Winding-up proceedings render challenges to prior asset auctions infructuous; claims must be pursued before the Liquidator.

M/s Kabra Agro Industries’ factory premises and property were auctioned by the Commercial Tax Department in recovery proceedings for outstanding dues. The auction was held on 20.12.2002, in which M/s Arjunlal Palia was declared the highest bidder for ₹1,02,00,000. A sale certificate was issued on 29.01.2003 and possession was delivered on 04.04.2003.

Subsequently, the Collector, Hoshangabad, exercising suo motu powers under Section 50 of the Madhya Pradesh Land Revenue Code, 1959, set aside the auction and sale certificate by order dated 23.12.2003.

The auction purchaser challenged that order, principally alleging lack of jurisdiction and breach of natural justice. The Single Judge dismissed the writ petition, finding irregularities in the auction process, including alleged violation of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (“SICA”) and non-compliance with the applicable auction procedure.

During the pendency of the appeals, the Company Court, in Company Petition No. 14/2001, accepted the BIFR reference and, by order dated 20.08.2009, directed the Official Liquidator to take over Kabra Agro Industries’ assets and proceed with winding-up. Review Petition No. 64/2010 against that order was dismissed on 09.03.2018.

The Division Bench also noted that W.A. No. 1138 of 2009 had been instituted and prosecuted without demonstrated authorisation from the State Government.

1. Whether the Collector had jurisdiction under Section 50 of the Madhya Pradesh Land Revenue Code, 1959, to interfere with the auction and sale certificate issued by the Commercial Tax Department.

2. Whether the auction and sale certificate were invalid because of alleged violation of Section 22 of SICA and non-compliance with the prescribed auction procedure.

3. Whether the auction purchaser was denied natural justice because the Collector cancelled the auction and sale certificate without affording an opportunity of hearing.

4. Whether the subsequent winding-up proceedings and appointment of the Official Liquidator rendered the appeals infructuous or otherwise left any surviving issue for adjudication.

5. Whether W.A. No. 1138 of 2009 was maintainable when it was filed and prosecuted without proper governmental authorisation and was directed against a private party.

The Court considered Section 50 of the Madhya Pradesh Land Revenue Code, 1959, concerning the Collector’s revisional or suo motu jurisdiction over revenue proceedings; Section 22 of SICA, which restricts specified recovery and coercive proceedings concerning a sick industrial company; and the principles of natural justice requiring an affected party to receive a meaningful opportunity of hearing before adverse action is taken.

The Court further applied the procedural rule that a private advocate cannot represent the State or its officers without due authorisation from the competent governmental authority.

It also applied the effect of winding-up proceedings: once the Company Court directs the Official Liquidator to take over the company’s assets, claims concerning those assets are to be dealt with in accordance with the winding-up process and under the supervision of the Company Court.

The Court observed that a writ ordinarily does not lie against a private party in the absence of a public or statutory duty.

The Division Bench did not finally adjudicate the auction purchaser’s jurisdictional, statutory, or natural-justice challenges on their merits. It treated the subsequent Company Court order directing the Official Liquidator to take over Kabra Agro Industries’ assets as decisive.

Since the disputed properties had become subject to the jurisdiction of the Company Court and the Liquidator, no effective relief could be granted in the writ appeals, and any claim of the auction purchaser was required to be submitted before the Liquidator.

In W.A. No. 1138 of 2009, the Court additionally found that the appeal lacked proper governmental authorisation because the Commercial Tax Officer appeared to have prosecuted it in his personal capacity and no material established authorisation for the private counsel.

The Court also noted the absence of a public or statutory duty enforceable against the private respondent.

The auction purchaser was granted liberty to submit its claim before the Official Liquidator in accordance with law.

W.A. No. 1138 of 2009 was also liable to dismissal for want of proper governmental authorisation and because it was directed against a private party without an enforceable public or statutory duty.