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Wednesday, May 29, 2013

SARFAESI Act, verses Official liquidator under companies Act = any sale conducted defraud other secured creditor within one year after the commencement of company petition is void = There cannot be any doubt of the fact from the dates given earlier that the transfer was within a period of six months from the date of presentation of the liquidation proceedings and consequently it is statutorily invalid and the law does not recognize it. In fact, an attempt was sought to be made that there is no reference to sale in either of the Sections and it only refers to transfer and consequently these provisions can have no application. It has to be held that the transfer of interest in immovable property is in consequence of a sale and therefore the word transfer takes in its fold the very act of sale. Therefore, by applying Section 531 it is quite clear that the transfer shall be deemed to be invalid. 12. Even under Section 531-A it is quite clear if the sale was within a period of one year from the date of presentation of the liquidation proceedings as against the Official Receiver who represents the body of the creditors on his appointment after the winding up proceedings, the sale is void. Therefore, by applying Section 531 or 531-A it is quite clear from any angle the sale in this case is hit by the above provisions and when the sale is statutorily invalid or void there is no need for a relief to be asked by the Official Receiver to set aside the sale or approach the Debt Recovery Tribunal, since these two provisions are to be exclusively dealt by the Company Court alone, which is rightly contended by the Official Liquidator. I hold that this Court alone can decide the binding nature of the transactions under Section 531 or 531(A) of the Companies Act. It is to be noted that the powers conferred under the SARFAESI Act for the Bank or the Authorized Officer is only in order to avoid the delay of legal proceedings and it does not give any right or advantage to misuse the power of quasi judicial nature in order to convert a Non Performing Asset and realize the money by adopting improper mode. Therefore, for all the above reasons, I hold that the sale as held by the Authorized Officer on behalf of the Creditor Bank is void and the right of the Official Receiver in the liquidation proceedings cannot be defeated and as the sale is void, it goes to the root of the obligations between the auction purchaser and the Authorized Officer and when once the sale is set aside as void, it is needless to say that the Creditor Bank cannot take advantage of the void sale and the auction purchaser shall be restored to the same position prior to the sale and any amount realized by the Creditor Bank cannot be retained by it. Accordingly, W.P.No.19297 of 2012 is allowed granting the reliefs claimed thereunder. W.P.No.33655 of 2011 and Company Application No.1972 of 2011 are dismissed. Consequent on the orders holding that the sale as void as it comes within the purview of this Court, Company Application No.421 of 2013 is also allowed as a consequence of the sale being held as void under Section 531 and 531 (A) of the Companies Act. No costs.


HON'BLE SRI JUSTICE N.R.L. NAGESWARA RAO        

WRIT PETITION Nos.19297 of 2012 & 33655 of 2011 & COMP.A.Nos.1972 of 2011 & 421    
of 2013 in C.P.No.215 of 2010

22.04.2013.

M/s. United Steel Allied Industries Private Limited             ....Petitioner

M/s. Indian Bank, Corporate Office, and others            ...Respondents

Counsel for the Petitioner:

Counsel for the Respondents:

<Gist :

>Head Note:

?Cases referred:
1. (2004) 4 SCC 311
2. 2013 LawSuit(SC) 205
3. 2012 (2) D.R.T.C. 47 (M.P.)
4. (2006) 134 Comp Cases 267 (Madras)
5. (2005) 127 Comp Cases 85 (Madras)
6. 2004 Comp Cases 27
7. (2007) 139 Comp Cases 191 (Madras)
8. 2012 (6) ALD 345 (DB)
9. (2010) 1 SCC 655
10. 2011 (1) L.S. 196

COMMON ORDER:    

