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IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2354 OF 2010 [Arising out of SLP(C) NO.5028/2006]

M/S. ARCHEAN GRANITES LTD. .......APPELLANT  

Vs.

M/S. RPS BENEFIT FUND LTD. & ORS. .....RESPONDENT(S)

O R D E R

Leave granted.  Heard the counsel.

2. The first respondent Company (‘Company’ for short),  

was the owner of an odd shaped (triangular) plot of land  

bearing No.23, G.N. Chetty Road, T. Nagar, Chennai measuring  

9315 sq. ft.  The first respondent had mortgaged the said  

property in favour of Bank of Madura Ltd. in the year 1998  

for a loan of Rs.60 lakhs. The first respondent decided to  

sell the said property to pay its depositors and the secured  

creditor.  It  took  out  advertisements  on  22.11.1998  and  

21.3.1999 for sale of the property. After considering the  

responses,  on  22.4.1999,  the  Board  of  Directors  of  first  

respondent passed a resolution to sell the said property to  

the  appellant  for  a  consideration  of  Rs.1.65  crores  and

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entered into an agreement of sale with appellant on the same  

day. In pursuance of it, the first respondent, under a Sale  

Deed dated 13.8.l999, sold the said property to the appellant  

herein for a consideration of Rs.1.65 crores. The sale deed  

recited that out of the sale price, Rs.95,80,275/- was paid  

to the vendor (first respondent); and as the property was  

subject  to  a  mortgage  in  favour  of  Bank  of  Madura  Ltd,  

Rs.69,19,725/-  was  retained  for  payment  to  the  said  Bank  

towards full and final settlement of the dues of the vendor.  

On  9.9.1999,  the  appellant  paid  Rs.10  lakhs  towards  the  

Bank’s dues. The appellant offered the balance amount due to  

the Bank by a demand draft under cover of its letter dated  

17.9.1999 with a request to the Bank to accept the same and  

discharge the mortgage.  

3. In  the  meanwhile  in  July,  1999,  Company  Petitions  

No.233 to 238 of 1999 were filed against the first respondent  

in  the  Madras  High  Court  for  winding  up.  By  order  dated  

7.9.1999, the High Court appointed the Official Liquidator as  

the Provisional Liquidator, to take over the assets of the  

company  into  custody.  In  view  of  the  pendency  of  the  

liquidation  proceedings,  the  Bank  refused  to  accept  the  

balance  amount  and  discharge  the  mortgage.  The  appellant  

therefore made an application to the High Court and sought  

confirmation and validation of the sale in its favour. It

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also sought permission to pay the balance money due to the  

secured creditor and receive the title deeds from the bank.  

4. The  learned  company  Judge  by  order  dated  30.4.2002  

dismissed  the  appellant’s  application.  The  learned  company  

Judge held that the transfer of the said property was made  

during  the  pendency  of  the  petition  for  winding  up;  that  

there was no material to show that the entire sale proceeds  

had  been  used  to  discharge  the  liabilities  of  the  first  

respondent company; that the payment of a deficit stamp duty  

of Rs.23,60,956/- in regard to the sale deed by the appellant  

without demur, demonstrated that the property was undervalued  

in the sale deed; and that the transaction was not bona fide.  

Consequently, the learned company Judge held that the sale  

was  void  under  section  531  A  of  the  Companies  Act,  1956  

(‘Act’  for  short).  The  appeal  filed  by  the  appellant  was  

dismissed by a Division Bench of the High Court on 7.10.2005.  

The said judgment is challenged in this appeal by special  

leave.  

5. The appellant contended inter alia that it was a bona  

fide purchaser for value; that the price paid by it was the  

prevailing true market value having regard to the peculiar  

shape and size; that when the property had earlier been put  

up for sale with a minimum bidding price of Rs.2.25 crores,

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it could not be sold due to want of response; that the sale  

was made in pursuance of a Board Resolution dated 22.4.1999  

and sale agreement dated 22.4.1999, for the benefit of the  

company and in the interests of the depositors; and that the  

High Court had misled itself by taking note of subsequent  

increase in land prices, ignoring the market value on the  

date of the sale.  

