Gujarat High Court
========================================================= vs Official
Liquidator Of M/S Omex ... on 11 August, 2014
O/OJMCA/89/2014
CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
MISC. CIVIL APPLICATION NO.89
In
OFFICIAL LIQUDATOR REPORT NO.43
In
OFFICIAL LIQUDATOR REPORT NO.36
In
OFFICIAL LIQUDATOR REPORT NO.136
of 2014
of 2013
of 2011
of 2010
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE R.M.CHHAYA
=========================================================
1 Whether Reporters of Local Papers may be NO allowed to see the judgment ?
2 To be referred to the Reporter or not ? NO 3 Whether their Lordships wish to see the
NO fair copy of the judgment ?
4 Whether this case involves a substantial NO question of law as to the interpretation
of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the NO Civil Judge?
=========================================================
BALLESHWAR GREENS PVT LTD....Applicant(s) Versus
OFFICIAL LIQUIDATOR OF M/S OMEX INVESTORS LTD &
8....Respondent(s)
========================================================= Appearance:
MR KAMAL B TRIVEDI, SENIOR ADVOCATE with MS SANGEETA K
VISHEN, ADVOCATE with MR HARSH JANI, ADVOCATE with MR
VINAY VISHEN, ADVOCATE for the Applicant(s) No.1
DR AMEE YAJNIK, ADVOCATE for the Respondent(s) No.1
OFFICIAL LIQUIDATOR for the Respondent(s) No.1
MR UDAY R BHATT, ADVOCATE for the Respondent(s) No.2
MR DS VASAVADA, ADVOCATE for the Respondent(s) No.7
MR ALKESH N SHAH, ASSISTANT GOVERNMENT PLEADER for the Respondent(s) No.8
MR SAURABH N SOPARKAR, MR MIHIR J THAKORE, MR MIHIR
H JOSHI, MR SHALIN N MEHTA, SENIOR ADVOCATES with MR
KILLOL V SHELAT, MR SANDEEP SINGHI, MR SP MAJMUDAR,
MR VIMAL A PUROHIT, ADVOCATES for the Respondent(s) No.9
=========================================================
CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA Date : 11/08/2014
CAV JUDGMENT CHALLENGE:
1. By this application, the applicant seeks direction to recall the order dated
17.12.2013 passed by this Court in Official Liquidator's Report
No.43 of 2013, whereby opponent No.9 herein emerged
to be highest bidder and has offered Rs.148 crores for the lands belonging to the
Company under liquidation for sale and has, interalia, prayed as under: "(I)
YOUR LORDSHIPS may be pleased to allow this application, in the interest of
justice by permitting the applicant herein to apply afresh for the bid in question
since it is ready and willing to purchase the land in question at the higher price
than what was fixed earlier.
(II) YOUR LORDSHIPS may be pleased to recall the order dated 17.12.2013
passed by this Hon'ble Court in Official Liquidator Report No.43 of 2013 in
Official Liquidator Report No.36 of 2011 in Official Liquidator Report No.136 of
2010 and pass appropriate order afresh in the matter, in the interest of justice, after
considering the plea of the applicant herein;
(III)YOUR LORDSHIPS may be pleased to grant such further and other reliefs as
may be deemed fit and proper by this Hon'ble Court in the interest of justice."
DETAILS OF EARLIER PROCEEDINGS IN A NUTSHELL:
2. A Company named M/s. Omex Investors Ltd. was ordered to be provisionally
wound up by an order dated 26.10.1989 passed by this Court in Company Petition
No.156 of 1989 and the Company was
thereafter ordered to be wound up by an order dated 6.3.1990 and the Official Liquidator
attached to this Court came to be appointed as liquidator of the
said Company. This Court, while passing the order of winding up of the Company,
directed the Official Liquidator to take possession of all properties of the Company in
liquidation as provided under Sections 456 of the Companies Act, 1956 (hereinafter
referred to as "the Act").
3. Thereafter, applications and reports were filed
for disposal of the plant and machinery as well as the building structure as well as the
lands belonging to the Company under liquidation. It would be appropriate to mention that
the leaseholders claimed their right over the properties belonging to the Company under
liquidation and the said proceedings, as informed by the Official Liquidator,
are pending before the Apex Court. It is a matter of
record that the plant and machinery of the Company in liquidation was sold for Rs.1,40,40,000/and the building structure was sold for Rs.85,00,000/ as
per the order passed by this Court in Misc. Civil Application No.37 of 1991 dated 19.12.2000.
4. As aforesaid, taking into consideration various
orders passed in applications/reports filed in case of the Company under liquidation, this
Court vide order dated 21.9.2010 passed in Company Application No.97 of 2010 was
pleased to direct the Official Liquidator to put to sell freehold land keeping aside
the leasehold land which can separately be dealt with after the outcome of the
proceedings before the Apex Court.
5. The record indicates that this Court by an
order dated 27.2.2012 passed in Official Liquidator Report No.36 of 2011 earmarked land
admeasuring 13,895 sq. mtrs. as completely freehold land and
therefore, this Court was pleased to issue further directions to the Official Liquidator to
issue a predecision advertisement and was pleased to issue
appropriate directions as observed in Paragraph 6 of the order dated 27.2.2012 passed in
Official Liquidator Report No.36 of 2011. The record further
reveals that the Official Liquidator issued a pre
decision advertisement on 4.4.2012 in Gujarati daily
"Divya Bhaskar", and English daily "Times of India"
inviting objections from concerned parties along
with necessary documents upto 25.4.2012 for freehold
land admeasuring 13,895 sq. mtrs. situated at T.P. Scheme No.18 (Ahmedabad), Final Plot
No.32/Part bearing survey No.25, 27B/1, 31, 38 of Mouje RajpurHirpur, Outside Raipur Gate, B/h. New Cloth
Market, Opp. Hirabhai Market, Diwan Ballubhai Road, Raipur, Ahmedabad.
6. The record further indicates that thereafter, further applications were filed being
Company Application No.475 of 2011, wherein this Court by an order dated 26.3.2013
directed the Official Liquidator to put freehold land as discussed hereinabove for
sale by inviting offers from intending purchasers in a sealed cover. This Court
was also pleased to further provide that the usual terms and conditions for such auction
shall be similar to the matter of Ahmedabad Manufacturing and Calico Printing Mills Co.
Ltd. (O.J. Civil Application No.183 of 2012). This Court was pleased to fixed the upset
price under auction at Rs.55 crores and EMD was fixed at 10% thereof. This Court further
directed the Official Liquidator to give
public advertisement for sale in two daily Gujarati
newspapers having wide circulation in the State of
Gujarat and in the city of Mumbai and also in one
English newspaper "Times of India" in the State of Gujarat and in the city of Mumbai.
It further appears from the record that accordingly, the Official Liquidator published
advertisement on 10.4.2013 in Gujarati dailies "Gujarat Samachar" and
"Divya Bhaskar" and "Mumbai Samachar" and "Gujarat
Samachar" in the city of Mumbai and "Times of India"
in the State of Gujarat and city of Mumbai for sale of the aforesaid lands of the Company
under liquidation. The record further reveals that in
response to the said advertisements, 12 tender forms
were sold, however, only 1 tender was received from M/s. Jay Bholenath Project Pvt. Ltd.
in a sealed cover. It further appears that thereafter, Company
Application No.151 of 2013 was filed, wherein it was
prayed by the said offerer to accept the offer of
Rs.45 crores. Considering the said application, this Court was pleased to refix the upset price at Rs.45 crores and directed the Official Liquidator to issue a fresh
advertisement in the same newspapers in English and Gujarati as provided in the
earlier order, inviting offers for sale of the lands in question on same terms and
conditions and the Official Liquidator was further directed to set out the time schedule for
different stages for the public auction.
7. The record indicates that accordingly, the Official Liquidator issued fresh
advertisement in daily newspapers "Gujarat Samachar" and "Divya Bhaskar" in
Gujarati and "Mumbai Samachar" and
"Gujarat Samachar" in the city of Mumbai and "Times
of India" in State of Gujarat and city of Mumbai on
10.7.2013. Pursuant to the said advertisements, 13 tenders forms were sold, out of which,
3 tenders were received from the intending purchaser in a sealed cover upto last
date i.e. 22.7.2013. The Official Liquidator filed Official Liquidator Report
No.43 of 2013 and interalia prayed as under: "(A) This Hon'ble Court may be pleased to
consider the views of the secured creditors of the company in liquidation in respect of
the highest bid that may be received in the interse bidding and may also be pleased to
confirm the sale in favour of the highest bidder on the terms and conditions of sale as per
tender document and/or such other and further terms and conditions as may be considered
appropriate by this Hon'ble Court, 'or' if this Hon'ble Court finds that the highest
offer received in the interse bidding is not the appropriate offer looking to the
fair market price and the valuation of assets of the Company in liquidation, this
Hon'ble Court may be pleased to direct the Official Liquidator to readvertise the sale on such terms and conditions and with such further orders and directions as
in the facts and circumstances of this case, may be considered appropriate and
expedient by this Hon'ble Court.
(B) This Hon'ble Court may be pleased to permit the Official Liquidator to make
payment of Rs.7,69,498/ from the fund available in Company's A/c. to M/s.
Navnitlal & Co., Advertising Agency being the advertisement expenses incidental to
sale proceedings, as per advertisement agency's Bill dated 13.04.2013 at Annexure"C" (Colly.) to this report.
(C) Such other and further orders and directions as may be considered just and
appropriate may also be passed."
Over and above the aforesaid 3 offerers, other 8 bidders made offer and deposited EMD
along with late fee charges, which came to be permitted by this
Court. It would also be appropriate to mention here that two applications were filed by
the other applicants claiming that they have leasehold right
over the lands in question. However, after hearing those applications and after calling for
details from the Town Planning Department of the State of
Gujarat, those applications came to be disposed of and ultimately, the lands in question
were determined to be freehold lands of the Company in liquidation.
8. The Official Liquidator Report No.43 of 2013
was heard on 17.12.2013 and this Court was pleased to conduct the auction accordingly in
the open Court, wherein 11 participants including the present applicant and the present
opponent No.9 - Vedica Procon Pvt. Ltd. participated and ultimately, after 12 rounds of
interse bidding, opponent No.9 - Vedica Procon Pvt. Ltd. emerged to be the highest
bidder at Rs.148 crores. This Court passed the following order on 17.12.2013: "1.
This Court (Coram: C.L.Soni, J.) by common order dated 26.03.2013 passed in
Company Application No.475 of 2011 in Official Liquidator's Report No.36 of 2011
and allied matters, was pleased to direct the Official Liquidator to put the freehold land of the
Company (in Liquidation) admeasuring 13895 Sq.Mtrs. Approx. situated at T.P.No.18 of
F.P. No.32/P, bearing Survey No.25, 27/B/1, 31, 38, Moje Rajpur Hirpur, Outside Raipur
Gate, behind New cloth Market, Opp.Hirabhai Market, Diwan Ballubhai Road,
Raipur, Ahmedabad, to auction for sale by inviting offers from
the intending purchasers in a sealed cover. The relevant para20 of the above mentioned
order is quoted hereinbelow.
"[20] The Official Liquidator is directed to put the freehold land of the company
admeasuring 13895 square meters to auction for sale by inviting offers from the intending
purchasers in sealed cover. The usual terms and condition for such auction shall
be similar to the matter of M/s.Ahmedabad Manufacturing and Calico Printing Mills Co.
Ltd. (Civil Application No.183 of 2012).
The upset price of the land under auction shall be fixed at Rs.55 Crores and earnest
money deposit shall be fixed at 10% thereof.
The Official Liquidator shall give public notice of the sale in the two daily Gujarati
newspaper having wide circulation in the State of Gujarat
and in the city of Mumbai as also in one English newspaper Times of India in the State
of Gujarat and in the city of Mumbai.
The schedule of program of sale shall be as under:
Sr.
No.
Description
Date
1
Date of Advertisement
2
Date
Forms
3
Date
of
property
of
issue
of
inspection
10/04/13
Tender 15/04/13
of 22/04/13
4
Last
date
of
receipt
offer
in
the
office
Official Liquidator
5
Opening
of
offers
of 29/04/13 upto
of 4.30 P.M.
and 03/05/13 at
auction/intersebidding 11.00 A.M. in the High Court of and onwards Gujarat
The matter shall be now listed on 3rd May 2013 for further action."
2. It further appears that pursuant to the said order, the Official Liquidator gave
advertisement in the Gujarat Samachar, Gujarati Daily, in all editions, Divya
Bhaskar, Gujarati Daily, in all editions, Mumbai Samachar, Gujarati daily in
Mumbai Edition and the Times of India, English
Daily, in Ahmedabad and Mumbai editions.
3. At the outset, it may be noted that in pursuance of the tender notice, two bidders viz.
M/s.JPS Entrade International Pvt. Ltd. and M/s.Siddhi Developers through Shri Mehulbhai
Patel, submitted their offers along with EMD in sealed covers to the office of the
Official Liquidator. It may be noted that, thereafter, the matter came to be adjourned
because of the fact that various bidders had filed applications for making their offers
after obtaining the permission of the Court. Nine other bidders have deposited EMD
along with late fee charges. It is also pertinent to note that the applications filed by the
objectors were disposed of by order dated 16.12.2013 and the proceedings for auction
were undertaken today.
4. Before the offers were permitted to be made by the bidders, at the request of the
Court, Ms.Amee Yajnik, learned counsel for the Official Liquidator was asked to read the
tender notice in open Court and accordingly, Ms.Yajnik read the whole
notice in English language and thereafter, both the envelopes were opened in the Court.
Ms.Yajnik also handed over two sealed covers containing offers made by
M/s.JPS Entrade International Pvt. Ltd. and M/s.Siddhi Developers for perusal of the
Court.
5. It may be noted that in all, there were total 11 bidders, who have participated in
the auction proceedings.
Sr. Name and Address of
No. Intending Purchasers
Name of the Bank
and Branch
Pay
Order/
D.D.No
Amount (Rs.)
EMD
1
M/s.JPS
Entrade
International Pvt. Ltd.
State Bank of India
365489
1,20,00,000
State Bank of India 365490 2,58,00,000 501, Panchsheel residency, Opp. Bank of Baroda
077656 72,00,000 Dr.Nathubhai Hospital, Usmanpura, Ahmedabad.
4,50,00,000/
2
3
Mehul B. Patel, M/s.
Siddhi Developers, 1st
Floor, Arohi Complex,
Bopal, Ahmedabad
Advance Space Link Pvt.
Ltd., 2122, Advance
Plaza, Outside Delhi
Gate, Shahibaug,
Ahmedabad380 004
Dena Bank
(0991)
4,50,00,000
360351
Kotak Mahindra Bank 226258
4,50,00,000
(EMD)
+ 4,80,822
late fee @ 15%
for delayed
period i.e. 26
days
4
Aashita Construction
Pvt. Ltd.
HDFC Bank
000448
(EMD)+
4,81,500/
late fee @ 15%
for delayed
period i.e. 26
days
12021, Narayan
Chambers,
B/h.Patang Hotel,
Ashram road, Ahmedabad.
5
6
4,50,00,000
Rushay Commodities Pvt.
Ltd. B/9, S.F.Sardar
Mall, Nikol Gam Road,
Ahmedabad
HDFC Bank
000082
Sparkling Tradefin Pvt.
Ltd. 508509, Shilp
Building, C.G.Road,
Kotak Mahindra Bank 411585
4,50,00,000
(EMD)+
6,41,000/
late fee @ 20%
for delayed
period i.e. 26
days
4,50,00,000
(EMD)+
Ahmedabad
7
M/s.Vision Impex
2,70,00,000/
15,53,425/
late fee @ 15%
for delayed
period i.e. 84
days
BOI UCO Bank
Room No.29, Second
1,80,00,000/
Floor, Bharaja Bhavan,
110/14, Kika Street,
Gulalwadi,
036869
950434
(EMD)+
21,08,219/
late fee @ 15%
Mumbai400 004.
for delayed
period i.e.
114 days
8
Balleshwar Greens Pvt.
Ltd.
Axis Bank
025061
4,50,00,000
(EMD)+
23,50,000/
801A, Mahalaya
Building, Opp. Hotel
late fee @ 15%
President, Swastik
for delayed
Cross Road, Ahmedabad
period i.e.
127 days
9
DeoPiyo Textiles Pvt.
Ltd.
Kotak Mahindra Bank 625130
4,50,00,000
(EMD)+
24,04,500/
9/10,
Shyamal
Raw
House,
Satellite
AD,
late fee @ 15%
Ahmedabad
for delayed
period i.e.
127 days
10
Ajay Kumar Tehelyani
Indian Bank
896139
4,50,00,000
3, Chandra Palace,
(EMD)+
24,04,700/
Jawahar Nagar, Nadiad
late fee @ 15%
for delayed
period i.e.
127 days
11
Vedica Procon Pvt. Ltd.
25,
4th Floor,
Shukan
mall,
Rajasthan
Hospital,
Shahibaug,
late fee @ 15%
Ahmedabad.
for delayed
Dena Bank
105291
4,50,00,000
105292
(EMD)+
26,26,637/
105293
period i.e.
105294
127 days
105295
517750
6. Today, the auction proceedings are undertaken in the open Court and after
interse bid of 12 rounds, M/s.Vedica Procon Pvt. Ltd. has offered highest amount
of Rs.148 crores as the sale consideration. It may further be noted that the applicant of
Company Application No.295 of 2013, M/s.Balleshwar Greens Pvt. Ltd. is the
second highest bidder and has offered Rs.146 crores for the land in question. It may be
noted that rest of the bidders withdrew their bids at various stages of 12 rounds.
7. In view of the aforesaid, it transpires that M/s.Vedica Procon Pvt. Ltd. being the highest
bidder, has offered Rs.148 Crores (Rupees One Hundred Forty Eight Crores) for the land
admeasuring 13895 Sq. Mtrs. Approx. situated at T.P.No.18 of F.P.
No.32/P, bearing Survey No.25, 27/B/1, 31, 38, Moje RajpurHirpur, Outside Raipur
Gate, behind New cloth Market, Opp.Hirabhai Market, Diwan Ballubhai Road, Raipur,
Ahmedabad.
8. Ms.Amee Yajnik, learned counsel for the Official Liquidator, Mr.D.S.Vasavada,
learned counsel for respondent No.6Union, Mr.U.R.Bhatt, learned counsel for respondent
No.1State Bank of India and Mr.Anip Gandhi, learned counsel for the ARCIL,
have expressed that the bid of M/s.Vedica Procon Pvt. Ltd. may be accepted.
9. In view of the above discussion, the bid of M/s.Vedica Procon Pvt. Ltd., being the highest
bidder, who has offered Rs.148 Crores for the land mentioned in the tender notice
deserves to be accepted and is hereby accepted as per the tender conditions on as
is where is basis and whatever there is basis.
10. Mr.Vimal Purohit, learned counsel for the applicant appearing in Company
Application No.304 of 2013, has expressed that the Court may permit one
nominee. However, considering the conditions of the tender notice, no orders are passed today.
It would be open for the applicant to approach this Court by way of filing a
proper application. It may further be noted that as per condition No.29 of the tender
notice, EMD price of second highest bidder viz. M/s.Balleshwar Greens Pvt. Ltd.
applicant of Company Application No.295 of 2013 shall be retained by the Official
Liquidator. The Official Liquidator shall take appropriate actions as envisaged under
the conditions of the tender notice, more particularly conditions No.29, 32 and 33.
As per the conditions of the tender notice, the Official Liquidator shall return EMD if any paid
by the applicants of the unsuccessful bidders, except the applicant
of Company Application No.295 of 2013, as stated above, within the time prescribed in
the tender notice. The envelopes containing offers given by M/s.JPS Entrade International
Pvt.Ltd. and M/s.Siddhi Developers are returned back to the
Official Liquidator in a sealed cover.
11. In view of the aforesaid, the present report stands disposed of. It is, however, clarified that
the prayers prayed for in the prayer (B) is not granted as the Official Liquidator
has already filed separate report being Official Liquidator's
Report No.76 of 2013. Ordered accordingly."
EVENTS AFTER THE ORDER DATED 17.12.2013:
9. The Official Liquidator thereafter informed the highest bidder Vedica Procon Pvt. Ltd.
- opponent No.9 herein to deposit 25% of the sale consideration
as per conditions of tender on or before 16.1.2014 and the balance remaining amount
being 75% i.e. Rs.106.50 crores on or before 16.4.2014 after adjusting Rs.4.5
crores being EMD amount in final payment of the sale proceeds by a
communication dated 19.12.2013. The record indicates that the
successful bidder i.e. opponent No.9 Vedica Procon Pvt. Ltd. deposited an amount of
Rs.37 crores on 16.1.2014. It is also a matter of record that as per
condition No.29, the present applicant who happens to be the second highest bidder has
been refunded the EMD amount of Rs.4.5 crores by the Official
Liquidator on 13.1.2014, on the request made by the applicant itself on 9.1.2014. The
record further indicates that the successful bidder opponent No.9
Vedica Procon Pvt. Ltd. has also been permitted by the Official Liquidator to deploy its
security guards on condition that it can post its security
the lands in question to protect their interest.
10. Opponent No.9 thereafter filed Misc. Civil Application No.53 of 2014 with a
prayer to grant extension of 4 months to deposit the balance
consideration of Rs.106.50 crores. After hearing the
Official Liquidator, the Secured Creditors and the
Trade Union, this Court by an order dated 31.3.2014 was pleased to dispose of the said
application by passing the following order: "(1) Heard Mr.S.N.Soparkar, learned
Sr. Counsel, with Mr.S.P.Majmudar, and Mr.Vimal A. Purohit, learned advocates for the
applicant, Mr.Gaurang Bhatt, learned advocate for opponent No.1
Official Liquidator, Mr.Uday R. Bhatt, learned advocate for opponent No.2 State Bank
of India, Mr.D.S.Vasavada, learned advocate for opponent No.7 Textile Labour
Association, and Mr.Vishal Patel, learned Assistant Government Pleader for opponent
No.8 Competent Officer and the Deputy Collector.
(2) Learned advocate for the ap plicant has also tendered
un dertaking dated
31.03.2014 signed by the director of the applicantCompany, which is taken on record.
(3) It may be noted that by order dated 17.12.2013 passed in Official Liquidator
Report No.43 of 2013 this Court accepted the bid of the applicant as the
applicant was the highest bidder, who has offered Rs.148 crores for the land mentioned
in the tender notice as per the tender conditions on "as is where is basis and
whatever there is basis." As per the conditions, the applicant, has
deposited 25% of the bid amount, which comes to Rs.37 crores on 16.01.2014 with the
Official Liquidator. It is pointed that the applicant in all has deposited Rs.41,76,26,637/
as on date. However, the present application is filed for extension of four months' time in
making payment of the remaining amount of Rs.106.5 crores, as per the agreed
terms and conditions. As stated above, the applicant has also filed undertaking
dated 31.03.2014 before this Court wherein the applicant has agreed as under:
"1. We shall make the payment of re maining amount of Rs.106.50 crores as
per following schedule, subject to ap proval of this Hon'ble Court with in terest @ 10% P.A.
for the extended term on unpaid amount.
a) We will deposit Rs.34 crores on or before 30.04.2014.
b) We will deposit Rs.24 crores on or before 30.05.2014.
c) We will deposit Rs.24 crores on or before 30.06.2014.
d) We will deposit Rs.24.5 crores on or before 30.07.2014.
2. Above payment will be made with interest @ 10% P.A. for the extended
term on delayed amount."
(4) In light of the aforesaid un dertaking and as per the statement made by
Mr.Gaurang Bhatt, learned advocate for opponent No.1Official Liquidator, Mr.Uday
R. Bhatt, learned advocate for opponent No.2 State Bank of India, Mr.D.S.Vasavada,
learned advocate for opponent No.7Textile Labour Association, that they have no
objection if the time as prayed for is granted by this Court, as per the undertaking
given by the applicant, this application is allowed.
(5) The applicant shall adhere to the aforesaid undertaking dated 31.03.2014 and
make payment of remaining amount of Rs.106.50 crores as under:
a) Rs.34 crores on or before 30.04.2014;
b) Rs.24 crores on or before 30.05.2014;
c) Rs.24 crores on or before 30.06.2014; AND
d) Rs.24.5 crores on or before 30.07.2014."
(6) It is further provided that the applicant shall pay 10% interest per
year starting from 16.04.2014 till the last installment of Rs.24.5 crores is paid, the same
shall be calculated proportionately on the outstanding/ unpaid amount. It is further
provided that the applicant shall pay such interest along with the last installment,
which the applicant has undertaken to pay on or before 31.07.2014.
(7) No further extension shall be granted by this Court to the applicant.
(8) With the aforesaid directions, the application stands disposed of."
OTHER PROCEEDINGS AFTER GRANT OF EXTENSION OF TIME TO DEPOSIT:
11. The present applicant challenged the order
dated 31.3.2014 passed by this Court in Misc. Civil
Application No.53 of 2014 by filing an appeal being
O.J. Appeal No.9 of 2014, which came to be disposed
of by the Hon'ble Division Bench of this Court vide
judgment and order dated 17.4.2014, wherein it has been observed as under: "4. We have
perused the judgment in the case of Shradhha Aromatics Pvt. Ltd. vs. O.L. of
Global Arya Indus tries Limited & Ors., reported 2011(6) SCALE 330. Para10 of the
above decision reads as under:
"10. We have considered the re spective submissions and
care fully perused the record.
Ordin arily, the Court is loathe to ac cept the offer made by any bidder
or a third party after acceptance of the highest bid/ offer given pursuant to an
advertisement issued or an auction held by a pub lic authority. However, in the pe culiar facts of
this case, we are inclined to make a departure from this rule.
Admittedly, total
area of the land advertised by the committee is 12,500 square meters
and the same is situated in an im portant district of Gujarat. It is also not in dispute that
the area has been substantially de veloped in last four years. The initial offer
made by M/s. Patel Agro Diesel Ltd. was of Rs.83 lakhs and the highest revised offer given
before the learned Company Judge was of Rs. 127 lakhs. After accept ance of the
revised offer by the learned Company Judge, the appel lant stepped in and made an
offer to pay Rs. 141 lakhs. The first application filed by it was dis
missed but the second
ap plication was allowed and the in
creased offer of Rs. 151 lakhs was accepted by the learned Company
Judge vide order dated 27.11.2007. That order did not find favour with
the Division Bench, which restored the first order passed by the learned
Company
Judge. If the order of the Division Bench is sus tained, the creditors of the Com pany
are bound to suffer because the amount available for repayment
of the dues of the creditors would be a paltry sum of Rs.127 lakhs. As
against this, if the offer made by the intervenorcumpromoter is ac cepted, the Official
Liquidator will get an additional amount of more than Rs.4.25 crores. The
availability of such huge amount will certainly be in the interest of the creditors
including GSIIC. Therefore, it is not possible to approve the order passed by the Di
vision Bench of the High Court. In a somewhat similar case - FCS Soft
ware Solutions Ltd. v. La Medical Devices Limited and others (supra),
this Court approved the acceptance of revised bid of Rs.3.5 crores
given by the
appellant with a direction to compensate the earli
er highest bidder by payment of the specified amount."
5. It is stated by Mr. S.N.
Soparkar learned Senior Advocate appearing with Mr. S.P. Majmudar that the possession
is given to them at 11.30am. However, we had directed at
12.00 noon to the parties to maintain statusquo which we propose to continue till
the application is made before the learned Single Judge because we had directed to
maintain statusquo on the oral statement made by the Deputy Official Liquidator that the
possession was not given and the same was confirmed by Mr. S.P.
Majmudar by consulting his client. Be that as it may. The appellant may file an application
before the learned Single Judge within a period of one week from today and the
statusquo shall remain in operation till the appellant files the application. Mr.
Soparkar submits that no such application is maintainable before the
learned Single Judge, we do not enter into this controversy as it is for the learned Single
Judge to decide this issue on the pleadings before him. As and when an application is
filed by the appellant before the learned Company Judge, an advance copy shall be
given to the Official Liquidator and the contesting respondent no.1 herein.
6. We are proposing to dispose of this appeal on the following consensus that:
1) The appellant before us will move before the learned Company Judge within a
period of one week with an appropriate application showing his desire to apply afresh for
the bid, as according to Mr. Trivedi, the order dated 17.12.2013 is not finalised and it
still re quires confirmation of the learned Single Judge. Be that as it may. If
the application is not made within one week, the benefit of this order will not enure for the
benefit of present appellant. The parties are directed to
maintain statusquo
till the appellant files an ap plication before the learned Single Judge and the learned
Com pany Judge shall decide the ques tion of
interim relief on mer its.
2) The appellant shall handover the Demand Draft of Rs.160 crores to Mr. R.C.
Mishra, Deputy Official Liquidator, who is present in the
Court, today itself. The Deputy Of ficial Liquidator has accepted it
and shall pass the receipt of the same to the present appellant. The
Official Liquidator shall see that the amount is kept in Fixed Deposit at least for one month
so that there is no loss of interest.
3) It goes without saying that we have not entered into the merits of the matter and
the deposit of Rs. 160 crores with Official Liquid ator is without prejudice to the
rights and contentions of the parties and we have adopted this
only because of the view expressed by the Apex Court in the case of Shradhha
Aromatics Private Limited (supra).