1.      All these matters arise out of a common issue.
M/s. Laran Sponge & Minerals Private Limited (hereinafter called as borrower)
has availed a loan with Indian Bank by hypothecation of the agricultural land
and also machinery belonging to the company and also the guarantors,
Smt. P. Latha and Sri P. Vara Prasada Raju, who are the Directors of the
Company.  A loan facility of Rs.12,00,00,000/- as M.T.L. loan and O.C.C. Limit
of Rs.5,00,00,000/- and L.C. of Rs.5,00,00,000/- and B.G. Limit of
Rs.40,00,000/- was availed in the year, 2008 and ad hoc Limit of
Rs.3,50,00,000/- in the year, 2009.
As there was default in repayment of the
loan and the loan was classified as Non Performing Asset (N.P.A.) Account and
the Indian Bank being a secured creditor under the provisions of SARFAESI Act,
2002, has taken possession of the property. 
A publication was given on
28.08.2010 for auction of the same.  
M/s. United Steel Allied Industries Private
Limited (Auction Purchaser) participated in the auction on 29.09.2010 and 25% of
sale price was deposited.  
Subsequently, on 01.01.2010 S.B.I. Global Factors
Limited has filed company petition for winding up as it is also a secured creditor and the petition was allowed on 18.07.2011 and the Official Liquidator was appointed to take possession of the property.  
After the auction 
a letter
dated 18.10.2010 was addressed by the auction purchaser to the effect that their
participation in the auction is subject to the following conditions:-
1) "Satisfactory legal due diligence and clear marketable title over land, plant
and machinery free from any lien, charge, encumbrances etc.,
2) Indemnity guarantee from the Indian Bank with respect to future litigation,
what so ever in nature, if any,
3) Indian Bank shall put us in the peaceful possession and handling over the
land, plant and machinery and smooth functioning without any obstructions, what
so ever in nature, from any quarter.
In this connection, we would also like to mention that in your above referred
letter you have mentioned that the total available land is about 20 acres,
whereas the land available is only 16 acres.  Further, the land available is not
sufficient to meet the technical requirements of plant.
In view of the above, we have no option, except to reserve our right to with
draw.  We request the Bank to refund the initial bid amount (inclusive of EMD)
of Rs.9.0 Crores deposited with the Bank at the earliest."


2.      It is also to be noted here that after the sale on 29.09.2010 after
deposit of 25% of the sale price, the balance of 75% was not deposited within
fifteenth day.  
Thereafter, on 24.11.2010 a letter is said to have been
addressed by the auction purchaser for grant of loan and accordingly loan was
granted on 07.01.2011 and the balance of sale consideration was adjusted from
that loan and a sale certificate was issued on 18.01.2011. 
Thereafter, as
contemplated under the tender agreement, the documents were sent for 
registration. 
At that stage, the Official Liquidator has addressed a letter on
20.09.2011 to the Sub Registrar, Hakundi Village, Ballari District, informing that the borrower company was wound up in C.P.No.215 of 2010 and he was   appointed as Liquidator and the Sub Registrar was requested not to register any
document with regard to the properties of the borrower.
Subsequently,
W.P.No.33655 of 2011 was filed on 14.12.2011 by the Indian Bank for a direction
to the Sub Registrar to register the sale certificate with regard to the
auctioned property.
While, the Writ Petition was pending, the Bank also filed
the COMP.A.No.1972 of 2011 on 27.12.2011 for a direction to the Official
Receiver to clarify his letter, dated 20.09.2011 addressed to the Sub Registrar.
While the matter stood thus as the auction purchaser claimed that the possession
was not given as there was further claims with regard to the auctioned property
and there were dues claimed by the authorities and as the property is not free
from encumbrances and as the Bank threatened to recover the amounts as a  
defaulter and to treat the loan account as Non Performing Asset.  W.P.No.19297
of 2012 was filed by the auction purchaser on 26.06.2012 and interim orders were
passed in W.P.M.P.No.24720 of 2012 in favour of the auction purchaser
restraining the Bank from proceeding and later it was varied in W.P.M.P.No.2850
of 2012 giving the Bank liberty to proceed against the auction purchaser in
accordance with law for recovery of the over due amounts and installments to the
extent of default by the auction purchaser.
As against that W.A.No.17 of 2013
was filed and by order dated 09.01.2013 the modification ordered in
W.P.M.P.No.2850 of 2012 was deleted and the matter was directed to be dealt by
this Court along with W.P.No.33655 of 2011. That is how both the Writ Petitions
were transferred to this Court.
While these matters are pending the auction
purchaser has filed COMP.A.No.421 of 2013 to set aside the sale alleging several
irregularities, suppression of facts and not following due process. It was also
further pleaded that the properties are not properly valued and the encumbrances
were not disclosed and possession was not delivered effectively.  It was also
pleaded that there were several claims of taxes etc., to a large sum of more
than 1 Crore and as such the sale is liable to set aside.
3.      The Indian Bank has denied all the allegations and supported the action
taken under SARFAESI Act. The Official Liquidator claims that this sale is void
under Section 446 as the leave was not obtained and also under Sections 531 and
531 (A) of Companies Act, 1956.  The transfer being void as it was done within
one year from the date of presentation of the winding up petition and the sale
certificate having been issued after the winding up order under Section 531(A).
The sale being fraudulent and undue preference to the one of the creditors,
since it is within six months is not valid under Section 531 and consequently he
has got every right to oppose the registration even without asking for setting
aside the sale as it is void. It is the contention of the S.B.I. Global that it
is also a secured creditor and there was no proper and valid notification or
valuation of the property and since the winding up process has been initiated by
it, the Indian Bank cannot claim any priority.

