Introduction: Property transactions, whether involving sale or purchase, are guided by fundamental principles that prioritize clarity, transparency, and adherence to natural justice principles. One critical aspect of property transactions is the timely payment of the sale consideration. This article delves deeply into the case of Raj Kumar and Co Pvt. Ltd. (in liqn.) versus the official liquidator in the Calcutta High Court, which revolved around a substantial delay in fulfilling the purchase consideration. The analysis underscores the significance of complying with court-issued sale orders and explores the legal consequences of non-compliance.
The Background: The roots of this case trace back to 1968 when a winding-up petition was filed against M/S Raj Kumar Company Private Limited. The subject of contention was a group of premises located at 232, 232/2, 235, 237, 239, 242, 243, and 244 Picnic Garden Road, Kolkata. Following years of legal proceedings, the Court sanctioned the sale of these premises to Ganges Rolling Industries Pvt. Ltd. in 1990, with the transaction valued at Rs. 57,50,000/-. It is crucial to note that the applicant, closely associated with the company undergoing liquidation, partially fulfilled the purchase consideration but failed to make the remaining payment of Rs. 17,25,000/- within the prescribed 18-month period.
Consequences of Non-Payment: The failure to meet this payment obligation had far-reaching legal consequences. In property sales, full payment of the purchase consideration is an essential prerequisite for concluding the transaction. Although Section 54 of the Transfer of Property Act does not explicitly stipulate a strict timeframe for payment, in cases involving sales sanctioned by the court, the specified payment period carries utmost significance.
The Role of the Official Liquidator: The court placed special emphasis on the role of the official liquidator in ensuring the integrity and transparency of winding-up proceedings. Despite the court’s recognition of the applicant as the rightful owner of the premises, their failure to meet the payment obligation did not exempt them from complying with the terms stipulated in the sale order. Consequently, the court declared the sale null and void, instructing the official liquidator to assume physical possession of the premises, excluding a portion acquired by the State. Furthermore, the part of the consideration previously paid by the applicant was forfeited.
Maintainability and Recovery: The court’s judgment also addressed the issue of maintainability, highlighting that a permanent stay of winding-up proceedings does not nullify the initial winding-up order. The court granted liberty to the State and other affected parties, including the official liquidator, to take all necessary legal measures to recover the amount appropriated in the acquisition proceedings.
Conclusion: The Raj Kumar and Co Pvt. Ltd. case serves as a compelling reminder of the substantial legal repercussions associated with non-compliance in property transactions, especially those subject to court orders. It reinforces the critical importance of adhering to the terms and timelines specified in sale orders issued by the Court. Failing to do so can lead to the nullification of a sale, with significant implications for all parties involved in the transaction. This case underscores the imperative of vigilance, transparency, and diligence in legal proceedings related to property sales, highlighting the enduring principles of justice and legality in such matters.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. This is an application filed by Ganges Rolling Industries Pvt. Ltd., seeking the following reliefs:
(a) The respondent be directed to forthwith perform its obligations in terms of the said order dated 25th April, 1990 and to remove the unauthorised occupants from Premises Nos. 232, 232/2, 235, 237, 239, 242, 243 and 244 Picnic Garden Road, Kolkata and to ensure a clear passage of 20 feet from the front portion of the main road so to enable the entry of vehicles into premises Nos. 232, 232/2, 235, 237, 239, 242, 243 and 244 Picnic Garden Road, Kolkata;
(b) Leave be granted to the applicant to deposit and pay the balance sum of Rs.17,25,000/- to the respondent;
(c) Leave be granted to the applicant to submit the draft Deed of Conveyance in respect of premises Nos. 232, 232/2, 235, 237, 239, 242, 243 and 244 Picnic Garden Road, Kolkata to the respondent;
(d) The respondent be directed to forthwith execute and register the Deed of Conveyance in respect of premises Nos. 232, 232/2, 235, 237, 239, 242, 243 and 244 Picnic Garden Road, Kolkata in favour of the applicant as per the draft Deed submitted by the respondent simultaneously with receipt of the balance sum of Rs.17,25,000/-;
(e) The Registrar of Assurances, Kolkata be directed to assess the stamp duty and registration fees payable for registration of the Deed of Conveyance in respect of premises Nos. 232, 232/2, 235, 237, 239, 242, 243 and 244 Picnic Garden Road, Kolkata in favour of the applicant on the basis of the consideration amount of Rs.57,50,000/- as the sale was made by the Hon’ble Court after publication of notice of sale by public auction in the newspapers;
(f) Leave be granted to the applicant to deal with and/or dispose of premises Nos. 232, 232/2, 235, 237, 239, 242, 243 and 244 Picnic Garden Road, Kolkata or any part thereof in the manner the applicant deems fit and proper;
(g) Ad interim orders in terms of prayers above;
(h) Such further order or orders be passed and/or direction or directions be given as this Hon’ble Court may deem fit and proper.