4) It goes without saying that once the application is made, it will be open for the learned
Single Judge to decide the same on merits. The statusquo thereafter will be sub ject to the
order which may be passed by the learned Single Judge after hearing the parties.
5) The order dated 31.3.2014 passed in Misc. Civil Application No. 53 of 2014 by the
learned Company Judge is interfered with to the above extent only.
7. With this consensus, this
ap peal is disposed of."
12. It further appears that thereafter, opponent
No.9 herein filed Misc. Civil Application No.90 of
2014 in O.J. Appeal No.9 of 2014, which came to be disposed of by the Hon'ble Division
Bench of this Court vide order dated 22.4.2014, wherein it is observed as under: "7.
In view of the above discussion, the modification application stands partly
ALLOWED with the modification that the word 'CONSENSUS' stands DE LETED
from second line of PARA6 of the judgment dated 17.04.2013, whereas, the
other submissions being devoid of merit, they are REJECTED.
8. It goes without saying that the learned Single Judge shall decide the
main matter on merits and while doing so he shall consider the decision in the case of
"SHRADHHA AROMATICS PVT. LTD." (Supra) and other decisions as well.
9. The order with regard to status quo, which is clarified by us today, does not
need, any further delving in the matter, as we have requested the
learned Single Judge to decide the main matter on merits, as observed by us in
the judgment dated 17.04.2014. No other points were urged / raised by the ap plicant before
us, except, the three points, as stated above. This
ap plication stands DISPOSED OF,
ac cordingly. No order as to costs."
THE PRESENT APPLICATION FOR RECALL:
13. The present applicant being the second highest
bidder has filed this application with the aforesaid
prayers mainly praying for recall of the order dated 17.12.2013 and as per the pleadings
of the application, the applicant has filed this application on two main grounds
which are more particularly enumerated in Paragraphs 2.9, 2.10, 2.11 and 3 of the
present application which are discussed hereinafter in detail.
14. The applicant herein has mainly contended in the present application as under:
(i) That while passing the order dated 17.12.2013, the successful bidder Vedica Procon
Pvt. Ltd. - opponent No.9 herein requested for permission of one
nominee, but such a request was declined as observed in Paragraph 10 by this Court in
its order dated 17.12.2013. It is contended that in disregard to condition No.31 as
well as the order dated 17.12.2013, Vedica Procon Pvt. Ltd. has
surreptitiously undergone a material change and has changed its registered office as well
as share capital of Vedica Procon Pvt. Ltd. and the earlier Directors Tamanna Paras Pandit and Paras Chamanlal
Pandit who were Directors of Vedica Procon Pvt. Ltd.
since its inception have resigned and one Narendra
Natwarlal Patel and Jayesh Tansukhlalbhai Kotak have become Directors of the said
Company with effect from 17.1.2014. It is alleged that such material
aspect has been suppressed and such aspect has been
resorted to in total disregard with the condition of auction as well as the order dated
17.12.2013 and hence, it is alleged that the same is fraudulent in
nature vitiating the order dated 17.12.2013 and also the subsequent order dated 31.3.2014.
(ii) It is contended by the applicant herein that
there is a change in the development regulations of Ahmedabad Urban Development
Authority with effect from 4.3.2014, whereby the Floor Space Index has been
enhanced from 1.0 to 1.8 which would entitle
the developer of the land for more construction. It
is contended that the applicant is ready and willing
to shell out an amount of Rs.160 crores for the land
in question which has already been deposited as per
the order passed by the Hon'ble Division Bench.
(iii)In Paragraph 3 of the application, as such
factual aspects are contended by the applicant and it is contended that the applicant has
filed this application to apply for a fresh bid as per the order of the Hon'ble
Division Bench. It is also contended that even though Vedica Procon Pvt. Ltd. has
deposited the entire amount on 16.4.2014, the
sale of the land in question is not yet confirmed by
this Court and no sale deed is yet executed. It is also reiterated that Vedica Procon Pvt.
Ltd. has committed gross material irregularity by not
adhering to the terms and conditions of the tender
documents more particularly, as regards nomination. It is also reiterated that during the
interregnum period, there is increase in Floor Space Index which
has enhanced the original value of the property in
question. The applicant has candidly submitted that
the order dated 31.3.2014 has lost its efficacy in view of the subsequent development and
it is specifically contended by the applicant that the said order dated 31.3.2014
has now become infructuous. The applicant has also contended that
this Court is the custodian of the interest of the Company and its Creditors.
In light of the aforesaid facts and contentions, the applicant has preferred this
application.
15. Opponent No.9 - Vedica Procon Pvt. Ltd. has filed its reply and has denied
the contentions raised by the applicant. It has been contended that
the present application is not maintainable in law
and no grounds are made for recall of the order. It
is also contended that the application is barred by
limitation and hence, it is not maintainable. It is also contended that the application suffers
from gross delay and laches. Opponent No.9 has contended
that it was declared as the highest bidder and it
has paid the full amount on 16.4.2014. It is further
contended that Vedica Procon Pvt. Ltd. having paid
25% of the sale consideration, the applicant herein
accepted the EMD amount which came to be returned by
the Official Liquidator and therefore, the applicant has lost its right to recall or review
the order dated 17.12.2013 by way of waiver, estoppel and
acquiescence and hence, the present application is
liable to be rejected. It is contended that there is no violation of the principles of natural
justice while passing the order dated 17.12.2013. It is contended that no allegation
of fraud is alleged against Vedica Procon Pvt. Ltd. It is contended that the applicant has
not challenged the order dated 17.12.2013. It is further contended that the
Official Liquidator has already given possession of the land in question and the same
has been taken over by Vedica Procon Pvt. Ltd. on 17.4.2014 at
11:30 a.m. in presence of the representatives of the Official
Liquidator, Textile Labour Association and personnel of Watch and Ward Staff.
16. Opponent No.9 herein has contended that it is not the case of the applicant that
Vedica Procon Pvt. Ltd. was not a successful bidder or that
consideration amount was not paid by Vedica Procon Pvt. Ltd. or that the possession of
the land was handed over by the Official Liquidator to some other
person and entity other than Vedica Procon Pvt. Ltd.
It is contended that the Company in law is equal to
a natural person and hence, a legal entity of its own. It is further contended that entity
of a Company is entirely separate from that of its Shareholders and it bears its
own name and has a seal of its own. Its assets are separate and distinct of
those of Shareholders and therefore, merely by change of registered office of
Vedica Procon Pvt. Ltd. or its share holding pattern or the Directors could not bring out
any change in the legal entity and that Vedica Procon Pvt. Ltd. would
continue to be in possession of the land handed over by the Official Liquidator. It is
contended that even otherwise, there is no restriction in this regard either in the
order dated 17.12.2013 or in any of the terms and conditions of the auction. It is contended
that equating the change in the Shareholders/Directors of a Company with Clause 31 of
the terms and conditions of the auction is
baseless, misleading and devoid of any merits. It is
denied that there is any material change or that the
same is surreptitiously affected as alleged. It is also denied that there is suppression or that there
is any disregard of condition of auction of the
order dated 17.12.2013. It is also denied that this Court declined the request of Vedica
Procon Pvt. Ltd. It is also denied that there is any fraud or that the order dated 17.12.2013
or 31.3.2014 is vitiated as alleged. It is denied that there is any fraud and it is
contended that in facts of the present case, there are no ingredients of fraud.
17. It is specifically contended that change of FSI
which is a subsequent event would not give any right for recall of the order dated
17.12.2013. It is contended that in commercial venture, the bidder
runs the hazard if any loss happens and equally, he
may make a profit of the transaction at the end of
the day. It is contended that the applicant decided
not to increase its bid, to match with the bid of Vedica Procon Pvt. Ltd. and having so
decided earlier, is barred from seeking rebid in respect of the property under the garb of
recall application and if such a course, as suggested by the applicant,
is given credence, in such a case, there would never be any finality in any auction
proceedings. It is contended that thus, the entire attempt of the
applicant to reopen the concluded transaction on the basis of subsequent facts is
impermissible. It is contended that a bidder, having participated in the auction and after
consciously deciding not to go higher than the highest bid, cannot be heard to
complain that his business/commercial decision turned out to be incorrect on second
thought and that it should be permitted to improve its offer. It
is contended that such action would be against the basic concept of auction where the fall of
hammer crystallizes the rights of the parties and any subsequent facts affecting the
valuation of the property thereafter are only irrelevant to determine
the adequacy of the price. It is contended that it
would be impermissible for a bidder to deprive the
purchaser of the benefit of a subsequent fact which may increase the valuation of the
property, otherwise, there would be no sanctity or closure to auction proceedings at all.
18. Opponent No.9 has also relied upon the
proceedings of handing over of the land in question
which is part of the record of this application.
19. The Official Liquidator has also filed its
report dated 23.4.2014. The Official Liquidator has narrated the earlier proceedings which
led to passing of the order dated 17.12.2013. The Official
Liquidator has also contended that as per the tender
conditions, Vedica Procon Pvt. Ltd. deposited 25% of the sale consideration i.e. Rs.37
crores on 6.1.2014. The Official Liquidator further submitted
that the present applicant addressed a communication
dated 9.1.2014 requesting the Official Liquidator to refund the EMD of Rs.4.50 crores as
per condition No.29 of the tender documents, wherein it is
specifically stated by the present applicant that as successful bidder, Vedica Procon Pvt.
Ltd. has deposited 25% of sale consideration and that such
EMD amount is to be returned as per condition No.29
of the tender documents. The Official Liquidator has further contended that the applicant
has never raised objections regarding auction of the proceedings at that relevant
point of time and accordingly, the Official Liquidator refunded the
EMD amount of Rs.4.5 crores to the present applicant through RTGS mode on 13.1.2014.
The Official Liquidator has further submitted that on a request made by Vedica
Procon Pvt. Ltd. by a communication dated 16.1.2014, the Official Liquidator has allowed
the auction purchaser for deploying their security guards on condition that it can post its
security outside the premises purchased by them to protect
their interest and to avoid the possibility of any casualty under the control and supervision
of security posted by the Official Liquidator at their own risk and consequences in
addition to the existing security arrangement made by the Official Liquidator.
20. The Official Liquidator has further submitted that Vedica Procon Pvt. Ltd.
deposited a Demand Draft of Rs.1,06,50,00,000/ vide communication dated 16.4.2014
and requested the Official Liquidator to hand over the possession of the land in question.
The Official Liquidator has averred that the said amount came to be deposited
by the Official Liquidator on 16.4.2014 and thus, the
Official Liquidator has already received full sale consideration amounting to Rs.148 crores
within stipulated time given as per the order dated
17.12.2013. It is further submitted that as per the request made by Vedica Procon Pvt.
Ltd., the Official Liquidator informed Vedica Procon Pvt. Ltd.
to remain present for handing over the possession of
the land in question on 17.4.2014 at 11:30 a.m. and
accordingly, the possession of the land in question is handed over to Vedica Procon Pvt.
Ltd. on 17.4.2014. The Official Liquidator has also relied upon the possession memo
dated 17.4.2014. The Official Liquidator has further submitted that the
Deputy Official Liquidator was present in the Court before the Hon'ble Division Bench.
However, no submissions have been made by Deputy Official
Liquidator and the Hon'ble Division Bench has passed the order dated 17.4.2014 without
hearing the Official Liquidator. It is further submitted that as
per the order dated 17.4.2014 passed by the Hon'ble Division Bench, the Official Liquidator
has deposited the amount of Rs.160 crores deposited by
the present applicant in the Bank on the same day and has kept the said amount in Fixed
Deposit Receipt as per the order passed by the Hon'ble Division Bench.
21. The Official Liquidator has also contended that the applicant has not challenged the
order dated 17.12.2013 passed by this Court before any forum. It is contended that the
present application is misconceived and not maintainable as the auction
process was duly conducted and completed with active
participation of the present applicant and the sale was confirmed in favour of the highest
bidder by this Court. It is contended that the present application is not legally
tenable at this stage after completion of whole sale process by this Court, only
because of increase in FSI by the Government. The Official Liquidator has
contended that the present application is not maintainable and the same deserves to be
rejected. The Official Liquidator has further contended that if such applications are
entertained, there would be no finality of auction process and the same would delay
the winding up proceedings.
22. The Textile Labour Association, the Trade Union
- opponent No.7 herein has also filed its reply. Opponent No.7 has contended that
the Company in liquidation was ordered to be wound up vide order dated
16.3.1990 passed by this Court in Company Petition No.156 of 1989. It is
contended that the claim of the workmen of the Company in liquidation lodged by it was
verified by the Chartered Accountant through his report dated 7.10.1999. It is
contended that as per the said report, the Chartered Accountant has verified the claims and
has found that an amount of Rs.14,40,33,438/ is due and payable to 1874
workers. The Union has further submitted that the workmen have been paid Rs.60 lacs
as per the order dated 6.9.2000 passed by this Court
in Company Application No.219 of 1999. The Union has further submitted that by a
further order dated 18.9.2002, the workmen have been paid further amount of Rs.55 lacs
and thus, in all, out of Rs.14,40,32,438/, the workers have been paid an amount
of Rs.1.10 crores and a net amount of Rs.13,30,32,438/ is still payable and thus,
the workmen have received only 7.64% of their total
dues. The Union has further averred that about 600 workmen have expired and there is
no disbursement after 2002. The Union has therefore prayed that out
of the amount deposited by the present applicant as well as Vedica Procon Pvt. Ltd. opponent No.9, this Court may pass an interim order for disbursement to the
workers. It is specifically averred in Paragraph 8 as under: "8.
... ... This is the essence and object of Section 529(A) of the Companies Act and therefore, the
hungry stomach of 1874 workmen or their widows may be satisfied. This is the prayer
that the answering respondent No.7 is making to this Hon'ble Court on behalf of 1874
workmen who are suffering from agony of starvation and they
are being laid into the morass of moribund and only this Hon'ble Court can place them
on firm ground and cross roads."
23. The applicant herein has filed its rejoinder to the affidavitinreply filed by opponent
No.9 and has denied the contentions raised by opponent No.9
in its reply. The applicant herein has categorically contended that the possession of the
land in question shown to have been given to Vedica Procon Pvt. Ltd. - opponent No.9 on
17.4.2014 is nothing but a paper possession and the same is in fragrant
disregard of the Hon'ble Division Bench order dated 17.4.2014. It is contended that
merely making of payment of consideration does not give any vested
right in favour of opponent No.9 more particularly, when the same is subject to
confirmation by this Court and in addition to this, the applicant has denied the
contentions raised by opponent No.9 in its affidavit. Similarly, the applicant has
also filed reply to the report of the Official Liquidator and as such, has denied the
contentions raised against the applicant in the report submitted by the Official Liquidator.
24. The applicant has also filed an additional affidavit dated 24.4.2014 to bring on
record the fact of the order dated 22.4.2014 passed by the Hon'ble Division
Bench in O.J. Misc. Civil Application No.89 of 2014.
25. During the course of hearing of this application, the applicant has filed a
further affidavit dated 9.5.2014. By the said affidavit, the
applicant sought permission of this Court to effect further deposit of Rs.40 crores with
the Official Liquidator by way of Demand Draft making total offer
at Rs.200 crores for the lands in question, instead
of Rs.160 crores as against the upset price of Rs.45 crores originally fixed by this Court
as per the order dated 10.5.2013. In addition to that, the
applicant has made a statement through his learned Senior Counsel that it shall deposit an
amount of Rs.14 crores with the Registry especially towards
dues of the workmen which will be subject to further
orders of this Court and accordingly, the following order was passed on 9.5.2014: "(1) The
matter was listed before this Court on 24.04.2014 and thereafter it
was listed on 06.05.2014 and since then the learned Senior Counsel / counsel for the
respective parties have been heard in length.
(2) Today the matter is heard and when learned Senior Counsel for the applic
ant was at the stage of giving rejoinder to the arguments made by the learned Senior
Counsel / Counsel for the other sides, due to paucity of time and in light of the
fact that the court is closed because of ensuing summer vaca
tion, the matter is adjourned.
(3) Mr.Kamal B. Trivedi, learned Senior Counsel for the applicant, has tendered further
affidavit dated 09.05.2014, which is taken on record, wherein in
Paragraph No.2 the applicant has stated that the applicant has now enhanced its
bid from Rs.160 crores to Rs.200 crores. This order is passed only because of
the fact that the matter is pending for hearing and the same would not create
any right in favour of the applicant and the same is passed in line of the obser vations made by
Division Bench of this Court vide order dated 17.04.2014
in O.J. Appeal No.9 of 2014. Mr.Kamal B. Trivedi, learned Senior Counsel for the applicant,
has tendered demand draft / pay order of Rs.40,00,00,000/ bearing
No.022859 dated 09.05.2014 of Axis Bank Ltd. in favour of Official Liquidator of M/s. Omex
Investors Ltd. (in liquida tion), a photocopy thereof is taken on record. Deputy
Official Liquidator, who is present in the court, is directed to accept the same.
(4) During course of hearing Mr.D.S.Vasavda, learned counsel for the opponentTLA,
and Ms.Amee Yagnik, learned counsel for the opponentOL,
have taken this Court through the pe culiar facts, more particularly both the
learned counsel have asserted that since 1989 the workmen are waiting for their
dues. Mr.Kamal B. Trivedi, learned Seni or Counsel for the
applicant,
states that the applicant shall deposit a further amount of Rs.14 crores with the
Registry of this Court, especially towards the dues of the workmen, which
will be subject to further orders of this Court. The
applicant shall de
posit such amount within a period of 02 (two) weeks from today. Such deposit of Rs.14 crores
by the applicant would be subject to
further orders of this
Court. It is also further clarified that such
deposit made by the applicant
shall not create any right in their fa vour. Mr.S.N.Soparkar, learned Senior
Counsel for opponent No.9 - the success ful bidder, states that amount of Rs.148 crores
is already deposited, which is more than enough to meet with the dues of the workmen.
(5) As pointed out by Mr.S.N.Soparkar, learned Senior Counsel for opponent No.9, time
to execute the sale deed is to get over on 15.05.2014 as per order
of this Court dated 17.12.2014. Consid ering the fact that this application is
being heard since 06.05.2014 and is now kept on 10.06.2014 for further hearing, the same
shall not be insisted upon by opponent No.9. S.O. to 10.06.2014 at 2:30 p.m."
Thus, the applicant has offered a price of Rs.214 crores for the lands in question.
26. Heard Mr. Kamal B. Trivedi, learned Senior Advocate with Ms. Sangeeta
Vishen with Mr. Harsh Jani with Mr. Vinay Vishen for the applicant, Dr. Amee
Yajnik, learned advocate for the Official
Liquidator, Mr. Uday R. Bhatt, learned advocate for
respondent No.2, Mr. D.S. Vasavada, learned advocate for respondent No.7, Mr. Alkesh
N. Shah, learned Assistant Government Pleader for respondent No.8 and
Mr. Saurabh N. Soparkar, Mr. Mihir J. Thakore, Mr.
Mihir H. Joshi, Mr. Shalin N. Mehta, learned Senior Advocates with Mr. Killol V. Shelat,
Mr. Sandeep Singhi, Mr. S.P. Majmudar, Mr. Vimal A. Purohit,
learned advocates for opponent No.9.
In addition to the oral arguments, the applicant and opponent No.9
Procon Pvt. Ltd. were also permitted to submit written arguments.
M/s. Vedica
CONTENTIONS RAISED BY THE APPLICANT:
27. Mr. Kamal B. Trivedi, learned Senior Advocate appearing for the applicant has
taken this Court through the basic pleadings as pleaded in the application and has
submitted that the present application is an application for recall of the
order dated 17.12.2013 and the present application
is not an application for review and has raised the following contentions:
(i) The present application is maintainable as an
application for recall of the order and it is not an
application for review. It was submitted that Rule 9 of the Companies (Court) Rules, 1959
provides for inherent powers for doing complete justice in the matter.
(ii) Mere acceptance of highest offer vide order dated 17.12.2013 does not and
cannot amount to confirmation of sale.
(iii)There is a difference between acceptance of
highest offer and confirmation of sale in favour of bidder making the highest offer.
(iv) If the confirmation of sale has not taken
place, then in that case, if this Court comes across
a better and concrete offer, then, this Court would
always like to go for it, while undertaking exercise to get adequate price of the property.
(v) Assuming that the confirmation has taken place, this Court would like to deconfirm the
sale when offer with a sizable difference and not moderate
difference comes before this Court. In the instant case, at the first instance, the difference
is of Rs.12 crores and the applicant is also ready to go higher.
27.1 As regards point No.(i), it was submitted that
the application is not a review application, nor is
it filed under the guise of a review application. It
was submitted that Rule 9 of the Companies (Court) Rules, 1959 provides for inherent
powers of the Company Court to do complete justice in the matter.
It was also submitted that in view of the fact that it is an application for review,
principles of waiver, estoppel and acquiescence or the limitation for entertaining a review
application are not applicable. It was also contended that there is
major difference between review of the order on one
hand and recall thereof on the other hand. It was
contended that in review, the High Court is to enter
into merits of the case to find out whether an error apparent on the face of the record
has been committed, whereas in case of recall, what is required to be seen with
reference to the order under reference is a violation of principles of
natural justice, illegality, material irregularity, suppression of facts and exercise of fraud. It was,
however, contended that the scope of recall application filed under the provisions
of the Companies (Court) Rules, 1959 is wider than the
normal recall applications as provided under Rule 9 of the Companies (Court) Rules, 1959.
On the aforesaid submissions therefore, it was
contended that the present application for recall is maintainable.
27.2 As regards point Nos.(ii) and (iii), it was contended that the order dated
17.12.2013 is an order of acceptance of bid and event of confirmation
is to take place. Relying upon the judgment of the Apex Court in the case of
Provash Chandra Dalui & Anr. Vs. Biswanath Banerjee & Anr., reported in 1989 Supp. (1)
SC 487 and Rajasthan State Industrial Development and Investment Corporation &
Anr. Vs. Diamond & Gem Development Corporation Ltd. & Anr.
reported in (2013) 5 SCC 470, it was contended that
the contract is to be interpreted by giving actual
meaning to the words contained therein and it is not permissible for the Court to make a
new contract, however reasonable it may be. It was contended that
the conditions No.9, 17, 33, 27 and 23 of the terms and conditions of public auction are
read in seriatim, in a purposive and harmonious fashion then, it would become
clear that there is vast difference between acceptance of highest offer in a
public auction on one hand and confirmation of sale
on the other hand and the words "confirmation" and
"acceptance" are to be interpreted literary. It was
further contended that so long as the full price is
not paid, the property remains within the possession
of the Official Liquidator and it is only after full
payment, confirmation of sale takes place, whereby sale becomes absolute which may lead
to grant of possession followed by execution of the sale deed.
It was contended that the principles enunciated by the Apex Court does not borne out
from the order dated 17.12.2013 and therefore, the order dated 17.12.2013 is
simply an order of accepting the highest offer of opponent No.9 and neither the sale
has become absolute nor the contract is concluded. It was contended that in every
auction, reserve price is fixed not on the basis of the dues, but the
same is fixed on reasonable market price which the
property is capable to fetch. It was contended that
adequacy and/or inadequacy of price depends upon and is related to the market value which
the property would fetch. It was further contended that when the highest bidder - opponent
No.9 herein applied for extension, the applicant realized that its
commercial wisdom was not correct. It was contended that confirmation of sale has not
taken place and sale deed is admittedly not executed and according
to the applicant, the possession has not been taken
over. On coming to know these facts, the applicant
approached this Court by way of an appeal. It was contended that though the amount of
total consideration is paid, the applicant has also deposited Rs.160 crores and there
being a sizable difference, the same suggests inadequacy of price. It was contended that
the Company Court is always interested to see that the maximum price is fetched and
therefore, no prejudice would be caused to
opponent No.9 if the higher market price is fetched
by recall of the order and by treating Rs.160 crores as upset price and by passing an order of reauction of the property in question, which has been raised
as aforesaid to Rs.214 crores by the applicant.
27.3 As regards point No.(iv), it was contended that there is no confirmation of sale in
favour of opponent No.9 as on 17.12.2013 and before the same would have been
confirmed in favour of opponent No.9, the applicant has given a higher offer of
Rs.160 crores and has also deposited the same. It
was contended that even thereafter during the course of hearing on 9.5.2014, the applicant
has further deposited an amount of Rs.40 crores. Considering the
issue of the dues of the workers, the applicant has also deposited a further amount of
Rs.14 crores taking into consideration the dues of the workers as per the order dated
9.5.2014. It was therefore contended that the offer of Rs.214 crores now made
by the applicant be treated as upset price and it was prayed that the auction be conducted afresh.
27.4 As regards point No.(v), it was contended that
the fundamental principle which is to be taken care
of by the Company Court while conducting the public auction is to see that the
maximum higher market price of the property in question is fetched. It was contended that
the market price is to be decided with reference to its best price on a given day that
could be accepted to be offered and not with reference to total dues of the
workers and creditors. It was contended that on 17.12.2013, all
the bidders were aware that there is possibility to
increase in FSI which would result into increase in
the value of the property in question and because of the said reason, the correct market
price of the property in question was not brought to the notice
of this Court and as such the public auction could
have been postponed. It is therefore contended that
the same would amount to material irregularity even if it is construed that by the order
dated 17.12.2013, the sale is confirmed in favour of opponent No.9, which would
be one of the valid ground for recall of the order even by deconfirming
the said alleged confirmation of sale. Relying upon the judgment of the Apex Court in
the case of Shraddha Aromatics Pvt. Ltd. Vs. O.L. of Global Arya Industries Ltd., reported
in (2011) 6 SCC 207 as well as in the case of Divya Manufacturing Co. Pvt. Ltd.
Tirupati Woollen Mills Shramik Sangharsha
Samity Vs. Official Liquidator, reported in (2000) 6 SCC 69,
it was contended that in view of the facts and circumstances that the price quoted by
the applicant is significantly higher than the price received, the said fact is
suggestive of the fact that the price quoted and fetched on 17.12.2013 was
inadequate which calls for recall of the order.
27.5 The learned Senior Advocate for the applicant
has relied upon the following judgments:
(a) Provash Chandra Dalui (supra)
(b) Rajasthan State Industrial Development and Investment Corporation (supra)
(c) Shraddha Aromatics Pvt. Ltd. (supra)
(d) Divya Manufacturing Co. Pvt. Ltd. Tirupati
Woollen Mills Shramik Sangharsha Samity (supra)
(e) Fertilisers and Chemicals Travancore Ltd.,
Udyogmandal Vs. Official Liquidator, High Court of Kerala, reported in (1996) 4 CLJ 380 (Ker)
(f) Vishnu Agarwal Vs. State of U.P., reported in AIR 2011 SC 1232.
(g) G.T. Swamy Vs. Goodluck Agencies, reported in 1990 (69) Comp. Cases 819.
(h) Girish Bhagwatprasad HUF through Karta and Manager Aastik & Anr. Vs.
Industrial Development Bank of India, rendered in Misc. Civil Application
No.187 of 2012 in Company Application No.414 of 2007 in Company Petition No.21 of
1984 dated 28.1.2014 passed by this Court (Coram: C.L. Soni, J.).
(i) Maharana Mills Rashtriya Kamdar Sangh Vs. OL of
Maharana Mills Ltd. & Ors., reported in 2011 (3) GLH
399.
(j) Industrial Reconstruction Bank of India Vs. Bengal Potteries Ltd. (in Liquidation)
in Application in Appeal in Matter No.93 of 1993, decided on 31.7.1995.
(k) U. Nilan Vs. Kannayyan, reported in AIR 1999 SC 3750.
(l) LICA (P) Ltd. (No.1) Vs. Official Liquidator, reported in 1996 Comp. Cases 788.
(m) LICA (P) Ltd. Vs. Official Liquidator, reported in (2000) 6 SCC 82.
(n) FCS Software Solutions Ltd. Vs. LA Medical
Devices Ltd. & Ors. reported in (2008) 10 SCC 440
(o) Nileshbbai Ramanbhai Patel Vs. Official Liquidator & Ors. (Gujarat) (DB)
rendered in O.J. Civil Application No.299 of 2013 vide order dated 25.7.2013
(p) Sadashiv Prasad Singh Vs. Harendar Singh & Ors. reported in AIR 2014 SC 1078.
(q) Chaudhary Brothers Vs. Official Liquidator of
Bhagwati Glass Container Ltd., reported in 2014 (2) GLH 271.
CONTENTIONS RAISED BY OPPONENT NO.9:
28. Mr. S.N. Soparkar, learned Senior Advocate
appearing for opponent No.9 in whose favour the bid
is accepted by this Court being the highest bidder has mainly raised the following points:
(i) Recall application filed by the applicant is not maintainable in law.
(ii) The application filed by the applicant suffers from gross delay and laches.
(iii)The applicant has suppressed material fact from this Hon'ble Court and that the
applicant's right to seek recall/review of the order dated 17.12.2013 is lost by waiver,
estoppel and acquiescence.
(iv) Whether an unsuccessful bidder can open up a
confirmed sale by stating that it is willing to pay more.