4.      In view of the above circumstances, the points that arise for
consideration are:-
1) Whether a valid sale has been conducted on behalf of the Indian Bank by the Authorized Officer under SARFAESI Act?  
2)  Whether the sale is void and fraudulent as contended by the Official Receiver?
3) Whether the sale is vitiated for several of the irregularities raised by the auction purchaser and if so it is liable to be set aside?
POINTS:
5.      The contention of Sri S. Ravi, Senior Advocate appearing for the Indian
Bank is that under the statutory provisions of SARFAESI Act, the sale has been
conducted and it is a special enactment and if any party is aggrieved, the
remedy is only to approach the Debt Recovery Tribunal (DRT) as contemplated
under Section 17 of the Act.  According to him, the Company Court does not have
any jurisdiction since SARFAESI Act is later enactment and as held by the
Supreme Court in several decisions.  He relied upon a decision reported in
Mardia Chemicals Limited and others Vs. Union Of India and others1,
whereunder
the constitutional validity of the SARFAESI Act was considered and the remedy
was found before the Debt Recovery Tribunal.  He also relied upon a decision
reported in Official Liquidator, U.P. and Uttarakhand Vs. Allahabad Bank and
others2, 
whereunder the same principle has been reiterated the above decision
shows that if the matter is pending before the Debt Recovery Tribunal then the
Official Receiver should be associated with the actions, if the matter is not
before the Debt Recovery Tribunal it is the Company Court that has to deal with
the validities. He also relied on a decision reported in
Saroj Shivhare and Others Vs. Gaurav Enterprises and others3, 
whereunder it was
held that the issue of the sale certificate itself is a completion of a sale and
no registration is necessary. 
According to him, the correspondence and the
admissions of the auction purchaser clearly goes to show that the possession was
delivered.  According to him, when once the possession was delivered, the
subsequent interference is not the duty of the Bank to protect.  He also
contends that it is for the buyer to verify whether there are any encumbrances
or not and if there are arrears of taxes etc., it shall be paid by the auction
purchaser only in substance.  According to him, neither the Official Liquidator
nor the auction purchaser can question the sale before the Company Court and
therefore their claims have to be rejected as the sale having been confirmed.
The Registrar shall be directed to register the property.
6.      On the other hand, the Official Liquidator contends that his attack on the
sales is under Section 531 and 531 (A) of the Companies Act and it is the
exclusive jurisdiction of the Company Court alone and the Debt Recovery Tribunal
has no jurisdiction.
According to him, in the decision relied on by the senior
counsel, the matters were pending before the Debt Recovery Tribunal and before
the sale the part of the Official Liquidator was dealt with.  
But in this case,
the sale was completed and, therefore, the facts are quite different.
According
to him, the question of fraudulent preference cannot be considered by the Debt
Recovery Tribunal.  Further more, if a sale is not void under the Statute, the
remedy is only to approach the forum, which has got jurisdiction to decide the
issue and the later Act does not apply as under Section 37 of the SARFAESI Act,
the provisions of the Company Act are not made inapplicable and they are held to
be only additional.  According to him, if a valid sale is conducted by the
Authorized Officer, even if the contention of the senior counsel is to be
accepted then only the Debt Recovery Tribunal has to be approached, but when the
sale itself is void there being no necessity to be set aside the question of
approaching the Debt Recovery Tribunal does not arise.
7.      The Official Liquidator has relied upon a Division Bench decision of the
Madras High Court reported in
Asset Reconstruction Company (India) Limited Vs. Official Liquidator, High
Court4,
whereunder even under the SARFAESI Act for the sale of the property and
the distribution of the assets, the association of the Official Liquidator is
stressed.  He also relied upon a decision of the Madras High Court reported in
Administrator, MCC Finance Limited Vs. Ramesh Gandhi5,
whereunder the provisions
of 531, 531-A and 537 of the Companies Act were considered.  He also relied upon
a decision of the Gujarat High Court reported in Official Liquidator of Piramal
Financial Services Limited Vs. Reserve Bank of India6,
 whereunder the instances
of fraudulent preference or transfer have been considered.  He also relied upon
another decision reported in Archean Granites Private Limited Vs. R.P.S. Benefit
Fund Limited and others7,
whereunder the instances of fraudulent preference and
sale of the property for lesser price etc., were considered.