2. Briefly, in or about 1968, one Giridhari Das Kothari filed a winding up petition being CP No.269 of 1968 against M/s. Raj Kumar Company Private Limited. By an order dated 21 May 1970, the company, was directed to be wound up and the Official Liquidator directed to take over the assets of the company (in liquidation). Originally, the company (in liquidation) had three immoveable properties. Out of the three immoveable properties, two of the immoveable properties have been sold by the Official Liquidator.
3. At the time of passing of the winding up order, the company (in liquidation) was the owner of an undivided half share of the premises nos. 232, 232/2, 235, 237, 239, 242, 243 and 244 Picnic Garden Road, Kolkata and the remaining undivided half share was owned by Hargobind Prasad Goenka as Karta of his Hindu Undivided Family.
4. Pursuant to the order of winding up, the Official Liquidator took possession of the assets of the company (in liquidation) including the half share in Premises nos.232, 232/2, 235, 237, 239, 242, 243 and 244 Picnic Garden Road, Kolkata.
5. Thereafter, one Ashoke Goenka, son of Hargobind Prasad Goenka filed an affidavit inter-alia contending, that in view of the difficulties in partitioning the premises, the premises be sold by the Official Liquidator as a single unit and the said Ashoke Goenka as Karta of Hindu Undivided Family be paid 50 per cent of the proceeds after deducting 50 per cent of the expenses to be incurred by the Official Liquidator in disposing off the same.
6. By an order dated 25 April, 1990, the sale of Premises nos. 232, 232/2, 235, 237, 239, 242, 243 and 244 Picnic Garden Road, Kolkata (the premises) measuring approximately 8 bighas, 9 cottahs, 12 chittacks and 18 sq. feet including the share of Hargobind Prasad Goenka (HUF) in the premises was confirmed in favour of the applicant.
7. For the sake of convenience, the order dated 25 April, 1990 is set out hereinbelow:
“Sale in favour of Mr. Chatterjee’s client, viz., M/s. Ganges Rolling Industries Private Ltd. of No.15, Brabourne Road, Calcutta, is confirmed at Rs.57,50,000/-. It is recorded that the offer of Rs. 56 lacs given earlier by M/s. Damodar Road-ways has been retracted by the offeror and Mr. Banerjee, though offered Rs. 55 lacs on behalf of his client, has instructrions not to proceed any further in the matter of bidding. In that view of the matter, the sale in favour of the concern named above at the above price is confirmed.
Mr. Chatterjee’s client has handed over to the Official Liquidator in Court today cheques for Rs.2,30,000/- as also banker’s cheques for Rs.3,45,000/- totalling Rs.5,75,000/-. The Official Liquidator is directed to encash the same forthwith. The balance amount of the purchase price, viz., Rs.51,75,000/- shall be paid by the purchaser by quarterly instalments within a period of 18 months from date. The Official Liquidator, however, is directed to pay 50% of the amounts received by his immediately on encashment thereof to Mr. Sen Barat’s client and retain the balance 50% until further orders of this Court.
The Official Liquidator shall make over possession of the premises in question to the purchaser immediately on payment of 50% of the total purchase price by the purchaser, but the Official Liquidator shall keep one guard posted at the premises until the entire purchase price is paid. The salary or monthly emoluments of the guard, however, shall be paid by the purchaser.
There shall be an order of injunction restraining the purchaser from dealing with or disposing of any part of the premises without obtaining prior leave of this Court.
It is recorded that the sale is confirmed in favour of the purchaser or its nominee or nominees and the certificate under the Urban Land Ceiling Act is not a requirement to be complied with by the vendor in the facts and circumstances of the matter under consideration since this is a sale by Court.