(v) The argument of the applicant that this Hon'ble Court by its order dated 17.12.2013
has not confirmed the sale in favour of opponent No.9 is baseless and without any merit.
(vi) Inspite of this Hon'ble Court declining the request of opponent No.9 for
nomination, opponent No.9 has changed its shareholding
pattern and the Directors thereby violated the terms and conditions as well as the order dated
17.12.2013 passed by this Court.
(vii)Whether the applicant is entitled to reopen the concluded transaction on the basis of
subsequent facts, namely, proposed increase of FSI by which the value of land in question is
likely to fetch more price.
28.1 As far as point No.(i) is concerned, it was contended that the order can be
recalled under certain specific grounds and circumstances and it
was argued that even if the same is not confirmed,
there should exist circumstances which would justify
recall of the order. It was contended that as far as
the present application is concerned, the following circumstances are pleaded:
(a) Subsequent higher bid.
(b) Request for extension of time for payment of
remaining 75% of the price by opponent No.9.
(c) Change of shareholding at the end of opponent No.9.
(d) Change in FSI.
It was contended that it is not even pleaded by the applicant that the price of the
property was inadequate on the date of the auction. It was
further contended that it is speculative attempt on
the part of the defeated bidder because of business
rivalry. It was contended that it is not even spelt
out by the applicant that under which provision, the present application is filed. It was
further contended that there is no provision in law for recall, except by way of
review. It was also contended that it is not the case of the applicant
that the order dated 17.12.2013 is passed exparte. It was further submitted that the
present application is filed very skillfully by terming it
as an application for recall and if it is considered
as review, it would be grossly time barred. It was
further contended that the principles enshrined in
Order 47 Rule 1 of the Code of Civil Procedure, 1908
would apply and for the same, the applicant has to show that there is an error apparent
on record. Relying upon the Apex Court judgment in the case of Cine Exhibition Private
Limited Vs. Collector, District Gwalior. reported in (2013) 2 SCC 698, in the case of
Budhia Swain Vs. Gopinath Deb reported
in (1999) 4 SCC 396 as well as in the case of Zahira
Habibullah Sheikh Vs. State of Gujarat, reported in (2004) 5 SCC 353,
it was contended that it is not open to party to circumvent review proceeding by
labeling it as recall and it is not the case of the applicant that there is any error apparent on
the record. It was contended that there is no error in
the order dated 17.12.2013 and as such in the wisdom
which has dawn on the applicant afterwards would not invalided the order. It was
contended that withdrawal of EMD by the applicant establishes the
fact that the applicant has acquiesced and that he
does not want to participate and the moment it is
said that the order dated 17.12.2013 was proper when it was passed, the applicant ought
to have given higher bid. It was thus contended that no grounds
required for recall of an order has been raised in the application itself. It was contended that it is
not the case of the applicant that the order dated
17.12.2013 has been obtained by any fraud practiced
upon this Court or that the Court has been mislead by any party or that the Court has
committed any mistake which prejudices any party. It was contended
that the applicant has not raised any ground in the
application that the order dated 17.12.2013 suffers from inherent lack of jurisdiction or
that a necessary party had not been served at all or has not represented and therefore, the
application itself is not maintainable. It was contended that realizing that the review
application is not maintainable, the applicant in order to achieve the review of order dated
17.12.2013 has labeled it as application for recall. It was submitted that what
cannot be done directly, cannot be permitted to be done indirectly and the present
application is an abuse of process of law and hence, liable to be rejected.
28.2 As regards point No.(ii), it is contended that the applicant was very much aware
about the proceedings of this Court and passing of the order
dated 17.12.2013. The applicant has participated in the interse bidding before this Court on 17.12.2013 and the present application is filed almost after 4
months and no explanation worth the name is given by the applicant for delay in filing
the present application. It was submitted that except two grounds that the Directors
of opponent No.9 has undergone change with effect from 17.1.2014 which
would vitiate the order dated 17.12.2013 and that by
a notification dated 4.3.2014, the FSI is changed,
no other grounds are raised in the application. It
was contended that the applicant was aware that the change of Directors has taken place
on 17.1.2014. However, there is no explanation why the applicant took more than 3
months to approach this Hon'ble Court. Similarly, the proposed change in FSI became
public as per notification dated 4.3.2014. However, no explanation is given in respect of
delay in filing the present application on 21.4.2014. It is therefore contended that the
present application suffers from gross delay and laches.
28.3 As far as point No.(iii) is concerned, it is contended that the applicant
participated in the interse bidding, wherein opponent No.9 was declared to be the highest
bidder and the applicant herein was the second highest bidder. It was contended that
as per condition No.29 of the terms and conditions
issued by the Official Liquidator, the EMD amount of
the second highest bidder i.e. the applicant was to
be retained by the Official Liquidator till the time
opponent No.9 deposits 25% of the sale consideration and such EMD amount was to be
returned to the applicant only thereafter. It is the case of opponent No.9 that it
deposited 25% of the sale consideration on or about 6.1.2014. That, on 9.1.2014,
the applicant addressed a letter to the Official Liquidator requesting the Official
Liquidator that as this Court has accepted the bid of opponent No.9 and that opponent
No.9, as a successful bidder, has deposited 25% of the sale
consideration, the EMD amount of the applicant along with late fee charges be refunded at
the earliest and accordingly, the Official Liquidator refunded
the EMD amount to the applicant on 31.1.2014. It was contended that this fact and the
conduct of the applicant clearly suggests that the applicant has no objection regarding
auction of property or inadequacy of the price at the relevant point of
time and these vital facts have been suppressed by the applicant in the application. It was
further contended that the applicant was not aggrieved by
the order dated 17.12.2013 and no appeal even till
date has been preferred by the applicant and thus, having waived its right, the applicant
cannot be permitted to agitate the issue under the garb of the
present application. It was contended that thus, the
applicant has lost its right to seek recall/review of the order dated 17.12.2013 by waiver,
estoppel and acquiescence.
28.4 As far as point No.(iv) is concerned, it was
contended that this Court vide order dated 26.3.2013
fixed the upset price of the lands in question at Rs.55 crores and subsequently, by an
order dated 10.5.2013, this Court has fixed the upset price at Rs.45 crores. Referring to
the order dated 17.12.2013, opponent No.9 contended that this Court conducted the
auction proceedings, wherein the applicant also participated and the offer of the
applicant after 12 rounds of interse bidding was
Rs.146 crores and that of opponent No.9 was Rs.148 crores and therefore, this Court by
order dated 17.12.2013 accepted the bid of opponent No.9 and
directed the Official Liquidator to take appropriate
actions. It was contended that there is no averment
of the applicant that the price offered by opponent No.9 was inadequate. On the contrary,
a statement has been made on behalf of the applicant before this
Court that it is not the case of the applicant that the price offered by opponent No.9
on the date of auction was inadequate. It was contended that it is
not even the case of the applicant that this Court
as a custodian has not taken into consideration the interest of the creditors, workers, etc.
while passing the order dated 17.12.2013. It was also
contended that it is not the case of the applicant that wide publicity to the intended sale
was not given to invite competitive offers or that the
valuation carried out by the valuer was not proper.
It was further contended that there is no averment
in the application that the order dated 17.12.2013
suffers from inherent lack of jurisdiction or that
there was any fraud or that a necessary party was
not heard or that the applicant was precluded from
participating in the bid. It is also not the case of
the applicant that any such party is prejudiced by the order dated 17.12.2013. In light of
the aforesaid contentions, it was contended that the
sale subject to confirmation of the Court does not mean that the Court shall set aside the
confirmed sale in favour of the highest bidder because at a
later stage, someone on second thought says that he is wiling to pay more.
It was contended that the judgments relied upon by the applicant to the effect that the
confirmed sale can be set aside are all decided on facts of such case and the judgments
relied upon by the applicant are not applicable to the present case.
The aforesaid judgments would not be applicable
to the facts of the present case. The learned Senior Advocate for opponent No.9 has
distinguished the aforesaid judgments in light of the facts stated in the present application.
28.5 As regards point No.(v), it was contended that by an order dated 17.12.2013, this
Court accepted the bid of opponent No.9 as being the highest bidder as per the tender
conditions. It was further contended that by the said order, the sale is confirmed
in favour of opponent No.9. It was contended that nowhere in the order dated
17.12.2013, it is stated by this Court that the sale
is not confirmed in favour of opponent No.9 or that the sale would be confirmed
subsequently. It was contended that on the contrary, in the aforesaid order, this
Court has directed the Official Liquidator to take appropriate action as envisaged under
conditions of tender including execution of
sale deed within one month from the payment of the
date of full consideration. It was contended that as per the said order dated 17.12.2013,
neither opponent No.9, nor the Official Liquidator is required to approach this
Court for sale confirmation of the execution of the sale deed. It was contended that there
is no provision in the terms and conditions which stipulates that the acceptance of
bid by this Court is separate and distinct from confirmation of sale by the Court. It
was thus contended that the order dated 17.12.2013
speaks for itself and as such the application lacks
complete factual background. It was contended that
the magical phrase "confirmation" and the question
of confirmation at the future date is imaginary. It was further contended that the conduct
of the applicant itself was to show that the bid of
opponent No.9 came to be accepted and confirmed by
the authority and thus, the contention that there is no concluded contract is factually
incorrect and legally unsustainable and the present application is
bereft of any contention in the application. It is
further contended that on perusal of Clauses 5, 8, 9, 13, 17, 20, 23, 29 and 33 of the
terms and conditions of sale, it would be evident that on acceptance of the highest
bid by this Court, this Court confirmed the sale in favour of the highest
bidder and such a fact is reflected from the letter dated 9.1.2014 addressed by the
applicant to the Official Liquidator.
28.6 As regards point No.(vi), it was contended that
it is not the case of the applicant that opponent No.9 was not a successful bidder or that
sale consideration amount was not paid by opponent No.9 or that the Official Liquidator
has handed over possession of the lands in question to any other
person or entity. It was contended that a Company in
law is equal to a natural person and hence, a legal
entity of its own. It was contended that the entity of the Company is entirely different
and separate from that of its Shareholders or the Directors. It
bears its own name and as a seal of its own and its assets are different and separate from
its Shareholders. It was contended that mere change of registered office of opponent No.9
or its shareholding pattern or the Directors would not
bring about any change in the legal entity. It was contended that the issue of nomination
was not foreclosed and that opponent No.9 has not sought or
intended to seek nomination. It was contended that the allegation of nomination is without
any basis and lacks factual background. It was contended that the change in structure is
not provided in conditions of sale and as per the conditions of sale, it was not
required to maintain the shareholding pattern. It was reiterated that Vedica
Procon Pvt. Ltd. remains Vedica Procon Pvt. Ltd. and
that there is no change in the legal entity. It is
further contended that opponent No.9 would continue
to be in possession of the land which according to
opponent No.9 has been handed over by the Official Liquidator and it is opponent No.9
who would be entitled to all the rights flowing from the order
dated 17.12.2013. It was contended that the attempt
on the part of the applicant to equate the change in
Shareholders/Directors of the Company with Clause 31
of the conditions of auction is baseless, misleading and devoid of any merits. It was
contended that Clause 31 restrains the offerers by intimating them that the nomination will
not be allowed only in order to ensure that the revenues of the statutory
authorities are not lost. It was also contended that the contention raised by the applicant
that the Court declined the request of opponent No.9 for
nomination is false as in Para 10 of the order dated 17.12.2013, it is clearly provided by
this Court that opponent No.9 can approach this Court by way of filing a proper application.
28.7 As regards point No.(vii), it was contended that the proposed change in FSI on
4.3.2014 would not give any right for recall of the order dated 17.12.2013. It was
submitted that the attempt to reopen the concluded transaction on the basis of
subsequent fact is impermissible and the auction
which is complete cannot be opened. It was contended that there is not even a suggestion that
the right price is not fetched. On the contrary, it was
contended that the price was adequate on the date of auction and thus, the auction which
is complete cannot be opened on the basis of the subsequent events. It was
contended that the applicant as a bidder participated in the auction and after
consciously deciding not to go higher than the highest bid cannot be heard to
complain that its business/commercial decision turned out to be a second thought and
that it should be permitted to improve its offer. It was contended that such a
contention is against the basic concept of auction, where at the fall of hammer, the same
crystallize the rights of the parties. It was contended that it is not even pleaded that there
is material irregularity as regards the adequacy of the price on the date on which the
auction proceedings were undertaken. Neither there is any allegation of
fraud, nor the price now given has any bearing for reopening a concluded contract. It was
contended that the reliance placed upon by the applicant on the judgment of the
Apex Court in the case of Shraddha Aromatics Pvt. Ltd. (supra) would not be
applicable in the present case and no case for re auction is made out. It was contended
that the judgment has to be read in context of the
controversy and not logical and the Apex Court was called upon to decide the matter on
different factual matrix, wherein the successful bidder has not raised any dispute and
therefore, it does not lay down that in every case, a subsequent higher price can
upset the concluded contract and thus, strong reliance placed on the same is misplaced. It
was contended that any subsequent fact affecting the valuation of the property thereafter
are only irrelevant to determine the adequacy of the price
when the hammer fell and it would be at the risk and consequence of the purchaser.
Elucidating this aspect further, it was contended by opponent No.9
that a concluded contract cannot be revisited on the
factual basis which is pleaded by the applicant. It
was contended that subsequent increase in FSI might
have increased the price and as a matter of fact, it
is not a subsequent event, but this aspect of FSI
was discussed even in the earlier order and during
the auction process. It was further contended that
in case of decrease in FSI, can a successful bidder come for reduction of the price paid
and thus, change in FSI is no ground for reopening a concluded contract and such a
contention and the higher bid which is given by the applicant is because of
subsequent events. It was contended that when it is
not pleaded and it is not the case of the applicant that the price is inadequate as on date
i.e. on 17.12.2013, a concluded contract cannot be revisited
by the present application which is filed after 40 days, which is time barred. It was also
contended that if any event adversely affecting the valuation
of the property namely reservation etc. had happened post the auction, the purchaser could
not have reviewed to back out from the turn and therefore, it
is inevitable and impermissible for a bidder to seek to deprive the purchaser of the
benefit of a subsequent fact which may increase the valuation of
the property. It was contended that in both cases,
parties take the consequence of a business decision,
its consequential loss or benefit and would be held
bound by it. Otherwise, there would be no sanctity
or closure to auction proceedings at all. Opponent No.9 has relied upon the judgment
rendered in the case of Ganga Retreat & Towers Limited & Anr. Vs.
State of Rajasthan & Ors. reported in (2003) 12 SCC 91 as well as in the case of
Alopi Parshad & Sons Ltd. Vs. Union of India, reported in AIR 1960 SC
588. 28.8 It was contended that the judgments relied upon
by the applicant are not applicable in the facts of
the present case and the case before the Apex Court
were based on different factual background and would
not be applicable in the instant case. It is thus contended that the application is misleading
and bereft of any material and without there being any justifiable ground for recall of
the order and hence, the application deserves to be dismissed.
28.9 It was contended that escalation in price is not a fraud and as such, there
is no substantive increase as offered by the applicant increase of Rs.12 crores is
insignificant which would mean hardly 8% after 4 months which would amount to 1% per
month and price now given has no bearing for reopening a concluded contract. It
was therefore submitted that the application deserves to be dismissed.
28.10 In support of the aforesaid contentions, opponent No.9 has relied upon the
following judgments:
(a) Navalkha and sons Vs. Ramanuja Das & Ors., reported in (1969) 2 SCC 537.
(b) Kayjay Industries (P) Ltd. Vs. Asnew Drums (P) Ltd. reported in (1974) 2 SCC 213
(c) Sharawan Kumar Agarwal Vs. Shrinenp Investment
Ltd. reported in (1990) 68 Comp Cases 52 (Calcutta) (DB).
(d) Valji Khimji & Co. Vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd.,
reported in (2008) 9 SCC 299.
(e) Sarvariya Exports Limited Vs. Official Liquidator of Urmi Oil Limited, reported in
(2009) 147 Comp Cases 336 (Gujarat) (DB).
(f) Arasmeta Captive Power Company Private Limited Vs. Lafarge India Private Limited,
reported in (2014) 1 Comp.L.J. 209 (SC).
(g) Ganga Retreat & Towers Ltd. (supra).
(h) M/s. Alopi Parshad & Sons Ltd. (supra).
(i) Cine Exhibition Private Limited (supra).
(j) Ram Kishun & Ors. Vs. State of Uttar Pradesh, reported in (2012) 11 SCC 511.
(k) Chaudhary Brothers (supra).
(l) Zahira Habibullah Sheikh (supra)
(m) Riverfront Properties Private Limited Vs. IDBI
Bank Ltd. & Ors. decided on 7.2.2014 in O.J. Appeal No.2 of 2014.
(n) Budhia Swain (supra).
Contentions raised by the Official Liquidator:
29. Dr. Amee Yajnik, learned advocate for the Official Liquidator submitted that
the Official Liquidator is attached to this Court and submitted that the winding up order
was passed in the year 198990 and since then, the workers are not paid. It
was submitted that the Secured Creditors, till date,
have not filed any claim. It was contended on behalf of the Official Liquidator that the
order dated 17.12.2013 is legal and proper and that the same has
been done after complete process. It was contended
that the present application for recall is filed on frivolous grounds. It was contended that
the applicant and opponent No.9 are in reality business
and if they have any rivalry, they may resolve it
amongst themselves. It was contended that when the order is passed, the sale is
confirmed. It was contended that the order dated 17.12.2013 is not
challenged. It was also further contended that what
is wrong with the order is not pointed out by the
applicant. It was contended that having accepted the EMD back suddenly in order to take
advantage of change in FSI, everything is attempted to be stalled. It was
contended that increase of Rs.12 crores is not even 10% increase. It was also
contended that the applicant did not increase at the time when the auction took place
though he participated in the same. It was therefore contended
that the present offer is mockery of price and it amounts to stalling the proceedings,
whereby ultimately, the workers would be deprived. It was contended that after
much difficulty, the auction was carried out and in fact, 600 workers have already
died. It was contended that the Official Liquidator has onus duty to perform as
far as workers' dues are concerned. It was contended that instead of permitting the
Official Liquidator to sell the property of the Company under liquidation, the
Official Liquidator is dragged into litigation by two parties who are in real estate business for
business rivalry or private gains. It was also contended that the fact in reality
remains that despite efforts by this Court directing the Official
Liquidator to see that some property is put to sale
out of huge parcel of land and workers may get their legal dues, it has not been fortified.
It was contended that all these factors may be taken into
consideration. It was contended that the applicant
has not challenged the order and in fact has found
nothing wrong in the order dated 17.12.2013 and that
the applicant was also a party to the order. It was contended that the applicant, at the
time of auction, did not even raise its bid by Rs.2 crores and thereafter, the applicant has
approached this Court after 4 months by increasing it to Rs.160 crores taking into
consideration the risk factor involved. It was contended that GDCR issue was
already on record and having failed to increase the
bid, the applicant cannot be permitted to say that
the order dated 17.12.2013 be recalled as more price is fetched mainly on the following points:
(i) It was contended that as small parcel of huge land were leasehold lands, nondemarcation
of freehold land in a way prevented the Official Liquidator to put the land for
sale to fetch the legal dues of workers and it could not be
materialized for almost 20 years.
(ii) That exercise of coming out with proper
demarcation of freehold parcel of land without there
being any encumbrance to 4 years as can be seen from various orders passed by this Court.
(iii)In view of multiple litigations by lessors including before the Apex Court,
effort of the Official Liquidator to put property for auction took
sometime and when the auction took place, it fail.
(iv) All these facts show that the workers have
waited for almost two decades for their legal dues
and so when the auction was confirmed by this Court,
the amount fetched was such that it covered not only the dues of the workers, but also
of the Secured Creditors and Unsecured Creditors.
29.1 It was contended that the aforesaid 4 points and two predecision
advertisements in newspapers widely circulated were definitely in the knowledge
of all those who came to bid including the Official
Liquidator. While the auction was confirmed by this Court, the Court could finally see hope
for those workers. It was contended that on these points, the Official Liquidator rests its
case by saying that primafacie, there is no point made out for recall
of the order dated 17.12.2013. It was contended that there is no substantial offer raised
by the applicant and as such the applicant should be
directed to deposit Rs.14 crores for the workers of
the Company, which came to be wound up in the year 1990.
29.2 It was contended that in order to substantiate the aforesaid points as well as in
order to establish that huge efforts have gone into exercise
undertaken to cull out this small parcel of land for
sale, this Court has kept in mind that despite such
huge property of the Company in liquidation because of nonclarity of freehold land and leasehold land and the complex litigations by the lessors seeking
relief for their rights, the order dated 17.12.2013
which has fetched a substantial amount, whereby the
dues of the workers shall be satisfied, should not be recalled only because another
business entity comes with a higher offer which is not even 10% of
the offer given by the auction purchaser should not be entertained, specifically when the
whole procedure of auction is taken before the Court where
the applicant was a party. It was contended that the applicant withdrew its EMD and has
not challenged the order by way of an appeal and therefore, the applicant should
show its bonafides and should deposit the amount towards workers' dues.
29.3 It was contended that in glaring facts of this case, the order need not be recalled
and the Official Liquidator, despite having received Rs.148 crores from this parcel of
land, is unable to disburse the amount to the workers. It was contended that this Court
may either ask the applicant to deposit Rs.15 crores towards workers' dues forthwith and
this Court, in view of circumstances of this
particular matter where applicant was a bidder who
appears to be a prudent businessman, has stalled the
property and fairly held auction and as such, this litigation is causing injustice to the workers. It
was contended that the Official Liquidator is not in
the business of real estate and if this practice is continued, there shall never be any
finality to auction where the Official Liquidator puts a
property of the Company in liquidation to sale with an objective of seeking all
stakeholders of erstwhile alive Company be paid their dues shall
never be able to pay the same. It was contended that the adequacy of offer is always
decided by this Court. It was also contended that the auction was
conducted before the Court which was a Company Court
and it is not an ordinary auction which is conducted in common parlance. It was lastly
contended that taking into consideration the aforesaid aspects, the
application deserves to be dismissed.
CONTENTIONS RAISED BY TEXTILE LABOUR ASSOCIATION:
30. Mr. D.S. Vasavada, learned advocate for opponent No.7 Textile Labour Association has taken this Court through the fact that this Court passed
an order of winding up of the Company in liquidation
on 16.3.1990. It was pointed out that the plant and machinery and building of the
Company under liquidation were disposed of in the year 2002 and
lastly, in the year 2002, two orders of disbursement were passed whereby the workers
received only an amount of Rs.1.15 crores. It was contended that 20
years have rolled by and the workmen of the Company
in liquidation are waiting for their legal dues. It
was further submitted that it is a hard reality that because of such a long span, 600
workmen of the Company in liquidation have expired. Relying upon
the judgment of this Court reported in the case of Textile Labour Association Vs. State,
reported in 1995 (1) GLH 12, Mr. Vasavada contended that from the amount which
is received by the Official Liquidator, the workers should be paid after the
ratio is worked out. Mr. Vasavada relying upon the facts and figures submitted that in
all, Rs.48 crores is due and payable, out of which about Rs.14
crores is to be paid to the workers and therefore,
it was contended that no prejudice would be caused to any stakeholders and therefore, this
Court may pass appropriate orders to disburse the amount to
the workers from the sale proceeds received.
CONTENTIONS RAISED BY OTHER SECURED CREDITOR:
31. Mr. U.R. Bhatt, learned advocate appearing for opponent No.2 - State Bank of India,
one of the Secured Creditor, contended before this Court that
the State Bank of India has lodged its claim before the Official Liquidator and this Court
may pass appropriate orders taking into consideration the
interest of the Secured Creditor. No other Secured Creditors have represented before this Court.
REJOINDER ON BEHALF OF THE APPLICANT:
32. Mr. Kamal B. Trivedi, learned Senior Advocate
for the applicant, in rejoinder, has submitted that the application is maintainable. It was
contended that in substance, the prayer is to reauction. It
was submitted that this Court has inherent powers to recall and such powers are traceable
from Rules 6 and 9 of the Companies (Court) Rules, 1959. It was contended that everybody
works for gain, however, within 4 corners of law. Mr. Trivedi, reiterating the
contentions raised in the initial argument, submitted that the price is not fixed on the basis
of dues and the test is that when auction takes place in Company Court, attempt
should be made to fetch best price. It was contended that the property
in question is capable of fetching more price on the
date on which the order is passed by this Court i.e.
on 17.12.2013 and the present application is filed
with a purpose to see that the property could fetch more price and it was contended that
there is no confirmation. It was further contended that the price on the date of
the order was as per the perception of the applicant on that day.
32.1 Mr. Trivedi referring to the Apex Court judgment in the case of Cine
Exhibition Private Limited (supra) and in the case of Budhia Swain
(supra) submitted that both the judgments are under the Supreme Court Rules. It was
contended that in exercise of inherent powers, this Court can exercise Suo Motu powers
and the bottom line is to do complete justice in the matter. It was contended
that the judgment is not to be read as a statute.
However, the facts as well as the statement of law
cannot be considered without referring to the facts.
It was further contended that Rule 9 of the Company (Court) Rules, 1959 empowers the
Court to do complete justice and this Court can also Suo Motu take such a view
and therefore, principles of waiver, estoppel and acquiescence will not apply. It
was further contended that if the Court feels that
on 17.12.2013, it was only an acceptance of higher
offer and if today, it is felt that the price would have gone more and more particularly, as
it is coming on record that the price could have been more, this Court would
like to exercise its jurisdiction while seeing that workers' interest is taken care of and in
such type of case, recall application is to be dealt with in this manner only.
It was contended that the judgment of the Apex Court in the case of Zahira Habibullah Sheikh
(supra) is not applicable to the present case. It was also contended that in Review
Application, the Court enters into merits of the case and tries to find out
whether there is any error apparent, however, so is not the requirement in case of recall.
It was contended that the principles such as breach of principles of natural justice
exercising material irregularity or fraud are the principles, which is normally available in
a Writ Petition, but before the Company Court, spectrum of recall is wider.
Referring to the judgments of the Apex Court in the case of Vishnu Agarwal (supra),
G.T. Swamy (supra) and Fertilisers and Chemicals Travancore Ltd.
(supra), it was contended that Rule 9 empowers the Court to recall and such a power is
an inherent power. It was further contended that the present
application is filed within 4 corners of this power and the application is thus maintainable.
It was contended that if it is maintainable, then, it is to be decided on merits and nonsuiting the applicant on the ground of maintainability would amount to
travesty of justice as well as turning blind eyes to
the propositions of the Rules. It was contended that
the contract is to be interpreted literary and each
word has its purpose. Referring to the conditions of
sale and more particularly, condition Nos.9, 17, 23, 27 and 33, it was contended that the
terms and conditions fixed cannot be treated superfluously, but it has to be given
purposeful interpretation. Referring to the aforesaid conditions, it was contended
that the value of word "confirmation" cannot be reduced and payment of full amount
does not amount to confirmation of sale. It was contended that if the said conditions are
read in order as indicated above, it brings out that the sale was not
confirmed, but it was only confirmation of highest offer. It was contended that only after
the full payment, occasion of sale deed would occasion and
the main thing as to whether the maximum price is
obtained or not and the price has no relation with the dues of the Company. Mr. Trivedi
also relied upon the judgment of the Apex Court in the case of U. Nilan (supra) and has
contended that the aforesaid terms are of specific connotations. It was lastly contended that
the judgments cited by opponent No.9 in the case of Ganga Retreat & Towers Limited
(supra) and in the case of M/s. Alopi Parshad & Sons Ltd. (supra) cannot be
made applicable to the present case. It was contended that in these circumstances,
the application deserves to be allowed and this Court may be pleased to hold the fresh
auction fixing Rs.214 crores as upset price and even workers can be disbursed the
amount.
FURTHER ARGUMENTS ON BEHALF OF OPPONENT NO.9:
33. Mr. Saurabh N. Soparkar, learned Senior Advocate for opponent No.9 contended
that the applicant is in some confusion in placing reliance upon the judgment relied upon
by opponent No.9 in the case of Vishnu Agarwal (supra) and it was
contended that either it wholly support or it does not apply. It was submitted that it does
not say that it can tinker with the concluded matter between the parties by, bypassing the
provisions of the Act. It was contended that the recall has very
narrow and limited connotation.
33.1 Referring to the judgment in the case of G.T.
Swamy (supra), it was contended that the same is not applicable. Referring to the facts of
the present case, it was contended that there is no question of
doing justice between the parties.
33.2 Referring to the judgment in the case of Fertilisers and Chemicals Travancore
Ltd. (supra), it was contended that the same is not applicable in the instant case and the
said judgment is not connected with the power of recall and the said case
is decided on merits of the case and the same has no relevance once the bid is accepted
and the confirmation is made. It was further submitted that
reliance put forward upon the judgment of Shraddha
Aromatics Pvt. Ltd. (supra) is misconceived and the said judgment is on facts.
33.3 It was further contended that the day on which
the order was passed, there was no error on the part of the Court and there is no patent
error in the same. It was contended that the same does not cause
any injustice between the parties more particularly,
if a party chooses not to bid higher, he must thank
himself and there is no injustice to the applicant and really, it was applicant's error in not giving
higher bid, which has resulted into injustice and
therefore, the said judgment does not apply. It was
contended that there is no injustice, nor any error.
