Case Law Companies Act Industrial Finance Corporate Vs Official Liquidators High Court Calcutta

Case Law Companies Act

Industrial Finance Corporate

Vs Official Liquidators High Court Calcutta

PETITIONER:
INDUSTRIAL FINANCE CORPORATION AND ORS.

Vs.

RESPONDENT:
OFFICIAL LIQUIDATOR, HIGH COURT, CALCUTTA ANDANR. ETC. ETC

DATE OF JUDGMENT16/02/1993

BENCH:
JEEVAN REDDY, B.P. (J)
BENCH:
JEEVAN REDDY, B.P. (J)
REDDY, K. JAYACHANDRA (J)

CITATION:
1993 AIR 1524 1993 SCR (1)1063
1993 SCC (3) 40 JT 1993 (2) 130
1993 SCALE (1)618
ACT:
Companies Act, 1956; Section 457(1)(e)-Sale of assets of a
Company in liquidation by Company Court — Terms of Sale
Notice-What is the procedure to be adopted.

 

HEADNOTE:
Neptune Paper Mills (N.P.M.) was directed to be wound-up by
the Company Court on August 4, 1987. The Official
Liquidator took possession of the assets of the company
under the orders of the Court N.P.M. had borrowed huge
amounts from several financial institutions including
Industrial Finance Corporation of India, I.C.I.C.I.,
W.B.I.D.C. and I.D.B.I. on security of its assets. In view
of the default committed by it in repayment, the financial
institutions (F.Is.) recalled their loans in April, 1988
with the result all the loans in their loans in April, 1988
with the result all the loans in their entirety became due
at once. On August 8, 1988 the F.Is. were granted leave to
rile a suit under Section 446 of the Companies Act A suit
was filed by them in September 1990 in the Calcutta High
Court wherein a direction was given to the official
liquidator to function as a receiver too.
In January 1990, the company court directed the sale of the
assets of the company in liquidation. Before making the
said order the court had obtained a valuation of the said
assets.The valuation was at Rs. 4 crores. Sale notices were
published from time to time in response to which certain
offers were received, the highest of them being Rs. 6.90
crores. For one or the other reason, no offer was accepted
and sale notice was published again.
The sale notice would state that (1) the said company in
liquidation will be sold as a going concern on “as is where
is and whatever there is basis”, (2) the bids will start
from 690 crores, (3) the successful bidder must deposit 10%
of his bid at the time of the sale, (4) the balance amount
of the sale price may be paid by instalments as would be
fixed by tile
1064
Hon’ble Court, Calcutta i.e., deferred payment of
instalments will be considered and (5) and purchaser shall
have to enter into an agreement and understanding with the
employees union on the same lines as has been entered into
previously by one of the bidders. In pursuance of the said
sale notice, certain offers were received including the one
by Buxa. Its offer was in a sum of Rs. 6 crores subject to
certain terms and conditions stipulated therein. In short,
it proposed to pay the said amount in instalments @ Rs. 45
lakhs per annum with a moratorium of one year immediately
following the confirmation of sale.
On the date of sale before the learned company Judge only
two parties remained in the field. They were asked to raise
their bids. Buxa raised its offer to Rs. 8 crores, the
higher of the two. The learned Judge accepted its offer
subject to the condition that the balance consideration
(after deducting 10% earnest money which was to be deposited
immediately) shall be paid in instalments prescribed by him.
It was directed that for the first two years following the
sale, Rs. 60 lakhs shall be paid each year. Thereafter,
half-yearly instalments of Rs. 30 lakhs shall be paid until
the entire earnest money is paid off. No interest was
stipulated. It was provided that on default of payment in
any one instalment yearly or half-yearly the official
liquidator shall forthwith take possession of the assets and
the earnest money paid shall stand forfeited.
Complaining that the terms settled by the learned Company
Judge were too liberal to the purchaser and pre-judicial to
the interest of the F.Is., an appeal was preferred by them
before the Division Bench. The Division Bench finding that
it would be inappropriate to set aside the sale, effected
modifications in the terms of sale thereby providing some
more safeguards to protect the interest of the F.Is.
Aggrieved by the order of the Division Bench, F.Is.
approached this court by way of a Special Leave Petition
(S.L.P. 14929/90). This Court, taking the view that the
allegations made on behalf of F.Is. can be dealt with by the
High Court if it is moved again declined to interfere with
the order of the High Court. But with a view to secure the
interest of the Financial institutions it passed an order on
19.11.90 that until the High Court makes its order the
Purchaser shall be taken to be the receiver and shall be
accountable as a receiver.
Accordingly the financial institutions filed an application
before the Division Bench requesting it to reconsider its
order with a prayer that the
1065
sale in favour of Buxa be set aside or in the alternative
Buxa be directed to deposit the entire balance consideration
of Rs. 7.2 crores at once. They further submitted that they
have a charge for Rs. 8 crores on the assets of the company
in liquidation and that granting a period of 10 years for
paying the balance consideration in instalments and not
taking adequte security from Buxa for proper payment of
balance consideration, was prejudicial of their interest.
The Division Bench disposed of the said application by its
order dated 20-2-1992, holding that (1) the F.Is. (Secured
creditors) by their acts and conduct have come within the
winding up and.. therefore, the assertion of their right as
secured creditors outside winding up proceedings cannot be