8.      The learned counsel appearing for the auction purchaser has also relied
upon a decision of this Court reported in
India Finlease Securities Limited, Chennai Vs. Indian Overseas Bank, Vijayawada,
Krishna District and Others8,
whereunder the provisions of SARFAESI Act, the
notion of sale and transfer have been considered and opined that the sale is not
complete unless the property for which the price was paid is transferred to the
buyer by a written proceedings.  It was also considering the provisions of
Rule 9 (2) and 9 (4) and found that the confirmation shall be by the secured
creditor and not by the Authorized Officer.  Incidentally, it was held that a
sale certificate is not required to be registered and no registered sale deed is
to be executed after the sale was confirmed by the Banks.  He also relied upon a
decision of the Supreme Court reported in
Haryana Financial Corporation and another Vs. Rajesh Gupta9, whereunder the
defects in the formation of a contract can be agitated by the auction purchaser.
9.      Therefore, in view of the above contentions, it is necessary now to see
the provisions under Section 531, 531A and 537 of the Companies Act:-
531:Fraudulent Preference:- .
1) Any transfer of property, movable or immovable,
delivery of goods, payment, execution or other act relating to property made,
taken or done by or against a company within six months before the commencement   
of its winding up which, had it been made, taken or done by or against an
individual within three months before the presentation of an insolvency petition
on which he is adjudged insolvent, would be deemed in his insolvency a
fraudulent preference, shall in the even of the company being wound up, be
deemed a fraudulent preference of its creditors and be invalid accordingly;
Provided that, in relation to things made, taken or done before the commencement
of this Act, this sub-section shall have effect with the substitution, for the reference to six
months, of a reference to three months.
2) For the purposes of sub-section (1), the presentation of a petition for
winding up in the case of a winding up by [the Tribunal], and the passing of a
resolution for winding up in the case of a voluntary winding up, shall be deemed
to correspond to the act of insolvency in the case of an individual.
531A: Avoidance of voluntary transfer:-  
Any transfer of property, movable or
immovable, or any delivery of goods, made by a company, not being a transfer or
delivery made in the ordinary course of its business or in favour of a purchaser
or encumbrancer in good faith and for valuable consideration, if made within a
period of one year before the presentation of a petition for winding up by [the
Tribunal] or the passing of a resolution for voluntary winding up of the
company, shall be void against the liquidator.
537: Avoidance of certain attachments, executions, etc., in winding up by
Tribunal:- .
1) Where any company is being wound up by the Tribunal- 
(a) any attachment, distress or execution put in force, without leave of the
Tribunal against the estate or effects of the company, after the commencement of
the winding up; or
(b) any sale held, without leave of the Tribunal of any of the properties or
effects of the company after such commencement,  shall be void.
2) Nothing in this section applies to any proceedings for the recovery of any
tax or impost or any dues payable to the Government."
10.     Section 531 deals with the case of fraudulent preference and in such a
circumstance the sale is held to be invalid.
In fact, though several complaints
were made about the nature of the publication and the contents therein, there is no material before the Court as to whether proper publication was given. 
 It
cannot be disputed that the S.B.I. Global is also a secured creditor, if the interest of the other creditors is not taken care of and if it is only for the benefit of single creditor even applying the principles under the Insolvency
Law, the sale is a fraudulent one.
The argument that the Indian Bank is
prepared to place before the Court the amount realized by the sale for
distribution of all the creditors does not hold good, for the reason that if at
the time of the sale, if the auction purchaser is to know that there are other
encumbrances on the property then the price to be quoted will be definitely
different. 
 In fact, there is no material on record as to what was the sale
price quoted by the Authorized Officer and as to whether it was less or more
than the price quoted by the auction purchaser.
11.     There cannot be any doubt of the fact from the dates given earlier that
the transfer was within a period of six months from the date of presentation of
the liquidation proceedings and consequently it is statutorily invalid and the
law does not recognize it.  In fact, an attempt was sought to be made that there
is no reference to sale in either of the Sections and it only refers to transfer
