The Central Investment Pvt Ltd. vs M/s Navlakha Hosieries Co. Ltd.

Heard on I.A. Nos.1693 of 2022; 1696 of 2022; 1698 of 2022; 1700 of 2022; 1702 of 2022; 1704 of 2022; 1705 of 2022; 1709 of 2022; 1741 of 2022; and 1743 of 2022 as well as perused the Document Nos.200/2025 and 5443/2025 as well as OLR No. 33/2024.

All these applications are with respect to property of the Company under Liquidation situated in Survey No.510 (510/1, 510/2, 510/3, 510/4, 510/5, 510/6 and 510/7). The issue involved is the auction of property and whether, the persons who are in possession of the subject property (and also participated in auction though residential society formed by them) can be permitted to match the bid placed by the highest bidder in view of the earlier orders passed by co-ordinated bench of this Court and whether, the sale deeds earlier executed in favour of these persons can create an equity in their favour.

It is expedient to first give brief background of the dispute in hand so as to bring clarity to the dispute and its adjudication.

The petitioner namely Central Investment (Private) Limited, 110, Sanyogitaganj, Indore filed Company Petition in terms of Section 439 of the Companies Act, 1956, thereby invoking provisions of Section 433(e) of the said Act. It was stated in the application that the Company under Liquidation Navlakha Hosieries Limited was incorporated on 02.01.1947 under the provisions of erstwhile Indore Companies Act (Act No.VII of 1940) as Public Company, Limited by 97500 Ordinary Shares of Rs.10/- each and by 25,000 deferred shares of Rs.1/- each. The registered office of the Company was at Maharani Road, Indore.

The Company was established to start a modern hosiery factory and to have spinning plant and ancillary work. The Company started its business, for which it arranged finance from the petitioner. As the Company under Liquidation was indebted to the petitioner in the sum of Rs.53,543.62/- in terms of Execution Case (C.O.S. No.29/1950) along future interest of Rs.1,987/- total Rs.55,530.62/-, thus, the present Company Petition was filed for recovery of part of the said dues for the reason that the goods, which were pledged by the Company under Liquidation to the petitioner Company fetched only an amount of Rs.2,422/-.

The case was initially registered as Company Petition No.1/1961. The Court initially passed an order on 07.08.1961 for winding up of the Company, pursuant to order passed in the original Company Petition, the present Company Petition was registered after the order of winding up (as per the prevalent procedure at the time). Pursuant to the order of winding up of the Company under Liquidation, Official Liquidator attached to this Court was appointed as its Liquidator. The Official Liquidator took charge of affairs of the Company and started the process of liquidation.

As Official Liquidator took charge of the assets of the Company and as by virtue of provisions contained in sub-section (2) of Section 456 of the Companies Act, 1956, the property and effects of the Company under Liquidation vested in the Company under the deeming provision, which resulted in disputes with regard to land and possession of around ten persons to whom the land has been sold by one Dhanna by executing registered sale deeds and further sale deeds to these persons by the purchasers. The Official Liquidator claimed that the property belongs to the Company, however, several persons claimed that registered sale deeds on different dates were executed by the concerned persons in their favour, details of which are as under: Khasra Sr. Purchased Registry Applicant IA No. claimed/ No. from dated area IA No. 510/5 1 Sh. Ramesh Panchal Fatima bi 13/07/1978 1693/2022 2438 sq.ft Sh. Dilip Verma, IA No. 510/3 2 Fatima bi 04/07/1983 Sh. Mithlesh 1696/2022 1980 sq.ft. Sh. Govind Singh IA No. 510/2 3 Dhanna 31/01/1974 Chouhan 1698/2022 7920 sq.ft IA No. 510/6 Sunder 4 Smt. Sadhna 26/11/2009 1700/2022 1485 sq.ft Bai IA No. 510/5 5 Sh. Matharilal Fatima bi 27/03/1991 1702/2022 1590 sq.ft No Sh. Ramesh Karnavat IA No. 510/1/5 Registry 6 Dhanna (claiming legal 1704/2022 Not Vide representative of Dhanna) mentioned agreement 23/10/1980 Babulal IA No. 510/5 No 7 Sh. Chandrashekhar Pukhraj 1705/2022 1325 sq.ft Registry Jain Smt. Veena Devi IA No. 510/5 8 Fatima bi 08/06/1978 Pooranmal Jain 1709/2022 1590 sq.ft 510/5 Sangeeta Sh. Dilip Prajapat & IA No. 9 Not W/o 02/06/2011 Hukum 1741/2022 mentioned Sanjay 510/4, IA No. 10 Smt. Sunderbai 510/6 Dhanna 30/01/1974 1743/2022 0.76 deci.

