Official Liquidator Of Aryoday Spg. And Wvg. Mills Co. LTD. vs. The Manager, State Bank Of INDIA

Held

The Court held that Respondent No. 3's failure to deposit any amount towards the Rs. 42 Crore sale consideration, despite the Court's order and the lapse of six months, was unacceptable. The reason provided by Respondent No. 3, concerning Income Tax proceedings for Rs. 76 Lakh, was deemed insufficient to justify their inability to meet a commitment of Rs. 42 Crore and was not considered a genuine excuse. The Court found Respondent No. 3's conduct to be lacking in confidence and a waste of the Court's time and resources. Consequently, the Court cancelled and set aside the previous order ratifying the offer and confirming the sale. The Official Liquidator was directed to initiate the process of advertisement for a fresh sale within ten days, including brief newspaper and detailed e-portal/website advertisements. Valuation was to be obtained within ten days, followed by fixing the upset price and passing an order for advertisement, with the entire process to be completed within four weeks. The Official Liquidator was permitted to initiate appropriate prosecution, civil or criminal, against Respondent No. 3 as per the tender terms, and to recover any shortfall in sale consideration from them. A cost of Rs. 1,00,000/- was imposed on Respondent No. 3, ear-marked for the TLA members.

Facts

This matter concerns the liquidation of Aryodaya Spg. & Wvg. Mills Co. Ltd. The company had a freehold land parcel in Ahmedabad. After previous attempts to sell the property failed, M/s. Mufaddal Developers Private Limited (Respondent No. 3) offered to purchase it for Rs. 42 Crore. The Court accepted this offer on January 22, 2019, with specific deposit timelines and conditions, including that the purchaser would be liable for statutory dues. However, Respondent No. 3 failed to deposit any amount. The Official Liquidator filed a report seeking permission to initiate action against Respondent No. 3 for non-compliance and to proceed with a second sale. The Textile Labour Association (TLA) supported this, noting they had not received any funds.

Key Issues

1. Whether the Court should permit the Official Liquidator to initiate action against M/s. Mufaddal Developers Pvt. Ltd. for failing to deposit the sale consideration as per the order dated January 22, 2019, and to proceed with a second sale of the property? Petitioner (Official Liquidator) argued that Respondent No. 3 has not deposited any amount towards the sale of the property, despite the Court's order and the terms of the tender. They sought permission to initiate necessary action against Respondent No. 3 and to conduct a fresh sale. The TLA supported this, highlighting their lack of received funds and urging action against Respondent No. 3 for thwarting the court process. Respondent No. 3 argued that proceedings initiated by the Income Tax Department for a tax default of Rs. 76 Lakh prevented them from fulfilling their obligation. However, they admitted they were not in a position to fulfill their obligation and had not approached the Court for an extension.