6. This Court issued notice on the special leave petition  

on 27.3.2006. During the pendency of the matter before this  

Court, there were a series of meetings among the creditor  

Bank (which by then was succeeded by ICICI Bank, the second  

respondent  herein),  the  official  liquidator,  and  the  

appellant to arrive at a mutually acceptable solution. On  

20.1.2010, the appellant arrived at an understanding with the  

secured  creditor  (second  respondent  Bank)  under  which  the  

Bank agreed to receive Rs.2.5 crores from the appellant in  

full  and  final  settlement  of  its  dues  against  the  total  

outstanding of Rs.3.8 crores (as on 31.12.2009) provided the  

entire amount was paid on or before 31.3.2010. At a meeting  

held on 5.11.2009, the appellant also offered to pay a sum of  

Rs. two crores to the Official Liquidator representing the  

first respondent by way of settlement to validate the sale.

7. When the matter had come up for consideration earlier,

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it would appear that the Official Liquidator was required to  

ascertain the prevailing market value so that an equitable  

solution  could  be  found.  The  official  Liquidator  had  

ascertained  from  the  Sub-Registrar  (vide  Sub-Registrar’s  

letter  dated  14.9.2009)  that  the  guideline  value  for  

properties situated at G.N. Chetty Road was Rs.7632/- per  

sq.ft. As per the said guideline value, market value worked  

out to be Rs.7.11 crores. The official Liquidator also made  

further enquiries and assessed the current market value was  

Rs.10.67 crores. The learned counsel for Official Liquidator  

submitted that the property could be sold by public auction  

to secure even a better price for the property. On the other  

hand,  the  appellant  submitted  the  relevant  date  for  

ascertainment of market value was 13.8.1999. The appellant  

pointed  out  that  if  the  present  value  of  amounts  

invested/incurred by it on the property is calculated (by  

adding interest at Bank rate to the amounts spent), it would  

be around Rs.4 crores. He also submitted that the question of  

auctioning the property does not arise, as the property was  

already sold to appellant and the order of the High Court  

refusing to approve the sale was under challenge. It is also  

contended on behalf of the appellant that though it had a  

good case on merits, it was willing to settle the matter by  

paying a lump sum of Rs. two crores to the first respondent  

to put an end to the litigation. He stated that the same

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would be in addition to what the appellant has already paid  

plus what it has to pay to the Bank (Rs.2.5 crores).  

8. Having regard to the market value as disclosed by the  

enquires by the official liquidator, we are of the view that  

what has been offered may not be adequate.  Keeping in view  

the present value of the amount already spent/incurred by the  

appellant (that is the consideration plus stamp duty paid  

with the interest thereon), it would be fair and reasonable  

if the appellant is required to pay Rs.2.5 crores to the  

ICICI Bank in full and final settlement of the amount due to  

the  Bank  and  a  sum  of  Rs.3.5  crores  to  the  Official  

Liquidator  representing  the  first  respondent,  in  all  Rs.6  

crores. Having regard to the fact that the issue is being  

examined with reference to an application under section 531A  

of  the  Act,  and  the  facts  and  circumstances,  payments  as  

aforesaid would result in a permanent solution doing complete  

justice among the parties.  

9. In view of the above, we allow this appeal in part and  

set  aside  the  impugned  judgment  dated  7.10.2005  of  the  

Division Bench of the High Court confirming the order dated  

30.4.2002 of the learned Company Judge. The application by  

appellant for approval and validation of the sale deed dated  

13.8.1999 in its favour is allowed subject to the following:

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(a) The  appellant  shall  pay  Rs.2.5  crores  

(Rupees  Two  and  half  crores)  to  second  respondent  

(ICICI Bank) on or before 30th March 2010 in full and  

final  settlement  of  the  mortgage  loan  of  first  

respondent;  

(b) The  appellant  shall  pay  Rs.3.5  crores  

(Rupees  Three  and  half  crores)  to  the  official  

Liquidator representing the first respondent company  

on or before 30th March 2010, to enable the official  

Liquidator to disburse the amount in accordance with  

the direction of the Company Court.

(c) On  payment  of  six  crores  as  aforesaid,  

the second respondent shall deliver the title deeds of  

the  property  to  the  appellant  and  discharge  the  

equitable  mortgage.  On  such  payment,  the  official  

Liquidator  shall  also  deliver  possession  of  the  

property of the appellant.   

(d) If  the  payments  as  aforesaid  are  not  

made,  this  appeal  shall  stand  dismissed  and  the  

judgment of the High Court shall stand confirmed.     

  .......................J.

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     ( R.V. RAVEENDRAN )

New Delhi;               .....................J. March 09, 2010.                ( R.M. LODHA )