accepted or sustained at that stage. (2) the purchaser Buxa
has taken possession of the assets sold, has re-employed the
workmen after entering into an understanding with them and
has also invested substantial amounts in recommencing the
production in the factor%?. (3) In the above circumstances,
the F.Is. cannot insist upon repayment of the entire money
due to them under the deeds of hypothecation executed by the
company in liquidation. However, it passed directions
curtailing the time for payment and providing for payment of
interest by the purchaser.
In these appeals by special leave it was contended for the
Appellants that (a) the procedure followed by the High Court
for selling the assets of the company in liquidation is not
fair and proper and that it has caused grave prejudice to
the interest of financial institutions, (b) By granting
liberal instalments, the “present price” of the assets sold
is no more than Rs. 4 crores, whereas the total amount. due
to the financial institutions is more than Rs. 12 crores,
(c) either the sale should be set aside and a fresh sale be
held or the instalments prescribed should be drastically
reduced coupled with a provision for reasonable interest on
the balance consideration.
On the other hand the purchaser/Respondent submitted that it
is not open to this court at this stage to effect any
modification in the terms of the sale; that though with a
view to save its investment which it had already made by the
date of the judgment of the Division Bench, it agreed to
certain further modifications being made by the Division
Bench; it is not now agreeable to any further modification
since in such a case it would not be possible for it to run
the industry or to pay the consideration and
1066
that as the purchaser has invested huge sums of money and
has reemployed almost all the workers; it is not in a
position to bear any further financial burden.
Modifying the order and dismissing the appeal, the Court,
HELD: 1. Though there is no standard or uniform pattern
to be followed with respect to the terms of the sale notice
issued by the Court, it would be appropriate for the court
to adopt such procedure as would avoid a situation where the
court is put to the task of negotiating the terms of sale
with the parties. That would also give room for avoidable
criticism and comment. It would have been better if the
sale notice itself had prescribed the number of instalments
which would he granted to the purchaser, besides other terms
and conditions and then invited offers on that basis.
Alternately, the court could have invited the offers subject
to such conditions as the offerers may prescribe and then
have them evaluated by a qualified person and select the
most appropriate one. If none of them are found acceptable
and if the court thought it appropriate, it could also allow
the bidders to- submit revised offers and then have them
evaluated. These are not the only two methods. But it has
to be emphasised that any method devised should be such as
to obviate the necessity or occasion for the court to
negotiate the terms and conditions of sale with the party or
parties. The sale notice in this case. merely stated that
the balance consideration may be paid in instalments as
would be fixed by the court The number and duration of
instalments and other allied terms like bank guarantee,
nature and terms of default clause, payment of interest on
instalments were all left to be determined by the Court. In
this case the bid of Rs. 6 crores was got enhanced to Rs. 8
crores, with lesser number of instalments than offered by
the purchaser all as a result of persuasive efforts by the
Company Judge. But it has given room for the argument that
had it been known before hand that so many instalments would
be granted without stipulation of interest, several higher
offers could have been received. [1073G-H, 1074A-D]
2. The contention that the Supreme Court has no power at
this stage to modify the number of instalments is untenable.
Nor there is any basis for Buxa to take up the stand that,
either the existing terms should be affirmed by this court
or it should be allowed to walk out of the deal altogether
along with its investment. This it cannot do for the
following
1067
reasons; Firstly, the sale notice itself stated that “the
balance amount of the sale price may be paid by instalments
as would be fixed by the Hon’ble Court, Calcutta i.e.,
deferred payment of instalments will be considered”. what
the High Court of Calcutta could do, can equally be done by
this Court sitting in appeal. Secondly, the purchaser has
repeatedly submitted before the Calcutta High Court that it
is prepared to abide by such conditions as may` be imposed
by the Court. [1074E-F]
3. Having considered and taken into account all the
relevant facts and circumstances of the case including the
interest of the financial institutions, the interest of the
workers who have since been re-employed by the purchaser and
the fact that the purchaser has already invested substantial
amount to revive the company, the following modification was
made in the number of instalments in which the balance
consideration has to be paid: [1075F-G]
The total balance consideration of Rs. 5.80 crores,
remaining due after payment of Rs. 52 lakhs due in the year
1992 shall be paid in full by the end of the year 1996 in
equal bimonthly instalments. The instalments shall be
payable by the last day of February, April, June, August,
October and December in each year. Each instalment
excepting the last instalment shall be in a sum of Rs. 24,
16,000. The last instalment shall be in such sum as to make
up the total short fall payable on that date i.e. Rs.
20,16,000. [1077C]