Some of the persons in possession of the property above mentioned filed I.A. No.8044/2018 thereby praying for permission to intervene in the matter, however, said application was dismissed by this court vide order dated 10/02/2020. The Court passed order to the effect that, "after passing of the winding up order, there is no question of granting such a prayer for intervention in the company petition". However, the Court observed that, "if the applicant has any interest in any of the property of the company under liquidation then he/she can file an appropriate application seeking protection of his / her interest".

Thus, the applications as quoted in above table came to be filed. The Official Liquidator, respondents to these applications by filling OLR No.14/2022 thereby contending that the Company under Liquidation is having land ad-measuring 15.119 hectare in Survey No.510/1 to 510/7 situated at Meghnagar, District Jhabua, out of which 4.815 hectare was agricultural land and 0.304 hectare was diverted land. It was further stated in the said OLR that out of 14.815 hectare, State Government had acquired an area of 13.302 hectare of land and remaining 1.513 hectare was marked as "Aabadi Kshetra". The possession of 13.302 hectare land was handed over to the State Government by the Official Liquidator on 06.07.1985. Thus, as per OLR No.14/2022 the remaining land with the Company under Liquidation is 0.384 hectare (0.080 hectare agricultural land and 0.304 hectare non-agricultural land). The present dispute relates to this 0.080 Hectare land.

This Court after considering rival submissions passed an order on 25.07.2017 thereby directing for valuation of the above said property of Company under Liquidation, pursuant to which valuer MPCON Ltd. carried out the valuation of the subject property in the year 2018 and reported Fair Market Value of Rs.2,011.77 Lakhs. Subsequently, the Registrar, Jhabua vide letter dated 31.01.2024 intimated the current value of the land comprised in above mentioned 9 survey numbers (0.080 Hectare) at Rs. 56,86,080/-. The Official Liquidator also contended in OLR No.14/2022 that the person who executed sale deeds in favour of the applicants in the above mentioned IAs namely Dhanna was shown as Chowkidar by the Tehsildar, Meghnagar, District Jhabua as per his letter dated 06.01.2007. Thus, the Official Liquidator contended that the said Dhanna was neither the possession holder nor was having any power / authority to sale / transfer the subject property of the Company under Liquidation to anyone including present applicants. It was further contended that Dhanna had earlier also raised claims against the property in question but they were rejected.

Before adverting further to this issue, it will be apposite to point out at this stage that on 24.06.2003, this Court passed an order whereby claim filed by Sunder Bai based on sale deed was considered and after considering the provisions of Section 446 of the Companies Act, 1956, the Court observed that earlier Sunder Bai made payment to Dhanna and then she has settled the dispute by paying the price of the land to the Official Liquidator. She submitted that she is in possession of 0.076 hectare land bearing Khasra No.510/4. The Court held that everything which has been done was (and still is) without sanction of the Company Court, hence is a nullity in view of the provisions of Section 446 of the Companies Act, thus, the Official Liquidator was directed that after verifying the proof of making payment and after satisfying that the payment has been made by Sunder Bai, the same shall be refunded to her within a month.

