District Collector and Another vs Circar Paper Mills Ltd. (In Liquidation) and Others

B. Prakash Rao, J.—The State through its District Collector, Nellore and the concerned Mandal Revenue Officer are the appellants in this appeal, filed under clause 15 of the Letters Patent challenges the correctness of the orders passed by the learned single judge in Company Application No. 1231 of 2004 in R.C.C. No. 20 of 2000, dated December 30, 2004, whereby at the instance of the company in liquidation viz., M/s. Circar Paper Mills Ltd., through its official liquidator the application purported to have been filed u/s 457(1)(c) of the Companies Act, 1956, read with Rules 9 and 11(b) of the Companies (Court) Rules, 1959, seeking for permission to sell the properties in question and for other consequential reliefs was ordered.

The brief facts, arising out of the present proceedings, are that in respect of the said company an order of winding up was passed on February 14, 2001, by the learned single judge in R.C.C. No. 20 of 2000. Thereafter, on an application filed by the official liquidator, as per the orders dated December 13, 2004, the official liquidator was permitted to sell the said property by inviting sealed tenders by publication in newspapers. Accordingly, as evident from the record, the official liquidator filed a report on August 24, 2004, dividing the property into three segments and followed up by the advertisement in the newspapers. In response thereto, several offers have been given, and later in view of the interest shown by the bidders to quote composite offer of all the allottees together, the official liquidator fixed the aggregate amount at Rs. 6,05,50,000 and conducted the auction, wherein M/s. Jeevaka Kandasari Sugar Mills Ltd., Hyderabad, which is added as respondent No. 5 in this appeal quoted the highest consolidated offer of Rs. 780 lakhs and paid 20 per cent. of the offer by the cheque dated August 18, 2004.

In the meanwhile, the Mandal Revenue Officer issued a telegram to the official liquidator on August 17, 2004, claiming that an extent of acres 40.65 cents in Survey Nos. 445-A1, A-5, A-6, 525, 527 and 529A is assigned land, and therefore, it could not have been sold or alienated. However, admittedly the said land is in possession of the company in liquidation. Later, the said Mandal Revenue Officer and the District Collector, Nellore were impleaded. The official liquidator filed another report on October 12, 2004, pointing out that out of the total extent, an extent of acre 25.29 cents is a patta land and the other extent of acre 40.65 is an assigned land. There appears that no objection is expressed in the initial stage for proceeding with the alienation, and therefore, the entire auction was proceeded with and ultimately the sale virtually came to a final conclusion. The learned single judge by taking into consideration all these and other facts and checkered events, including the objections raised by the appellants herein, rejected the same and allowed the application filed by the official liquidator confirming the highest bid in favour of respondent No. 5 for an amount of Rs. 780 lakhs and with further directions to complete the formalities. While, allowing the said application, the learned single judge has taken into account the fact that all the while when the process is on even before the company court, no attempt has been made by the appellants herein to enquire into the purchases of the landed property by the company much earlier to 1986 nor even after the orders of winding up were passed by the company court. It is also to be noticed that by taking into account the market value as quoted by the appellants before the learned single judge and expression of no-objection for deposit of amount at such rate, i.e., at Rs. 1.50 lakhs per acre with the Government the learned single judge has also directed the said amount of Rs. 1.50 lakhs per acre to be deposited with the appellants herein out of the total proceeds. Therefore, the appellants cannot be permitted to take such objection and the same are not unsustainable.

Heard the learned advocate general and Sri Mr. M. Anil Kumar, Mr. C. Ramesh Sagar, Ms. Padma Sharanappa, Mr. M. Narender Reddy and Mr. P.V. Markandeyulu for the respondents.

The main contention urged on behalf of the appellants rests on the plea that the said property is an assigned land and therefore u/s 4(1)(b) of the Andhra Pradesh Assigned Lands (Prohibition of Transfer) Act, 1977, the same could not have been alienated, and further mere direction to deposit the said amount would not in any way cure the defect, and in view of the nature of the land, the learned single judge should have excluded the said extent from the alienation. There is a denial in regard to the consent or acceptance for proceeding with the alienation.

The aforesaid submissions were sought to be repelled on behalf of the respondents pointing out the various checkered events, and especially, the total lull on the part of the appellants herein without any proper proceedings or objections at the appropriate time, and therefore, the entire claim of the appellants is stated to be totally unsustainable.

On these and consideration of other submissions made on behalf of both sides and on perusal of the material, the point which arise for consideration is whether on the facts and circumstances the objection in regard to alienation of the landed property which is sought to be sold on behalf of the appellants is sustainable and its effect on the alleged auction and sale ?

The facts, which totally remained undisputed and un-controverted are that the said property was sold under a registered sale deed dated June 25, 1977, by the A. P. I.I. C. Ltd., in favour of Pennar Steels Ltd., vide document No. 1436 of 1977 and possession of the land was taken by M/s. Pennar Steels Ltd., on May 16, 1977, itself. Later, the land in Survey Nos. 521, 525, 527, 529, 445-A.1, 445-A.5 and 445-A.6 along with other buildings in the aforesaid lands was purchased by the company in liquidation, i.e., M/s. Circar Paper Mills under registered sale deed dated May 24, 1980, from one Balasada Venkata Janardhan son of Jagannada Rao. M/s. Pennar Steels sold the said property in Survey Nos. 445-A1, 445-A5, 445-A6, etc., to the said company in liquidation on February 8, 1986. Thereafter, the said company in liquidation obtained loan facility from the State Bank of India, State Bank of Hyderabad and Industrial Development Bank of India by mortgaging the said properties as a security in Survey Nos. 445-Al, 445-A5, 445-A6, 521, 525, 527 and 529A. Thereafter, the proceedings for winding up came to be initiated in R. C. C. No. 20 of 2000, and accordingly the winding up order was passed on February 14, 2001, and the official liquidator became the custodian of the property as contemplated u/s 456(1) of the Companies Act, 1956.