 

JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 636-37 of
1993
From the Judgment and Order dated 20.2. 1992 of the Calcutta
High Court in Appeal No. 493 of 1.990.
Harish Salve and Indranil Ghosh for the Appellants.
P. Chidambarani. M.I,. Lahoty Ms. S. Khazanchi, K.(‘.
Gellani and P.S. Jha for the Respondents,
The Judgment of the Court was delivered by
B.P. JEEVAN REDDY. J. Heard the counsel for the parties.
Leave granted in both the S.L.Ps. We shall first deal with
the appeal arising from S.L.P.(c) No, 5377/92
1068
The appeal is directed against the order dated 4.3.1992
passed by a Division Bench of the Calcutta High Court
modifying its earlier order of November 13, 1990. The
controversy in this appeal pertains to the terms of sale of
the assets of a Company in liquidation. A few facts are
necessary to be stated to appreciate the controversy.
Neptune Paper Mills (N.P.M.) was directed to be wound-up by
the Company Court on August 4,1987. The Official Liquidator
took possession of the assets of the company under the
orders of the Court. N.P.M. had borrowed huge amounts from
several financial institutions including Industrial Finance
Corporation of India, I.C.I.C.I., W.B.I.D.C. and I.D.B.I. on
security of its assets. In view of the default committed by
it in repayment, the financial institutions (F.Is.) recalled
their loans in April, 1988 with the result all the loans in
their entirety became due at once. On August 8, 1988 the
F.Is. were granted leave to file a suit under Section 446 of
the Companies Act. A suit was filed by them in September,
1990 in the Calcutta High Court wherein a direction was
given to the official liquidator to function as a receiver
too.
In January 1990, the company court directed the sale of the
assets of the company in liquidation. Before making the
said order the court had obtained a valuation of the said
assets. The valuation was at Rs. 4 crores. Sale notices
were published from time to time in response to which
certain
offers were received, the highest of them being Rs. 6.90
crores. For one or the other reason, no offer was accepted
and sale notice published again. It would be appropriate at
this stage to notice the terms of the sale notice, which led
to the sale in favour of the respondent, Buxa Holdings
Limited since re-named as Kanoi Agrotech Limited
(hereinafter referred to as “Buxa”). The Sale notice
published in the newspaper “The Hindu’ dated 10th April,
1990 reads as follows:
“PUBLIC NOTICES
Sale Notice Sale Notice Sale Notice
In the matter of
Neptune Paper Mills Ltd (in Liquidation)
That in terms of the order of the Hon’ble High
Court,
Calcutta dated 3.4.90, take notice the sale of
the above-
1069
named company as going concern and “as is
where is and whatever there is basis” will be
held at 2.00 pm on 17.4.90 in the open Court
of the Hon’ble Company Judge, High Court,
Calcutta. The bids of such sale will be
started from 6.90 crores. The successful
bidders must deposit 10% of his/their bids in
the Court at the time of sale. The balance
amount of the sale price may be paid by
instalments as would be fixed by the Hon’ble
Court, Calcutta i.e., deferred payments of
instalments will be considered. The Purchaser
shall have to enter into an agreement and or
memorandum of understanding with the
employees’ union in the same line with which
has already been entered into with one of the
bidders in court.
The bidder may have inspection of the assets
of the company on applications to Official
Liquidator before the sale of date. Terms and
condition along with the list of assets will
be available at the office of the undersigned
during the office hours.
Official Laiquidator High Court Calcutta
Dated the 10th April, 1990.”
The significant thing to notice is that the sale notice did
not specify the number of instalments nor did it specify the
period within which the entire consideration was to be
remitted. All that it stated was that (1) the said company
in liquidation will be sold as a going concern on “as is
where is and whatever there is basis”, (2) the bids will
start from 6.90 crores, (3) the successful bidder must
deposit 10% of his bid at the time of the sale, (4) the
balance amount of the sale price may be paid by instruments
as would fixed by the Hon’ble Court, Calcutta i.e., deferred
payment of instalments will be considered and (5) the
purchaser shall have to enter into an agreement and
understanding with the employees’ union on the same lines as
has been entered into previously by one of the bidders. In
pursuance of the said sale notice, certain offers were
received including the one by Buxa. Its offer was in a sum
of Rs.6 crores subject to certain terms and conditions
stipulated therein. In short, it proposed to pay the said
amount in instalment @ Rs.45 lakhs per annum with a