This order was challenged by Sunder Bai by filing Company Appeal No.2/2003, which was allowed by Division Bench of this Court vide order dated 15.05.2007 thereby remitting the matter back to the Company Court, however, the Official Liquidator was restrained from taking action against Sunder Bai otherwise than in accordance with law.

This Court then considered the fact situation and also the OLR No.14/2022 and vide order dated 16.01.2024 the Court noted that the applicants are in long possession since more than 46 years and the fact that the Government could not take the possession of the land under dispute having an area of 0.80 hectare, the Court observe that one more effort deserves to be made to arrive at a settlement between those persons and the OL / Government. As such, the co-ordinate Bench of this Court directed for obtaining current market value of the land; the total liability of the Company under Liquidation; and location of the land. Pursuant to this order dated 16.01.2024 the Official Liquidator had filed OLR No.14/2024, whereby it was provided that as per the Valuation Report the current value of the property under dispute is Rs.56,86,080/-.

The Official Liquidator by way of this OLR also pointed out in para 6 the earlier order passed by this Court on 07.02.2003 in as much as taking note of the fact that there is no dispute that there are no liability on the company now and the OL has a surplus amount for distributing amongst the contributories / shareholders of the Company. It is thus, pointed out by the Official Liquidator that except the present dispute there is nothing to be decided in the present Company Petition.

Considering OLR No.14/2024, this Court passed order dated 22.04.2024, whereby it was observed that Official Liquidator has sought permission to conduct e-auction to get the maximum price of the property in question. The Court also noted the submission made by the counsel for the persons, who are in possession of the land in question that they are ready to pay amount as per valuation to get sale deed executed in their favour. The Court however, observed in para 3 that let the price be obtained by conducting e-auction then this Court may consider the proposal of the persons in possession whether they are ready to meet out the price. As there was some typographical error in the order dated 22.04.2024, this Court on 08.07.2024 passed order correcting the reserve price of the property.

Pursuant to orders dated 22.04.2024 and 08.07.2024, advertisement of e-auction sale was issued inviting bids for sale of assets of the Company in Liquidation for freehold land admeasuring 0.384 hectare situated at Khasra No.510/1/5, etc. On 06.08.2024, the last date to submit EMD was 22.08.2024 and date of e-auction was 29.08.2024.

The Reserve Price was fixed at Rs.56,86,080/-. The Earnest Money Deposit was Rs.5,68,600/-. The Auction Conducting Agency received three offers pursuant to the above said NIT. These three bidders were (i) Shri Vinayak Rahwasi Sahkari Sanstha Maryadit, Meghnagar (the society formed by the persons who are in possession of the land in question and who have filed present applications), (ii) Shri Pradeep Kumar Bafna (highest bidder, intervenor) and (iii) Shri Sanjay Jain. The highest offer received was Rs.94,86,080/- from the intervenor Mr. Pradeep Kumar Bafna (in I.A. No.6095/2025).

Thus, the Official Liquidator sought appropriate directions from this Court regarding the bid. The matter was considered by this Court on 03.07.2025. On the said date the counsel for the persons in possession of the property, while referring to order dated 16.01.2024 and 22.04.2024, submitted that this Court had earlier clarified that effort be made for settlement of the dispute between the parties and also that after fetching price in e-auction, it will be seen whether the persons in possession are ready to match the price. Hence, the persons in possession are entitled to match the price in view of the earlier orders passed by co-ordinate Benches of this Court. However, this was only an oral assertion without there being any document on record. As such, the counsel sought time to file affidavit for submitting in writing that it is ready to match the offer. Accordingly, one week's time was granted on 03.07.2025

On 07.07.2025, the applicant filed an affidavit before this Court through their registered Society and its elected representatives supported by a resolution, whereby they proposed to pay an amount which is higher by Rs.1 Lakh form the amount quoted by the highest bidder.