Similarly, it was contended that the principles laid down by the Apex Court in the case
of Provash Chandra Dalui (supra) and in the case of Rajasthan State Industrial
Development and Investment Corporation (supra) would not apply to the present case. It
was further contended that by the order dated 17.12.2013, the two important
ingredients namely "offer" and "acceptance" is there and the contract is concluded.
Referring to condition Nos.29, 32 and 33 of the terms and conditions of the auction sale, it
was contended that there is no formal set of judgments that in absence of word
"confirmation", once sale deed is to be executed after full payment is received,
the argument that the sale is not confirmed is completely fallacious. It was further
contended that the return of EMD means confirmation of sale and therefore, the
argument that there is no confirmation of sale is wrong and concluded contract does
not require any confirmation of sale. It was contended that the Apex Court has not held
that the judge has to say confirmation of sale and the provisions of Order 21
Rule 89 and 90 does not apply to the present case
and the same is wholly irrelevant. Referring to the judgment of the Division Bench of
Calcutta High Court in the case of Sharawan Kumar Agarwal (supra),
it was contended that it is in favour of opponent No.9 and the applicant has not been
able to show that it is in whose public interest, recall is necessary. Reiterating the
contentions raised earlier, it was submitted that most importantly, the applicant has not
dealt with the case of Valji Khimji (supra). It was further submitted that even
the judgment of Lica (P) Ltd. (supra) is based on Clause 11 which is followed in
Sarvariya Exports Limited (supra). It was contended that if Clause 11
goes, automatically, all will fall. It was contended
that on the basis of subsequent events and change in
law, the present application cannot be entertained and the same deserves to be dismissed
more particularly, on the grounds which are raised in the application and the application
deserves to be dismissed.
34. Before considering the submissions made by the learned Senior Advocates appearing
for the applicant, opponent No.9 in particular and the
learned counsel appearing for the other opponents, it would be appropriate to refer to
the various judgments cited by both the sides.
DECISIONS RELIED UPON BY LEARNED COUNSEL APPEARING
FOR THE APPLICANT, OPPONENT NO.7 AND OPPONENT NO.9:
(a) In the case of Provash Chandra Dalui (supra), it has been observed in Paragraphs
10 to 14 as under: "10 'Ex praecedentibus et consequentibus optima fit interpretation'.
The best interpretation is made from the context. Every contract is to be
construed with reference to its object and the whole of its terms. The whole
context must be considered to ascertain the intention of
the parties. It is an accepted principal of construction that the sense and meaning of the parties
in any particular part of instrument may be collected 'ex antecedentibus et
consequentibus;' every part of it may be brought into action in
order to collect from the whole one uniform and consistent sense, if that is possible. As Lord
Davey said in N. E. Railway V/s. Hastings, (1900) AC 260 (267), "... the deed must be
read as a whole in order to ascertain the true meaning of its several clauses, and ...
the words of each clause should be so interpreted as to bring
them into harmony with the other provisions of the deed if that interpretation does no
violence to the meaning of which they are naturally susceptible...".
In construing a contract the Court must look at the words used in the contract
unless they are such that one may suspect that they do not convey the intention
correctly. If the words are clear, there is very little the Court can do about it. In
the construction of a written instrument it is legitimate in order to ascertain the
true meaning of the words used and if that be doubtful it is legitimate to have regard to the
circumstances surrounding their creation and the subject matter to which it was designed
and intended they should apply.
11. The habendum in the lease states:
"Upon the prayer of the second party Lessee to take the said land in arrangement and
settlement for a stipulated period for starting factories, Lathe works, manufacturing
and repairing of Motor Car parts, manufacturing and repairing Electric
Fans and various manufacturing businesses, constructing pucea buildings on the said land
or in portion thereof or subletting houses etc. and for constructing shop rooms etc.
under the following terms and provisions, to which he agreed and upon
giving possession of the said land to the second party Lessee, the second party
Lessee hereby admit and promise that."
12 Particulars and four boundaries of the property in Schedule "Ka" are given as :
"In the District of 24 Parganas, within the Police Station Bhowanipore, in Mouza
Bhowanipore Village, within the jurisdiction of the SubRegistry Alipore, in
Government Khas Mahal, in Division 6, Sub Division "E" (E) relating to Dihi 55
gram, in holding No. 224 within the surplus land of scheme No. 4 of the Calcutta
Improvement Trust, a portion of the plot No. 62 of the said scheme, the rent free
land measuring more or less 065,30 six kathas, five chittaks, thirty square feet
together with foundation of the wall together with all fittings and fixtures and easement
and other rights etc. with all rights and entire right is the property
whose current Municipal premises No. 5/2A, Russa Road and the second party Lessee have
taken the said property on lease for a stipulated period of twenty years".
(emphasis added) 13 In clause 9 of the lease it would be
seen how and when the rent is to be paid and when the lease would be liable to be
cancelled have been stated. Clause 11 stipulates that at the first instance the period of
lease was made 10 years and in case the Lessee acted in accordance with what was
expected of him under clause 9, the period of the lease would be extended for a
further period of 5 years up to 31.03.1961 at enhanced rent of Rs. 250 per
month, and if the Lessee continued to act in accordance with what was expected of him under
clause 9 during this period of 5 years the period of the lease would be
extended for a further period of 5 years, that is up to 3 1.03.1966 at a monthly rent
of Rs. 300 and in case the Lessee continued to act during this period as expected of
him under clause 9 till the end of the period of 20 years he would be entitled by
serving a notice to obtain an extension for a further maximum period of one year at
enhanced rent of Rs. 500 per month.
14 It is pertinent to note that the word used is 'extension' and not 'renewal'. To
extend means to enlarge, expand, lengthen, prolong, to carry out further than its original
limit. Extension, according to Black's Law Dictionary, means enlargement of the
main body; addition of something smaller than that to which it is attached; to lengthen
or prolong. Thus extension ordinarily implies the continued existence of something to
be extended. The distinction between 'extension and 'renewal' is chiefly that in the
case of renewal, a new lease is required, while in the case of extension the same lease
continues in force during additional period by the performance of the stipulated act.
In other words, the word 'extension' when used in its proper and usual sense in
connection with a lease means a prolongation of the lease. Construction of
this stipulation in the lease in the above manner will also be consistent when the
lease is taken as a whole. The purposes of the lease were not expected to last for
only 10 years and as Mr. A. K. Sen rightly pointed out the Schedule specifically mentioned
the lease as "for a stipulated period of twenty years." As these words are very clear,
there is very little for the Court to do about it."
(b) In the case of Rajasthan State Industrial Development and Investment Corporation
(supra), it has been observed in Paragraphs 23 and 24 as under: "23 A party cannot claim
anything more than what is covered by the terms of
contract, for the reason that contract is a transaction between the two parties and has been
entered into with open eyes and understanding the nature of contract. Thus,
contract being a creature of an agreement between two or more parties, has to be
interpreted giving literal meanings unless, there is some ambiguity therein. The contract
is to be interpreted giving the actual meaning to the words contained in
the contract and it is not permissible for the court to make a new contract, however
is reasonable, if the parties have not made it themselves. It is to be interpreted in such a way
that its terms may not be varied. The contract has to be interpreted
without giving any outside aid. The terms of the contract have to be construed
strictly without altering the nature of the contract, as it may affect the interest of either of the
parties adversely. (Vide: United India Insurance Co. Ltd. v. Harchand
Rai Chandan Lal, AIR 2004 SC 4794; Polymat India P. Ltd. & Anr. v. National Insurance
Co. Ltd. & Ors., AIR 2005 SC 286).
24 In DLF Universal Ltd. & Anr. v.
Director, T. and C. Planning Department Haryana & Ors., AIR 2011 SC 1463,
this court held:
"13. It is a settled principle in law that a contract is interpreted according to its
purpose. The purpose of a contract is the interests, objectives, values, policy that
the contract is designed to 82ctualize. It comprises joint intent of the parties.
Every such contract expresses the autonomy of the contractual parties' private will. It
creates reasonable, legally protected expectations between the parties and reliance on
its results. Consistent with the character of purposive interpretation, the court is
required to determine the ultimate purpose of a contract primarily by
the joint intent of the parties at the time the contract so formed. It is not the
intent of a single party; it is the joint intent of both parties and the joint intent
of the parties is to be discovered from the entirety of the contract and the
circumstances surrounding its formation.
14. As is stated in Anson's Law of Contract:
"a basic principle of the Common Law of Contract is that the parties are free
to determine for themselves what primary obligations they will accept...Today, the
position is seen in a different light. Freedom of contract is generally regarded
as a reasonable, social, ideal only to the extent that equality of bargaining power between
the contracting parties can be assumed and no injury is done to the
interests of the community at large."
15. The Court assumes:
"that the parties to the contract are reasonable persons who seek to achieve
reasonable results, fairness and efficiency...In a contract between the joint
intent of the parties and the intent of the reasonable person, joint intent trumps, and the Judge
should interpret the contract accordingly."
(c) In the case of Shraddha Aromatics Pvt. Ltd.
(supra), it has been observed in Paragraphs 4, 5, 6, 15 and 16 as under: "4. Undeterred by
rejection of one application, the appellant filed another
application, which came to be registered as Company Application No.504 of 2007, for
recall of order dated 30.8.2007. After considering the rival submissions, learned
Company Judge vide his order dated 27.11.2007 allowed the second application. The
relevant portions of that order are extracted below:
"13. If the above conduct of the applicant is to be viewed in light of the latest
judgment of the Hon'ble Supreme Court in
the case of Divya Manufacturing Company (P) Limited (Supra), it is clear that though
the sale was confirmed in favour of respondent No.2, neither the possession of
the movable properties was handed over nor the sale deed was executed in favour of
respondent No.2. Unless and until these formalities are over, it cannot be said
that the transaction is complete and before that, if higher offer is made, the Court
would certainly consider and at that point of time, it is to be seen as to whether the
earlier transaction is by virtue of fraud. The real criteria is that the property of the Company
in liquidation should fetch maximum price and whether the properties
can be adjudged on the basis of the offers which are received. Here in the present case,
the applicant has offered Rs.1.51 Crores. If that is to be considered as
market value then in that case, certainly the offer of Rs. 1.27 Crores made by
respondent No.2 and accepted by the Court earlier cannot be said to be an adequate
price and hence, the Court is well within its power to reconsider the case. The
authorities cited by the learned advocate appearing for the respondent No.2 are
confining to the facts of those cases. Even in the case of Divya Manufacturing Company
(P) Limited, a distinction was sought to be drawn by submitting that there was
condition laid down in the tender document empowering the Court to set aside the sale.
Irrespective of the fact whether any such condition is there or not, the Court is well
within its power to reconsider its decision especially when higher amount is offered
and ultimately, it is in the advantage and benefit of the Secured
Creditors and workers.
14. Even the Division Bench of this Court has taken the view in O.J. Appeal No. 80 of 2007
decided on 28.06.2007 where the Learned Single Judge has rejected the application
for de confirmation of sale and while considering the higher offer made by that
appellant, since the original successful bidder had increased its offer to match with
the offer made by the appellant in the appeal, the matter was accordingly decided.
15. Considering the over all view of the matter and looking to the facts and
circumstances of the present case, the Court is of the view that since the present
applicant is offering Rs. 1.51 Crores and it is already deposited with the Official Liquidator,
there is no reason not to accept the said offer. Therefore, the order dated 30.08.2007
passed by this Court in OLR No. 143 of 2007 is hereby recalled and the sale of Lot
No. A of the Company in liquidation confirmed in favour of respondent No.2 is
hereby cancelled. The Court hereby confirms the sale of Lot No. A
of the Company in liquidation in favour of the present applicant for Rs. 1.51 Crores. Since the
entire sale consideration has already been deposited by the applicant
with the Official Liquidator, the Official Liquidator is hereby directed to hand over
the possession of the movables within one week from today and the sale deed be
executed in favour of the present applicant within one week from the date of receipt of the
draft of sale deed from the present applicant.
16. Since the respondent No.2 has already paid an amount of Rs. 1.27 Crores, now the
said amount is required to be refunded to the respondent No.2. The equity, however,
demands that the respondent No. 2 should be adequately compensated by way of interest
on the said amount. The present applicant is, therefore, directed to pay interest @ 12% p.a.
on the actual amount of the respondent No.2 lying with the Official Liquidator.
The calculation be made accordingly and the applicant shall deposit
the said amount of interest with Official Liquidator and on deposit of the said
amount of interest, the possession of the property would be handed over as well as the
sale deed would be executed in his favour. The amount of interest so deposited
by the applicant would be refunded to the respondent No.2 along with the amount of
Rs. 1.27 Lacs."
5. Respondent No.2 challenged the aforesaid order in O.J. Appeal No.248 of 2007. During the
pendency of the appeal, the Division Bench of the High Court gave opportunity to
the parties to give higher offers. This is evident from order sheets dated 28.2.2008, 3.3.2008
and 27.3.2008, which read as under:
"DATE: 28.02.2008 It is stated that when the property was auctioned, offer of Rs.
1.51 crore was given by respondent No.4, and option was
given to the appellant if he is prepared to pay Rs. 1.51 crores.
The Counsel for the appellant prays for time to seek instruction from his client, whether
appellant is prepared to pay Rs. 1.51 crores. List on 3.3.2008.
DATE: 03.03.2008 On 28.02.2008, when some other party
offered Rs.1.50 Crores, we gave the option to the appellant to offer similar amount,
as the Court felt that preference should be given to the appellant, if similar amount
is offered by the appellant.
Today, respondent No.1 Shradhha Aromatics Pvt. Ltd. offered Rs.1.61 Crores.
Counsel for the appellant prays time to consult his client, whether he can offer the
amount similar to which is offered by the respondent No.1.
List it on 05.03.2008.
DATE: 27.03.2008 On 05.03.2008, respondent no.1 was prepared
to deposit Rs.1.51 crores. The parties were directed to appear in person in Court and submit
their bids. However, today, the appellant has backed out and submits that he does not
want to participate in the bidding.
Respondent no.1 Shradhha Aromatics Pvt. Ltd. has already deposited an amount of
Rs.1.51 crores. Respondent No.1 is, therefore, directed to deposit a demand
draft for the balance amount of Rs.10 lakhs within three weeks and thereafter the
matter will be taken up for hearing.
However, it is made clear that as the appellant does not want to pay higher
amount as has been offered by respondent no.1, he will not be permitted to
submit any bid by offering a higher amount hereafter. The appellant submits that
he shall only make his submissions on the next date.
List it on 22.04.2008."
6. After undertaking the aforesaid exercise, the Division Bench of the High Court
considered the question whether the learned Company Judge was justified in
reviewing/recalling order dated 30.8.2007 on the ground that the appellant herein had
offered better price and answered the same in negative. The Division Bench opined that the
confirmed auction sale cannot be set aside merely because subsequently a higher
price is offered by one of the bidders.
15. We have considered the respective submissions and carefully perused the
record. Ordinarily, the Court is loathe to accept the offer made by any bidder or a
third party after acceptance of the highest bid/offer given pursuant to an
advertisement issued or an auction held by a public authority. However, in the peculiar
facts of this case, we are inclined to make a departure from this rule. Admittedly,
total area of the land advertised by the committee is 12,500
square meters and the same is situated in an important district of Gujarat. It is
also not in dispute that the area has been substantially developed in last four years.
The initial offer made by M/s. Patel Agro Diesel Ltd. was of Rs.83 lakhs and the
highest revised offer given before the learned Company Judge was of Rs.127 lakhs. After
acceptance of the revised offer by the learned Company Judge, the appellant
stepped in and made an offer to pay Rs.141 lakhs. The first application filed by it was
dismissed but the second application was allowed and the increased offer of Rs.151
lakhs was accepted by the learned Company Judge vide order dated 27.11.2007. That
order did not find favour with the Division Bench, which restored the first
order passed by the learned Company Judge. If the order of the Division Bench is
sustained, the creditors of the Company are bound to suffer because the amount
available for repayment of the dues of the creditors would be a paltry sum of Rs.127
lakhs. As against this, if the offer made by the intervenorcumpromoter is accepted, the Official
Liquidator will get an additional amount of more than Rs.4.25 crores. The
availability of such huge amount will certainly be in the interest of the creditors including
GSIIC. Therefore, it is not possible to approve the order passed by the Division
Bench of the High Court. In a somewhat similar case
FCS Software Solutions
Ltd. v. La Medical Devices Limited and others (supra), this Court approved the
acceptance of revised bid of Rs.3.5 Crores given by the appellant
with a direction to compensate the earlier highest bidder by payment of the specified amount.
16. In the result, the appeal is disposed of in the following terms:
(i) The impugned order is set aside.
(ii) The offer of Rs.7.60 crores including additional amount of Rs.2 lakhs made by the
intervenorcumpromoterM/s. Chiripal Textile Mills Private Limited is accepted.
(iii) The Registry is directed to encash the fixed deposits of Rs.7.60 crores and
get prepared a demand draft of the total amount including the interest in the name
of the Official Liquidator attached to the Gujarat High Court. The latter shall depute
an authorised officer to collect the demand draft from the Registry of this Court.
(iv) Within four weeks from today, the intervenorcumpromoter shall pay Rs.6 lakhs
to the appellant and Rs.5 lakhs to respondent No.2 by way of compensation
because on account of pending litigation, they were prevented from utilising the
amount deposited with the Official Liquidator.
(v) Within four weeks from the date of receipt of demand draft by the Official
Liquidator attached to the Gujarat High Court and production of receipt showing
payment of money by the intervenorcum promoter to the appellant and respondent
No.2 in terms of sub paragraph (iv) above, GSIIC shall execute sale deed(s) in favour of the
nominee of the intervenorcum promoter, namely, M/s Chiripal Energy Ltd.
and handover possession of the land etc. to the purchaser.
(vi) The tax etc., if any, payable to the State Government and/or agencies/ instrumentalities
of the State in respect of the assets of the Company shall be paid by the purchaser."
(d) In the case of Divya Manufacturing Co. Pvt.
Ltd. (supra), it has been observed in Paragraphs 7, 9, 11 to 16 as under: "7. The Court noted
that it cannot shut eyes to the fact that initially the property was proposed to
be sold at the price of Rs. 37 lakhs. Thereafter the sale
was confirmed at Rs. 85 lakhs which was set aside and at the intervention of the
Division Bench, the amount was enhanced to Rs. 1.3 crores. The Court observed that as two
applicants have come forward with a proposal to purchase the said property at Rs. 2
crores, the principle laid down in LICA (P) Ltd. (1) v. Official Liquidator1 and LICA
(P) Ltd. (2) v. Official Liquidator2 applies squarely to the facts of the present case.
The Court also observed that it was conscious of the fact
that there should be a finality even in a company sale, but so long as possession is not handed
over to the purchaser and the sale deed is not executed, the Court by virtue of
clause 11 of the terms and conditions for sale can reopen the sale in the interests of
justice. The Court also referred to the decision in Navalkha & Sons
v. Sri Ramanya Das and Ors.3. Considering all the submissions made by the learned
counsel for the parties, the sale confirmed in favour of appellant for an amount of Rs.
1.3 crores was set aside with a direction that respondent Nos. 7 and 8 should
compensate Divya by paying Rs. 70 thousand each for the loss suffered by it and
directed for resale of the assets of the Company. That order is under challenge
before this Court.
9. The learned counsel for the appellant submitted that the order passed by the High
Court setting aside the confirmed sale is on the face of it illegal and erroneous. He
submitted that before confirmation of sale in favour of Divya all endeavours were made by the
judges and finally the offer of appellant to purchase at Rs. 1.30 crores was
accepted and sale was confirmed. At that time, Jayrespondent No. 8 had not
increased its offer of Rs. 1.25 crores. Respondent No. 7 was not permitted to bid
as he did not comply with the requirements mentioned in the advertisement for sale and,
therefore, on 2nd July, 1998 before commencement of auction sale, he was not
permitted to participate in auction. It is, therefore, submitted that after the sale is confirmed,
subsequent higher offer cannot constitute a valid ground for setting aside such
confirmation. He referred to various decisions in support of his contention and
submitted that once the sale was confirmed by the Court after applying its mind to all relevant
considerations, it is not permissible to probe in retrospect and to
accept subsequent offers by Jay or Sharma. He pointed out that as such initial valuation
report fixed the value of the property at Rs. 37 lakhs only. Thereafter the appellant
raised its offer to Rs. 85 lakhs and agreed to reemploy the workmen,
so the learned Single Judge confirmed the sale in its favour. As the said order was challenged
before the Division Bench, the Division Bench directed the Official Liquidator to
conduct fresh sale and finally the highest offer of appellant of
Rs. 1.30 crores was accepted by the Court. In such a situation the Division Bench
wrongly relied upon the judgment of this Court in LICA (P) Ltd. v. Official
Liquidator & Anr. (supra). It is also submitted that after disposal of the appeal,
the Division Bench became functus officio and therefore also it could not
review its earlier order.
11. In our view, on facts it is apparent that the Division Bench of the High Court has
considered all the relevant facts including the fact that at the initial
stage, the appellant Divya offered only Rs. 37 lakhs to purchase the properties. That
means, the appellant wanted to purchase at a throw away price. Thereafter, at the
intervention of the Court, the price was increased to Rs. 1.3 crores by the
appellant. This indicates that appellant was keen to purchase the property, however
by paying only the bare minimal amount and to take advantage of sale by the liquidator in the
hope that if there are no other purchasers, it would purchase the Company at a
price which is abnormally below the market price. It is also true that on 2nd
July 1998, the offer made by the appellant was accepted and it was ordered that sale
in its favour be confirmed, but at the same time, before possession of the property could
be handed over, or before the sale deed could be executed in its favour,
respondent Nos. 7 and 8 pointed out that the assets and properties could be sold at
Rs. 2 crores. For showing their bona fides, they were directed to deposit Rs. 40 lakhs
each and also to pay Rs. 70 thousand each as damages to the appellant. Further, the
application for setting aside the sale was filed within a few days of the order accepting
the bid of the appellant. In these set of circumstances, when correct
market value of the assets was not properly known to the Court and the sale was
confirmed at grossly inadequate price, it was open to the Court to set it at naught
in the interest of the company, its secured and unsecured creditors and the employees.
Appellant is also duly compensated by payment of Rs. 70 thousand each by
respondent Nos. 7 and 8.
12. The law on this subject is well settled. In the case of Navalkha and Sons (supra),
after appellant s offer was accepted, a fresh offer from one Gopaldas Darak for higher
amount was received by stating that he could not offer in time
because he came to know of the sale only 2 days prior to the date of the application
and there was possibility of higher bids. Instead of directing a fresh auction or
calling for fresh offers, the learned Judge thought it proper to arrange an open bid in the Court
itself on that very day as between M/s. Navalkha and higher offeror Gopaldas
Darak. M/s. Navalkha thereafter offered higher bid at Rs. 8,82,000 and its bid was
accepted and the learned Judge concluded the sale in its favour with a direction
to pay the balance amount. Thereafter an application was filed offering Rs. 10
lakhs. A contention was raised that due publicity of the sale of the property was
not made, but that application was rejected by the Court.
Hence, an appeal was filed by the applicant who made an offer of Rs. 10 lakhs and
another by one contributory against the order of confirmation. Both appeals were
allowed by the Division Bench and the order passed by the learned Judge was set aside with a
direction to take fresh steps for sale of the property either by calling
sealed tenders or by auction in accordance with law. That order was challenged before this
Court by M/s. Navalkha. It was contended that there was no justification for the
Division Bench to interfere with the order of the learned Single Judge. In
that context, after quoting Rule 273 of the Companies (Court) Rules, 1959, the Court
observed :
"The principles which should govern confirmation of sales are well established.
Where the acceptance of the offer by the Commissioners is subject to confirmation of
the Court the offeror does not by mere acceptance get any vested right in the
property so that he may demand automatic confirmation of his offer. The condition of
confirmation by the Court operates as a safeguard against the property being sold
at inadequate price whether or not it is a consequence of any irregularity or fraud in
the conduct of the sale. In every case it is the duty of the Court to satisfy itself
that having regard to the market value of the property the price offered is reasonable.
Unless the Court is satisfied about the adequacy of the price the act of confirmation of
the sale would not be a proper exercise of judicial discretion. In Gordhan Das Chuni
Lal v. T. Sriman Kanthimathinatha Pillai (AIR 1921 Mad.
286), it was observed that where the property is authorised to be sold by private
contract or otherwise it is the duty of the court to satisfy itself that
the price fixed is the best that could be expected to be offered. That is because the
Court is the custodian of the interests of the company and its creditors and the sanction
of the Court required under the Companies Act has to be exercised with
judicial discretion regard being had to the interests of the Company and its creditors as well.
This principle was followed in Rathnaswami Pillai v. Sadapathy Pillai (AIR
1925 Mad. 318) and S. Soundarajan v. M/s. Roshan & Co. (AIR 1940 Mad. 42.) In A.
Subbaraya Mudaliar v. K. Sundararajan (AIR 1951 Mad. 986) it was pointed out that the
condition of confirmation by the Court being a safeguard against the property
being sold at an inadequate price, it will be not only proper but necessary that the
Court in exercising the discretion which it undoubtedly has of accepting or refusing the
highest bid at the auction held in pursuance of its orders, should see that the
price fetched at the auction is an adequate price even though there is no
suggestion of irregularity or fraud."
13. From the aforesaid observation, it is abundantly clear that the Court is the
custodian of the interests of the Company and its creditors. Hence, it is the duty of
the Court to see that the price fetched at the auction is an adequate price even though
there is no suggestion of irregularity or fraud. As stated above, in
the present case, the sale proceedings have a chequered history. The appellant started its offer
after having an agreement with the Employees Samity for Rs. 37 lakhs. This was on the
face of it under bidding for taking undue advantage of Court sale. At the
intervention of the learned Single Judge, the bid was increased to Rs. 85 lakhs.
Subsequently, before the Division Bench, the appellant increased it to Rs.
1.30 crores. At that stage, respondent No. 7, Sharma was not permitted to bid because
it had not complied with the requirements of the advertisement. It is to be stated
that on 26th June, 1998, the Division Bench has ordered that offers of Eastern Silk
Industries Ltd. and Jay Prestressed Products Ltd. would only be considered on 2nd July,
1998 and confirmation of sale would be made on the basis of the offers
made by the two parties. Further, despite the fact that the appellant Divya had
withdrawn its earlier offer, the Court permitted it to take part in making further
offer as noted in the order dated 2nd July, 1998. In these set of circumstances, there was no
need to confine the bid between three offerors only.
14. In LICA (P) (1) v. Official Liquidator & Anr. (supra), this Court dealing with a
similar question observed thus :
"The purpose of an open auction is to get the most remunerative price and it is the
duty of the court to keep openness of the auction so that the intending bidders would be free
to participate and offer higher value. If that path is cut down or closed the possibility of
fraud or to secure inadequate price or underbidding would loom
large. The Court would, therefore, have to exercise its discretion wisely and with
circumspection and keeping in view the facts and circumstances in each case."
15. The matter was again brought before this Court and in LICA (P) Ltd. (2) v.
Official Liquidator & Anr. (supra) and the Court held:
"Proper control of the proceedings and meaningful intervention by the court would
prevent the formation of a syndicate, underbidding and the resultant sale of
property for an inadequate price. The order passed by this court yielded the result that
the property which would have been finalised at Rs. 45 lakhs, fetched Rs. 1.10
crores and in this court a further offer of Rs. 1.25 crores is made. In other words, the
property under sale is capable of fetching a higher market price. Under these
circumstances, though there is some force in the contention of Sri Ramaswamy that the
court auction may not normally be repeatedly disturbed, since this court, on the earlier
occasion, had limited the auction between the two bidders, the impediment will not
stand in the way to direct sale afresh. Even today the parties
are prepared to participate in the bid."
16. Further, there is a specific condition No. 11 in terms and conditions of sale as quoted
above which empowers the Court to set aside the sale even though it is
confirmed for the interests of creditors, contributories and all concerned and/or
public interest. In this view of the matter, it cannot be said that the Court
became functus officio after the sale was confirmed. As stated above, neither the
possession of the property nor the sale deed was executed in favour of the
appellant. The offer of Rs. 1.30 crore is totally inadequate in comparison to the offer of
Rs. 2 crores and in case where such higher price is offered, it would be in the interest
of the Company and its creditors to set aside the sale. This may cause some
inconvenience or loss to the highest bidder but that cannot be helped in view of the fact
that such sales are conducted in Court precincts and not by a
business house well versed with the market forces and price. Confirmation of the sale by a
Court at grossly inadequate price, whether or not it is a consequence of any irregularity or
fraud in the conduct of sale, could be set aside on the ground that it was not just and
proper exercise of judicial discretion. In such cases, a meaningful intervention by
the Court may prevent, to some extent, underbidding at
the time of auction through Court. In the present case, the Court has reviewed its
exercise of judicial discretion within a shortest time."