and consequently these provisions can have no application.  It has to be held
that the transfer of interest in immovable property is in consequence of a sale
and therefore the word transfer takes in its fold the very act of sale.
Therefore, by applying Section 531 it is quite clear that the transfer shall be
deemed to be invalid.
12.     Even under Section 531-A it is quite clear if the sale was within a period
of one year from the date of presentation of the liquidation proceedings as
against the Official Receiver who represents the body of the creditors on his
appointment after the winding up proceedings, the sale is void.  Therefore, by
applying Section 531 or 531-A it is quite clear from any angle the sale in this
case is hit by the above provisions and when the sale is statutorily invalid or
void there is no need for a relief to be asked by the Official Receiver to set
aside the sale or approach the Debt Recovery Tribunal, since these two
provisions are to be exclusively dealt by the Company Court alone, which is
rightly contended by the Official Liquidator.             I hold that this Court
alone can decide the binding nature of the transactions under Section 531 or
531(A) of the Companies Act. 
13.     In fact, the amendments made to SARFAESI Act in 2004 deletes the word   
Appeal under Section 17 and only provides for an application to be made to the
Debt Recovery Tribunal.  The right of Appeal is quite different from an
application to be presented before the Debt Recovery Tribunal. The Legislative
intent is not very clear for deleting word "Appeal".  Therefore, it cannot be
said that this Court cannot entertain this application and consider the
objections of the Official Receiver to consider the sale as not binding and his
consequential request for not registering the properties as being without
jurisdiction.
14.     Though no specific pleadings are made by the parties challenging the
procedure of the sale, since the Court is considering the validity of the sale
under the statute, it is the question of law and the Court has to deal with it.
If the provisions of SARFAESI Act have been violated in conducting sale, the
sale cannot be said to be a valid sale.
It is to be noted that the powers
conferred under the SARFAESI Act for the Bank or the Authorized Officer is only in order to avoid the delay of legal proceedings and it does not give any right or advantage to misuse the power of quasi judicial nature in order to convert a
Non Performing Asset and realize the money by adopting improper mode.
Any  
Authorized Officer who is conducting the sale is discharging the quasi-judicial
functions and he has to follow the rules and conduct the sale according to law.
There cannot be an understanding or agreement between the borrower, auction 
purchaser or the creditor by violating mandatory provisions, in order to get
undue benefit to the Creditor Bank.
15.     In this connection, it is useful to refer to Rule 9 (1) (2) (3) (4) and
(5) of SARFAESI Act:- 
Rule 9: Time of Sale, issues of sale certificate and delivery of possession,
etc.:-
1) "No sale of immovable property under these rules shall take place before the
expiry of thirty days from the date on which the public notice of sale is
published in newspapers as referred to in the proviso to sub-rule (6) or notice
of sale has been served to the borrower.
2) The sale shall be confirmed in favour of the purchaser who has offered the
highest sale price in his bid or tender or quotation or offer to the authorised
officer and shall be subject to confirmation by the secured creditor:
Provided that no sale under this rule shall be confirmed, if the amount offered
by sale price is less than the reserve price, specified under sub-rule (5) of
rule 9:
Provided further that if the authorised officer fails to obtain a price higher
than the reserve price, he may, with the consent of the borrower and the secured
creditor effect the sale at such price.
3) On every sale of immovable property, the purchaser shall immediately pay a
deposit of twenty-five
per cent. of the amount of the sale price, to the authorised officer conducting
the sale and in default of such deposit, the property shall be forthwith be sold
again.
4) The balance amount of purchase price payable shall be paid by the purchaser
to the authorised officer on or before the fifteenth day of confirmation of sale
of the immovable property or such extended period as may be agreed upon in
writing between the parties.
5) In default of payment within the period mentioned in sub-rule (4), the
deposit shall be forfeited and the property shall be resold and the defaulting
purchaser shall forfeit all claim to the property or to any part of the sum for
which it may be subsequently sold."
16.     The provisions are akin to the provisions of the Court sale to be
conducted under Order XXI Rule 85 and 86 of Civil Procedure Code. Order XXI,
Rules.85 and 86 reads as under:-

