29.41 21.13 8.28 11.48 3.20 23. Referring to the same, learned Senior Counsel appearing for petitioner would contend that the petitioner is ready to negotiate with the Official Liquidator in respect of the land admeasuring Ac.8.28 cents and a direction may be given to the Official Liquidator to negotiate with the petitioner. On instructions, he has submitted 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 satisfy that he is the owner of the said property. Thus, he is an illegal encroacher. He cannot seek a direction to 1 st 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 Official Liquidator in respect of the land admeasuring AC.8.28 guntas and seek a direction to Official Liquidator to execute registered sale deed in his favour. He cannot seek a direction to 1 st 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 Official Liquidator in respect of the land admeasuring AC.8.28 guntas and seek a direction to Official Liquidator to execute registered sale deed in his favour. The said contentions and claim made by the petitioner in the present application is contrary to the principle laid down in the aforesaid judgments and Section 457 (1) (c) of the Act. Official Liquidator has to consider the claim of 2 nd respondent and thereafter, he has to conduct auction in respect of the aforesaid property. Petitioner has to participate in the open auction. He cannot encroach the land belongs to the company in liquidation and seek a direction to the Official Liquidator to conduct private negotiations with him. That is not the purport and object of Section 457(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 application. Therefore, this application is liable to be dismissed. 25. In the light of the aforesaid discussion, this application isdismissed. However, the petitioner is directed to hand over the aforesaid land which is in his possession to the Official Liquidatorwithin four (4) from the date of receipt of copy of this order, to enablethe Official Liquidator to conduct open auction. Liberty is granted tothe petitioner herein to participate in the open auction. Liberty is alsogranted to the 2nd respondent to claim land over the said property.