Contesting this, the highest bidder also filed I.A. No.6095/2025 thereby contending that in terms of Rule 273 of the Companies (Court) Rules, 1959, the properties of a company under liquidation shall be sold through public auction or by inviting sealed tenders or in such manners as the Judge may direct and as the Court directed for e-auction, the auction has been held in which the persons in possession of the property have also participated through society and not individually. The intervenor, highest bidder, has fairly participated and adequate price of Rs.94,86,080/- has been offered. As such, in view of the law as laid down by the Hon'ble Apex Court in the case of Navlakha & Sons Vs. Ramanya Das & Others reported in (1969) 3 SCC 537 , the sale should be confirmed and the possession holders should not be allowed to make counter offer against the highest bidder.

The persons in possession of the property in question then filed reply vide Document No.5443/2025 thereby contending that the highest bidder is also is similarly situated person. He had also purchased some of the property adjoining to the property under question through registered sale deed executed by the Official Liquidator with the permission of the Court. Thus, it was contended that the said person is only trying to take leverage of situation as he ultimately intends to sale out the said property to the persons in occupation. It was further contended that in view of the orders passed by this Court on 16.01.2024 and 22.04.2024, the Court never intended to sale the property in question by e-auction but the objective of e-auction was to fetch the maximum market price of the property.

Learned counsel for the persons in possession submits that the applicants are in possession and occupation of the land in question for more than 46 years, where several homes and shops are constructed. Not only this, they have paid double price first to the initial seller Dhanna and then to the Official Liquidator in the year of 1980 when the agreement dated 23.10.1980 was executed between the members of the applicant society (persons in possession of the land) and Official Liquidator. He submits that it was agreed by the said agreement that sale deeds will be executed in favour of those persons for a total sale consideration of Rs.21,000/-, out of which an amount of Rs. 14,000/- was already paid on the date of agreement itself. The remaining amount was also paid within one month in terms of the agreement. He further submits that the in order to protect their possession, they have still resolved to make payment the third time matching the market / auction price in the interest of settlement.

He submits that present is a peculiar case where equity is in favour of the persons in possession for the reason that they cannot be said to be encroachers or illegal occupiers of the land. They have bona fidely purchased the land in question from Dhanna by paying adequate sale consideration on due execution of registered sale deed. They were not in the knowledge of the fact that the said person was not having title of the property, however, when it came to light, they again agreed and paid the amount of settlement to the Official Liquidator in the year of 1980 as per aforesaid agreement. Thus, they continued to remain in possession of the property for such a long period of 46 years.

He further submits that present is a case which cannot be equated with an ordinary or regular case. It has peculiar facts to itself and by considering this, this Court vide order dated 22.04.2024 observed in para 3 that after obtaining price by conducting e-auction, the proposal of the persons in possession will be considered that whether they are ready to meet out the price and thereafter, the company petition will be finally disposed of. He thus, submits that the order passed by co-ordinate Bench of this Court makes it imperative that the persons in possession be given an opportunity to met the highest bid.

Learned counsel for the highest bidder submits that he has participated in the proceedings fairly and bona fide. A Notice Inviting Bid was issued. Bids were submitted by three persons, out of them present applicant is the highest bidder. In the present matter it is also not the case that the price offered by the present applicant is not adequate. He submits that the value of the property was valued by the valuer at Rs.56,86,080/-. As against this, the present applicant has offered an amount of Rs.94,86,080/-, thus the price is adequate. He further submits that in view of the settled position of law the present occupiers should not be permitted to intervene in the auction process as held by the Hon'ble Apex Court in the case of Navlakha & Sons (Supra).

Learned counsel for the Official Liquidator repeated submissions made by him in OLR No.33/2024. It has been stated by the learned counsel that the only dispute which remains in the present Company Petition is with respect to the auction of the property situated in Survey No.510. He submit that there is no other liability and the moment this issue is closed, the Company Petition can be disposed of by directing dissolution of the company.

Heard learned counsel for the parties and perused the record.