(e) In the case of Fertilisers and Chemicals Travancore Ltd. (supra), it has been
observed in Paragraphs 11 to 13 as under: "11. The Supreme Court in the above
mentioned decision took the stand, even if there is no fraud or irregularity it is
open to the Company Judge to exercise the discretion to conduct a resale so that most
remunerative price should be secured. Keeping in view the interest of the
creditors, workmen etc., the Company Judge exercised his discretion to reopen the
auction. The Division Bench has interfered with the sale order passed by the Single
Judge. The finding of the Division Bench was received by the Supreme Court
and upheld the decision of the learned Company Judge. (emphasis supplied by the court)
12. The principle laid down by the Supreme Court in the abovementioned decision is
applicable to the instant case as well. The question of adequacy of sale consideration
is also one of the important factors to be taken note of by the Company Court. The
interest of the secured creditors, unsecured creditors, shareholders, etc., is
also a factor to be taken note of by the Company Judge. Even in the absence of fraud
or irregularity, it is open to the Company Judge to exercise his discretion in cases where the
court comes to the conclusion that there is every possibility of getting higher price. IN
the instant case, it is true, that the FACT had earlier made an offer for Rs.26.76
lakhs. It is also an admitted fact that the State Bank of India has made an offer for
Rs 52 lakhs. The present offer made by the FACT is Rs.66.09 lakhs. There is a
difference of about Rs.14.09 lakhs. The Company Court, while
exercising discretion, has to safeguard the interest of the company in liquidation as well as
the creditors, etc., even if no irregularity or fraud is alleged or proved.
13. Under the abovementioned circumstances, I am, therefore, inclined to direct the
official liquidator to re auction the property with wide publicity with upset price as
66.09 lakhs. I also direct the applicantFACT to deposit an amount of Rs.25,000
for meeting the preliminary expenses for conducting re
auction. The official liquidator will take expeditious steps to conduct the
re auction
after settling the terms and conditions. The reauction will be
conducted within a period of three months from the date of receipt of a copy of this order."
(f) In the case of Vishnu Agarwal (supra), it has been observed in Paragraph 9 as under: "9.
Apart from the above, we are of the opinion that the application filed by the
respondent was an application for recall of the Order dated 2.9.2003 and not for review.
In Asit Kumar v. State of West Bengal and Ors., 2009 (1) SCR 469 : (AIR 2009
SC (Supp) 282), this Court made a distinction between recall and review which
is as under: "There is a distinction between ...... a review petition and a recall
petition. While in a review petition, the Court considers on merits whether there is
an error apparent on the face of the record, in a recall petition the Court does not go
into the merits but simply recalls an order which was passed without giving an
opportunity of hearing to an affected party. We are treating this petition under
Article 32 as a recall petition because the order passed in the decision in All Bengal
Licensees Association v. Raghabendra Singh and Ors. [2007 (11) SCC 374] : (AIR 2007 SC
1386) cancelling certain licences was passed without giving opportunity of
hearing to the persons who had been granted licences."
(g) In the case of G.T. Swamy (supra), it has been observed as under: "...A similar question
about the powers of the court to issue a commission in the
exercise of its powers under section 151 of the Code in circumstances not covered by
section 75 and Order xxvi arose in Padam Sen v. State of Uttar, Pradesh AIR 1961 SC
218, 1961 Cri.L.J. 322, [1961] 1 SCR 884, and this court held that the court can issue
a commission in such circumstances. It observed (at page 887 of SCR); at (page
219 of AIR) thus:
"the inherent powers of the court are in addition to the powers specifically
conferred on the court by the. Code. They are complementary to those Powers and,
therefore, it must be held that the court is free to exercise them for the Purposes
mentioned in section 151 of the code when the exercise of those powers is not in any way in
conflict with what has been expressly provided in the Code or against
the intentions of the Legislature."
These observations clearly mean that the inherent powers are not in any way
controlled by the provisions of the Code as has been specifically, stated in section
151 itself. But those powers are not to be exercised when their exercise may be in
conflict with what had been expressly provided in the Code or against the
intentions of the Legislature.
...But, in this case, the applicants are not aggrieved by the order of the winding up in the sense
that the same is bad in law. Their prayer is that this windingup order should not be
given effect to since the petitioners have settled all the claims
against the company and the company now is in a position to carry on business within the
framework of the Act and if the windingup order were to be given effect
to, great prejudice would be caused to the interests of the company....
...Rule 6 reads as under: "practice and procedure of the court and
provisions of the Code to apply. Save as provided by the Act or by these Rules, the
practice and procedure of the court and the provisions of the Code so far as
applicable, shall apply to all proceedings under the Act and these Rules. The Registrar
may decline to accept any document which is presented otherwise than in accordance
with these rules or the practice and procedure of the court."
Rule 9 reads as under: "inherent powers of court. Nothing in these Rules shall be
deemed to limit or otherwise affect the inherent powers of the
court to give such directions or pass such orders as may be necessary for the ends of
justice or to prevent abuse of the process of the court."
A combined reading of rules 6 and 9 indicates that the inherent power of this court
could be exercised in the manner provided under section 151, Civil Procedure
Code, except in cases where the Act and the Rules provide otherwise. So, the line of
enquiry this court has to adopt for discerning the limits of its powers under
rule 9 is to see whether there is anything in the provisions of the Act or in the Rules
which takes away the power of this court to recall an order of winding up in
the circumstances mentioned in the company application."
(h) In the case of Girish Bhagwatprasad (supra), it
has been observed in Paragraphs 14, 43, 44 and 45 as under: "14. Learned senior advocate
Mr. Soparkar submitted that in substance, the present application is for review of
the order dated 25.8.2008. Mr. Soparkar submitted that the contents of the
application clearly suggest that the applicants want
the order dated 25.8.2008 to be reviewed by this Court on more than one grounds by
looking at the merits of the proceedings of Company Application No.414 of 2007. Mr.
Soparkar submitted that since the application is opposed on the ground that
the same is grossly delayed and barred by limitation, for which no explanation is
given in the application, the applicants in second thought adopted a clever and
mischievous idea of deleting word review and the prayer for condonation of
delay. Mr. Soparkar submitted that under the guise of prayer for recall, the applicants want
review of the order which is not permissible as held by the Hon'ble Supreme Court in
the case of Cine Exhibition Private Limited Vs. Collector, District
Gwalior and others reported in (2013)2 SCC
698. Mr. Soparkar submitted that unless the Court first review its order, recall of
order is not possible and therefore, even if recall of the order is prayed, the law of limitation
would apply. Mr. Soparkar submitted that as per the Limitation Act, application for
review is to be filed within three months. Mr. Soparkar submitted
that even application for recall would fall within residuary Article 137 which provides for
three years time limit. Mr. Soparkar submitted that since there is no
application or explanation for delay in the present application, this Court may not
entertain the application even though the same is now restricted only for the prayer of
recall. Mr. Soparkar submitted that since deed of assignment is a registered
document, the applicants could be said to have deemed knowledge of assignment and
therefore, application for recall was required to be filed within three years from
the date of registration of assignment. Mr. Soparkar has relied on the
judgment in the case of Dilboo (Smt)(Dead) By LRs. and others Vs. Dhanraji (Smt)
(Dead) and others reported in (2000)7 SCC
702.
...
...
...
...
...
...
...
...
43. The Company Court has inherent powers under Rule 9 of the Rules to pass necessary orders
to do complete justice to the parties by recalling its order if it finds
that there was total lack of jurisdiction to deal with particular application whereon
the order was made and it was not properly apprised of the correct facts or correct
position of law by party in whose favour the order is passed. Present is not the
case where the applicants are seeking review under the guise of seeking
modification/ clarification or recalling of the order. The applicants have come with clear
case that they are equity shareholders of the company under
liquidation which were pledged by them with IDBI by way of security for the loan
advanced by the IDBI to the company. In respect of such shares, if the IDBI wanted
to get its action of assigning the rights, title and interest therein ratified with
the help of the Court, the applicants were the first affected persons in whose absence
no order affecting their rights could have been passed.
44. Learned senior advocate Mr. Soparkar, however, submitted that even if the
application is treated only for recalling of the order dated 25.8.2008 passed by this
Court, the law of limitation would apply to such application. Mr. Soparkar submitted that
for such kind of application, limitation would be as per Article 137 of
the Limitation Act which provides for three years time limit to prefer such application.
Mr. Soparkar submitted that the present application is hopelessly time barred and no
explanation for delay is given in the application. Mr. Soparkar submitted that the
applicants having dropped the prayer for condonation of delay, the application
cannot be entertained.
45. The above contentions of learned senior advocate Mr. Soparkar cannot be accepted
for the simple reason that when the patent error is found in the order of the Court
resulting into injustice to a party by not hearing such party, it is always open to
the Court to exercise its inherent powers to do complete justice to such party by
recalling the order for which delay cannot come in the way of the Court."
(i) In the case of Maharana Mills Rashtriya Kamdar
Sangh (supra), it has been observed in Paragraph 49 as under: "49.
Having regard to the aforesaid aspects and as a result of the above noted
discussion, I am of the view that Rule 9 of the Company Court Rules confers inherent
jurisdiction on the Court to pass appropriate necessary order and to give
such directions and pass such orders as may be necessary to meet the ends of justice
and also having regard to the fact that when this Court has power to direct
disbursement of the available amounts in accordance with the provision of Sections
529, 529A and 530 then such power to direct final disbursement would include power to
direct ad hoc disbursement as well, therefore, having regard to all of the above
discussed aspects and also having regards to the fact that :
(a) in response to the OLR dated 27th September 2005 filed in Company application
No.203 of 2001 any objection either as regards to the Chartered Accountant's
report and/or the details with reference to the workers' claim eligible for the purpose
of Section 529 was not filed/raised by the respondent State Bank of India,
(b) Similarly, any objection was not filed/raised by the respondent State Bank of
India, at the relevant time, in connection with the details of the claim of the workers
eligible for Section 529A of the Companies Act, and/or with regard to
the Chartered Accountant's report of which reference was made in the said OLR dated
23.01.2006,
(c) the order dated 03.10.2007 was passed by the Court wherein it was inter alia
observed that, ".......the Official Liquidator shall consider the claim found
to the extent of admissible limit and for the disputed claim the matter shall be
considered by the Official Liquidator and the same shall be finalized by this Court at the
time when disbursement is to be ordered", and the same order was not and
has not been challenged by the respondent State Bank of India,
(d) and considering the fact emerging from the record of the said Company Application No.203
of 2001 that at any stage of the said proceedings, the respondent State Bank
had never raised any objection or dispute with regard to the details of the claim of the
workmen and/or with regard to the report of the Chartered Accountant and the
"disputed claim" of which reference made in the order dated 03.10.2007 was in view of the
dispute/objection recorded by the Chartered Accountant in respect of the workers'
claim to the extent of Rs.5,46,55,820/ (comprising Rs.2,50,20,379/ towards privilege
leave, Rs.2,58,73,673/ towards bonus and Rs.37,61,768/ towards notice pay) in the
report dated 29th September 2005 and in respect of the workers' claim to the extent of
Rs.5,47,50,284/ (comprising Rs.2,51,14,843/ privilege leave, Rs.2,58,73,673/ towards
bonus and Rs.37,61,768/ towards notice pay) mentioned by the Official Liquidator in the
report dated 23.01.2006. The said reference of "disputed claim" as mentioned in the
order dated 03.10.2007 was obviously not with reference to any objection raised by
the respondent State Bank of India inasmuch as at any stage in the said application,
any objection was not filed/raised by the respondent State Bank of India,
(e) even in respect of present application, the respondent State Bank of India had not filed any
objection until 25th July 2011 when, for the first time, the affidavit came to be
filed by the respondent State Bank of India. Even in the said affidavit
dated 25th July 2011 either in para 2, 3 or 4 of the said affidavit any objection with
regard to the details of the claim of the workmen as mentioned in the OLR dated
11.05.2011 (at page 21) and/or as mentioned in the Chartered Accountant's report dated
13.07.2011 (at page 36), has not been raised. Actually, the only objection which
is raised in the affidavit dated 25.07.2011 is with respect to its own claim and it is
submitted that the Chartered Accountant is not justified in reducing its claim i.e. claim
of respondent State Bank of India from Rs.5,73,99,210/ to Rs.3,62,15,578/.
In fact, the said respondent State Bank of India has also not raised any dispute with regard to
the claim amount by other two secured creditors/financial institutions
viz. IDBI Bank and Central Bank of India,
(f) and also having regard to the fact that though the winding up order came to be made
in December 1989 and almost 22 years have rolled by since then the workers have not
been paid any amount until now and
(g) also having regard to the fact that although the sale proceeds have been
received since December 2010, any order with regard to disbursement could not
be passed until now and the amounts are lying idle, without disbursement, with the
Official Liquidator.
In view of the above noted facts and circumstances, it appears appropriate to
pass order for ad hoc disbursement keeping alive all rights and objections of all
secured creditors including the respondent State Bank of India as well as all the
workers, as regards the quantification of the final claim and/or disbursement ratio,
and that therefore I am inclined to accept the request for ad hoc disbursement of the amount
available with the Official Liquidator, amongst the secured creditors and the workers."
(j) In the case of Industrial Reconstruction Bank
of India (supra), it has been observed in Paragraphs 16 to 18 and 21 as under: "16. It is wellsettled that the highest bidder has no right that his bid should be
accepted as a matter of course. The meaning of the word "confirmation of sale"
according to Black's Law Dictionary is:
The confirmation of a judicial sale by the Court which ordered it is a signification in some
way (usually by the entry of an order) or the Court's approval of the
terms, price and the condition of sale.
17. In this case excepting that the successful bidder was found to be the
highest bidder, the terms and conditions of sale has not yet been approved. In other
words, confirmation means a contract or written memorandum thereof, by which
that which was inform or imperfect, invalid, is ratified, rendered valid and binding, made firm
and unavoidable. It means to give formal approval. Ordinarily, no right accrues in
favour of the highest bidder until and unless the sale is confirmed by the Court.
18. The Court, while dealing with the property and/or selling the property under
compulsion, must act in public interest. It cannot act arbitrarily. The object of
holding auction is generally to raise the highest and the maximum price. AH attempts
must be to obtain the best available price while in such auction sale made by the
Court. When such a sale is being made for the benefit of the creditors technicalities
cannot be allowed to stand in the way when it is found that further auction or fresh
auction is bound to fetch more price. The creditors have beneficial interest in such
property and the sale thereof and the Court is under an obligation to secure the best
market price available in a market economy so that more money comes into the hands of
the Court for repaying the loan wholly or in part of the creditors for whose benefit
the property is being sold. The disposal of the property by the Court partakes the
character of a trust so the disposal in public interest must be by such method as would
grant an opportunity to public at large to participate in it, as that is the
way. to best sub serve the public good. Of course this may result some hardship to the
highest bidder whose bid was accepted with earnest money. But such hardship or
inconvenience is inevitable in such cases of public auction by the Court when the
Court is not an expert auction dealer and that the principles of bid by the auctioneer in
the market that as soon as the hammer finally fails sale is closed,
does not and cannot apply to a sale made by the Court.
21. Under such circumstances, we are unable to attach finality to the acceptance of the
bid and in the interest of the creditors, and in order to get higher price
the bid, which was already been accepted, is treated as provisional and a fresh bid is to be
held by us in which Sree Ganga Construction Co. Ltd. will be at liberty to participate
along with the other parties, and in case it is found that other bidders
are unable to bid higher, then the bid of Sree Ganga Construction Co. Ltd. would be accepted
as final and his bid will be confirmed. On the contrary, if the bid increases, it
will be open to any of the parties to participate in the bid and the highest bid has to be
accepted and confirmed in accordance with the notice inviting offers."
(k) In the case of U. Nilan (supra), it has been observed in Paragraphs 19 to 26,
33 and 48 as under: "19 Originally, there was no provision under Order 34, Rule
5, Code of Civil Procedure enabling the defendant to deposit
the mortgage money into Court at any time before confirmation of sale so as to save his
property from being sold. This provision was introduced by the Transfer of
Property (Amendment) Act (21 of 1929) and it was provided that if, at any time, before
the confirmation of sale made in pursuance of a final decree, the defendant
makes payment into Court of all amounts due from him under subrule (1) of Rule 4 of
Order 34, the Court shall, on an application made by the defendant, pass a final decree
and if such a decree has already been passed, it would be open to
the Court to pass an order :
(a) directing the plaintiffmortgagee to deliver up the documents referred to in the
preliminary decree to the mortgagor; and, if necessary,
(b) directing him to transfer the mortgaged property, as directed in the said
decree and, also, if necessary,
(c) directing the plaintiffmortgagee to put the defendant in possession of the property.
20 Order 34, Rule 5 provides the last chance to the mortgagor to save his
property from being passed on to the auctionpurchaser and avoid the disturbance of his
title ensuring, at the same time, that mortgage money is paid to the person in whose
favour the property had been mortgaged by depositing the entire amount
in the Court, including the amount, where the property has been sold, contemplated by subrule (2) of this Rule. The whole step has to be taken before the confirmation of sale.
21 What is the meaning of the phrase "before the confirmation of sale" may now be
considered in the light of other relevant provisions of the Code of Civil
Procedure.
22 Now, an application to set aside the sale can be filed under Order 21, Rule 89, Code
of Civil Procedure while another application for setting aside the sale on the ground of
irregularity or fraud can also be given under Order 21, Rule 90, Code of Civil Procedure
Similarly, if the property has been sold, it would be open to the purchaser to make an
application for setting aside the sale on the ground that the judgmentdebtor had no
saleable interest in the property sold in execution of the decree.
23 Order 21, Rule 92(1), Code of Civil Procedure including the proviso thereto
provides as under : "R. 92. Sale when shall become absolute or be set aside. Where
no application is made under Rule 89, Rule 90 or Rule 91, or where such
application is made and disallowed, the Court shall make an order
confirming the sale, and thereupon the sale shall become absolute :
Provided that, where any property is sold in execution of a decree pending
the final disposal of any claim to, or any objection to the attachment of, such property,
the Court shall not confirm such sale until the final
disposal of such claim or objection."
24 The above provisions indicate that if an application is not made either under Rule
89 or Rule 90 or Rule 91 for setting aside the sale, the Court would confirm the sale.
So also, where such application is made and is disallowed, the sale would be confirmed.
When the "sale" thus becomes absolute, the Court is required to grant a certificate
under Order 21, Rule 94 to the person in whose favour the sale has been confirmed
specifying therein the details of the property sold, the name of the purchaser as also the
date on which the sale became absolute. Once these steps have been taken and a
certificate has been issued to the purchaser, the latter, namely, the
purchaser can obtain delivery of possession of the property sold through the Court
process by making an application under Order 21, Rule 95, Code of Civil Procedure
or if the property is in possession of the tenant, symbolic possession would be
delivered to him.
25 Art. 180 of the Limitation Act, 1908 which has since been replaced by the
Limitation Act, 1963, provided for a limitation of three years for making an
application for delivery of possession under Order 21, Rule 95, C.P.C.
26 In a case which was ultimately decided by the Privy Council, the question arose as to
when the sale shall be deemed to have become absolute; either on and from the
date on which it was confirmed or on and from the date on which the appeal,
filed against an order rejecting application for setting aside the sale, was disposed of.
The Privy Council in Chandra Mani Saha V/s. Anarjan Bibi, AIR 1934 Privy Council 134,
held as under : ". . . . .in construing the meaning of the
words "when the sale becomes absolute" in Art. 180, Limitation Act, regard must be
had not only to the provisions of O. 21, R. 92(1) of the Schedule to the Civil Procedure
Code, but also to the other material Sections and Orders of the Code, including those
which relate to appeals from Orders made under O. 21, R. 92(1). The result is that where
there is an appeal from an order of the Subordinate Judge, disallowing the
application to set aside the sale, the sale will not become absolute
within the meaning of Art. 180, Limitation Act, until the disposal of the appeal, even though
the Subordinate Judge may have confirmed the sale, as he was bound to do, when he
decided to disallow the above mentioned application.
Their Lordships, therefore, are of opinion that on the facts of this case the sales
did not become absolute within the meaning of Art. 180, Limitation Act, until 17.03.1927
and that the applications for possession of the properties purchased at the auction
sales were not barred by the Limitation Act."
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33 The first part of the above extract is wholly inapplicable to the present case as
it is nobody's case that the Court had been deliberately fixing dates after dates to avoid
confirmation of sale or to accommodate the judgmentdebtor. The other
part of the extract is relied upon by both the parties, specially the respondent in
support of the contention that the deposits under Order 34, Rule 5 can be made and has
to be made before the confirmation of sale.
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48 The High Court endorsed the view of the trial Court that on the deposit of the
balance amount of the mortgage money, the mortgage stood discharged. The trial Court
having also allowed the application of the respondent for return of documents under
Order 34, Rule 5A, C.P.C., there was no occasion for the High Court to have
dismissed C.M.A. Nos. 19 and 74/84."
(l) In the case of LICA (P) Ltd. (No.1) (supra), it has been observed as under:
"The purpose of an open auction is to get the most remunerative price and it is the
duty of the court to keep openness of the auction so that the intending bidders would be free
to participate and offer higher value. If that path is cut down or closed the possibility of
fraud or to secure inadequate price or underbidding would loom
large. The court would, therefore, have to exercise its discretion wisely and with
circumspection and keeping in view the facts and circumstances in each case. One
of the terms of the offer in this case is that even confirmation of the sale is
liable to be set aside by the High Court as per Clause 11 of the conditions of offer. The sale
conducted was subject to confirmation. Therefore, mere acceptance of
the offer of Mr. Shantilal Malik does not constitute any finality of the auction nor would it he
automatically confirmed. The appellant offered a higher price even now at Rs. 45,00,000.
Keeping in view the interest of the company and the creditors
and the workmen to whom the sale proceeds would he applied, the learned company judge
was right in exercising her discretion to reopen the auction and directing Mr. Shantilal
Malik as well to make a higher offer than what was offered by the appellant. In
every case it is not necessary that there should be fraud in conducting the sale,
though on its proof the sale gets vitiated and it is one of the grounds to set aside the
auction sale. Therefore, the discretion exercised by the
learned single judge cannot be said to be unwarranted. Under the circumstances, we are
satisfied that the Division Bench of the Calcutta High Courtcommitted manifest
illegality in interfering with the order of the learned single judge. The appeal is
allowed. The order of the Division Bench is set aside.............."
(m) In the case of LICA (P) Ltd. (supra), it has been observed as under: "5.
Proper control of the proceedings and meaningful intervention by the court would prevent the
formation of syndicate, underbidding and the resultant sale of property for
inadequate price. The order passed by this Court yielded the result that the
property which would have been finalised at Rs.45 crores is made. In other
words, the property under sale is capable of fetching a higher market price. Under these
circumstances, though there is some force in the contention of Shri Ramaswamy
that the court auction may not normally be repeatedly disturbed, since this Court, on the earlier
occasion, had limited the auction between the two bidders, the impediment will
not stand in the way of directing sale afresh. Even today the
parties are prepared to participate in the bid. Accordingly we fix the upset price at
Rs.1.50 crores. It is stated that Mr. S.L. Malik had already deposited a sum of Rs.45
lakhs. Bank drafts for a sum of Rs.80 lakhs are produced before us today. Therefore, we direct
that the bank drafts should be deposited in the office of the learned Company
Judge on or before 27.9.1993 and the balance amount of Rs.25 lakhs shall be
deposited on or before 11.10.1993 making up the total sum of Rs.1.50 crores. Learned
Single Judge is requested to conduct the auction afresh between the parties
immediately after the reopening of pooja holidays fixing the upset price at Rs.1.50
crores. The highest bidder should deposit the balance amount on the same day before
the working hours are closed. On deposit so made the Court would confirm the sale. No
appeal thereon shall be entertained on any ground whatsoever."
(n) In the case of FCS Software Solutions Ltd.
(supra), it has been observed in Paragraphs 28 to 37 as under: "28. Having heard the learned
counsel for the parties, in our opinion, no case has
been made out by the appellant against the Order passed by the High Court. From the
facts stated above, it is clear that in November, 2004, the bid of the appellant
was highest and was accepted by the Official Liquidator. But it is also clear
that certain facts which were necessary to be brought to the notice of intending
purchasers were not set out in the proclamation of sale nor were disclosed at the time
of sale notice. They related to valuation of movable and immovable
properties, fixation of reserve price, non inventory of plant and machinery, etc. The
attention of the Company Judge was invited by other bidders by filing Company
Applications. The Company Judge considered the objections and having prima facie
satisfied, Ordered fresh auction. We find no illegality in the said approach. When
fresh bids were received, it was found that the highest offer was of respondent No. 3 Society
which was of Rs.3.5 crores. The Company Judge extended an opportunity to the
appellant to raise its bid. It, however, appears that the appellant was adamant to
get the property for Rs.1.47 crores on the ground that the said offer
was highest and all the proceedings taken by the Official Liquidator and Company Judge
thereafter were totally illegal and unlawful. In our opinion, the respondents
are right that in such cases, the approach of the Company Judge should be to get
highest price so as to satisfy maximum claims against the Company in liquidation. The
procedure followed by the Company Judge, therefore, cannot be said to be illegal.
29. It may be observed at this stage that even before the Division Bench, such
opportunity was afforded to the appellant to raise its bid but it was not availed of by the
appellant. The Division Bench, in the impugned Order, noted:
"Even during the course of proceedings in this appeal, we had specifically asked the learned
counsel for the appellant as to whether the appellant was willing to go for interse
bidding to which he flatly declined".
30. In this connection, we may refer to some of the decisions of this Court to
which our attention has been invited.
31. In M/s Navalkha & Sons v. Sri Ramanya Das & Ors., 1969 (3) SCC 337, it was held by
this Court that the principles which should govern confirmation of sale are wellsettled. Where the acceptance of the offer by the Commission is subject to
confirmation of the Court, mere acceptance of offer by the Commission would not confer
vested right to the property in favour of the bidder. Condition of confirmation by
Court operates as a safeguard against the property being sold at an inadequate price,
whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. It is
the duty of the Court to satisfy itself about the proper valuation.
But once the Court comes to the conclusion that the price offered is adequate, no
subsequent higher offer can constitute a valid ground for refusing confirmation of
the sale or offer already received.
32. In Kayjay Industries (P) Ltd. v. M/s Asnew Drums (P) Ltd. & Ors., (1974) 2 SCC
213, this Court held that it is the duty of the Court to accept the highest bid and the
Court is not bound to go on adjourning the sale on the basis of valuation report.
Referring to and relying on Navalkha, the Court stated that in public sales, the authority
must protect interest of the parties keeping in view the fact that a Court sale is
a forced sale and, notwithstanding the competitive element of
public auction, the best price is not often forthcoming.
33. In Union Bank of India v. Official Liquidator, High Court of Calcutta & Ors.,
(2000) 5 SCC 274, this Court observed that in auction sale of the property of the
Company which is Ordered to be wound up, the Company Court acts as a custodian for
the interest of the Company and its creditors. It is the duty of the Company
Court to satisfy itself as to reasonableness of price by disclosing valuation report
to secured creditors of the Company and other interested persons.
It was further held that the Court should exercise judicial discretion to ensure that sale of
property should fetch adequate price. For deciding what would be reasonable price,
valuation report of an expert is essential. The Company Judge himself must apply
his mind to the valuation report. The Court observed that
the High Court did not interfere with the auction sale on the ground of sympathy for the
workers which was not proper. The auction sale was, therefore, set aside by this Court
and Official Liquidator was directed to resell the property after
obtaining fresh valuation report and after furnishing copy of such report to secured creditors.
34. In Divya Manufacturing Company (P) Ltd. v. Union Bank of India & Ors., (2000) 6
SCC 69, this Court held that even confirmed sale can be set aside. In that
case, highest bid by a party was accepted by the Court and the sale was confirmed,
but before possession was delivered to the auction purchaser and execution of sale deed,
other parties offered much higher price. The High Court required the
subsequent bidders to deposit an amount of 25% which was done. Considering the facts
in their entirety, the High Court set aside the confirmation of past highest bid. The said
action was challenged in this Court. This Court held that in an appropriate
case, even confirmed sale can be set aside. The Court in this connection, relied upon
earlier two decisions in LICA (P) Ltd. (1) v. Official Liquidator,5 (1996) 85 Comp Cas
788 (SC) and LICA (P) Ltd. (2) v. Official Liquidator,6 (1996) 85 Comp Cas 792 (SC).
35. The learned counsel for the appellant is no doubt right in submitting that in Divya,
there was a specific condition (Clause 11) which empowered the Court to
set aside confirmed sale "in the interest of creditors, contributors and all
concerned and/or public interests". But the Court put the matter on principle and
stated: (SCC p. 78, para 13) "13. ......it is the duty of the Court to see
that the price fetched at the auction is an adequate price even though there is no
suggestion of irregularity or fraud". (emphasis supplied)
It proceeded to observe: (SCC p. 79, para
16) "16. ......Confirmation of the sale by a Court at grossly inadequate price, whether or not
it is a consequence of any irregularity or fraud in the conduct of sale, could be set aside on
the ground that it was not just and proper exercise of judicial discretion.
In such cases, a meaningful intervention by the Court may prevent, to some extent,
underbidding at the time of auction through Court". (emphasis supplied)
36. In Gajraj Jain v. State of Bihar & Ors.,7 (2004) 7 SCC 151, this Court
reiterated that in absence of valuation report and reserve price, the auction sale becomes
only a pretence. If there is no proper mechanism and if the intending
purchasers are not able to know details of the assets or itemised valuation, auction sale
cannot be said to be in accordance with law. If publicity and maximum
participation is to be attained, all bidders must know the details of the assets
and the valuation thereof.