moratorium of one year immediately following the
confirmation of sale. When the matter
1070
was taken up by the learned Company Judge on 17th September,
1990, only two parties remained in the field. They were
asked to raise their bids. Buxa raised its offer to Rs. 8
crores, the higher of the two. The learned Judge accepted
its offer subject to the condition that the balance
consideration (after deduction 10% earnest money which was
to be deposited immediately) shall be paid in instalments
prescribed by him. The learned Judge directed that for the
first two years following the sale, Rs. 60 lakhs shall be
paid each year. Thereafter, half-yearly instalments of
Rs.30 lakhs shall be paid until the entire eat-nest money is
paid off. No interest was stipulated. It was provided that
on default of payment in any one instalment yearly or half-
yearly the official liquidator shall forthwith take
possession of the assets and the earnest money paid shall
stand forfeited. Certain other conditions were also
stipulated but it is not necessary to notice them for the
purpose of this appeal.
Complaining that the terms settled by the learned Company
Judge were too liberal to the purchaser and prejudicial to
the interest of the F.Is., an appeal was preferred by them
before the Division Bench. On a consideration of relevant
circumstances, the Division Bench came to the opinion that
it would not be appropriate for it to set aside the sale,
and that no useful purpose will be served by postponing the
sale of the assets any further. At the same time, it was of
the opinion that some more safeguards should be provided to
protect the interest of the F.1s: Accordingly, it effected
the following modifications in the terms of sale: (i) The
balance consideration namely Rs.7 crores 20 lakhs (the
earnest money of Rs. 80 lakhs was already deposited) shall
be paid in the following manner: for the first two years,
the instalments payable each year shall be Rs. 60 lakhs;
thereafter half-yearly instalments in a sum of Rs. 40 lakhs
each shall be paid till the entire consideration is paid
off. The first instalment shall be paid by 10th June, 1993
and the last instalment by 30th June, 2000 A.D. (ii) In case
of default in payment of any one instalment, the official
liquidator’shall be entitled to take possession of the
assets sold. In such an eventuality the entire earnest
money and other instalments paid till then shall stand
forfeited. (iii) Buxa shall provide a revolving bank
guarantee in favour of the official liquidator for a sum of
Rs. 60 lakhs till all the instalments are paid. The bank
guarantee shall be furnished within three weeks from the
date of the order and shall be kept alive till the entire
consideration is paid off. It Is not necessary to notice
the other terms and conditions. This order was made on
November 13, 1990.
1071
Aggrieved by the order of the Division Bench, F.Is.
approached this Court by way of a Special Leave Petition
(S.L.P. 14929/90), which was disposed of on 19.11.1990 under
the following order :
“Taken on Board on being mentioned. We have
heard Mr. Gopal Subramanium for the petitioner
and counsel for the respondents. We are of
the view that some of the allegations which
Mr. Subramanium makes can be appropriately
dealt with by the High Court in the case the
High Court is moved again but at present we do
not think it would be advisable to interfere
with the order of the High Court. We gather
today is fixed as the date of which the
possession of property would be transfered
from the official liquidator to the purchaser.
To secure the interest of the Financial
institutions the petitioner we are of the view
that until the High Court makes its order the
purchaser shall be taken to be the receiver
and shall be accountable to be a receiver.”
Accordingly the financial institutions filed an application
before the Division Bench requesting it to reconsider its
order. In this application, the F.Is. prayed that the order
dated 13th November, 1990 be recalled, the sale in favour of
Buxa be set aside or in the alternative Buxa be directed to
deposit the entire balance consideration of Rs. 7.2 crores
at once. It was submitted by the F.Is. that the company in
liquidation has been directed to be sold by the company
court free from all encumbrances that the financial
institutions have a charge for Rs. 8 crores on the assets of
the company in liquidation and the granting a period of 10
years for paying the balance consideration in instalments is
highly prejudicial to the interest of the F. Is. Not taking
adequate security from the Buxa for proper payment of
balance consideration, it was submitted, was also
prejudicial to their interest. At the time of arguments,
however, their counsel did not press the request for setting