Order XXI, Rules.85 and 86:-
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 the 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.
86. Procedure in default of payment:- In default of payment within the period
mentioned in the last proceeding rule, the deposit may, if the Court thinks fit,
after defraying the expenses of the sale, be forfeited to the Government and the
property shall be re-sold and the defaulting purchaser shall forfeit all claim
to the property or to any part of the sum for which it may subsequently be sold.
17.     Under the provisions of Rules 85 and 86, if the full purchase money is not
paid within fifteen days, further steps have to be taken.  But the only
difference under Rule 9 (4) is that the time can be extended by agreement in
writing between both the parties, it evidently means that such an extension
shall be within 15 days period stipulated under Clause 4.  But, in this case no
such thing has happened.
18.     The tender cum bid agreement also stipulates the same, which reads as
under:-
33. Sale is subject to confirmation by the Bank.  Bank will confirm the sale
only after ensuring that initial payment of 25% of sale price is paid/deposited
(on the same date) by way of DD/BPO.
34. The EMD deposited by the successful tenderer shall be held as Security
Deposit for due performance of the contract.  Successful tenderer shall deposit
the balance amount within 15 days of confirmation of the sale by the Bank or
within the extended period as agreed between the parties. Such deposit will be
made in the form of Demand Draft/ Bankers' Pay Order on a Bank, payable at
Hyderabad.
35. No time extension for making the payment after the stipulated period will be
granted nor shall the successful tenderer be allowed to make part payments.
However, the Seller may, in his discretion, entertain and consider request for
extension of time for making payment provided the request has been made in
writing and duly signed by the successful tenderer/representative himself.
Evidently, the above stipulations are keeping in view the provisions under Rule
9 of SARFAESI Act.
19.     To be more clear, the auction was held on 29.09.2010 and the amount has to
be deposited by fifteenth day that comes by 14.10.2010, if both the parties have
agreed between themselves in writing, the extension of the time should have been
given by the Authorized Officer. But, in this case, it did not happen and on the
other hand on 18.10.2010 the auction purchaser has written a letter repudiating
the sale and for refund of the money, which clearly goes to show that no
extension is sought within a period of 15 days.  Therefore, if the rigor under
Rule 9 is to be followed, there is no occasion for the Authorized Officer except
to go for re-auction.  In fact, this is the principle of law even under the
Court sale which has been repeatedly held and in this connection it will be
useful to refer to a decision of this Court reported in V. Vedanda Vyasulu and
Others Vs. K. Purushotam and another10.  The Authorized Officer has no option or
discretion rather than to cancel the sale.
20.     Further, the manner in which the further steps were taken are also
objectionable and it cannot be said to be fair play either by the creditor or
the Authorized Officer, when the sale consideration was not paid.  An
application for loan was given on 24.11.2010, evidently, it is not an
application for loan for purchase of the property. A loan of nearly Rs.19 to 20
Crores was granted on 07.01.2012 and from this loan amount the sale price was
adjusted and the balance was treated as a separate loan account.  It is crystal
clear that the Authorized Officer has violated the mandatory provisions in
conducting a sale, which a civil Court itself cannot violate and, therefore,
facilitated the creditor to grant a loan and thereafter appropriated the same
towards the sale consideration and thereafter the sale certificate was issued on
17.01.2011 without there being a request in writing for extension of the time
within the fifteenth day for payment of balance consideration and an order in
writing granting such extension, as claimed, which are mandatory under Rule 9
and Tender-cum-Bid agreement. The above facts are telltale about the failure of
the Authorized Officer to proceed according to law and the consequential
advantage the creditor bank has got.  It is abundantly fraudulent. When once the
sale fails to have any legal effect by application of Rule 9 it cannot be said
to be a valid sale and neither the auction purchaser nor the creditor can derive
any benefits and such sales are to be ignored.
21.     Therefore, taking any view of the matter, it is quite clear the sale in
this case is statutorily void under Section 531, 531-A and 537 of the Companies
Act and also under Rule 9 of the SARFAESI Act, that being so the creditor cannot
claim any benefits.
22.     It is sought to be contended that there was no need for registration and the sale certificate itself is sufficient probably under the SARFAESI Act it appears to be so. 
But if the parties have contracted to the contrary, the same
cannot be avoided.  In this connection, it is useful to refer to Clause 42, 43
and 44 of the tender given bid documents for sale.
" 42) On confirmation of sale by the Bank and upon payment of the full amount of
price, the Authorised Officer will execute the Sale Certificate in favour of the
Purchaser. The registration charges, payment and stamp duty etc., shall be borne
by the Purchaser.
43) It will be the responsibility of the Purchaser to take all steps necessary
for registration of the Sale Certificate.
44) The cost towards registration if, expenses incurred towards stamp duty,
etc., and any other expenses will be borne by the purchaser.  The seller will
not bear any expenses what so ever."

