Andhra Pradesh High Court – Amravati
Ravi Venkateswarlu vs M/S. Acqa Dev India Limited on 31 December, 2024
APHC010593242012
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3331]
(Special Original Jurisdiction)
TUESDAY, THE THIRTY FIRST DAY OF DECEMBER
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE SUBBA REDDY SATTI
CIVIL REVISION PETITION Nos.6529 and 4657 of 2012
CIVIL REVISION PETITION No.6529 of 2012
Between:
M/s. Acqua Dev India Ltd., and Others ...PETITIONER(S)
AND
Kode Basava Venkateswar Rao and Others ...RESPONDENT(S)
Counsel for the Petitioner(S):
1. SUDHAKARA RAO AMBATI
Counsel for the Respondent(S):
1. PRABHU NATH VASIREDDY
2. MADHAVA RAO NALLURI
CIVIL REVISION PETITION NO: 4657/2012
Between:
Ravi Venkateswarlu ...PETITIONER
AND
M/s Acqa Dev India Limited and Others ...RESPONDENT(S)
Page 2 of 15
Counsel for the Petitioner:
1. PRABHU NATH VASIREDDY
Counsel for the Respondent(S):
1. SUDHAKARA RAO AMBATI
The Court made the following:
COMMON ORDER
The Judgment Debtors 1, 2, and 5 filed C.R.P.No.6529 of 2012
against the order dated 31.07.2012 in E.A.No.356 of 2008, E.P.No.33 of
2003 in O.S.No.10 of 1998 on the file of the Principal District Judge,
Ongole.
2. C.R.P.No.4657 of 2012 was filed by the 4th respondent-auction
purchaser (auction-not confirmed) against the order dated 31.07.2012 in
E.A.No.357 of 2008 in E.P.No.33 of 2003 in O.S.No.10 of 1998 on the file
of Principal District Judge, Ongole.
3. a) One Kode Basava Venkateswara Rao, S/o Raghavaiah, 1st
respondent in C.R.P.No.6529 of 2012 and 4th respondent in
C.R.P.No.4657 of 2012 filed the suit O.S.No.10 of 1998 against M/s
Acqua Dev India Limited and its Directors for recovery of an amount of
Rs.6,61,027/- towards arrears of salary etc. The plaintiff filed I.A.No.2067
of 1998 under Order XXXVIII Rule 5 of CPC and got attached the landed
property of an extent of Ac.6.20 cents in different survey numbers of
Maddipadu village on 15.10.1998. The attachment was made absolute
on 12.10.1999. The defendants in the suit were set exparte and an
exparte decree was passed on 17.04.2003. The decree holder filed
E.P.No.33 of 2003 to execute the decree and an auction was conducted
Page 3 of 15
on 10.11.2004. The revision petitioner in C.R.P.No.4657 of 2012 became
the highest bidder. The executing Court did not confirm the auction.
b) One of the secured creditors filed Company Petition No.84 of
1996 on the file of the High Court of Andhra Pradesh against M/s Acqua
Dev India Limited, 1st defendant in the suit, under Section 433 (e), 434
(1) (b) and 439 of the Companies Act, 1956 for winding up of M/s Acqua
Dev India Limited. On contest, the company petition was allowed on
05.08.1999. M/s Acqua Dev India Limited was wound up under the
provisions of the Companies Act and the Official Liquidator was directed
to take charge of the properties including ten pumps.
c) Neither the pendency of the company petition nor the winding up
order was brought to the notice of the Civil Court. The defendants in the
suit were set exparte and the Civil Court passed an exparte decree. The
Directors of the 1st defendant filed E.A.No.356 of 2008 under Sections 47
and 151 of CPC to declare the decree dated 17.04.2003 as null and void.
He also filed E.A.No.357 of 2008 under Sections 47 and 151 of CPC to
declare the sale and other execution proceedings conducted by the Court
after 05.08.1999 as null and void.
d) In the affidavit filed in support of the petitions, it was pleaded
about the filing of the suit; attachment of property; exparte decree in the
suit; filing of company petition; passing of wound-up order dated
05.08.1999 and publication of the same in newspapers. It was further
pleaded that because of the wound-up order dated 05.08.1999, the
plaintiff has no right to proceed in the suit, unless and until he gets the
leave of the tribunal under Section 446 of the Companies Act. When
once wound-up order was passed, the Civil Court’s jurisdiction was
subject to leave of the tribunal/company Court and thus, the decree and
Page 4 of 15
judgment in the suit is without jurisdiction and it is void. It was further
pleaded that since the decree is void, the executing Court could not have
proceeded with the execution of the decree. The plaintiff got knowledge
of the order in company petition.