37. In the present case, it was alleged that there were several irregularities in the
first auction. The tender notice did not state valuation of movable and immovable
property; reserve price was not fixed, inventory of plant and machinery was not made
available, etc. If on consideration of these facts, the Company Judge Ordered fresh
auction, in our considered opinion, no complaint can be made against such action."
(o) In the case of Nileshbbai Ramanbhai Patel (supra), it has been observed as under: "5.3
Learned advocate Mr. Shah emphasized that every time it is not necessary that
there should be a direct evidence of fraud but as observed by the Honourable Apex
Court when a property is tried to be acquired at a grossly inadequate price,
that situation itself is to be construed to be sufficient to indicate fraud or some
collusion.
6. Learned advocate Mr. Patel for respondent Nos.19 and 20 vehemently opposed the
application and submitted that this contention about the fraud is nothing, but an
afterthought and merely because the third highest bidder in the first auction happens to
be brother of the present highest bidder (in second auction), can not
be said to be sufficient to hold that there is collusion or there is fraud on the part of present
highest bidder. The learned advocate for respondent Nos.19 and 20 submitted that
the offer accepted by the Court need not be disturbed on any such application.
Besides to see that sanctity of the proceedings before the Court is maintained, on
such application the Court should not be interfere with the orders passed.
7. This Court having heard the contentions of both the sides and having gone through
the material on record is of the considered opinion that the price which is quoted by the
present highest bidder of Rs.1.40 crores cannot be said to be realistic price because the
same property was offered a price of Rs.2.18 crores in the first
auction. It appears that taking clue from the fact that the Court is not going to be harsh on
backing out from the offer made and not honoured, the present bidder, has
come forward to offer merely Rs.1.40 crores for the same property for which his own
brother quoted the price of Rs.2.10 crores. Be that as it may, this Court cannot loose sight of
the fact that this Court is a trustee of the property and this Court is
expected to opt for such course of action which is going to fetch more money so that waiting
creditors including labourers can be paid something more. Mr. Vasavada
appearing for the labourers rightly invited the attention of the Court to the decision of the
Honourable the Apex Court in the matter of Shradhha Aromatics Private Limited
versus O.L. of Global Arya Industries Limited and Others reported in 2011 (6)
SCALE 330 = 2011 (6) SCC 207. Learned advocate invited the attention of
the Court to the observations made by the Honourable the Apex Court in para 10, which
reads as under:
10. We have considered the respective submissions and carefully perused the record.
Ordinarily, the Court is loathe to accept the offer made by any bidder or a third party
after acceptance of the highest bid/offer given pursuant to an advertisement
issued or an auction held by a public authority. However, in the peculiar
facts of this case, we are inclined to make a departure from this rule.
Admittedly, total area of the land advertised by the committee is 12,500
square meters and the same is situated in an important district of Gujarat. It is also not
in dispute that the area has been substantially developed
in last four years. The initial offer made by M/s. Patel Agro Diesel Ltd. was of Rs.83
lakhs and the highest revised offer given before the learned Company Judge was of
Rs.127 lakhs. After acceptance of the revised offer by the learned Company Judge, the
appellant stepped in and made an offer to pay Rs.141 lakhs. The first
application filed by it was dismissed but the second application was allowed and the
increased offer of Rs.151 lakhs was accepted by the learned Company Judge vide
order dated 27.11.2007. That order did not find favour with the Division Bench, which
restored the first order passed by the learned Company Judge. If the order of the Division
Bench is sustained, the creditors of the Company are bound to suffer because the
amount available for repayment of the dues of the creditors would be a paltry
sum of Rs.127 lakhs. As against this, if the offer made by the intervenorcum promoter is
accepted, the Official Liquidator will get an additional amount of more than
Rs.4.25 crores. The availability of such huge amount will certainly be in the
interest of the creditors including GSIIC.
Therefore, it is not possible to approve the order passed by the
Division Bench of the High Court. In a somewhat similar case
FCS Software Solutions
Ltd. v. La Medical Devices Limited and others (supra), this Court
approved the acceptance of revised bid of Rs.3.5 Crores given by the appellant with a
direction to compensate the earlier highest bidder by payment of the specified amount.
7.1 Taking into consideration the aforesaid ruling of the Honourable the Apex Court and
the facts of the case, this Court deems it proper to recall its order dated 17.04.2013.
Taking into consideration the facts of the case, it is deemed proper to direct the Official
Liquidator to re advertise the auction of this property on the same terms and conditions
but with increased upset price of 1.60 crores in three daily newspapers, of which
one is having circulation at national level.
7.2 Learned advocate Mr. Shah, on instructions of his client, submitted that the earnest
money deposited by the applicant may be retained and he be
permitted to pay the deficit earnest money as and when advertisement appears, within
the time prescribed in the advertisement.
7.3 The earnest money of respondent Nos.19 and 20 be refunded to them by the Official
Liquidator at the earliest preferably by 05.08.2013. Civil Application is disposed
of, accordingly. Rule is made absolute."
(p) In the case of Sadashiv Prasad Singh (supra), it has been observed in Para 14 as under:
"14. A perusal of the impugned order especially paragraphs 8, 12 and 13 extracted
hereinabove reveal that the impugned order came to be passed in order to work out the
equities between the parties. The entire deliberation at the hands of the High
Court were based on offers and counter offers, inter se between
the Allahabad Bank on the one hand and the objector Harender Singh on the other,
whereas the rights of Sadashiv Prasad Sinha the auctionpurchaser, were not at all taken into
consideration. As a matter of fact, it is Sadashiv Prasad Sinha who was
to be deprived of the property which came to be vested in him as far back as on
28.8.2008. It is nobody's case, that at the time of the auctionpurchase, the value of the property
purchased by Sadashiv Prasad Sinha was in excess of his bid. In fact, the factual
position depicted under paragraph 8 of the impugned judgment
reveals, that the escalation of prices had taken place thereafter, and the value of the
property purchased by Sadashiv Prasad Sinha was presently much higher than the
bid amount. Since it was nobody's case that Sadashiv Prasad Sinha, the highest bidder
at the auction conducted on 28.8.2008, had purchased the property in question at a price
lesser than the then prevailing market price, there was no justification whatsoever
to set aside the auction purchase made by him on account of escalation of prices
thereafter. The High Court in ignoring the vested right of the appellant in the property in
question, after his auction bid was accepted and
confirmed, subjected him to grave injustice by depriving him to property which he had
genuinely and legitimately purchased at a public auction. In our considered view, not only
did the Division Bench of the High Court in the matter by ignoring the sound, legal
and clear principles laid down by this Court in respect of a third party auction
purchaser, the High Court also clearly overlooked the equitable rights
vested in the auctionpurchaser during the pendency of a lis. The High Court also clearly
overlooked the equitable rights vested in the auction purchaser while
disposing of the matter."
(q) In the case of Kayjay Industries (P) Ltd.
(supra), wherein it has been observed as under: "7. Certain salient facts may be
highlighted in this context. A Court sale is a forced sale and, notwithstanding the competitive
element of a public auction, the best price is not often forthcoming. The judge
must make a certain margin for this factor. A valuer s report, good as a basis, is not as
good as an actual offer and variations within limits between such
an estimate, however careful, and real bids by seasoned businessmen before the auctioneer
are quite on cards. More so, when the subjectmatter is a specialised industrial
plant, which has been out of commission for a few years, as in this
case, and buyers for cash are bound to be limited. The brooding fear of something out of the
imported machinery going out of gear, the vague apprehensions of possible claims
by the Dena Bank which had a huge claim and was not a party, and the litigious
sequel at the judgmentdebtor s instance, have scare value in inhibiting intending
buyers from coming forward with the best offers. Businessmen make uncanny
calculations before striking a bargain and that circumstances must enter the judicial verdict
before deciding whether a better price could be had by a postponement of the sale.
Indeed, in the present case, the executing Court had admittedly declined to
affirm the highest bids made on 1651969, June 5, 1969 and August 28, 1969, its
anxiety to secure a better price being the main reason. If Court sales are too frequently
adjourned with a view to obtaining a still higher price it may prove a selfdefeating
exercise, for industrialists will lose faith in the actual sale taking place and may not care
to travel up to the place of auction being uncertain that the sale would at all go through.
The judgmentdebtor s plea for postponement in the expectation of a higher price in the
future may strain the credibility of the Court sale itself and
may yield diminishing returns as was proved in this very case.
9. The first respondent's counsel, Shri Parekh, drew our attention to condition No.
3 in the present proclamation of sale which is as follows :
"The highest bidders for the two lots shall be declared to be the purchasers of the
respective lots, provided always that he or they are legally qualified to bid, and
provided that it shall be in the discretion of the undersigned Receiver holding the
sale to decline acceptance of the highest bid for any lot when the price offered for
any of the two lots appears so manifestly inadequate, as to make its acceptance
inadvisable. The highest bid offered by any bidders for any of the two lots shall be
subject to the sanction and approval of the District Judge, Thana.
Form 29 prescribed in Appendix E to the Code contains condition No. 3 which is in
like terms. The Court s activist obligation to exercise a discretion to make a fair sale
out of a Court auctionand avert a distress sale is underscored by this provision.
In all public sales the authority must protect the interests of the parties and the rule is
stated by this Court in Navalkha and Sons. v. Ramanya Das, (1970) 3 SCR 1 thus : "The
principles which should govern confirmation of sales are well established. Where the
acceptance of the offer by the Commissioners is subject to confirmation of the Court
the offerer does not by mere acceptance get any vested right in the property so
that he may demand automatic confirmation of his offer. The condition of confirmation
by the Court operates as a safeguard against the property being sold
at inadequate price whether or not it is a consequence of any irregularity or fraud in
the conduct of the sale. In every case it is the duty of the Court to satisfy itself
that having regard to the market value of the property the price offered is
unreasonable. Unless the Court is satisfied about the adequacy of the price the act of
confirmation of the sale would not be a proper exercise of judicial discretion."
Be it by a receiver, commissioner, liquidator or Court this principle must govern.
This proposition has been propounded in many rulings cited before us and summed up
by the High Courts. The expressions material irregularity in the conduct of the
sale must be benignantly construed to cover the climax act of the Court accepting
the highest bid. Indeed, under the Civil Procedure Code, it is the
Court which conducts the sale its duty to apply its mind to the material actors bearing
its mind to the material factors bearing on the reasonableness of the price
offered is part of the process of obtaining a proper price in the course of the sale. Therefore,
failure to apply its mind to this aspect of the conduct of the sale may amount to
material irregularity Mere, substantial injury without material
irregularity is not enough even as material irregularity not linked directly to inadequacy
of the price is insufficient. And where a Court mechanically conducts the
sale or routinely signs assent to the sale papers, not bothering to see if the offer is too low
and a better price could have been obtained, and in fact the price is substantially
inadequate, there is the presence of both the elements of
irregularity and injury. But it is not as if the Court should go on adjourning the
sale till a good price is got, it being a notorious fact that Court sales and market prices are
distant neighbours. Otherwise, decreeholders can never get the property of the debtor
sold. Nor is it right to judge the unfairness of the price by hindsight wisdom.
May be, subsequent events, not within the ken of the executing
Court when holding the sale, may prove that had the sale been adjourned a better price could
have been had. What is expected of the Judge is not to be a prophet but a
pragmatist and merely to make a realistic appraisal of the factors, and, if satisfied
that, in the given circumstances, the bid is acceptable, conclude the sale. The Court may
consider the fair value of the property, the general economic trends, the large sum
required to be produced by the bidder, the formation of a syndicate, the futility of
postponements and the possibility of litigation, and several other factors dependent
on the facts of each case. Once that is done, the matter
ends there. No speaking order is called for and no meticulous post mortem is proper. If the
Court has fairly, even if silently, applied its mind to the relevant considerations
before it while accepting the final bid, no probe in retrospect is permissible.
Otherwise, a new threat to certainty of Court sales will be introduced.
10. So viewed we are satisfied that the district Court had exercised a
conscientious and lively discretion in concluding the sale at Rs. 11.5 lakhs. If
the market value was over 17 lakhs, it is unfortunate that a lesser price was fetched.
Mere inadequacy of price cannot demolish every Court sale. Here, the Court
tried its best, time after time, to raise the price. Wellknown industrialists in the public and
private sectors knew about it and turned up. Offers reached a stationary
off indefinitely in recovering its dues on baseless expectations and distant,
prospects. The judgmentdebtor himself, by his litigious exercises, would have contributed
to the possible buyers being afraid of hurdles ahead. After all,
producing around Rs. 11.4 lakhs openly to buy an industry is not easy even for
apparently affluent businessmen. The sale proceedings had been pending too long and
the first respondent could not, even when given the opportunity, produce buyers by
private negotiation. Not even a valuer's report was produced by him. We are
satisfied that the District Judge had committed no material irregularity in the
conduct of the sale in accepting the highest offer of the appellant on September
3, 1969."
(r) In the case of Sharawan Kumar Agarwal (supra), wherein it has been observed as under:
"The fact that the offer was to be made by way of sealed tenders which were to be
opened in court where public auction would take place was duly advertised. The
conditions of sale, which were available from the official liquidator, were clear
and unambiguous and had provided that the auction would take place not only amongst
the offerors but also outsiders. There was thus no change or modification in the manner
of sale. Under such circumstances, it was not only an auction in a public
place but also a public auction and in the presence of the presiding judge.
The price which the assets ultimately fetched upon sale as a going concern on
February 6, 1990, was far in excess nearly double of the reserve price. There is,
therefore, no inherent evidence that the sale price was inadequate. The fact
that none of the secured creditors who is keeping out of liquidation objected to the sale being
knocked down at the price offered by the first respondent on the day
in question and that none of them has come up in appeal nor has any creditor of other
class complained or now complains about the inadequacy of price also leads to the view that
the price offered by the first respondent was rightly found by the court to be adequate.
There is also no other independent evidence to show that the price fetched was
inadequate. It is significant to note further that on the day on which
the sale was confirmed even the appellant himself was not prepared to go beyond his offer of
Rs.1,80,00,000 as against Rs.1,85,00,000 offered by the first respondent.
The question then is whether the sale is favour of the first respondent should have been
deconfirmed and the assets ought to have been offered for resale merely on the basis of
a higher offer (Rs.2,10,00,000) made by the appellant on the day next after
he was outbidden by the first respondent. In answering this question due weight must be given
to the fact, firstly, that no irregularity or fraud is alleged and,
secondly, that in this case the question is not whether the sale should be confirmed after
the acceptance of a bid by the auctioneer or agent but whether a fresh
sale should be ordered by setting at naught the sale already confirmed by the court after
taking into consideration all facts and circumstances merely because an offeror who was
outbidden changes his mind and offers a higher price subsequently. The
relevant principles enunciated in Navalkha and Sons case [1970] 40 Comp Cas 936 (SC)
and in Roshan and Co.'s case, AIR 1940 Mad 42, would apply with still greater force in such a
case. Besides, the scope of interference with the discretion exercised
by the court has also not to be lost sight of. Unless it is shown that the discretion has been
exercised unreasonably, capriciously, or by adoption of unjudicial approach or on wrong
principles, there would be no ground to interfere.
Now, it is true that the court must satisfy itself that having regard to the market value
of the property, the price offered and accepted is adequate. The court being the
custodian of the interests of the company and its creditors, the power to confirm
a sale or to withdraw the confirmation has to be exercised with
judicial discretion regard being had to the fact that the price fetched is the best that
can be expected to be offered even though there may be no suggestion of
irregularity or fraud. It is also true that in the present case there is a specific provision
incorporated in the terms and conditions of sale that the sale in favour
of a purchaser was liable to be set aside, even after the sale is confirmed and the
purchase consideration is paid, the interest and benefit of creditors, contributors and
all concerned and/or for public interest. However, the investment of such power does
not mean that the Court should review and set aside an order
confirming a sale which has already taken place nearly because at a later stage on
second thought, someone, more particularly an offeror who was outbidden, says that he
is willing to pay more. Once the Court has come to the conclusion that the price
offered is adequate and has confirmed the sale, the subsequent higher offer made
under such circumstances, without anything more, cannot constitute a valid ground for
interfering with the rights arising out of sale which has already been confirmed.
As earlier discussed, there is no reason to believe that in the present case the court erred either
on principle or on facts in exercising its discretion to sanction and confirm the
sale in favour of the first respondent on February 6, 1990. All
possible care was exercised right from the inception to ensure that having regard to
the market value of the property and other circumstances, the price fetched is adequate.
The record is replete with materials showing that at all relevant
stages requisite steps were taken in that direction. A valuation report was obtained, the reserve
price was fixed and revised upwards wide publicity to the intended sale was given to
invite most competitive offers, the cooperation of workmen and
secured creditors was secured so that the buyer may not have to face subsequent
obstacles and the assets were sold as a going concern with the end in view of
starting the manufacturing unit in the larger public interest and also in the interests
of workmen, creditors and contributories. There is no suggestion of any irregularity
or fraud. There is no independent evidence of the sale having
taken place at an inadequate price. Between the two parties who were offering bids, the
sale was ultimately confirmed in favour of the one who offered a better price. Ample
opportunities were given to the appellant to outbid the first respondent but he did
not avail of them on the date of sale. The price ultimately obtained was far in excess
of the reserve price. No prejudice is thus apparent.
Against this background, merely because on second thoughts on the next day the
appellant came forward with an offer to pay more, there would be no justification,
without more, to deconfirm the sale already made in favour of the first respondent, who
had meanwhile parted with ten per cent, of the purchase price, taken delivery of the
assets and entered into an agreement with workmen. None complained when the sale was
confirmed by the court. None other than the appellant is before us challenging the
confirmation by way of appeal. True, the secured creditors appear to have extended
their support to the appellant when he came forward with a fresh offer on the day next
after the sale was confirmed and they have supported him in this appeal also. But
this, too, apparently is a second thought. The unions with whom the agreement has been entered
into by the first respondent are supporting it in the present proceedings.
About 100 workmen are stated to have been employed. Having regard to all the
circumstances of the case, in our opinion, there is no justification for interference
with the confirmation of sale made by the court in favour of the first respondent and its refusal
to set aside the same. If a higher offer made subsequently on second
thoughts by someone who has outbidden when the sale was confirmed were to be regarded,
without anything more, as the sole factor for withdrawing sanction already granted to
a court sale, there is a real risk of such sales becoming a speculative exercise which
may not inspire the confidence of persons who act on the faith and belief in the
finality of actions of court. We see no reason, therefore, to set aside the orders
under appeal passed by the court."
(s) In the case of Valji Khimji (supra), wherein it has been observed as under:
26. Learned counsel for the appellant Mr. Sundaram has relied upon the decision of
this court in Kayjay Industries P. Ltd. V. Asnew Drums P. Ltd. [1974] 2 SCC 213 in
which it was observed that mere inadequacy of price cannot demolish every court sale.
The court also observed in paragraph 7, as under (page 218):
"If court sales are too frequently adjourned with a view to obtaining a still
higher price it may prove a selfdefeating exercise, for industrialists will lose
faith in the actual sale taking place and may not care to travel up to the place of
auction being uncertain that the sale would at all go through."
27. On the other hand, learned counsel for the respondents relied upon a decision of this Court
in Divya Manufacturing Company (P) Ltd. etc. vs. Union Bank of India & Ors.
etc. (2000) 6 SCC 69. We have carefully perused the above decision and we
find that it is clearly distinguishable.
28. The facts of the case were that at the initial stage the appellant offered 37 lakhs for
purchasing the property in question. At the intervention of the court the price was raised
to 1.3 crores, and ultimately it was found that the property could be sold for Rs.2
crores. It was on these facts that this Court held that even after confirmation of the sale
the same could be set aside.
29. Thus, the ratio in Divya Manufacturing Company (P) Ltd. (supra) was that if there
is fraud then even after the confirmation the sale can be set aside because it is wellsettled that fraud vitiates everything. On the facts of that case, the
Court was of the view that that confirmed sale deserved to be set aside.
30. In our opinion the decision of this Court in Divya Manufacturing Company
(P) Ltd. (supra) cannot be treated as laying down any absolute rule that a
confirmed sale can be set aside in all circumstances. As observed by one of us (Hon. Katju, J.)
in his judgment in Civil Appeal No. 4908/2008 (Dr. Rajbir Singh Dalal vs.
Chaudhary Devi Lal University, Sirsa & Anr pronounced on 6.8.2008), a decision of a
Court cannot be treated as Euclids formula and read and understood mechanically. A
decision must be considered on the facts of that particular case."
(t) In the case of Sarvariya Exports Limited
(supra), wherein it has been observed as under: "23. Thus, it is apparent that on reading
the two affidavits together the Court ought to have, in the first instance, put the
applicant to strict proof and called for further explanation as to what was the
applicant doing in the interregnum, i.e. between 24.08.2007 when the applicant opted
out of bidding before Sale Committee, and 25.03.2008 when the application was filed
before the Company Court. It appears that the applicant was waiting till the other
bidders were out of the race and thereafter, without participating in the
auction, the applicant intended to steal a march over the other bidders, including the
successful bidder. The learned counsel for the applicant in this context fairly stated that the
applicant was trying to arrange for finance and it was only when financial arrangement
could be made the applicant approached the Court. The Court appreciates
the frankness of the learned counsel, but the same only goes to prove the fact that the applicant
was all along aware of the stage of the proceedings and waited for an
opportune time to approach the Court. Even otherwise, this cannot be a valid ground
for upsetting a confirmed sale.
24. There is nothing on record either in the first affidavit dated 25.03.2008 or the second
affidavit dated 27.03.2008 as to when and how the applicant derived
knowledge about confirmation of sale having been made on 12.02.2008. In fact the
applicant waited for the successful bidder, respondent No.3, to tender the entire sale
price and approached the Court only at that late stage to contend that it was open to the Court
to intervene before the O.L. executed the sale deed as, till that point of time, the sale
could not be stated to have been concluded."
(u) In the case of Arasmeta Captive Power Company Private Limited (supra), wherein
it has been observed as under: "28. At this juncture, we think it condign
to refer to certain authorities which lay down the principle for understanding the ratio
decidendi of a judgment. Such a deliberation, we are disposed to think, is
necessary as we notice that contentions are raised that certain observations in some
paragraphs in SPB & Co. (supra) have been relied upon to build the edifice that
latter judgments have not referred to them.
29. In Ambica Quarry Works v. State of Gujarat and others, it has been stated that the
ratio of any decision must be understood in the background of the facts
of that case. Relying on Quinn v. Leathem it has been held that the case is only an
authority for what it actually decides, and not what logically follows from it.
31. In Krishena Kumar v. Union of India and others, the Constitution Bench, while dealing
with the concept of ratio decidendi, has referred to Caledonian
Railway Co. v. Walker's Trustees and Quinn (supra) and the observations made by Sir
Frederick Pollock and thereafter proceeded to state as follows: "The ratio decidendi is the
underlying principle, namely, the general reasons or
the general grounds upon which the decision is based on the test or abstract from the specific
peculiarities of the particular case which gives rise to the decision. The
ratio decidendi has to be ascertained by an analysis of the facts of the case and the process of
reasoning involving the major premise consisting of a preexisting rule
of law, either statutory or judgemade, and a minor premise consisting of the material facts of
the case under immediate consideration. If it is not clear, it is
not the duty of the court to spell it out with difficulty in order to be bound by it. In the words
of Halsbury (4th edn., Vol. 26, para 573) "The concrete decision alone is binding
between the parties to it but it is the abstract ratio decidendi, as ascertained on
a consideration of the judgment in relation to the subject matter of the decision,
which alone has the force of law and which when it is clear it is not part of a
tribunal's duty to spell out with difficulty a ratio decidendi in order to
bound by it, and it is always dangerous to take one or two observations out of a long
judgment and treat them as if they gave the ratio decidendi of the case. If more reasons
than one are given by a tribunal for its judgment, all are taken as forming
the ratio decidendi." [Emphasis added]
32. In State of Orissa v. Mohd. Illiyas11, it has been stated thus: "12. ... According to the wellsettled theory of precedents, every decision contains three basic postulates: (i)
findings of material facts, direct and inferential. An inferential finding of facts is the
inference which the Judge draws from the direct, or perceptible facts; (ii)
statements of the principles of law applicable to the legal problems disclosed
by the facts; and (iii) judgment based on the combined effect of the above. A decision
is an authority for what it actually decides. What is of the essence in a decision is its
ratio and not every observation found therein nor what logically flows from the
various observations made in the judgment."
33. In Islamic Academy of Education v. State of Karnataka12, the Court has
made the following observations: "2. ... The ratio decidendi of a judgment has
to be found out only on reading the entire judgment. In fact, the ratio of the
judgment is what is set out in the judgment itself. The answer to the question would
necessarily have to be read in the context of what is set out in the judgment and not in
isolation. In case of any doubt as regards any observations, reasons and
principles, the other part of the judgment has to be looked into. By reading a line here
and there from the judgment, one cannot find out the entire ratio decidendi
of the judgment." [Underlining is by us]
34. The said authorities have been relied upon in Natural Resources Allocation, In
Re, Special Reference No. 1 of 2012.
35. At this stage, we may also profitably refer to another principle which is of
assistance to understand and appreciate the ratio decidendi of a judgment. The
judgments rendered by a court are not to be read as statutes. In Union of India v.
Amrit Lal Manchanda and another14, it has been stated that observations of courts are
neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out
of their context. The observations must be red in the context in
which they appear to have been stated. To interpret words, phrases and provisions of a statute,
it may become necessary for judges to embark into lengthy discussions
but the discussion is meant to explain and not to define. Judges interpret statutes, they do
not interpret judgments. They interpret words of statutes; their words
are not to be interpreted as statutes.
36. In Som Mittal v. Government of Karnataka, it has been observed that
judgments are not to be construed as statutes. Nor words or phrases in judgments to be
interpreted like provisions of a statute. Some words used in a judgment
should be read and understood contextually and are not intended to be taken literally. Many a
time a judge uses a phrase or expression with the intention of emphasizing a
point or accentuating a principle or even by way of a flourish of writing style. Ratio
decidendi of a judgment is not to be discerned from a
stray word or phrase read in isolation.
37. From the aforesaid authorities it is luculent that the larger Bench in SBP & Co.
(supra), after deliberating at length with regard to the role of the Chief Justice or his designate,
while dealing with an application under Section 11(6) of the Act,
has thought it appropriate to define what it precisely meant in paragraph 39 of the judgment.
The majority, if we allow ourselves to say so, was absolutely
conscious that it required to be so stated and hence, it did so. The deliberation was required to
be made as the decision in Konkan Railway Corporation Ltd. v. Rani Construction
(P) Ltd. where the Constitution Bench had held that an order
passed by the Chief Justice under Section 11(6) is an administrative order and not a judicial
one and, in that context, the Bench in many a paragraph proceeded to
state about the role of the Chief Justice or his designate. The phrases which have
been emphasized by Mr. Ranjit Kumar, it can be irrefragably stated, they cannot be
brought to the eminence of ratio decidendi of the judgment. The stress laid thereon may
be innovative but when the learned Judges themselves have culled out the ratio
decidendi in paragraph 39, it is extremely difficult to state that the principle stated in
SBP & Co. (supra) requires the Chief Justice or his designate to decide the
controversy when raised pertaining to arbitrability of the disputes. Or to express an
opinion on excepted matters. Such an inference by syllogistic process is likely to usher
in catastrophe in jurisprudence developed in this field. We are disposed to think so
as it is not apposite to pick up a line from here and there from the judgment or to
choose one observation from here or there for raising it to the status of "the ratio decidendi".
That is most likely to pave one on the path of danger and it is to be scrupulously
avoided. The propositions set out in SBP & Co. (supra), in our opinion, have been
correctly understood by the twoJudge Bench in Boghara Polyfab Private Limited (supra)
and the same have been appositely approved by the threeJudge Bench in Chloro Controls India
Private Limited (supra) and we respectfully concur with the same. We find no substance
in the submission that the said decisions require reconsideration, for certain observations
made in SBP & Co. (supra), were not noticed. We may hasten to add that the threeJudge Bench has been satisfied that the ratio decidendi of the judgment in SBP & Co.
(supra) is really inhered in paragraph 39 of the judgment."
(v) In the case of Ganga Retreat & Towers Ltd.
(supra), wherein it has been observed as under: "41. Every contract including one by
auction is subject to provisions of law. Whenever any action is taken in performance
of a contract, it must conform to the law in force at the time when action is taken. In the
instant case when the appellants applied for approval of building plans it
is the law that is in force at that time, which would be applicable. Doctrine of promissory
estoppel is not available when any action is desired to be taken in
contravention of the provisions of law. The terms and conditions of the sale as
announced when the property was put to sale were in accordance with law and no
guarantee was given (nor could have been given) that the law would not change,
or that the terms and conditions would be enforceable even in violation of law which
may be in force. FAR was a matter of law and the FAR was fixed either by the JDA or JMC in
exercise of its statutory powers. The contract when entered into, the FAR
approved by JDA was 2 and its subsequent reduction in 1996 to 1.75 would not
invalidate the contract or by treating as a breach of the contract nor can it be
treated by the Government."
