- (1.) The Padrauna Raj Krishna Sugar Works Ltd.- hereinafter called 'the Company'-carried on the business of manufacture and sale of sugar and supply of electricity. The Company was in financial difficulties in 1954 and was unable to meet its obligations. The principal liabilities of the Company in July 1955 were Rs. 81,821-2-0 due as income-tax provisionally assessed for the assessment year 1952-53 in respect of which an order for recovery was made under Section 46 (2) of the Income-tax Act, 1922; Rs. 5,64,301-14-9 due as sugarcane cess under Section 20 of the Sugar Factories control Act, 1938 for the years 1952-53 to 1954-55; and Rs. 1,92,053-12-3 due by the Company to the Co-operative Development Union Ltd., as arrears of cane price for the year 1954-55.
(2.) By order dated July 14, 1954, issued under the Essential Supplies (Temporary Powers) Act, the Government of U. P. appointed the Collector, Deoria as the Authorised Controller of the Company. On August 8, 1955 the Land Reforms Commissioner sanctioned the proposal submitted by the Collector, Deoria, to sell the holdings and the property of the Company for realizing Rs. 8,38,176-13-0. Sardar Jagjit Singh, Chief Engineer, Indian Institute of Sugar Technology, Kanpur, valued the movables belonging to the Company i.e., tools and workshop plant, mill stores, spare parts and furniture at Rs. 7,64,817 and the lands and the factory at Rs. 23,75,000. Thereafter a sale proclamation was issued on October 4, 1955 for recovery of the total amount of Rs. 8,38,176-13-0. The sale was fixed for November 8, 1955. In the first instance only the movables were put up for sale by the Collector, Deoria, but the highest bid offered was Rupees 2,75,000. The Collector then put up for sale the immovable property for which a bid of Rs. 23,50,000 was made and accepted. The movables were then put up for sale and the highest bid for Rupees 2,75,000 was accepted. The purchasers of both the lots were the Cawnpore Sugar Works Ltd. through their managing agent Tulsidas Mundra--respondent No. 7 in this appeal.
(3.) On December 6, 1955, the Company moved an application before the Commissioner, Gorakhpur Division, under Rule 285-I of the U. P. Zamindari Abolition and Land Reforms Rules praying that the sale be set aside. The Commissioner rejected the petition, observing that an application under Rule 285-I of the U. P. Zamindari Abolition and Land Reforms Rules, 1952, to set aside a sale on the ground of material irregularity or mistake in publishing or conducting a sale may be granted only if the applicant proves to the satisfaction of the Commissioner that he has sustained substantial injury by reason of such irregularity or mistake, and that no material irregularity or mistake was proved to be committed in publishing or conducting the sale, far less, a mistake or irregularity which could have caused substantial injury to the applicant. The sale was confirmed by order dated July 2, 1956, by the Land Reforms Commissioner.;