The purchaser shall have the liberty to fill up the shallow pond. The Official Liquidator is directed to remove the unauthorised occupants from the premises in question and shall ensure a clear passage of about 20 ft. from the front portion of the main road so as to enable the entry of vehicles into the said premises. The Official Liquidator would be at liberty to obtain necessary assistance from the police authorities and the Officer-in-Charge of the concerned Police Station is directed to render all possible assistance to the Official Liquidator in the matter of removing the unauthorised occupants.
The Official Liquidator is directed to forthwith return the earnest money received from other officers.
All parties including the Official Liquidator, the concerned police authorities and the purchaser to act on a singed copy of this dictated order on usual undertaking.”
8. Pursuant to the aforesaid, the applicant was put in actual physical possession of the entirety of the premises. By an order dated 29 July, 1993, the Court also permitted the applicant to file an application with the Calcutta Municipal Corporation to fill up the shallow pond in terms of the order dated 25 April, 1990. Ultimately, by an order dated 25 April, 1996, the applicant was permitted to fill up the same. Thereafter, by orders dated 27 October, 1995 and 3 November, 1995, a scheme for revival of the company (in liquidation) was also sanctioned and the winding up order dated 21 May, 1970 stood permanently stayed.
9. Subsequently, diverse proceedings were filed by the applicant as owner, in the acquisition proceedings initiated by the State pertaining to a portion of the premises. By orders dated 16 March 2017 and 29 March 2017, passed in LA Case No. 162/203, the applicant was inter-alia granted permission to withdraw the awarded amount of Rs.51,33,625.84/- as compensation for acquisition of Premises No. 232 & 232/2 Picnic Garden Road. Significantly, the order records that the applicant is to be treated as a person having an interest in the land and in the compensation in respect of the acquisition proceedings.
10. It is contended on behalf of the applicant that a sum of Rs.40,25,000/- has been paid to the respondent in terms of order dated 25 April, 1990 and only the balance consideration of Rs.17,25,000/- remains unpaid. It is further contended that the unauthorised occupants who were directed to be removed from the premises have not yet been removed. The passage of 20 feet from the front portion of the main road to enable entry of vehicles into the premises has also not been cleared. It is also contended that diverse orders recognize the applicant to be the lawful owner of the premises and the sale in respect of the entirety of the premises stood confirmed in favour of the applicant in terms of the order dated 25 April, 1990. A Status Report dated 30 November, 2022 filed by the Official Liquidator also records the applicant to be the lawful owner of the premises. On the basis of the aforesaid orders and admissions made therein, the applicant alleges to be the true and lawful owner of the premises and seeks the aforesaid reliefs. It is also alleged that the entire matter was being looked after by one Saroj Kumar Chamaria on their behalf who had expired and the cause papers of this proceeding were untraceable. Hence, the delay in filing of this application.
11. It is also submitted that in terms of Rules 6 and 9 of the Company (Court) Rules, 1959, this Court has inherent powers to pass all the orders as prayed for in this application. The applicant also relies on Order XXI, Rule 92 read with section 65 of the Code of Civil Procedure, 1908, to contend that the entirety of the premises vests in the applicant from the date of sale and the Certificate of Sale, by itself, does not create any title, but is merely evidence of the sale. As such, the formality of issuance of a certificate is only a mere acknowledgement and purely a ministerial act. Hence, the sale certificate should be issued in favour of the applicant. In support of such contention, the applicant relies on the decisions of Sadashiv Prasad Singh vs. Harendar Singh & Ors. (2015) 5 SCC 574, Pattam Khader Khan vs. Pattam Sardar Khan & Anr. (1996) 5 SCC 48, Sagar Mahila Vidyalaya vs. Pandit Sadashiv Rao (1991) 3 SCC 588, Arvind Kumar vs. GOI (2007) 5 SCC 745 and Janak Raj vs. Gurdial Singh (1967) 2 SCR 77.
12. On behalf of the Official Liquidator, it is submitted that the applicant is a sister company of the company (in liquidation) and that the directors of both the companies are closely related. The deponent is the wife of Ashok Kumar Goenka who had inherited the remaining 50 per cent of the premises after the death of her father-in-law, Hargobind Prasad Goenka. In any event, in view of the order dated 27 October 1995 passed by this Court, the winding up petition had been permanently stayed and the company (in liquidation) stood revived. In such circumstances, this application is not maintainable and is liable to be dismissed. Moreover, in view of the subsequent conduct of the applicant in not making payment of the entire consideration, the sale in terms of the order dated 25 April, 1990 be set aside.