4. A counter was filed on behalf of the decree holder. It was
contended, interalia, that the defendants filed written statement and later,
they were set exparte. It was not pleaded in the written statement about
the company petition. The other Directors filed E.As. as well as I.As. and
they were dismissed. The petitioners earlier filed I.A.Nos.954 and 955 of
2007 and later not pressed the same.
5. The 4th respondent filed a separate counter. It was contended that
earlier E.A.Nos.919 and 920 of 2004 were filed and they were dismissed.
E.A.Nos.1517 and 1518 of 2004 for restoration were filed and they were
also dismissed. The 5th defendant in the suit filed E.A.Nos.1022 and
1023 of 2007 and they were dismissed. The petitioners filed an appeal
before the High Court vide ASSR No.10681 of 2008 against the judgment
and decree in O.S.No.10 of 1998 with delay and the same was dismissed
on 10.11.2010. The 4th respondent filed E.A.No.138 of 2011 to reopen
the E.P.No.33 of 2003 for confirmation of sale and eventually, prayed to
dismiss the petition.
6. During the enquiry, the 2nd petitioner examined himself as PW.1
and got marked Exs.A1 to A13. The auction purchaser examined himself
as RW.1 and no documents were marked. The decree-holder, except the
filing counter, seems did not contest.
7. The executing Court having held that the decree passed in
O.S.No.10 of 1998 violates Section 446 and 537 of the Companies Act,
Page 5 of 15
1956, however, dismissed E.A.No.356 of 2008. E.A.No.357 of 2008 was
allowed, in part, by setting aside the sale held on 10.11.2004 on
condition of judgments debtors depositing the decretal amount and 5% of
solatium on that amount, after deducting the amount already deposited,
within 2 months. It was further observed that the decree-holder is entitled
to withdraw the amount deposited by him together with interest accrued
thereon as well as 5% solatium. Against the said common order, the
above two civil revision petitions were filed.
8. Heard Sri Ambati Sudhakar, learned counsel for judgment
debtors/defendants 1, 2 and 5 and Sri Prabhunath Vasireddy, learned
counsel representing Sri Madhava Rao Nalluri, learned counsel for
auction purchaser.
9. Sri Ambati Sudhakar, learned counsel for judgment debtors would
submit that the decree in O.S.No.10 of 1998 is nullity because of wound
up order in C.P.No.84 of 1996 dated 05.08.1999. The leave from the
tribunal is necessary and the auction purchaser is aware of legal
proceedings. He would submit that in pursuance of the order in
E.A.No.357 of 2008, the entire amount was deposited and the sale is not
confirmed in favour of the auction purchaser. The auction purchaser has
no right to challenge the proceedings.
10. Per contra, Sri Prabhunath Vasireddy, the learned counsel would
contend that the execution application filed under Section 47 of CPC is
not maintainable and the order in C.P.No.84 of 1996 was not brought to
the notice of the Court. He would also submit that E.As. filed by the other
shareholders earlier were dismissed. The statutory appeal filed by the
revision petitioners/judgment debtors against the decree was dismissed
due to delay. He would submit that the plaintiff is not aware of the
Page 6 of 15
liquidation proceedings. Earlier C.R.P.No.4657 of 2012 was allowed,
however, the order was reviewed and the C.R.P. was restored.
11. Now, the point for consideration is:
Does the common order passed by the executing Court
order dated 31.07.2012 in E.A.Nos.356 and 357 of 2008 in
E.P.No.33 of 2003 in O.S.No.10 of 1998 on the file of
Principal District Judge, Ongole, suffer from any illegality
warranting interference by this Court?
12. As seen from the narration supra, there is no dispute regarding the
filing of suit O.S.No.10 of 1998 by the plaintiff against M/s Acqua Dev
India Limited and its Directors for recovery of amount towards arrears of
salary; attaching the properties in I.A.No.2067 of 1998 on 15.10.1998
and making attachment absolute on 12.10.1999 and passing of decree
on 17.04.2003 (exparte).
13. It is also an undisputed fact that one of the secured creditors filed
C.P.No.84 of 1996 seeking to wind up the company and an order passed
by the company Court wound up the company on 05.08.1999. In the
execution of the decree, without knowing the wound-up order, the
property was put to auction and it was knocked down for an amount of
Rs.9,10,000/-, however, the auction was not confirmed.