aside the sale. His main submission was that Buxa be
directed to pay the entire balance consideration immediately
and that till the payment is made, it should be directed to
furnish a bank guarantee besides interest @ 15% per annum.
Alternately, it was submitted that the number of instalments
granted be reduced sharply with a provision for interest
thereon. The Division Bench disposed of the said
application by its order dated 20.2.1992. It held that (1)
the F.Is. (secured creditors) by their acts and conduct have
come within the winding, up and. therefore the
1072
assertion of their right as secured creditors outside
winding up proceedings cannot be accepted or sustained at
that stage. (2) The purchaser Buxa has taken possession of
the assets sold, has re-employed the workmen after entering
into an understanding with them and has also invested
substantial amounts in recommencing the production in the
factory. (3) In the above circumstances, the F.Is. cannot
insist upon repayment of the entire money due to them under
the deeds of hypothecation executed by the company in
liquidation. (4) The only question that survives for
consideration is whether the time for making the payment
should be curtailed and whether some interest should be
directed to be paid by the purchaser. The application was
disposed of with the following directions:
(a) The purchaser (Buxa) shall pay in the year 1992 a sum
of Rs. 80 lakhs in six bimonthly instalments payable on the
last day of February, April, June, August, October and
December.
(b) In the year 1993, the sum payable shall be Rs. 85
lakhs. In 1994, it shall be Rs. 90 lakhs and in 1995, Rs.
95 lakhs. In the year 1996 and thereafter, the annual
amount payable shall be Rs. one crore till the entire
consideration is paid off.
(c) The revolving bank guarantee shall be equal to the
amount payable in each of the said years.
(d) Along with the last instalment, the purchaser shall pay
a lumpsum of Rs. 25 lakhs as and by way of interest.
(e) The purchaser shall not encumber, alienate or transfer
assets purchased by him so long as the entire consideration
is not paid. This does not, however, prevent it from
raising monies-by hypothecation, mortage or by creating
charge on the said assets.
(f) In default of payment in any two of the bimonthly
instalments, the Official Liquidator shall take possession
of the assets sold and all the amounts paid till then shall
stand forfeited.
A few other directions were made which, not being relevant
herein, need not be noticed.
In this appeal it is contended by Sri Salve, learned counsel
for the appellants that the procedure followed by the High
Court for selling the
1073
assets of the company in liquidation is not fair and proper
and that its has caused grave prejudice to the interest of
financial institutions. He submitted that by granting such
liberal instalments, the “present price” of the assets sold
is no more than Rs. 4 crores, whereas the total amount due
to the financial institutions is more than Rs. 12 crores.
He submitted that either the sale should be set aside and a
fresh sale be held or the instalments prescribed should be
drastically reduced coupled with a provision for reasonable
interest on the balance consideration. On the other hand,
Sri P. Chidambaram, learned counsel for the purchaser
submitted that it is not open to this court at this stage to
effect any modification in the terms of the sale. The
purchaser in any event is not agreeable to any further
modification. If this court proposes to effect any
modification in the terms of sale, the purchaser should be
left free to withdraw his offer and to walk out. The
learned counsel submitted that Buxa’s offer of Rs. 6 crores,
which was ultimately raised to Rs. 8 crores, was subject to
the conditions contained in its offer. True it is that Buxa
accepted the terms and conditions stipulated by the Company
Judge which were different from those stipulated by it. But
this was by its consent. As a matter of fact, with a view
to save its investment which it had already made by the date
of the judgment of the Division Bench, it even agreed to
certain further modifications being made by the Division
Bench on both the occasions. The purchaser is not now
agreeable to any further modification since in such a case
it would not be possible for it to run the industry or to
pay the consideration. He submitted that the purchaser has
invested huge sums of money and has reemployed almost all
the workers and that it is not in a position to bear any
further financial burden.
(11) Before we deal with the contentions urged by the
learned counsel, we feel constrained to make certain
observations with respect to the terms of the sale notice
issued by the court. While we agree that there is no
standard or uniform pattern to be followed in such matters,
