Auction purchaser was to be relieved from auction process as property was not free from encumbrance

Case details: Asset Reconstruction Company (India) Ltd. v. Mahansaria Industrial Ventures (P.) Ltd. - [2021] 128 taxmann.com 210 (SC)

Judiciary and Counsel Details

• • Rohinton Fali Nariman, Navin Sinha and K.M. Joseph, JJ.
  • P.S. Narasimha, Sr. Adv., Rajesh Kumar-I, AOR, V.K. Sachdeva, Adv., Ms. Aditi Tripathi, Adv. and Nipun Sharma, Adv. for the Petitioner.
  • K.V. Viswanathan, Sr. Adv, Udit Mendiratta, Adv. R. Sudhinder, Adv., Ms. Ekta Bhasin, Adv. and Ashok Mathur, AOR for the Respondent.

Facts of the Case

In the instant case, land belonging to borrower company ‘JCT’ was secured asset with various lenders, the interest of those lenders was acquired by the appellant-reconstruction company, which then issued a notice under section 13(2) to borrower company.

The Appellant issued an auction notice for the sale of said land. Subsequently, the auction was conducted wherein the respondent emerged as a successful bidder. However, in other proceedings, a petition for winding up of borrower company was admitted and an Official Liquidator was appointed.

High Court Held

During the proceeding, the Gujarat State Sales Tax Department filed a claim of Rs. 268.28 crores before Official Liquidator wherein it contended that it had an overriding charge on the property. However, the High Court by the impugned order held that respondent-successful bidder was a third party and was interested in purchasing land which was free from all encumbrances and it would not bid for said land had he known that State itself was laying claim over it. Thus, the auction purchaser was to be relieved from the auction process and was entitled to receive a refund of part sale consideration made by it to the appellant.

Case Review

• • Asset Reconstruction Co. (India) Ltd. v. Mahansaria Industrial Ventures (P.) Ltd. [2021] 128 taxmann.com 209 (Punj. & Har.) (para 1) SLP dismissed.