As already pointed out on July 13, 2004, the official liquidator was directed to sell of the properties and on July 29, 2004, sale ordered, this was followed by issuance of notice for the sale of property by the official liquidator by making up due publications of sale proclamation in the local newspapers in Eenadu Telugu daily newspaper on July 28, 2004 and Deccan Chronicle English newspaper on July 29, 2004.

At this juncture, the Mandal Revenue Officer appears to have initiated the proceedings purportedly under the provisions of the Andhra Pradesh Assigned Lands (Prohibition of Transfer) Act, 1977, on July 20, 2004, by issuing notice only to the company in liquidation, but no notice was given to the official liquidator. It is stated, since the company was being in liquidation the notice could not have been received by itself and that stood refused and followed by a substituted service of notice by affixing the notice of sale of the property on July 21, 2004. However, the Tahisildar passed an order on August 7, 2004, itself resuming the said property. Later, the Tahsildar chose to send a telegram on August 7, 2004, seeking for deletion of the said land from the sale. Apparently, there was no attempt on the part of the official liquidator to verify these aspects and the appropriate proceedings. There is no denial on its part on the fact that the lands are assigned lands and certainly this would be governed by the provisions of the law concerning the assignments. Yet the official liquidator has sold the properties and filed a report on August 24, 2004. At this juncture, the Tahsildar filed an affidavit before the company court on December 28, 2004, pointing out that the property is valued between Rs. 50,000 to Rs. 1,50,000 per acre. Thereafter, the District Collector and Tahsildar were brought on record suo motu as per the orders of the company court on December 13, 2004, in R. C. C. No. 20 of 2000. No doubt, except making a claim that it is an assigned land and therefore it could not have been sold under the provisions of the Andhra Pradesh Assigned Lands (Prohibition of Transfer) Act, 1977, the appellants have not evinced any interest nor came up with an appropriate proceedings to countenance the proceedings before the company court. However, either way such silence or inaction from both would not make it legal where it is illegal.

For convenience sake, the relevant portion of the said Act is extracted below:

Section 4.-...

The provisions of the Andhra Pradesh Assigned Lands (Prohibition of Transfer) Act, 1977, is a social welfare legislation and sufficiently well protected under the Constitution of India. Necessarily, it prevails over all other laws including the company law and therefore any act done in pursuance of the Companies Act, 1956, would not in any way hamper or discard the incidents, which follow in respect of any such lands which are assigned. The prohibition as contained therein as against alienation is complete and it has been now well established that any such act of alienation or meddling therewith is impermissible under the law and would be void. This Court repeatedly held that transfer of any nature in respect of assigned land is illegal and unenforceable. In this case, the State, no doubt had taken certain steps for resumption of the land in view of the violation of the conditions in the assignment. However, though it was late, the fact remains that there is no challenge to the said resumption proceedings nor there is any challenge by the company in liquidation pointing out or even by the official liquidator to dispute the correctness of the fact that the land in question is originally an assigned land. Once it is an assigned land irrespective of the course of the events or transactions of whatsoever nature, which may happen touching upon it, would not shed its shell and protective umbrella or assignment and the protection as contemplated under the law. Under the very provision, the State has ample powers to resume the lands and rest back. The State thus constitutes to hold over the reins over the land. There is no period of any limitation to divest of its whole right. Therefore, it cannot be said that merely because there has been certain laches on the part of the appellants herein or any of its representatives or officials, the legal instrument which has to be proved cannot be proved and would not hold water. The learned single judge had simply put the entire such inaction on the part of the State only at the instance of the appellants herein while rejecting its claim on the land, which runs quite contrary to the letter of the law and the incidents following. We are conscious of the directions given by the learned single judge for deposit of Rs. 1,50,000 per acre with the State however that itself would not in any way take out from the purview of the legal bar as contemplated under the law. Neither such a course is permitted under any of the provisions of the Act, and in fact, it would only amount to adding premium to the illegal act which is prohibited under the law. Nothing can be compensated towards relinquishment of sovereign power. Therefore, the respondents including respondent No. 5 herein, the auction purchaser cannot take any advantage of such conditions made by the learned single judge, nor they are entitled to make any claim.

For the aforesaid reasons, we are of the view that the entire action on the part of the company court through its official liquidator is trying to obliterate the incidents of an assigned land and trying to put to sale, are totally void ab initio. Hence, the appeal is accordingly allowed to the extent of the assigned land i.e., acres 40.65 cents situated in Survey Nos. 445-A1, 445-A5, 445-A6, 525, 527 and 529A of Kodurupadu village of Nellore Mandal and District. The application filed by the official liquidator u/s 457(1)(c) of the Companies Act, 1956, for permission to sell the land in question is dismissed and the alleged auction conducted subsequent thereto is set aside. However, we make it clear that the company can be proceeded against other assets, if any. No costs.