it would be appropriate for the court to adopt such
procedure as would avoid a situation where the courts is put
to the task of negotiating the terms of sale with the
parties. That would not be consistent with the dignity of
the court. It would also give room for avoidable criticism
and comment. It would have been- better if the sale notice
itself had prescribed the number of instalments which would
be granted to the purchaser, besides other terms and
conditions and then invited offers on that basis.
Alternately, the court could have invited the offers subject
to such conditions as the offerers may
1074
prescribe and then have them evaluated by a qualified person
and select the most appropriate one. If none of them are
found acceptable and if the court thought it appropriate, it
could also allow the bidders to submit revised offers and
then have them evaluated. We are not saying that these are
the only two methods. There may be others. Our object is
only to emphasise that any method devised should be such as
to obviate the necessity or occasion for the court to
negotiate the terms and conditions of sale with the party or
parties. The sale notice in this case merely stated that
the balance consideration may be paid in instalments as
would be fixed by the court. The number and duration of
instalments and other allied terms like bank guarantee,
nature and terms of default clause, payment of interest on
instalments were all left to be determined by the court. It
is true that in this case the bid of Rs. 6 crores was got
enhanced to Rs. 8 crores, with lesser number of instalments
that offered by the purchaser all as a result of persuasive
efforts by the Company Judge. Even so, it has given room
for the argument that had it been known beforehand that so
many instalments would be granted without stipulation of
interest, several higher offers could have been received.
We are not prepared to agree with Mr. Chaidambaram, learned
counsel for Buxa that this court has no power at this stage
to modify the number of instalments. Nor do we see any
basis for Buxa to take up the stand that either the existing
terms should be affirmed by this court or it should be
allowed to walk out of the deal altogether along with its
investment. This it cannot do for more than one reason.
Firstly, the sale notice itself stated that “the balance
amount of the sale price may be paid by instalments as would
be fixed by the Hon’ble court, Calcutta i.e., deferred
payment of instalments will be considered”. What the High
Court of Calcutta could do, can equally be done by this
court sitting in appeal. Secondly, the purchaser had
repeatedly submitted before the Calcutta High Court that it
is prepared to abide by such conditions as may be imposed by
the Court. We may refer to the stand taken by the counsel
for the purchaser before the Division Bench as recorded in
its order dated 13th November, 1990. It reads thus: “Mr.
Mukherjee, learned Advocate appearing on behalf of the
purchaser has submitted that the sale in this case was sale
of assets of the Mill as a going concern and not merely sale
as scrap. The Court had power to grant such instalments
whether it was specifically provided in the terms and
conditions as advertised or not. In this connection he has
drawn our attention to clause (10) of the Terms. He has
1075
submitted in the present case the court had granted such
instalments for such period and on such terms after
considering all the facts..(para 7).. He has submitted that
in any event if this court is not inclined to approve the
confirmation of the sale on the terms and conditions as
prescribed by the Trial Court, it may allow such
confirmation in favour of his clients to remain but provide
for some modification and/or addition to such term and
conditions if this court think it fit and proper. In this
context, he has submitted that so far as the instalments are
concerned, the quantum may be increased so that all the
instalments are paid by the year 2000 A.D instead of 2002
A.D. as directed by the impugned order. So far as the
guarantee is concerned, he has submitted that the court can
provide for similar guarantee as provided for in other cases
for sale by court in cast of default. He also submitted
that it may be provided that the charge of the secured
creditors be shifted to the sale proceeds and that the sale,
which was free from encumbrances, should be subject to this
that his clients should approach the financial institutions
for further financial held (para 8) …. ” Even before the
second Division Bench which passed the impugned order, the
purchaser did not take up the stand that the court has no
power to modify the terms and conditions of sale. All that
its counsel submitted was that having regard to the facts
