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In Re: Saran Engineering Company ... vs Unknown

High Court Of Judicature at Allahabad|25 July, 2001


JUDGMENT Ambwani, J.
1. By order dated 9-2-2000, the offer of Sri Prem Mohan Singh to purchase movable and immovable assets of the company (in liquidation) for a total amount of Rs. 1,50,00,000 was accepted, and the payment was directed to be made as suggested in paragraph 9 of the affidavit of Sri Prem Mohan Singh supporting the application. It was directed that the possession be given by the liquidator to the intending purchaser as soon as five per cent of the sale consideration is deposited and the first quarterly instalment is paid to the liquidator, and the bank guarantee for the remaining amount is furnished to the Official Liquidator and the Official Liquidator was directed to inform the court whether the remaining instalments have been paid on due date or not. On 20-10-2000, a notice was directed to be issued to Sri Prem Mohan Singh by registered post to show cause by 10-11-2000 as to why the earnest money of Rs. 7,50,000, deposited by him be not forfeited, as he had not complied with the terms of deposit. An application dated 10-11-2000 was filed with affidavit giving reasons as to why the applicant was not able to make balance payment. These reasons included the serious local law and order problems and the willingness of the bank to process the loan application of the applicant. The applicant had already paid earnest money of Rs. 7,50,000 and was required to pay balance amount of Rs. 1,42,50,000. He had been permitted to deposit entire amount in two equal quarterly instalments, the last of which was in December, 2000.
2. The Court considered his application and having regard to the facts and circumstances and after hearing Official Liquidator permitted the applicant to deposit the entire balance or sale consideration by 31-3-2001. It was clearly recorded in the order that if the amount is not deposited by the date fixed, Sri Prem Mohan Singh has agreed that interest may be charged on the balance remaining on simple interest at the rate of 12 per cent for the period for which the amount remained unpaid. This condition was to be subject to the deposit of at least one-third of the balance amount by 31-3-2001. It was directed that if the said one-third amount is not deposited by 31-3-2001, the earnest money will stand forfeited and the property will be re-advertised for sale. If one-third [amount] is deposited by 31-3-2001, the remaining amount was provided to be deposited in two equal instalments,--first of this was on or before 30-6-2001, and the second instalment was to be deposited on or before 30-9-2001. Interest due was directed to be deposited with last instalment and it was clarified that the interest will be calculated with effect from 1-1-2001.
3. Sri Prem Mohan Singh did not avail, the options either by depositing entire amount falling due on 31-3-2001, or instalments falling due on 30-6-2001, and 30-9-2001, along with interest of 12 per cent with effect from 1-1-2001. He moved an application on 2-5-2001 giving reasons due to which he could not deposit the amount. On this, the Court gave a last opportunity to him to deposit within 15 days one-third of the balance sale consideration along with 12 per cent p.a. simple interest on the unpaid amount calculated from 1-10-2001, that is, the last date for deposit of the first of the two original instalments. Time was thus granted upto 18-5-2001 to the purchaser for depositing one-third of balance sale consideration plus 12 per cent of interest on unpaid amount calculated from 1-10-2000 till the date of deposit to the Official Liquidator. It was made clear that if the amount is not paid, the earnest money shall stand forfeited and the property will be re-advertised for sale. It was directed that if the one-third amount is deposited by 18-5-2001, the remaining amount will be deposited with interest @ 12 per cent on the remaining unpaid amount from the date of deposit of the first instalment till the date of deposit in two equal five monthly instalments to be paid on or before 18-7-2001 and 18-9-2001. Other prayers were directed to be considered after the applicant showed his bona fides by depositing the one-third amount with an interest within 15 days.