13. By an order dated 25 April, 1990, the sale of the premises for an aggregate amount of Rs.57,50,000/- stood confirmed in favour of the applicant. Diverse orders have been passed from time to time treating the applicant to be the owner of the premises. The actual physical possession of the premises has also been handed over to the applicant. The shallow pond has also been filled up. The applicant has also received the entire compensation alongwith interest in respect of acquisition proceedings for a portion of the premises.
14. Order XXI Rule 85 of the Code of Civil Procedure, 1908 provides as follows:
85. Time for payment in full of purchase-money.—The full amount of purchase-money payable shall be paid by the purchaser into Court before the Court closes on the fifteenth day from the sale of the property:
Provided, that, in calculating the amount to be so paid into Court, the purchaser shall have the advantage of any set-off to which he may be entitled under Rule 72.
15. Rule 272 of the Companies Court Rules 1959 reads as follows:
Sale to be subject to sanction and to confirmation by Court – Unless the Court otherwise orders, no property belonging to company which is being wound-up by the Court shall be sold by the Official Liquidator without the previous sanction of the Court, and every sale shall be subject to confirmation by the Court.
16. In terms of the order dated 25 April, 1990, the applicant was directed to pay the balance purchase consideration in quarterly instalments over a period of 18 months. The applicant has only paid an aggregate amount of only Rs.40,25,000/-. Admittedly, there remains an amount of Rs.17,25,000/- due and payable. The obligation of any purchaser to ultimately pay the entire purchase consideration within the prescribed time period is a necessary pre-condition to any sale. To this extent, the confirmation of sale is in one sense incohate. There is a shortfall in the sale consideration even after a period of 33 years. The applicant is solely responsible for such default. The duty to timely pay the entirety of the purchase consideration in terms of the order dated 25 April, 1990 was squarely on the applicant. Non-payment of the entire consideration in terms of the order dated 25 April, 1990 renders the sale a nullity.
17. On a plain reading of section 54 of the Transfer of Property Act, 1882, the time of payment of price is not necessarily a sine qua non to the completion of the sale. However, the order dated 25 April, 1990 provided for a stipulated time period for payment which assumes significance in cases of sale by Courts.
18. Rules 6 and 9 of the Company (Court) Rules, 1959 provides as follows:
R.6:Practice and Procedure of the Court and provisions of the Code to apply – Save as provided by the Act or by these rules the practice and procedure of the Court and the provisions of the Code so far as applicable, shall apply to all proceedings under the Act and these rules. The Registrar may decline to accept any document which is presented otherwise than in accordance with these rules or the practice and procedure of the Court.
R.9:Inherent powers of Court – Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court.
19. It is true that on a reading of Rule 9, powers of the widest amplitude have been given to the Company Court. If the sky is the limit then there is always the risk of touching the abysmal lows. Discretion when exercised by any Court of Law means sound discretion guided by law. Centuries ago, Lord Camden had observed:
“The discretion of a Judge is the Law of Tyrants; it is always unknown; it is different in different Men; it is causal, and depends on Constitution, Temper, and Passion. In the best it is often-times Caprice, in the worst it is every Vice, Folly, and Passion to which human Nature is liable.”
[Doe d. Hindson vs. Kersey (1680) 8 How St. Tr 57]
20. The exercise of any discretion must be in good faith, fairly, for the purpose for which the power is being conferred and without exceeding the limits of such power. No discretion should be legally unfettered. The exercise of any discretion cannot be arbitrary, vague and fanciful; but legal, regular and according to reason. The Rule of Law requires that no discretion should be unconstrained so as to be potentially arbitrary. [Tom Bingham, The Rule of Law, Chapter 4].