and circumstances of the case, the instalments should not be
reduced. The impugned order records the contention of the
purchaser’s counsel in the following words: “It is submitted
by Mr. Mukherjee, learned counsel for the purchaser that
having regard to the commitments of the company and the fact
that former employees have been re-employed and the company
has to consistently run on a profitable basis, it would not
be possible to reduce the instalments any further.”
Having considered and taken into account all the relevant
facts and circumstances of the case including the interest
of the financial institutions, the interest of the workers
who have since been re-employed by the purchaser and the
fact that the purchaser has already invested substantial
amount to revive the company, we are of the opinion that
certain modifications should be made in the number of
instalments in which the balance consideration shall be
paid. But before we do so, we must refer to a particular
fact which discloses the unfair conduct of the purchaser
(Buxa). According to the impugned order the purchaser had
to pay a sum of Rs. 80 lakhs in the year 1992 in bimonthly
instalments. It paid only a total sum of Rs. 28 lakhs. The
excuse now put forward for nonpayment of the
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balance of 52 lakhs is the order of ‘status quo’ passed by
this court- Having entertained the S.L.P. filed by the
financial institutions, this court (K. Jayachandra Reddy
and late R.C. Patnaik, JJ.) passed the following order on
14.5.1992:
“Heard both the parties.
Status quo to be maintained.
The second respondent in SLP(C) 5377/92 shall
not encumber, alienate or transfer the assets
of the company in liquidation purchased by
him. Respondent No.2, shall, however,
maintain accounts and, as and when required,
produce the same before the Court.
Post the matter before an appropriate Bench on
21.7.1992.
Meanwhile, if the parties alone chose to file
affidavits, they may file.
As the matter before us is at an interlocutory
stage, it need not be treated as part heard.”
It is evident from a reading of the order that the order to
maintain status quo did not and could never have meant stay
of instalments payable by the purchaser in accordance with
the impugned order. To say so would amount to placing a
totally unreasonable and unwarranted interpretation upon the
said order. It would be unfair above all. The purchaser
has been put in possession of the assets purchased by him
and no fetter whatsoever was ever placed by the said order
upon his possession or enjoyment of the property purchased
by him. The idea behind the order was that the purchaser
should not transfer, alienate or encumber assets purchased
and that he should maintain the accounts and produce them
before the court. The order directing that status quo to be
maintained has to be understood in the said context. We
must say that after some debate, Mr. Chidambaram agreed
fairly that his client’s interpretation of the said order
was wrong, that he retreats his default and that he is
prepared to pay the said amount of Rs. 52 lakhs along with
such interest as may be prescribed by this Court. It is
directed that the purchaser shall pay the said amount of Rs.
52 lakhs due for the year 1992 in terms of the impugned
order along with an amount
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of Rs. 6 lakhs representing the interest on the said amount,
consolidated i.e., a total of Rs. 58 lakhs on or before 5th
March, 1993. This payment shall be in addition to such
other amounts as may be payable in accordance with the
impugned order as modified by us herein.
Now coming to the modification of the terms imposed in the
order under appeal, the only modification we wish to make is
in the number of instalments. After the payment of the
aforesaid Rs. 52 lakhs due in the year 1992, the total
balance consideration will be Rs. 5.80 crores. This amount
shall be paid in full by the end of the year 1996 in equal
bi-monthly instalments. The instalments shall be payable by
the last day of February April, June, August, October and
December in each year. This means that each instalment,
excepting the last instalment, shall be in a sum of
Rs.24,16,000. The last instalment shall be in such sum as to
make up the total shortfall payable on that date i.e., Rs.
20,16,000. There shall be no other modification in the
terms and conditions prescribed in the order under appeal
including those relating to default and interest. Having
regard to the facts and circumstances of the case, there
shall be no order as to costs.
For the reasons given above, the appeal arising from S.L.P.
(C) No. 6736/92 filed by the purchaser is dismissed. No
costs.
G.N.R.
Appeal dismissed.
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