14. Whether the petition under Section 47 of CPC is maintainable or
not?
Page 7 of 15
15. It is appropriate to extract Section 47 of CPC, which reads thus:
Section 47: Questions to be determined by the Court executing
decree.
(1) All questions arising between the parties to the suit in which the
decree was passed, or their representatives, and relating to the execution,
discharge or satisfaction of the decree, shall be determined by the Court
executing the decree and not by a separate suit.
(2) xxx
(3) Where a question arises as to whether any person is or is not the
representative of a party, such question shall, for the purposes of this
section, be determined by the Court.
Explanation-1 — For the purposes of this section, a plaintiff whose
suit has been dismissed and a defendant against whom a suit has been
dismissed are parties to the suit.
Explanation II.– (a) For the purposes of this section, a purchaser of
property at a sale in execution of a decree shall be deemed to be a party to
the suit in which the decree is passed; and
(b) all questions relating to the delivery of possession of such property to
such purchaser or his representative shall be deemed to be questions
relating to the execution, discharge or satisfaction of the decree within the
meaning of this section.
16. Thus, a perusal of Section 47 of CPC, the Executing Court must
determine the questions relating to execution, discharge or satisfaction of
the decree in the execution proceedings only and not by a separate suit.
Explanation-1 of sub-rule (3) makes it clear that the plaintiff and
defendant, whose suit was dismissed, are parties to the suit.
Explanation-II makes it clear that a purchaser of the property and an
auction purchaser shall be deemed to be party to the suit.
Page 8 of 15
17. The objection as to the nullity of the decree has to be decided by
the Executing Court itself. A decree passed by a Court having no
jurisdiction over the subject-matter is a nullity and its validity can be
questioned before the Executing Court also. The executing Court can
decide whether the decree is void ab initio. The dispute whether a decree
is null and void due to the Court’s lack of jurisdiction has to be
necessarily decided under Section 47 of CPC. Immadi Laxmi Vs.
Sreyabhilashi Chit Funds1. Sarwan Kumar Vs. Madanlal Agarwal2.
Dhurandhar Prasad Singh Vs. Jai Prakash University 3 . Vasudev
Dhanjibhai Modi Vs. Rajabhai Abdul Rehman4.
18. The question whether the provisions of Section 47 of the Code of
Civil Procedure can be invoked in the case of an ex parte decree and can
a distinction be drawn between an ex parte decree and a decree on
merits for invoking the provisions of Section 47 of the Code of civil
Procedure, was answered in affirmative by the Division Bench of the
composite High Court in Kolli Purushotham Chowdhary Vs. Sri Balaji
Finance Corporation and Anr5.
19. The Hon’ble Apex Court in Desh Bandhu Gupta Vs. N.L.Anand 6,
observed as follows:
“17. Under Section 47 all questions relating to execution, discharge or
satisfaction of the decree should be determined by the Executing Court
alone. The pre-sale illegalities committed in the execution are amenable to
the remedy under Section 47. Post-sale illegalities or irregularities causing1
2002 Suppl (1) ALD 126
2
AIR 2003 SC 1475
3
AIR 2001 SC 2552
4
AIR 1970 SC 1475
5
1997 (6) ALD 717
6
(1994) 1 SCC 131
Page 9 of 15substantial injury to the judgment-debtor are covered under Order 21 Rule
90. Sub-rule (1) thereof covers the field of material irregularities or fraud in
publicity or conducting the sale. Sub-rule (2) enjoins proof thereof and the
court should find that by reason thereof the applicant sustained substantial
injury. The total absence of drawing up of the proclamation of sale and
settlement of its term by judicial application of mind renders the sale a
nullity being void. It is covered by Section 47. The non-application of mind
whether sale of a part of the property would satisfy the decree debt is a
material irregularity doing substantial injury to the appellant attracting Order
21 Rule 90. In either case the sale is liable to be set aside. It is true that
there is distinction between mere irregularity and material irregularities and
the sale is not liable to be set aside on proof of mere irregularity. It must be
material irregularity and the court must be satisfied that on account thereof
substantial injury was sustained by the appellant. The sale of 550 sq. yards
for recovery of a paltry sum of Rs 7,780.33, without selling a portion
thereof, caused substantial injury to the appellant.”