As emerges from the facts as recorded herein above, the persons in occupation of the properties under auction are in possession by virtue of sale deeds executed in the years of 1974 to 1983. It is also not under dispute that Dhanna posed before them as the title holder of the property and executed the sale deed and also that earlier in the year of 1980 an agreement was executed between the Official Liquidator and 7 other persons on 23.10.1980. However, this Court is not in an agreement with the submissions made by the learned counsel for the persons in occupation to the effect that this Court intended to fetch the maximum price by directing e-auction and the objective was not to sale the property in e-auction. In the considered view of this Court, this is not the purport of the order passed by this Court 22.04.2024. The intention of the Court was to ensure that the property fetches the highest price, though the court observed that it will consider the proposal of the persons in possession whether they are ready to match the the price, the co-ordinate Bench of this Court observed in para 3 of the order dated 22.04.2024 following :

Thus what the Court really intended was to ensure that best price for the land, when it directed for e-auction. Inviting a bidder with predisposition of mind that only bid will be sought with no sale cannot even be conceived to be a fare idea. The real intention was to sale to such person who offers the highest price. However, as coordinate bench of this Court has already decided to give an opportunity to the persons in possession of the property to match the highest price by the afore quoted order as such, in the peculiar facts of the present case, the Court is of the considered view that a balance of interest has to be worked out. However, balance of interest of all the participants in the bid has to be kept in mind.

This Court cannot remain oblivious of the settled position of law. The Hon'ble Apex Court in the case of Navlakha & Sons (Supra) has held in no uncertain terms that the sanctity of an auction proceeding cannot be tinkered with in a casual manner at the behest of a third person only for a higher offer. This Court has also passed a detailed order in this behalf in Company Petition No.12/2004. However, facts of this case are not only peculiar but also reflects a completely different picture than one would find in such cases usually.

The highest bidder, Mr. Pradeep Kumar Bafna in fact is sailing in the same boat, as pursuant to above referred agreement dated 23.10.1980, the O.L. had executed sale deed in his favour on 23.07.1985. Thus more or less he was also in the same position and he has also got the sale deed in similar manner. As such, it cannot be said that he has come to bid for the land in question completely unaware about the situation of the same, particularly the fact that the land in question is in possession of several persons and they have earlier got sale deeds and agreement with OL with respect to the said land. He is also aware of the fact that the persons in possession of the land in question are residing on the same for last more than 46 years and have constructed residential houses and shops thereon.

It is, thus clear that the highest bidder took a calculated risk, he put his bid knowing all the disputes regarding the land in question, being a similarly situated person.

In this view of the matter it cannot be said that the auction stood concluded when the intervenor was found highest bidder. The auction and the highest bid had already been put to qualification by the coordinate bench of this court when vide order dated 22.04.2024 it directed for consideration to see whether the persons in occupation of the land will be ready to match the bid. As such, in all fairness when the co-ordinate Bench has already observed regarding consideration of proposal to meet out the price, this Court has to consider a fair process so as to give equal opportunity to the highest bidder and to possession holders of the property in a fair manner.

Rule 273 of the Companies (Court) Rules, 1959 provides as under:

As such, the property can be sold through auction or by inviting sealed tenders or in such manners as the Judge may direct.

In the present case, in the considered view of this Court the best procedure for giving fair and equal opportunity to all the parties, it will be appropriate that highest bidder, persons in possession of the property and the others person, who originally participated in the e-auction process be given opportunity to bid in an open and live bid by physically remaining present at a designated place.

As such, it is hereby directed that all three persons, who originally made offers i.e. the persons in possession of the property through their registered Society, intervener Mr. Pradeep Kumar Bafna and other person Mr. Sanjay Jain (if still ready to participate) be invited for open bid physically on a date to be fixed by the Official Liquidator, which shall not be beyond a period of 60 days from the date of this order. As such, all the above applications are disposed of with following directions :

With the aforesaid, all the above mentioned I.As. and OLR No.33/2024 stand disposed of. List the case after ten weeks.