It clearly goes to show that the parties contemplated registration, but however,
it shall be at the expenses of the purchaser consequently, it cannot be argued
by the creditor.
23.     Therefore, when the auction purchaser wants the sale deed to be executed,
the Authorized Officer or the creditor cannot deny the same.
24.     There is a question about the maintainability of the application by the auction purchaser about the validity of the sale. 
 It is true that on the basis
of the decisions relied on by the learned senior counsel Sri S. Ravi, it may be
correct that the auction purchaser has to approach the Debt Recovery Tribunal.
But, however, it has been fairly well settled that when the proceedings before
the lower authorities are not properly conducted, the Writ jurisdiction of the
High Court is not denied.  The substance of the writ is about the several
irregularities in conducting the sale, which were found to be valid by this
Court and the sale having been held to be void, the right of the auction
purchaser to quick redressal in the writ is sustainable. Though in ordinary
circumstances, if the application is singularly filed by the auction purchaser,
then it may be that he has to approach the Debt Recovery Tribunal, but, however
in this case the other applications challenging the action of the Official
Liquidator and the exclusive jurisdiction of the Company Court under Section 531
and 531(A) of the Companies Act are being considered and the benefit of such
proceedings cannot be denied to the auction purchaser and consequently I hold
that in the particular circumstances of this case, the application filed by the
auction purchaser can be held to be maintainable.
25.     Therefore, I hold that as the sales are statutorily void and the Official
Liquidator has got every right to take possession of the property by ignoring
them, the letter written by him for restraining the registration itself is an
action of assertion that the sale is void.  In fact, such action is being
questioned in the Writ Petition and also Comp.A.No.1927 of 2011. The point in
these cases is the binding nature of the sale on the Official Liquidator and
when once the sales are void and when the decision rests on this aspect, there
need not be any separate application to be filed by the Official Liquidator for
setting aside the sale. If once his letter seeking for stopping of registration
is held to be valid, consequently, it has to be held that as the void sale need
not be set aside, they have to be ignored and challenge made by the Creditor
Bank is not valid.
26.     So far as the auction purchaser is concerned, evidently, he is challenging
the letter written by the Creditor Bank about the pressure for realization of
the amount due under a void sale and the reasons given above clearly goes to
show that the Creditor Bank cannot take advantage of the void sale and
therefore, the necessary relief has to be granted to the auction purchaser
restraining the Creditor Bank enforcing the liability.  So far as it relates to
the auction sale proceedings and the adjustment or payment, which has been 
realized by it, since substantial relief is granted in the Writ filed by the
auction purchaser, the benefit of it cannot be denied in the application to set
aside the sale.
27.     Therefore, for all the above reasons, I hold that the sale as held by the
Authorized Officer on behalf of the Creditor Bank is void and the right of the
Official Receiver in the liquidation proceedings cannot be defeated and as the
sale is void, it goes to the root of the obligations between the auction
purchaser and the Authorized Officer and when once the sale is set aside as
void, it is needless to say that the Creditor Bank cannot take advantage of the
void sale and the auction purchaser shall be restored to the same position prior
to the sale and any amount realized by the Creditor Bank cannot be retained by
it.
28.     Accordingly, W.P.No.19297 of 2012 is allowed granting the reliefs claimed
thereunder.  W.P.No.33655 of 2011 and Company Application No.1972 of 2011 are  
dismissed.  Consequent on the orders holding that the sale as void as it comes
within the purview of this Court, Company Application No.421 of 2013 is also
allowed as a consequence of the sale being held as void under Section 531 and
531 (A) of the Companies Act. No costs.
_____________________________  
N.R.L. NAGESWARA RAO, J    
Dated: 29.04.2013

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