20. As seen from the oral and documentary evidence, the defendants
having filed written statement did not contest the suit and they were set
exparte. Ex.A1 is copy of order in C.P.No.84 of 1996, whereby the 1 st
defendant-company is ordered to be wound up much prior to the decree
in the suit. In such circumstances, in the considered opinion of this court,
an application filed under Sec 47 CPC would definitely maintainable. The
executing court has to necessarily decide as to the excitability of the
decree in such circumstances.
21. The next question falls for consideration is, Whether leave from the
Company Court/Tribunal is necessary? and Whether the Directors of the
company can maintain a petition under Section 47 of CPC?
22. Section 446 of the Companies Act, 1956, which is relevant is
extracted below:
Page 10 of 15
Section 446:- Suits stayed on winding up order
(1) When a winding up order has been made or the Official Liquidator
has been appointed as provisional liquidator, no suit or other legal
proceeding shall be commenced, or if pending at the date of the winding up
order, shall be proceeded with, against the company, except by leave of
the Tribunal and subject to such terms as the Tribunal may impose.
(2) Tribunal shall, notwithstanding anything contained in any other law
for the time being in force, have jurisdiction to entertain, or dispose of–
(a) any suit or proceeding by or against the company;
(b) any claim made by or against the company (including claims by or
against any of its branches in India);
(c) any application made under section 391 by or in respect of the
company;
(d) any question of priorities or any other question whatsoever,
whether of law or fact, which may relate to or rise in course of the winding
up of the company,
whether such suit or proceeding has been instituted or is instituted or
such claim or question has arisen or arises or such application has been
made or is made before or after the order for the winding up of the
company, or before or after the commencement of the Companies
(Amendment) Act, 1960 (65 of 1960).]
(4) Nothing in sub-section (1) or sub-section (3) shall apply to any
proceeding pending in appeal before the Supreme Court or a High Court.
23. A perusal of sub-section 1 of Section 446 would manifest that upon
a winding up order, or upon the appointment of the Official Liquidator, the
suit or other proceedings, be it pending or to be instituted, shall not
proceed further except with the leave of the Tribunal. Thus, leave from
company Court/tribunal is a sine qua non to proceed further after the
winding up of a company is ordered.
Page 11 of 15
24. The Hon’ble Apex Court in Harihar Nath and others Vs. State
Bank of India and others7, considered the object of Section 446 of the
Companies Act and observed thus:
“18. The object of Section 446 of the Act is not to cancel, nullify or abate
any claim against the company. Its object is to save the company which
has been ordered to be wound up, from unnecessary litigation and from
multiplicity of proceedings and protect the assets for equitable distribution
among its creditors and shareholders. This object is achieved by
compelling the creditors and others to come to the court which is winding
up the company and prove their claims in the winding up. For this purpose,
all suits and proceedings pending against the company are also stayed
subject to the discretion of the winding-up court to allow such suits and
proceedings to proceed. When a winding-up order is passed, the effect is
that all the affairs pertaining to the company in liquidation, including all
suits/proceedings by or against the company, come within the control and
supervision of the winding-up court. The winding-up court has to decide
whether it will let the suit/proceeding to continue in the court where it is
pending, or it will itself adjudicate the suit/proceeding. Thus, under Section
446(1), the winding-up court only decides about the forum where the suit
has to be tried and disposed of …
20. It is now well settled that if any winding-up order is passed
during the pendency of a suit against the company, and if the suit is
continued without obtaining leave in spite of that bar contained in
Section 446(1), the decree passed is only voidable at the instance of
the liquidator, and not void ab initio. In fact, where such decree has
been passed against the company and others, the only person who can
avoid the decree on the ground of non-compliance with Section 446(1) of
the Act, is the Official Liquidator of the company and not the other
defendants. A suit/proceeding filed against a company, prior to the order of
its winding up, does not come to an end on the passing of an order of7
(2006) 4 SCC 457
Page 12 of 15winding up. The order of winding up merely stays further proceedings in
the suit/proceeding. The suit/proceeding becomes dormant. Various
alternatives are possible when a suit gets so stayed. The plaintiff in the suit
can move an application under Section 446(1) of the Act, and when leave
is granted, proceed with the suit. If the leave is refused, the suit may be
transferred to the Company Court for being tried and disposed of under
Section 446(2)(a) of the Act. The plaintiff may also file an application for
transfer of the suit to the Company Court for disposal under Section
446(2)(a). Alternatively, the plaintiff may get the suit dismissed with liberty
to make a claim under Section 446(2)(b) of the Act. Even if the suit is
proceeded with, without obtaining leave of the Company Court, either not
being aware of the order of winding up or ignoring the provisions of Section
446(1), the resultant decree will not be void, but only be voidable at the
instance and option of the Official Liquidator of the company …” (emphasis
is mine)
25. Thus, given the expression of the Apex Court, the contention of Sri
Ambati Sudhakar, learned counsel for judgment debtors that because of
the order in C.P.No.84 of 1996, the decree in suit O.S.No.10 of 1998 is to
be treated as void, falls to ground. The judgment and decree, at the most
is voidable. However, leave of the company Court/Tribunal is necessary
to proceed further or the plaintiff can as well get the suit transferred to the
company Court for adjudication.