(w) In the case of M/s. Alopi Parshad & Sons Ltd. (supra), it has been observed as under:
"22.There is no general liberty reserved to the courts to absolve a party from liability to
perform his part of the contract, merely because on account of an uncontemplated turn
of events, the performance of the contract may become
onerous. That is the law both in India and in England, and there is, in our opinion, no general
rule to which recourse may be had as contended by Mr. Chatterjee, relying
upon which a party may ignore the express covenants on account of an uncontemplated
turn of events since the date of the contract...."
(x) In the case of Cine Exhibition Private Limited (supra), it has been observed as under:
"8. We are of the view that the ratio laid down in the abovementioned Judgment
squarely applies to the facts of this case as well. Generally an application for correction
of a typographical error or omission of a word etc. in a Judgment or order would
lie, but a petition which is intended to review an order or Judgment under Order
XLVII Rule 1 of the Code of Civil Procedure and in criminal proceedings
except on the ground of an error apparent on the face of the record, could not be
achieved by filing an application for clarification / modification / recall or
rehearing, for which a properly constituted review is the remedy. Review power is
provided under Order XL of the Rules, which reads as follows:
"1. The Court may review its judgment or order, but no application for review will
be entertained in a civil proceeding except on the ground mentioned in Order XLVII,
Rule 1 of the Code, and in a criminal proceeding except on the ground of an error
apparent on the face of the record.
2. An application for review shall be by a petition, and shall be filed within
thirty days from the date of the judgment or order sought to be reviewed. It shall
set out clearly the grounds for review.
3. Unless otherwise ordered by the Court an application for review shall be disposed of by
circulation without any oral arguments, but the petitioner may supplement his
petition by additional written arguments. The Court may either dismiss the petition
or direct notice to the opposite party. An application for review shall as far as
practicable be circulated to the same Judge or Bench of
Judges that delivered the judgment or order sought to be reviewed.
4. Where on an application for review the Court reverses or modifies its former decision
in the case on the ground of mistake of law or fact, the Court, may, if
it thinks fit in the interests of justice to do so, direct the refund to the petitioner of
the courtfee paid on the application in whole or in part, as it may think fit.
5. Where an application for review of any judgment and order has been made and
disposed of, no further application for review shall be entertained in the same
matter."
(y) In the case of Ram Kishun & Ors. (supra), it has been observed as under: "25. In
Navalkha & Sons v. Ramanya Das, this Court while dealing with the confirmation
of sale by court, held that there must be a proper valuation report, which should
be communicated to the judgmentdebtor and he should file his own valuation report and
the sale should be conducted in accordance with law. After confirmation of sale,
there should be issuance of sale certificate. The Court cannot interfere unless it is
found that some material irregularity in the conduct of sale has been committed.
The Court further held that it should not be a forced sale. A valuer's report should be as good
as the actual offer and the variation should be within limit. Such estimate
should be done carefully. The Court further held that unless the court is satisfied
about the adequacy of the price the act of confirmation of the sale would not be a
proper exercise of judicial discretion. [See also Kayjay Industries (P) Ltd. v.
Asnew Drums (P) Ltd., Union Bank of India v. Official Liquidator, B. Arvind Kumar v. Govt.
of India and Transcore v. Union of India.
26. In Divya Mfg. Co. (P) Ltd. v. Union Bank of India this Court held that a
confirmed sale can be set aside on the ground of material irregularity or fraud.
The court does not become functus officio after the sale is confirmed. In Valji Khimji
and Co. v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd., the
Court held that auctionsale should be set aside only if there is a fundamental error
in the procedure of auction e.g. not giving wide publication or on evidence that
property could have fetched more value or there is somebody to offer substantially
increased amount and not only a little over the auction price. Involvement of any kind
of fraud would vitiate the auctionsale.
27. In FCS Software Solutions Ltd. v. La Medical Devices Ltd., this Court considered a
case where after the confirmation of auctionsale it was found that valuation of
movable and immovable properties, fixation of reserve price, inventory of plant and
machineries had not been made in the proclamation of sale, nor disclosed at the
time of sale notice. Therefore, in such a fact situation, the sale was set aside
after its confirmation.
28. In view of the above, the law can be summarized to the effect that the recovery
of the public dues must be made strictly in accordance with the procedure prescribed by law.
The liability of a surety is coextensive with that of the principal debtor. In case
there are more than one surety the liability is to be divided equally among the
sureties for unpaid amount of loan. Once the sale has been
confirmed it cannot be set aside unless a fundamental procedural error has occurred or
sale certificate had been obtained by misrepresentation or fraud."
(z) In the case of Zahira Habibullah Sheikh (supra), it has been observed in
paragraph 7 as under: "7. In Delhi Admn. v. Gurdip Singh Uban, it was held that
by describing an application as one for "clarification" or
"modification" though it is really one of review, a party cannot be permitted to
circumvent or bypass the circulation procedure and indirectly obtain a hearing in
the open court. What cannot be done directly cannot be permitted to be done
indirectly. The court should not permit hearing of such an application for
"clarification", "modification" or "recall" if the application is in substance a clever
move for review."
(aa) In the case of Budhia Swain (supra), it has been observed as under: "6. What is a
power to recall? Inherent power to recall its own order vesting in
tribunals or courts was noticed in Indian Bank v. M/s. Satyam Fibres India Pvt. Ltd.1.
Vide para 23, this Court has held that the courts have inherent power to
recall and set aside an order (i) obtained by fraud practised upon the Court, (ii) when
the Court is misled by a party, or
(iii) when the Court itself commits a mistake which prejudices a party. In A.R. Antulay
v. R.S. Nayak & Anr.2 (vide para
130), this Court has noticed motions to set aside judgments being permitted where (i) a
judgment was rendered in ignorance of the fact that a necessary party had not been
served at all and was shown as served or in ignorance of the fact that a necessary party
had died and the estate was not represented, (ii) a judgment was obtained
by fraud, (iii) a party has had no notice and a decree was made against him and such party
approaches the Court for setting aside the decision ex debito justitiae on proof of the
fact that there was no service.
7. In Corpus Juris Secundum (Vo1. XIX) under the Chapter "Judgment Opening
and Vacating" (paras. 265 to 284 at pages 487
510) the law on the subject has been stated. The grounds on which the courts may open
or vacate their judgments are generally matters which render the judgment void or
which are specified in statutes authorising such actions. Invalidity of the judgment of
such nature as to render it void is a valid ground for vacating it at
least if the invalidity is apparent on the face of the record. Fraud or collusion in
obtaining a judgment is a sufficient ground for opening or vacating it. A judgment
secured in violation of an agreement not to enter judgment may be vacated on that
ground. However, in general, a judgment will not be opened or vacated on
grounds which could have been pleaded in the original action. A motion to vacate
will not be entered when the proper remedy is by some other proceedings, such as by appeal.
The right to vacation of a judgment may be lost by waiver or estoppel. Where a party
injured acquiesces in the rendition of the judgment or submits to it, waiver or
estoppel results.
8. In our opinion a tribunal or a court may recall an order earlier made by it if
(i) the proceedings culminating into an order suffer from the inherent lack of
jurisdiction and such lack of jurisdiction is patent, (ii) there exists fraud or
collusion in obtaining the judgment, (iii) there has been a mistake of the court
prejudicing a party or (iv) a judgment was rendered in ignorance of the fact that a
necessary party had not been served at all or had died and the estate was not
represented. The power to recall a judgment will not be exercised when the ground for reopening the proceedings or vacating the judgment was available to be pleaded in the
original action but was not done or where a proper remedy in some other proceeding such as
by way of appeal or revision was available but was not availed. The right to
seek vacation of a judgment may be lost by waiver, estoppel or acquiescence.
11. The O.E.A. Collector was satisfied of the notice having been published. Assuming that the
notice was not published in the manner contemplated by law, it will at best be a case
of irregularity in the proceedings but certainly not a fact striking at the very
jurisdiction of the authority passing the order."
(bb) In the case of Textile Labour Association (supra), it has been observed as under:
"(20) It is submitted that if such a view is taken any creditor having a money claim against any
debtor may contend that his right to life and liberty is deprived of by the debtor and
instead of filing a civil suit he can bring his claim to the High Court under
Article 226 of the Constitution. This is a farfetched and extreme argument. The
paramount consideration mentioned by the Supreme
Court regarding saving human lives would be the relevant guideline for exercising power of
the High Court in such circumstances. The Supreme Court had exercised the power under
Article 32 of the Constitution and that power is only for enforcement of
Fundamental Rights. The question involved in this petition is of right to life and
livelihood of 2700 workmen and their families. The court cannot be oblivious of the fact
that on account of closure of numerous mills in Ahmedabad utterly
miserable conditions have resulted for the families of the unemployed workmen. There
have been instances of suicides because of utter economic hardships on account of
unemployment of such mill workers. There have been cases of premature deaths because
of lack of economic support medical treatment and medicines. Many other
undesirable consequences follow even driving the people to criminal activities
including prostitution. In such miserable circumstances if right to livelihood and a
bare necessity of human dignity cannot be enforced though guaranteed by the Constitution
the Court cannot justify its existence for the enforcement of Fundamental Rights.
Article 21 guarantees at least that minimal.
(23) In view of the aforesaid discussion the contention that the petition is not
maintainable has to be rejected."
CONCLUSION:
35. Considering the pleadings, the contentions raised by the learned counsel
appearing for the respective parties, various orders passed by this
Court in proceedings pertaining and relating to the
Company under liquidation and the judgments cited by the learned counsel appearing for
the parties, it clearly transpires that even though the Company
under liquidation came to be wound up in the year
1990 by this Court, it is only in the year 2012 that
the lands in question were demarcated and earmarked and the proceedings for its disposal
could be undertaken by the Official Liquidator. As stated hereinabove, the
leaseholders filed an application for being joined as party in Official Liquidator
Report No.43 of 2013 being Company Application No.305 of 2013, wherein this Court
passed an order dated 2.12.2013 and called for details from the Town
Planning Officer of the State of Gujarat as well as
the District Collector. Ultimately, the details were produced by the Government authorities
and by an order dated 16.12.2013, this Court dismissed the said application filed
by one of the applicants claiming to be the heir of the original leaseholder,
wherein in Paragraphs 6 and 7, the details of the
same are mentioned. Thus, it was possible for this Court to hold auction on 17.12.2013.
As narrated hereinabove, the upset price came to be fixed twice,
firstly at Rs.55 crores, and finally at Rs.45 crores
for the area of 13,895 sq. mtrs. It is an admitted
position that the lands put to auction are situated in the prime locality of Ahmedabad
City, having potentiality of commercial development and it is
situated in the main market area. As per the order dated 17.12.2013 which is under
consideration, auction proceedings were held in open Court, wherein
12 rounds of offers were considered by the Court and opponent No.9 herein emerged to be
the highest bidder at Rs.148 crores and the present applicant
being second highest bidder at Rs.146 crores.
36. It may be noted that the auction is governed by
the terms and conditions which are at AnnexureA to this application. Considering the terms
and conditions of the sale and more particularly,
condition No.5 provides that the offers received by
the Official Liquidator shall be opened before this Court. Condition No.7, interalia, provides that the Official Liquidator reserves the right to accept the highest or any offer
which will be subject to sanction and confirmation of this Court. Condition
No.8 provides for interse bidding to be held in the
Court. Condition No.9 provides that the final offer, after interse bidding so received, will
be considered by the High Court for sanction or
otherwise. The said condition further provides for payment of 25% excluding EMD within
one month or such time as the High Court stipulates from the date of final acceptance of
particular offer and the balance amount of purchase consideration will have to be paid
within three months thereafter by the purchaser or within such time as may be
fixed by this Court. Condition No.17 provides that the property shall be handed
over to purchaser on payment of full sale price to the Official
Liquidator and/or subject to such directions as the Court may issue in such matters.
Condition No.27 provides for a particular declaration to be
incorporated in the deed of conveyance. Similarly, condition No.29 provides for return of
EMD to the unsuccessful bidders including the second highest
bidder, wherein it is, interalia, provided that the
EMD amount paid by the second highest bidder will be returned only after receipt of 25%
of sale consideration from the successful bidder. Condition
No.31 provides for a stipulation that no nomination
will be allowed. Condition No.33 provides that the
successful bidder will have to execute the sale deed
within one month from the date of payment of full sale consideration after confirmation of
sale by this Court. Thus, as per the terms and conditions of
auction at the first instance, the highest bidder is to be identified. It is no doubt true
that thereafter, as per the conditions, on payment of
full price, the highest bidder is to be handed over the possession of the lands in question
which, as per condition No.33, is to be followed by execution
of a sale deed. In the instant case, opponent No.9
emerged to be the highest bidder and offered price of Rs.148 crores. The facts reveal that
as per condition No.9, opponent No.9 paid 25% of the
purchase price on 6.1.2014. As the facts emerge in this application thereafter, opponent
No.9 approached this Court by way of filing O.J. Misc. Civil Application No.53 of
2014, which came to be disposed of on an undertaking filed by opponent No.9,
whereby opponent No.9 was granted 4 installments as provided in Para 5 of the
order dated 31.3.2014 and opponent No.9 was also directed to pay interest at the rate of
10% starting from 16.4.2014 till the last installment of Rs.24.5
crores is received, to be calculated proportionately on the outstanding/unpaid amount. The
applicant challenged the said order dated 31.3.2014 by way of filing an appeal being O.J.
Appeal No.9 of 2014 on 16.4.2014. Incidentally, on the same day opponent
No.9 paid the remaining amount of consideration i.e. Rs.106.5 crores. Though it is
disputed by the present applicant, the records reveal that on
17.4.2014 when O.J. Appeal No.9 of 2014 came to be
heard and disposed of by the Division Bench of this Court, the Official Liquidator handed
over the possession of the lands in question to opponent
No.9. However, it is an admitted position that the
sale deed is not executed. In opinion of this Court,
opponent No.9 and the Official Liquidator have still to adhere to condition No.33 of the
terms and conditions in order to see that the sale deed is executed. The draft of
such a sale deed is to be placed before the concerned Company Court for its
approval and admittedly, before any such procedure as envisaged under condition No.33
could be undertaken by Official Liquidator as well as opponent No.9, the present
applicant raised its offer to Rs.160 crores and as per the order dated
17.4.2014 passed by the Division Bench of this Court in O.J. Appeal No.9 of 2014, the
said amount is deposited with the Official Liquidator on 17.4.2014. The applicant thus
offered Rs.12 crores more than the highest bidder i.e. opponent No.9 on the said day.
It may further be noted that as aforesaid, during the course of hearing of this
application, the applicant again enhanced the offer from Rs.160
crores to Rs.200 crores and deposited further Rs.40 crores as per the order dated
9.5.2014 passed by this Court. It may further be noted that during the course of hearing,
as learned counsel for the Official Liquidator as well as learned counsel for the Textile
Labour Association pointed out that since 1990, the workmen are waiting for their legal
dues, which according to the affidavit filed by Textile Labour Association comes
to approximately Rs.14 crores, the applicant endeavoured to deposit further amount of
Rs.14 crores as per order dated 9.5.2014. In these view of the facts therefore, today
the offer given by the applicant stands at Rs.214 crores. In this set of factual
background therefore, this application needs to be considered.
37. As far as contention raised by opponent No.9 to
the effect that the present application is filed as an afterthought in the garb of an
application for recall and further that this application is not
maintainable as an application for recall, deserves
to be negatived, in view of the fact that there is a
wide gap between the price fixed in the auction and
the price now offered by the applicant. As provided
under Rule 9 of the Companies (Court) Rules, 1959, this Court has inherent powers to
consider this application in order to secure ends of justice between the parties. The
Company Court while conducting the auction is the trustee and custodian of the property
of the erstwhile Company more particularly, it has to protect the interest of the
workers, secured creditors, unsecured creditors and
the shareholders. In light of glaring difference in the price offered by the applicant and
the price obtained in the auction, this Court cannot rely upon
any technicalities and in opinion of this Court, on the contrary, it owes a duty to exercise
inherent powers under Rule 9 of the Companies (Court) Rules, 1959. On appreciating the
ratio laid down by the judgments cited by the applicant as well as opponent
No.9, in facts of this case, the present application is held to be maintainable. Though the
applicant herein was the second highest bidder, it cannot be nonsuited on the grounds of
estoppel, waiver and acquiescence, especially in light of the judgments
of the Apex Court more particularly, in the cases of Shraddha Aromatics Pvt. Ltd. (supra),
Divya Manufacturing Co. Pvt. Ltd. (supra) and the judgment of this Court in the case of
Chaudhary Brothers (supra) as the paramount consideration of the
Company Court is to see that maximum market price is fetched and considering the gap
between the price determined in the auction and the price now offered, the price fetched
in the auction is grossly inadequate. As noted hereinabove, it is an admitted position that
the sale deed is not executed and thus, as per the terms and conditions of auction,
the sale procedure is not yet complete.
38. From bare reading of the application, it is
clear that the application is for recall and not for
review of the order dated 17.12.2013. It is no doubt
true that the applicant has not challenged the said order. However, it is a matter of fact
that the applicant's challenge is the order dated 31.3.2014 passed in O.J. Misc. Civil
Application No.53 of 2014, whereby this Court extended the time to pay the
remaining amount of sale consideration as per
the highest bid accepted by the Court, wherein the Division Bench has clearly observed
that the applicant may approach the Company Court and as per the directions issued by
the Division Bench, the present application is filed and therefore, the same
needs to be entertained.
39. The contention raised by opponent No.9 that
what cannot be done indirectly cannot be permitted to be done indirectly and that the
present application is an abuse of process of law, deserves
to be negatived. Similarly, the contention raised by opponent No.9 that the present
application is grossly time barred also deserves to be negatived in
light of the fact that the last date of payment of
the remaining amount of consideration was 16.4.2014
which came to be extended by this Court vide order
dated 31.3.2014, to which, the applicant was not a
party. It is an admitted position that the applicant
approached the Division Bench of this Court by way
of filing O.J. Appeal No.9 of 2014 on 16.4.2014 and therefore, it cannot be gainsaid that
the present application for recall is grossly time barred.
40. Even if it is construed that the offer of Rs.148 crores made by opponent
No.9 amounts to confirmation of sale, the fresh offer now given by
the applicant who himself was also a bidder (second highest bidder) at the auction held
on 17.12.2013 before this Court is very high and the same therefore demonstrates
that the offer which was accepted by this Court by the order dated 17.12.2013,
was accepted at a grossly inadequate price. It is true that there are no allegations of fraud
or any other illegality. However, in the instant case, the offer made by the
applicant is significantly higher than the price which is
received in the auction and therefore, the present case falls in the exception of deconfirming the sale. Considering the ratio laid down by the Apex Court in the case of
LICA (P) Ltd. (No.1) (supra), LICA (P) Ltd. (supra), Divya Manufacturing Co. Pvt. Ltd.
(supra) and Shraddha Aromatics Pvt. Ltd.
(supra), when the higher price which is now offered
is substantially higher, it would be in the interest
of the Company and its creditors to recall the order impugned in this application. Even in
the case of Navalkha and sons (supra), the Apex Court has observed that if the
Court is satisfied about the adequacy of price, then in such a case, the confirmation
of sale cannot be deconfirmed. However, as observed hereinabove, in facts of this case,
the Court is satisfied that the price was inadequate. Even considering the judgment
of the Apex Court in the case of Valji Khimji (supra), the Apex Court has also considered
the aspect that in the situation when the auction sale came to be
finalized at a given price and subsequently, someone else offers a substantially higher
price, then an inference can be drawn that the price fetched at the
auction was grossly inadequate. Even in the case of Kayjay Industries Pvt. Ltd. (supra), it
has been observed that when the price fetched is substantially inadequate, the
element of irregularity as well as injury are present. It is no
doubt true that the Company Court does not possess expertise in determination of true and
correct market value of the land put to auction, however,
while considering the bid in the auction, it has to
consider the overall facts, circumstances as well as
factors which would fetch maximum price of the land. The auction held by a Company
Court is little different than the auction held in common parlance. In the instant case, the
highest bid which is accepted by the Court made by opponent No.9 rests at
Rs.148 crores. The facts reveal that at the initial stage, the same was increased by Rs.12
crores on 16.4.2014. However, thereafter, it is an admitted
position that the same has been increased to Rs.200
crores and lastly at Rs.214 crores. Thus, the gap of
price between the highest bidder and the applicant as on date is of Rs.66 crores. Thus,
the gap in price of the highest bidder and the applicant is as such Rs.11 crores more than
even the basic upset price of Rs.45 crores. On the date on which the
highest bid came to be accepted i.e. on 17.12.2013,
it is no doubt true that the FSI (Floor Space Index)
of the area in which the land is situated was 1 and
with effect from 17.3.2014, it has been increased to
1.8, even in the order passed by this Court while
fixing the upset price, this factor was considered. With the increase in FSI even if it is
roughly calculated, the extent of possible/permissible
construction would increase from 13,895 sq. mtrs. to
24,840 sq. mtrs., meaning thereby, the permissible
construction would be 11,040 sq. mtrs. more. On the
date on which, the auction came to be held by this Court and while accepting the highest
bid of opponent No.9, the change in FSI was not sanctioned but was only in offing and
therefore, this Court have had no occasion to consider the said factor. While
determining the market value, factor of potential development is an important
factor. Considering the aforesaid development of increase in
FSI which was in offing, though uncertain, could not be considered by this Court, which
in opinion of this Court has led to insufficient determination of
the true and correct market value of the lands in question. Though the increase in FSI is
an event which has occurred after acceptance of highest bid
still however, the vital factor of potentiality of development could not be considered,
which has resulted into irregularity as well as injury and as
held by Division Bench of Calcutta High Court in the case of Sharawan Kumar Agarwal
(supra), the same constitute something more than merely a higher price.
41. It is no doubt true that opponent No.9 has
canvassed that as the applicant was also one of the bidder in the auction proceedings held
on 17.12.2013, the applicant could have taken risk which is as such taken by the
opponent No.9 and enhanced its bid. However, such a vital factor of potentiality of
development which could not be considered by this Court in the circumstances
narrated hereinabove, has resulted into inadequacy of price fetched which is amply
clear from the substantial gap between the price fetched at the
auction held on 17.12.2013 and the price now offered as an upset price. The increase
from the price offered by the highest bidder opponent No.9 at Rs.148 crores and
now offered by the applicant at Rs.214 crores is a substantial wide gap which has
resulted into insufficiency of price fetched which even according to Apex Court amounts
to irregularity. The Company Court is custodian of the properties of the Company under
liquidation and therefore, such factors need to be considered even at this stage and merely
because highest bid is accepted by this Court and the Official Liquidator
has formally handed over the possession of the land in question and this Court by an
order dated 17.12.2013 has also ordered the Official Liquidator
to adhere to the other conditions which provides for execution of a sale deed, would not
preclude this Court from examining this matter as far as
inadequacy of price is concerned.
42. This Court in the case of Chaudhary Brothers (supra), after considering almost
all judgments which are cited even in this case has very
succinctly explained the principles which are laid down by the Apex Court and has
observed in Paragraphs 1, 3.11 to 3.14, 8.2, 11 to 14.3, 18 to 18.3 and 19.1 to 19.6 as under:
"1. The applicant, by this application, which is registered as Company Application
No. 211 of 2013 seeks that the order dated 21.6.2013 whereby sale of certain
properties of the company liquidation came to be confirmed in favour of the bidder
whose offer was found to be highest (Rs. 20.10 Lacs) during the auction / interse
bidding before the Court (hereinafter referred to as successful bidder) may be
recalled and cancelled and instead his (i.e. the applicant's) offer, which is for higher
amount (i.e. about Rs. 9.90 lacs more than the highest bid which came to be
accepted vide order dated 21.6.2013 during auction / interse bidding) may be accepted.
3.11 At this stage it is relevant to recall that According to the advertisement
reserved price for Lot No. 2 i.e. the goods in question was fixed at Rs.16,50,000/.
3.12 On the next hearing, i.e. on 20.6.2013, the proceedings were adjourned for
the reasons mentioned in the order dated 20.6.2013. On the next date, i.e. on 21.6.2013,
the interse bid amongst the said six bidders was conducted and during the said interse bidding (auction) present opponent No.2 emerged as highest bidder with revised
offer at Rs. 20,10,000/ as against the reserved / upset price of Rs.16,50,000/. On
conclusion of the said interse bidding / auction, the Court
passed the order dated 21.6.2013 confirming sale in favour of M/s. Omar Steel who was
one of the said six bidders (i.e. opponent No.2 in present proceedings). The relevant part of
said order dated 21.6.2013 reads thus:
1...........
2. At the outset, it is necessary to mention that the 6 bids / offers in
question which are under consideration are restricted to lot No. II (i.e. only for
movable such as plant, machineries, furniture, fixtures, raw materials and
finished goods except records).
3. As mentioned in the order dated 13.6.2013 in response to the advertisement issued
by OL pursuant to order dated 30.4.2013, OL received in all 6 bids /
offers from (1) Omar Steel (2) G.K. Traders (3) Adinath Enterprise (4) Monali Textile (5)
V.L. Intex and (6) Chechani Trading Company.
4.............
5. Accordingly, the said 6 bidders are given chance for interse bidding.
5.1 For the said purpose, when the learned advocate for OL called out the names of the bidders,
only 5 bidders / their representatives viz. Omar Steel, G.K.
Traders, Adinath Enterprise, Monali Textile and Chechani Trading Company came
forward and it is reported that V.L. Intext (who had submitted offer of Rs.16,55,000/) has not remained present for interse bidding.
6. At the instruction of the Court, learned Counsel for OL informed the said 5 bidders
that they may raise their bids / offers by minimum Rs.50,000/ if they want to participate
and continue in the interse bidding.
7. In the process, Chechani Trading Company, gradually increased its offer from
Rs.16,50,000/ to Rs.18,60,000/ whereas Adinath Enterprise gradually increased its
offer from Rs.16,90,000/ to Rs.18,10,000/ and G.K. Traders gradually increased its offer
from Rs.16,81,000/ to Rs.19,60,000/. Monali Textile did not increase its offer from
Rs.17,10,000/ however, Omar Steel gradually increased its initial offer from Rs.16,50,000/
to Rs.20,10,000/.
8. Thereafter, none of the bidders came forward to increase their offer or to even match
the offer (i.e. Rs.20,10,000/) of Omar Steel.
9. Thus, considering the fact that the increased offer of Omar Steel is highest, the said
bidder is considered as highest bidder and accordingly declared as successful highest
bidder for the movable properties mentioned / described in the
advertisement issued pursuant to the order dated 30.4.2013 and consequential
advertisement (i.e. notice inviting bids / tenders) issued by OL and the tender
document (if any).
10. Therefore sale is confirmed in favour of said highest bidder viz. Omar Steel on
the terms and conditions in this order and in the tender document and in the
advertisement. All conditions mentioned in this order and in the tender document as
well as in the advertisement will be applicable and binding to the successful
bidder and are to be treated as part of present order as if they all are
specifically and expressly incorporated and mentioned in this order. The conditions in this
order are in addition to the conditions in the advertisement and tender document.
11. Though not necessary, so as to remove any doubts or confusion or any future dispute
or controversy, it is clarified that the term plant used in the
advertisement and in this order means only manufacturing facility (i.e. machines /
equipments for manufacturing process) and not the building and / or permanent or
temporary super structure or any material being part of or used in the building and /
or permanent or temporary superstructure.
12. In view of the above following order is passed: (A) The said highest bidder i.e. Omar Steel
shall, as per the condition in the advertisement / tender document pay 25% of
purchase consideration to the OL within 30 days from today and balance amount of
purchase sale consideration shall be paid within 3 months thereafter.
(B).........
(C) ........
(D) The stamp duty, registration charges, AUDA / Society charges and all other
incidental charges thereto shall be borne by the purchaser.
(E) .........
(F).........
3.13 In pursuance of the said order dated 21.6.2013, the said successful bidder was obliged
to make payment of sale consideration within and in accordance with the time schedule
prescribed in the said order.
3.14 It was after completion of the entire aforesaid procedure and after the sale
conformation and order dated 21.6.2013 that the present applicant preferred this
application on 29.7.2013.
8.2 Ms. Yajnik, learned advocate for OL has submitted that in the facts of the case the Court
may pass any appropriate order. So far as the factual aspects pursuant to the order dated
21.6.2013 is concerned, Ms. Yajnik, learned advocate for OL relied on
the details mentioned in OL's reply/ report dated 7.8.2013. Mr. Dave, learned advocate
for one of the secured creditors submitted that a secured creditor would be interested
in securing higher price for the property in question so that more amount towards its dues can
be received and disbursed by OL and therefore if there is likelihood to secure
higher price for the property in question then the said opportunity may be allowed. No
one has attended the hearing and no one has made submission for and on behalf of
respondent No.5 and respondent No.3.
11. So as to appreciate rival contentions, it would be appropriate to take into account
some relevant precedents and observations in certain decisions.