4. Sri Prem Mohan Singh tendered a cheque of Rs. 51,00,000 with the Official Liquidator on 21-5-2001 to cover the instalment and collection charges of the bank and gave a letter that his account has that much of money and, therefore, the cheque will be encashed. The cheque was drawn on State Bank of India Morhowrah District Saran, Bihar. On 23-5-2001, when the matter came up for orders, the Official Liquidator pointed out that under the Government instructions, payment above Rs. 500 should be received only by bank draft and that the encashment of outstation cheque is likely to take a lot of time. In the circumstances, Sri Prem Mohan Singh, who was present through his counsel, was granted 15 days time to submit a bank draft of Rs. 50,82,500 (that is, amount of cheque minus collection charges) to the Official Liquidator and upon tendering of bank draft, the cheque was to be returned. The matter came up thereafter on 11-7-2001. On that date, Sri R.P. Agarwal, Advocate, appearing for Sri Prem Mohan Singh requested time to find out as to why the draft could not be deposited. The Court found that in the background, the Court was left with no option but to consider the matter for forfeiture of earnest money on 18-7-2001. Today when the matter was taken up, Sri Prem Mohan Singh is present in person with his advocate, Sri R.P. Agarwal. He has filed an affidavit giving reasons as to why he could not deposit the instalments. In paragraph 5 - he has stated that his father had been a prominent doctor, and practised at Morhowrah for 12 years and that he belonged in the same village having property of more than rupees one crore near the said factory, and so he imagined that bad people and miscreants could be controlled, but the atmosphere is changed and bad elements are harassing him. In para 7, he has stated that the workers had kidnapped the proprietor of Rohtak and Company and indirectly his own nephew, Munna Singh, and after one month, he could be recovered. In para 8, he has stated that District Magistrate, Chapra has given him S.L.R. Government police security for his protection. In para 10, he states that he approached State Bank of India for financial deferred payment to Court and C.C. limit for starting the mill. The bankers after taking all factors into consideration were ready, but when they came to campus for enquiry, they found miscreants' rough behaviour for not starting the mill and refused to consider the appeal for payment. In para 13, he stated that he had resigned from the post of Senior Deputy Manager, Bihar State Financial Corporation, to safeguard the assets and for arrangement of sale consideration. On this ground, a prayer was made for permitting him to deposit the entire amount with upto date interest by 30-9-2001.
5. Sri R.P. Agarwal, the counsel for the applicant, has submitted that the applicant has given detailed reasons due to which he could not comply with the payment schedule fixed by earlier orders. He has submitted that in case the applicant is permitted to deposit the entire amount by 30-9-2001 with 12 per cent interest, the Official Liquidator shall not suffer in any manner inasmuch as he will be adequately compensated with interest.
6. From the aforesaid facts and circumstances and background of the case detailed as above, and the reasons given in the affidavit of Sri Prem Mohan Singh filed today, I find that he has not only failed to avail repeated opportunities given to him to deposit the money in instalments, but has misused the leniency and accommodation given by this Court for permitting him to pay the amount. His request for deferment of payment by fixing instalments was accepted thrice by the Court. It appears that he is simply delaying the matter and is trying to take advantage of the fact situation and location of the properties. He is also aware of the fact that the earlier bid for sale did not materialise and that it may be difficult for the Official Liquidator to sell the property in future. It may be noticed that the applicant has resigned as Senior Manager of the Bihar State Financial Corporation, and has considerable properties in the same area where the factory is located. He is fully aware of the financial implication of the matter and the local condition. The reasons given by him, therefore, do not appear to be bona fide and genuine.
7. On the last three occasions, accommodation was granted to him and time was extended by providing instalments with clear understanding that if the first instalment was not deposited, the earnest money shall be forfeited. He had tendered a cheque of first instalment; but when he has required to produce bank draft, he could not deposit the same within 15 days or even till this day after about two months. A long time of about one year has been availed [of] by him during which the properties are deteriorating. In the circumstances, the Court is left with no option but to cancel the acceptance of the tender for failure to deposit the amount offered for sate, and to forfeit the earnest money of Rs. 7,50,000 deposited by Sri Prem Mohan Singh. Let the Official Liquidator submit his report, and draft for re-advertisement of the properties of the company for sale within two weeks.
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In Re: Saran Engineering Company ... vs Unknown


High Court Of Judicature at Allahabad

25 July, 2001
  • S Ambwani