26. In the case at hand, as discussed supra there is no dispute about
the winding up order passed by C.P.No.84 of 1996 dated 05.08.1999. It
is also appropriate to extract Section 537 of the Companies Act, 1956
which reads thus:
S.537. Avoidance of certain attachments, executions, etc., in winding
up by Tribunal
(1) Where any company is being wound up by Tribunal–
Page 13 of 15
(a) any attachment, distress or execution put in force, without leave of
the Tribunal against the estate or effects of the company, after the
commencement of the winding up; or
(b) any sale held, without leave of the Tribunal of any of the properties
or effects of the company after such commencement shall be void.
(2) Nothing in this section applies to any proceedings for the recovery
of any tax or impost or any dues payable to the Government.
27. As seen from the common order under revision, in Ex.A12
application filed by the other Directors, the learned District Judge seems
recorded a finding that the decree is invalid because of the liquidation
proceedings. The auction purchaser, who was examined as RW.1 in his
cross-examination deposed that a few days after the Court auction, he
came to know about the liquidation proceedings, however, neither he
enquired about those proceedings nor approached the official liquidator.
The decree-holder for the reasons best known did not come into the
witness box to rebut the allegations of judgment debtors regarding his
knowledge of winding up the proceedings initiated before the company
Court.
28. Thus, the oral and documentary evidence makes it evident that the
decree was passed after the winding-up order was passed by the
company Court and without obtaining leave. Even the sale was
conducted contrary to Sections 446 and 537 of the Companies Act. Of
course, as per the expressions of the Apex Court, it is for the Official
Liquidator to challenge the proceedings, but not the judgment debtors
regarding the voidability of the decree.
29. Given the discussion supra, this Court is of considered opinion that
the decree cannot be declared as a nullity. Since the judgment and
Page 14 of 15
decree is voidable, the E.A. filed by the Judgment Debtors, in the facts of
this case, is maintainable.
30. The property put to auction is Ac.6.20 cents. As per Ex.A11
market value certificate as of 01.10.2004, the total value of land is
Rs.24,42,040/-. The property was sold in auction on 10.11.2004 for
Rs.9,10,000/-. The executing Court upheld the contention of judgment
debtors that the auction was stage managed. In Madala Surya
Lakshmana Prasad Vs. Kallakuri Pattabhi Ramaswamy and
another8, the learned single Judge of the composite High Court held that
the judgment debtor cannot be made to suffer for the defects and
irregularities in the sale effected by the executing Court. In fact, in the
case at hand, the executing the Court while setting aside the sale,
directed the judgment debtors to deposit the auction amount with 5%
solatium and the judgment debtors complied with the order. The decree
holder seems to have withdrawn half of the amount by filing cheque
petition. Regarding the withdrawal of the other half, no material is
available on record. However, this court presumes that the decree
holder might have withdrawn the amount, other he would have contested
the revisions.
31. If the sale is not confirmed, the right of the auction purchaser, be it
decree-holder or third party is in a nebulous stage, as held by the Apex
Court in Desh Bandhu Gupta Vs. N.L. Anand & Rajinder Singh9. In
the case at hand, it is evident from the evidence that the auction has not
been confirmed. When the auction purchaser applied for the reopening of
E.P.No.33 of 2003, the judgment debtors filed the above execution
applications. However, this Court will not adjudicate the issue regarding
8
2011 (5) ALT 267
9
(1994) 1 SCC 131
Page 15 of 15
the maintainability of revision filed by the judgment debtors. That issue
will be decided in an appropriate case.
32. Given the discussion supra, this Court does not find any merit in
both the Civil Revisions. Hence, they are liable to be dismissed.
33. Accordingly, the Civil Revision Petitions are Dismissed. However,
no order as to costs.
As a sequel, pending miscellaneous petitions, if any, shall stand
closed.
___________________________
JUSTICE SUBBA REDDY SATTI
PVD