21. Section 457 of the Companies Act, 1956 read with Rule 272 of the Company Court Rules, 1959, govern sales by the Official Liquidator. The duty of the Company Court while conducting a sale under Rule 272 is a more onerous task than an ordinary sale conducted by Court in executing a decree. In a sale by the Company Court, the Court holds a fiduciary duty position protecting the interests of all stakeholders. On the other hand, in sales in execution of a decree the sale is rarely held without notice to the judgment debtor. Ordinarily, the judgment debtor in such sales is present to protect its interests. On the other hand, the Official Liquidator is often a silent spectator in such proceeding. The conduct of the Official Liquidator also questions the credibility of the entire process of liquidation. There appears to be a general sense of indifference in the manner in which the Official Liquidator conducts the liquidation proceedings.
22. On 30 November, 1992, the Official Liquidator requested the applicant to make payment of the balance consideration of Rs.17,25,000/-. On 28 April, 1994, the Official Liquidator reiterated the request to the applicant to make payment of the balance consideration of Rs.17,25,000/- alongwith 10 per cent interest per annum. The demand of the Official Liquidator in directing the applicant to pay the entire consideration alongwith 10 per cent interest keeping in view the escalated market value of the premises is not only commercially imprudent, but also wholly without jurisdiction. Surprisingly, the Official Liquidator had never brought the fact of non payment of the balance consideration before any Court since the passing of the order dated 25 April 1990. In this regard, it was submitted on behalf of the Official Liquidator that both the letters dated 30 November, 1992 and 28 April, 1994 issued on behalf of the Official Liquidator were misconceived and not tenable in law.
23. There has been a conscious effort to perfect the so very imperfect marketable title of the applicant and the original owners vis-a-vis the premises. There are no grounds either pleaded nor which exist which warrant condonation of the inordinate delay in the applicant being unable to make payment of the balance consideration after a period of 33 years. There is no question either in law or equity to permit the applicant to pay the shortfall in price after a delay of 33 years. The benevolence and magnanimity shown to the applicant must end.
24. All the authorities cited by the applicant are distinguishable and inapposite. The single most distinguishable fact in this case is that the applicant has unjustifiably defaulted in making payment of the entire consideration whilst during the interregnum enjoying all the fruits of ownership including the right of having withdrawn the entire compensation money in the acquisition proceedings. In such circumstances, the contention of the applicant that the order dated 25 April, 1990 gives an indefeasible right of ownership to the applicant as auction purchaser is rejected. On the contrary, in view of the escalated market price and the subsequent conduct of the applicant, it would be a pernicious exercise of discretion to permit any of the prayers as prayed for in this application. In such circumstances, this Court cannot remain blind to an obvious and manifest illegality committed in conducting the sale.
25. On the point of maintainability raised by the Official Liquidator, I find no substance in the contention that the application is not maintainable since there is a permanent stay of the winding up proceedings. The order of permanent stay does not completely obliterate the winding up order. Company petitions even when dismissed on merit are traditionally not regarded as dismissed or disposed of but as permanently stayed. There is a history of more than a century which goes behind such recording. (Asset Reconstruction Company (India) Ltd. vs. M/s. Bengal Shelter Housing Development Limited 2017 SCC OnLine Cal 5833). The effect of a stay or permanent stay of the proceedings is that the proceeding remains in suspended animation meaning thereby it is effectively subsisting but inoperative for the time being. (Sudarshan Chits (I) Ltd. v. O. Sukumaran Pillai, (1984) 4 SCC 657). This fact would also be evident from the prayers made in this application wherein the applicant has sought for directions on the Official Liquidator to inter-alia execute the conveyance and for other reliefs. In such circumstances, I find no merit in the objection of maintainability and the same is rejected.
26. In view of the above, the sale in terms of the order dated 25 April, 1990 is declared to be a nullity. The Official Liquidator is directed to forthwith take actual physical possession of the entirety of the premises, if necessary, with police assistance [save and except the portion of the premises acquired by the State] and retain the same until further orders of Court. The part consideration paid by the applicant stands forfeited. Notwithstanding repeated efforts to serve the company even by way of advertisements, the company remained unrepresented.
27. The Registrar, Original Side is directed forthwith to serve a copy of this order on the office of the Advocate General, State of West Bengal. Liberty is granted to the State and any other affected party including the Official Liquidator to take all necessary steps in accordance with law also against the applicant, its directors, servants, agents and assigns inter-alia for recovery of the amount appropriated in the acquisition proceedings and for filling up the shallow pond.
28. With the aforesaid directions, CA/13/2021 stands dismissed.