(a) In case of M/s. Navalkha & Sons. v. Sri Ramanya Das & Ors. [1969 (3) SCC 537],
Hon'ble Apex Court considered the issue related to Court accepting highest bid and
confirming the sale. The factual background of the said case is succinctly summarized by the
Court in para 12 of subsequent decision in the case of Divya
Manufacturing. Thus it would be useful to borrow the said summation of fact which
read thus: "12..........In the case of Navalkha and Sons (supra), after appellants offer
was accepted, a fresh offer from one Gopaldas Darak for higher amount was received
by stating that he could not offer in time because he came to know of the sale only 2
days prior to the date of the application and there was possibility of higher bids. Instead of
directing a fresh auction or calling for fresh offers, the learned Judge
thought it proper to arrange an open bid in the Court itself on that very day as between
M/s Navalkha and higher offeror Gopaldas Darak. M/s Navalkha thereafter
offered higher bid at Rs.8,82,000 and its bid was accepted and the learned Judge
concluded the sale in its favour with a direction to pay the balance amount.
Thereafter an application was filed offering Rs.10 lakhs. A contention was raised
that due publicity of the sale of the property was not made, but that application
was rejected by the Court. Hence, an appeal was filed by the applicant who made an
offer of Rs.10 lakhs and another by one contributory against the order of
confirmation. Both appeals were allowed by the Division Bench and the order
passed by the learned Judge was set aside with a direction to take fresh steps for sale
of the property either by calling sealed tenders or by auction in accordance
with law. That order was challenged before this Court by M/s Navalkha. It was
contended that there was no justification for the Division Bench to interfere with
the order of the learned Single Judge.
In the said factual background, Hon'ble Apex Court, after referring to Rule 273 of
Company Court Rules 1959, observed that:
"6. The principles which should govern confirmation of sales are wellestablished. Where
the acceptance of the offer by the Commissioners is subject to confirmation of the
Court the offeror does not by mere acceptance get any vested right in the
property so that he may demand automatic confirmation of. his offer. The
condition of confirmation by the Court operates as a safeguard against the property being
sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the
conduct of the sale. In every case it is the duty of the Court to satisfy itself
that having regard to the market value of the property the price offered is reasonable.
Unless the Court is satisfied about the adequacy of the price the act of confirmation of
the sale would not be a proper exercise of judicial discretion. In Gordhan Das Chuni
Lal v. T. Sriman Kanthimathinatha Pillai(1) it was observed
that where the property is authorised to be sold by private contract or otherwise it is the duty
of the Court to satisfy itself that the price fixed 'is the best that could be
expected to be offered. That is because the Court is the custodian of the
interests of the Company and its creditors and the sanction of the Court required
under the Companies Act has to be exercised with judicial discretion regard being had to
the interests of the Company and its creditors as well. This principle was
followed in Rathnaswami Pillai v. Sadapathi Pillai(2) 'and S. Soundajan v. M/s. Roshan &
Ca.(1). In A. Subbaraya Mudaliar v. K.Sundarajan it was pointed out that the
condition of confirmation by the Court being a safeguard against the property
being sold at an inadequate price, it will be not only proper but necessary that the
Court in exercising the discretion which it undoubtedly has of accepting or refusing the
highest bid at the auction held in pursuance of its orders, should see that the
price fetched at the auction, is an adequate price even though there is no
suggestion of irregularity or fraud. It is well to bear in mind the other principle which
is equally wellsettled namely that once the court comes to the conclusion that the
price offered is adequate, no subsequent higher offer can constitute a valid ground
for refusing confirmation of the sale or offer already received.
(See the decision of the Madras High Court in Roshan & Co's case)"
From the above quoted decisions it emerges that in the said decision, which is, almost in all
cases, consistently considered and followed by the Apex Court, it emerges that
in view of the fact that the Court is the custodian of interest of the company and
creditors it is not only proper but necessary for the Court to ensure that the price
fetched at the auction is best and higher price though there is no suggestion of
irregularity or fraud. Thus, the said observation by the Apex Court emphasizes
that the paramount duty of the Court is to protect best interest of the company, creditors
(i.e. shareholders and contributories) and the workers and to ensure that the Court
should also ensure that highest price is received at the auction. Ordinarily, this
would translate into the situation which would justify the
decision to set side the confirmed sale in the event higher price is offered even
after confirmation of sale. However, it may be noticed that in the very same decision the Apex
Court, in the immediately next paragraph, observed that it is equally well settled that
once the Court comes to the conclusion that the price offered is
adequate, subsequent higher offer cannot be a valid ground to refuse confirmation of
sale. Thus, the guiding and determining factor is satisfaction of the Court that
adequate and reasonable price is received.
(b) In 1974, in the case between M/s Kayjay Ind. (Pvt.) Ltd. vs M/s Asnew Drums (P) Ltd
(1974 2 SCC 213) Hon'ble Apex Court examined the issue related to sale of
property by Court. True it is that, in the said decision, Hon'ble Apex Court examined
the issue in light of the provisions under Order 21 Rule 90. However, the issue about the
Court's obligation in accepting previous bid was also considered by Hon'ble Apex Court
in the said decision. Hon'ble Apex Court speaking through Hon'ble Mr. Justice
V.R.Krishna Iyer [as His Lordship then was] observed in the said decision that:
"9.........Be it by a receiver, commissioner, liquidator or Court this
principle must govern. This proposition has been propounded in many rulings cited
before us and summed up by the High Courts. The expressions 'material irregularity in the
conduct of the sale' must be benignantly construed to cover the climax
act of the Court accepting the highest bid. Indeed, under the Civil Procedure Code, it is the
Court which conducts the sale its duty to apply its mind to the material factors
bearing its mind to the material factors bearing on the reasonableness of
the price offered is part of the process of obtaining a proper price in the course of the sale.
Therefore, failure to apply its mind to this aspect of the conduct of the sale may amount to
material irregularity Mere, substantial injury without material
irregularity is not enough even as material
irregularity not linked directly to
inadequacy of the price is insufficient. And where a Court mechanically conducts the
sale or routinely signs assent to the sale papers, not bothering to see if the offer is too low
and a better price could have been obtained, and in fact the price is substantially
inadequate, there is the presence of both the elements of irregularity and injury.
But it is not as if the Court should go on adjourning the
sale till a good price is got, it being a notorious fact that Court sales and market prices are
distant neighbours. Otherwise, decreeholders can never get the property of the debtor
sold. Nor is it right to judge the unfairness of the price by hindsight wisdom.
May be, subsequent events, not within the ken of the executing
Court when holding the sale, may prove that had the sale been adjourned a better price could
have been had. What is expected of the Judge is not to be a prophet but a
pragmatist and merely to make a realistic appraisal of the factors, and, if satisfied
that, in the given circumstances, the bid is acceptable, conclude the sale. The Court may
consider the fair value of the property, the general economic trends, the large sum
required to be produced by the bidder, the formation of a syndicate, the futility of
postponements and the possibility of litigation, and several other factors dependent
on the facts of each case. Once that is done, the matter
ends there. No speaking order is called for and no meticulous post mortem is proper. If the
Court has fairly, even if silently, applied its mind to the relevant considerations
before it while accepting the final bid, no probe in retrospect is permissible.
Otherwise, a new threat to certainty of Court sales will be introduced.
10. So viewed we are satisfied that the district Court had exercised a conscientious
and lively discretion in concluding the sale at Rs. 11.5 lakhs. If
the market value was over 17 lakhs, it is unfortunate that a lesser price was fetched.
Mere inadequacy of price cannot demolish every Court sale. Here, the Court
tried its best, time after time, to raise the price. Wellknown industrialists in the public and
private sectors knew about it and turned up. Offers reached a stationary
off indefinitely in recovering its dues on baseless expectations and distant,
prospects. The judgmentdebtor himself, by his litigious exercises, would have contributed
to the possible buyers being afraid of hurdles ahead. After all,
producing around Rs. 11.4 lakhs openly to buy an industry is not easy even for
apparently affluent businessmen. The sale proceedings had been pending too long and
the first respondent could not, even when given the opportunity, produce buyers by
private negotiation. Not even a valuer's report was produced by him. We are
satisfied that the District Judge had committed no material irregularity in the
conduct of the sale in accepting the highest offer of the appellant on September 3, 1969.
Thus, Hon'ble Apex Court has observed that material irregularity in the conduct of the sale
must be benignantly construed and failure to apply mind to the material factors
bearing on the reasonableness of the price would amount to material irregularity
and that where the sale is conducted mechanically or where it is not
examined as to whether the offer is too low and better price could be obtained or the price is
substantially inadequate, then there is presence of element of
irregularity as well as injury. The above quoted observations by the Apex Court
clearly brings out that if relevant aspects are not taken into account at the time of determining
revised / upset price before inviting bids and consequently correct and
proper market value is not reflected in the reserved price then it would amount to
material irregularity and that would be sufficient justification to deconfirm the
sale even though there is no suggestion or allegation about fraud. The same principle
would be applicable to the case of sale by company court for properties of the company
in liquidation.
(c) In the decision in case of Sharawan Kumar Agarwal v. Shrineap Investment Ltd &
Ors [(1990) 2 Comp LJ 231 (Cal)], Hon'ble High Court of Calcutta, speaking through the
Chief Justice Hon'ble Mr. Justice P.D.Desai (as his Lordship then was)
observed thus: "44. Now, it is true that the Court must satisfy itself that having regard
to the market value of the property, the price
offered and accepted is adequate. The Court being the custodian of the interests of the company
and its creditors, the power to confirm a sale or to withdraw the confirmation
has to be exercised with judicial discretion regard being had to the fact that the price
fetched is the best that can be expected to be offered even though there may be
no suggestion of irregularity of fraud. It is also true that in the present case, there is a
specific provision incorporated in the terms and
conditions of sale that the sale in favour of a purchaser was liable to be set aside, even after
the sale is confirmed and the purchase consideration is paid, in the interest and
benefit of creditors, contributors and all concerned and/or for
public interest. However, the investment of such power does not mean that the Court
should review and set aside an order confirming a sale which has already taken
place merely because at a later stage on second thoughts someone, more particularly,
an offeror who was outbidden, says that he is willing to pay more. Once the Court has come
to the conclusion that the price offered is adequate and has confirmed the
sale, the
subsequent higher offer made under such circumstances, without anything more,
cannot constitute a valid ground for interfering with the rights arising out of
sale which has already been confirmed.
46. Against this background, merely because on second thoughts on the next day, the
appellant came forward with an offer to pay more, there would be no justification,
without more, to deconfirm the sale already made in favour of the first respondent, who had
meanwhile parted with ten percent of the purchase price, taken delivery of the
assets and entered into an agreement with workmen. None complained when the sale was
confirmed by the Court. None other than the appellant is before us challenging the
confirmation by way of appeal. True, the secured creditors appear to have extended
their support to the appellant when he came forward with a fresh offer on the day next
after the sale was confirmed and they have supported him in this appeal also. But
this, too, apparently is a second thought. The unions with whom the agreement has been entered
into by the first respondent are supporting it in the present proceedings.
About 100 workmen are stated to have been employed. Having regard to all the
circumstances of the case, in our opinion, there is no justification for interference
with the confirmation of sale made by the Court in favour of the first respondent and its
refusal to set aside the same. If a higher offer made subsequently on second
thoughts by someone who was outbidden when the sale was confirmed were to be regarded,
without anything more, as the sole factor for withdrawing sanction already granted to
a Court sale, there is a real risk of such sales becoming a speculative exercise which
may not inspire the confidence of persons who act on the faith and belief in the
finality of actions of Court. We see no reason, therefore, to set aside the orders
under appeal passed by the Court."
In the above decision by High Court of Calcutta (Coram: Honourable the Chief
Justice Mr. P.D. Desai, as his lordship then was) the Court did not accept the
subsequent higher offer though it had support of the secured creditors and the
Court observed that power and discretion to take steps to fetch best price does not
mean that the Court should review and set aside the order confirming sale which has already
taken place, merely because at a later stage on second thought someone comes
forward and says that he is willing to pay more. The Court emphasized the requirement
of something more than merely higher offer which means infection in the decision of
sale confirmation by way of illegality or fraud.
(d) In the decision between Lica (P.) Ltd v. Official Liquidator & Anr. [1996 (85) CC
788], Hon'ble Apex Court observed thus: "The purpose of an open auction is to get
the most remunerative price and it is the duty of the court to keep openness of the
auction so that the intending bidders would be free to participate and offer higher value.
If that path is cut down or closed the possibility of fraud or to secure
inadequate price or underbidding would loom large. The court would, therefore, have to
exercise its discretion wisely and with circumspection and keeping in view the
facts and circumstances in each case. One of the terms of the offer in this case is that even
confirmation of the sale is liable to be set aside by the High Court as per Clause 11 of the
conditions of offer. The sale conducted was subject to
confirmation. Therefore, mere acceptance of the offer of Mr. Shantilal Malik does not
constitute any finality of the auction nor would it he automatically confirmed. The
appellant offered a higher price even now at Rs. 45,00,000. Keeping in view the
interest of the company and the creditors and the workmen to whom the sale proceeds
would he applied, the learned company judge was right in exercising her discretion to reopen
the auction and directing Mr. Shantilal Malik as well to make a higher offer than
what was offered by the appellant. In every case it is not necessary that there
should be fraud in conducting the sale, though on its proof
the sale gets vitiated and it is one of the grounds to set aside the auction sale.
Therefore, the discretion exercised by the learned single judge cannot be said to be
unwarranted. Under the circumstances, we are satisfied that the Division Bench of
the Calcutta High Courtcommitted manifest illegality in interfering with the order of the
learned single judge. The appeal is allowed. The order of the Division Bench is
set aside.............."
(e) In the decision in case between Divya Manufacturing Co. Ltd. vs. Union Bank of
India & Ors. [(2000) 6 SCC 69], Hon'ble Apex Court considered the decision in case
of Navalkha and Sons and examined the issue whether the request to cancel sale
confirmation order and to accept fresh offer after having confirmed the sale in
favour of one party should be entertained or not. In the said decision Hon'ble Apex
Court observed, inter alia, that: "11. In our view, on facts it is apparent
that the Division Bench of the High Court has considered all the relevant facts including
the fact that at the initial stage, the appellant 'Divya' offered only Rs. 37 lakhs to
purchase the properties. That means, the appellant wanted to
purchase at a throw away price. Thereafter, at the intervention of the Court, the price was
increased to Rs. 1.3 crores by the appellant. This indicates that appellant
was keen to purchase the property, however by paying only the bare minimal amount and
to take advantage of sale by the liquidator in the hope that if there are no other
purchasers, it would purchase the Company at a price which is abnormally below
the market price. It is also true that on 2nd July 1998, the offer made by the appellant
was accepted and it was ordered that sale in its favour be confirmed, but at the same time,
before possession of the property could be handed over, orbefore the sale deed
could be executed in its favour, respondent Nos. 7 and 8 pointed out that
the assets and properties could be sold at Rs. 2 crores. For showing their bona fides,
they were directed to deposit Rs. 40 lakhs each and also to pay Rs. 70 thousand each
as damages to the appellant. Further, the application for setting aside the sale was filed within
a few days of the order accepting the bid of the appellant. In these set of
circumstances, when correct market value of the assets was not properly known to the
Court and the sale was
confirmed at grossly inadequate price, it
was open to the Court to set it at naught in the interest of the company, its secured
and unsecured creditors and the employees. Appellant is also duly compensated by
payment of Rs. 70 thousand each by respondent Nos. 7 and 8.
13. From the aforesaid observation, it is abundantly clear that the Court is the
custodian of the interests of the Company and its creditors. Hence, it is the duty of
the Court to see that the price fetched at the auction is an adequate price even though
there is no suggestion of irregularity or fraud. ........"
The Apex Court has, thus, observed that it is the duty of the Court to satisfy itself that before
putting up notice / advertisement inviting bids, proper and
adequate and reasonable market value of the property is determined and at later stage to satisfy
itself about adequacy of the price being offered and accepted. It is
also observed by the Apex Court that if the correct market value of the property was not
properly known to the Court and the sale was confirmed at grossly inadequate
price then even in absence of any suggestion or allegation about illegality or fraud
in the sale process, the Court may, upon being satisfied, set aside the
sale confirmation if it is established that the sale was confirmed at grossly
inadequate price.
(f) In the decision in case of Lica (P) Ltd. vs. Official Liquidator [(2000) 6 SCC
82], Hon'ble Apex Court observed that:
"5. Proper control of the proceedings and meaningful intervention by the court would prevent
the formation of syndicate, underbidding and the resultant sale of property for
inadequate price. The order passed by this Court yielded the result that the
property which would have been finalised at Rs.45 crores is made. In other
words, the property under sale is capable of fetching a higher market price. Under these
circumstances, though there is some force in the contention of Shri Ramaswamy
that the court auction may not normally be repeatedly disturbed, since this Court, on the earlier
occasion, had limited the auction between the two bidders, the impediment will
not stand in the way of directing sale afresh. Even today the
parties are prepared to participate in the bid. Accordingly we fix the upset price at
Rs.1.50 crores. It is stated that Mr. S.L. Malik had already deposited a sum of Rs.45
lakhs. Bank drafts for a sum of Rs.80 lakhs are produced before us today. Therefore, we direct
that the bank drafts should be deposited in the office of the learned Company
Judge on or before 27.9.1993 and the balance amount of Rs.25 lakhs shall be
deposited on or before 11.10.1993 making up the total sum of Rs.1.50 crores. Learned
Single Judge is requested to conduct the auction afresh between the parties
immediately after the reopening of pooja holidays fixing the upset price at Rs.1.50
crores. The highest bidder should deposit the balance amount on the same day before
the working hours are closed. On deposit so made the Court would confirm the sale. No
appeal thereon shall be entertained on any ground whatsoever.
(g) In the case between Union Bank of India v. Official Liquidator H.C. Of Calcutta &
Ors. [(2000) 5 SCC 274], the Hon'ble Apex Court observed, inter alia, that:
"6. Against that order appellant preferred an appeal before the Division Bench. Before
the Division Bench a contention was raised with regard to the inadequacy of the price
and the Court observed that the Court would be rather loath to interfere and intervene in a
Court Sale where a question of inadequacy of the price is to be considered
by observing that:
"Court sale has taken place for the benefit of the employees concerned and more than
100 employees were starving to death and the Official Liquidator was trying to sell
the assets as a going concern so that the employment opportunities can be maintained
in these hard days."
10. At the outset we would state that in proceedings for winding up of the Company
under liquidation, the Court acts as a custodian for the interest of the company and the
creditors. Therefore, before sanctioning the sale of its assets, the Court is required
to exercise judicial discretion to see that properties are sold at a reasonable price. For
deciding what would be reasonable price, valuation report
of an expert is must. Not only that, it is the duty of the Court to disclose the said valuation
report to the secured creditors and other interested persons including the offerors. Further,
it is the duty of the Court to apply its mind to the valuation report for verifying
whether the report indicates reasonable market value of the property to be
auctioned, even if objections are not raised.
19. As discussed above, in the present case, there is total nonapplication of
mind to the material which is required to be considered for auction sale of the
assets of the Company.
26. Hence, if the sale is set aside in appeal, it cannot be stated that purchaser is
entitled to have refund of the amount with interest.
(h) In the decision in case between Gajraj Jain vs. State of Bihar (2004 [7] SCC 151,
Hon'ble Apex Court observed that: "14.In the present case, it has been urged that absence of
valuation report and the reverse bid does not vitiate the sale. We
do not find merit in this argument. In the case of M/s. S. J. S. Business Enterprises
(P) Ltd. (supra), it has been held that the Financial Corporation, in the matter of sale
under S. 29, must act in accordance with the statute and must not act
unreasonably. In this case, the Corporation fails on both the counts. It has neither
complied with the provisions of sub sections (1) and (4) of S. 29, nor has it
acts fairly. The test of reasonableness has been laid down in the above judgment in
which it is held that reasonableness is to be tested against the dominant consideration to
secure the best price. Value or price is fixed by the market. In
the case of going concern, one has to value the assets shown in the balance sheet
(Valuation of Real Property by S. Datta page 198).In our view, if the object of S. 29 of
the Act is to obtain the best possible price then the Corporation ought to have
called for the valuation report. This has not been down. There is no
inventory of assets produced before us. The mortgaged assets of the company could be
sold on itemized basis or as a whole whichever is found on valuation to be more
profitable. No particulars in that regard have been produced before us. If publicity
and maximum participation is to be attained then the bidders should know the details of the
assets (or itemized value). In the absence of the proper mechanism the auction
sale becomes only a pretence.......
(i) In the decision in case of Valji Khimji and company vs. OL of Hindustan Nitro
Product (Gujarat) Limited (2008 9 SCC 299) Hon'ble Apex Court, considered the case of the
bidder who did not participate in auction proceedings but after the sale was
confirmed by the Court in favour of one of the bidders (who participated in auction
proceedings and whose offer was highest during auction) he belatedly came forward
with higher offer coupled with request to cancel the sale. In the said decision
Hon'ble Apex Court observed that:
30. In our opinion the decision of this Court in Divya Manufacturing Company
(P) Ltd. (supra) cannot be treated as laying down any absolute rule that a
confirmed sale can be set aside in all circumstances. As observed by one of us (Hon. Katju, J.)
in his judgment in Civil Appeal No. 4908/2008 (Dr. Rajbir Singh Dalai vs.
Chaudhary Devi Lal University, Sirsa and Anr. pronounced on 6.8.2008), a decision of a
Court cannot be treated as Euclid's formula and read and understood
mechanically. A decision must be considered on the facts of that particular case.
31. If it is held that every confirmed sale can be set aside the result would be that no auction
sale will ever be complete because always somebody can come after the auction or its
confirmation offering a higher amount.
32. It could have been a different matter if the auction had been held without adequate
publicity in well known newspapers having wide circulation, but
where the auction sale was done after wide publicity, then setting aside the sale after its
confirmation will create huge problems. When an auction sale is advertised in wellknown newspapers having wide circulation, all eligible persons can
come and bid for the same, and they will be themselves be to blame if they do not come
forward to bid at the time of the auction. They cannot ordinarily later on be allowed
after the bidding (or confirmation) is over to offer a higher price.
33. Of course, the situation may be different if an auction sale is finalized say for Rs.1
crore, and subsequently somebody turns up offering Rs. 10 crores.
In this situation it is possible to infer that there was some fraud because if somebody
subsequently offers 10 crores, then an inference can be drawn that an attempt had
been made to acquire that property/asset at a grossly inadequate price. This
situation itself may indicate fraud or some collusion. However, if the price offered
after the auction is over which is only a little over the auction
price, that cannot by itself suggest that any fraud has been done.
35. In the first case mentioned above, i.e. where the auction is not subject to
confirmation by any authority, the auction is complete on the fall of the hammer, and certain
rights accrue in favour of the auction purchaser. However, where the auction is
subject to subsequent confirmation by some authority (under a statute or terms of
the auction) the auction is not complete and no rights
accrue until the sale is confirmed by the said authority. Once, however, the sale is
confirmed by that authority, certain rights accrue in favour of the auction purchaser, and these
rights cannot be extinguished except in exceptional cases such as fraud."
What emerges from the observations by the Apex Court in the said decision is that
sanctity of the confirmed sale is important and merely because offer for higher price
is placed before the Court then in absence of fraud or illegality confirmed sale ought not be
disturbed and set aside otherwise any auction cannot be finalized and any
auction will not attain finality. Besides the exception on aground of fraud and illegality other
exception, which the Apex Court in the decision, found
acceptable is grossly inadequate price with emphasis on the expression gross. This
would mean that if slightly higher price is offered by any interested purchaser then
the Court should not readily agree to set aside the confirmed sale.
(j) In the decision by the Hon'ble Division Bench of this Court dated 25.7.2013 rendered
in OJ CA No.299 of 2013 in OLR No.34 of 2013 wherein the Hon'ble Division
Bench observed that: "7.1 Taking into consideration the
aforesaid ruling of the Honourable the Apex Court and the facts of the case, this Court
deems it proper to recall its order dated 17.04.2013. Taking into consideration the
facts of the case, it is deemed proper to direct the Official Liquidator to re
advertise the auction of this property on the same terms and conditions but with
increased upset price of 1.60 crores in three daily newspapers, of which one is
having circulation at national level."
So far as the above referred order by Division Bench is concerned it is relevant
to note that in the said decision not only the facts materially differ from the facts in present
case but in the said case the Hon'ble Division Bench was satisfied that the two
bidders who happened to be brothers, mislead and misdirected the
auction process which, in the facts of the case, Court considered fraud or mischief
with the Court. In this context, Division Bench recorded in paragraph No.4 of the the
said decision: "Learned advocate Mr. Shah for the applicant submitted that it is not
in dispute that the highest bidder in second auction happens to be brother of third
highest bidder in the first auction. The price offered by the brother of the present
highest bidder was Rs.2.10 crores whereas the price offered by the present highest
bidder is only Rs.1.40 crores. Learned advocate Mr. Shah for the applicant
submitted that mere price difference itself is suggestive of the fact that the present
highest bidder took a clue from his brother i.e. third highest bidder and having
realised that the first highest bidder of first auction who quoted price Rs.2.18 crores is
not coming forward the present highest bidder may try to purchase the
property at the minimum possible price."
Having regard to the said aspect and also having regard to the gap between the price
subsequently offered and the previous offer and after considering the decisions in Divya
Manufacturing Co. (supra) and Valji Khimji (supra) the Court set aside the sale
confirmation order. In light of the facts of present case the said order would not be of
assistance to the applicant in supporting its request in present case.
(k) Subsequently, in case between Abhishek Shops & Warehouse Coop. Soc. Ltd. vs.
Monali Textile in O.J. Appeal No.49 of 2003, decided on 24.12.2003 the Division
Bench observed that:
"7. Thus in light the above price fetched by the property/land in question has to be considered
adequate or not. The impugned order as observed above has indirectly suggested
that the price fetched is inadequate while observing that the
property could have fetched more price and that the Company Court could have ordered
for revaluation of the property under the sale. In our opinion this is sufficient to
indicate whether the price fetched in the auction can be said to be adequate. We are in
agreement with the observation in the impugned order that the property under sale could
have fetched more price than Rs.4,05,00,000/. It need hardly be said
that the effort of the Company Court has to be in the direction of obtaining the
maximum price of the property in the auction for the benefit of workers, secured,
unsecured creditors and the company, and the entire class of creditors
would stand to benefit by the higher price received by the property under the sale."
The above mentioned observations in the said order are made in factual background
which is recorded in the order. The relevant part of the order reads thus: "in the
auction whereas Respondent No.1 gave offer of Rs.75,00,000/ and raised it
to Rs.3,76,00,000/. The property was valued by the approved valuer in January 1998 at
Rs.3,88,00,000/; that in the Court auction the appellant gave highest bid of
Rs.4,05,00,000/. Respondent No.1 did not participate in Court auction. Whereas
Mahavir Developers (respondent no.8) gave bid of Rs.3,86,00,000/. By the order dated
11.9.2003 Company Judge accepted the offer made by Arvindbhai Kantibhai Patel promoter /
organizer of proposed society for Rs.4.05,00,000/ and confirmed the sale
accordingly........After confirmation of sale in favour of the proposed society,
present respondent no.1 on 1992003 moved an application being O.J.M.C.A. No.167 of
2003 praying for recall / review of the order dated 11.9.2003 accepting highest bid
of Rs.4,05,00,000/ and confirming the sale as above, contending that because of some financial
constraints the applicant could not bid or put any offer either before the committee or
before the Court; that the applicant has now arranged the finance and
applicant is ready to deposit an amount of Rs.40 lacs towards E.M.D. without any interest
thereon; that the applicant is ready to pay minimum price of Rs.4.15
crores as against Rs.4.05 crores; that the sale should be confirmed in favour of the
applicant by reviewing /modifying the order dated 11.9.2003."
In the said decision Court also observed that: "....it is not merely higher offer given by
respondent no.1 which weighed with the Company Court in directing reauction of the
property, but found necessary in light of the circumstances pointed out above and
that the property would have fetched more price and with that the order dated 119 2003 has
been recalled. It is a settled legal position that the discretion exercised in directing
reauction by the Company Court should not be interfered with unless the impugned
order is wrong on principle."
Thus, merely higher offer by the applicant was not the reason for directing reauction in said
case and that therefore the said decision does not help the applicant since in present
case offer of higher price is the only reason cited in support of the request.
Actually the said decision reiterates the position which is maintained since the decision
in Navalkha Brothers (supra) viz. merely higher offer cannot be
good and valid ground to cancel confirmed sale.
(l) In the decision in case between FCS Software Solutions Ltd. Vs. LA Medical
Devices Ltd (2008 (10) SCALE, Hon'ble Apex Court found that: "But it is also clear that
certain facts which were necessary to be brought to the
notice of intending purchasers were not set out in the proclamation of sale nor were
disclosed at the time of sale notice. They related to valuation of movable and immovable
properties, fixation of reserve price, noninventory of plant and machinery, etc. The
attention of the Company Judge was invited by other bidders
by filing Company Applications. The Company Judge considered the objections and having
prima facie satisfied, ordered fresh auction. We find no illegality in the said approach."
It was in the backdrop of the said fact that order passed by learned Company Judge
for fresh auction in the said decision was found to be justified. In present case the facts are
materially different. Hence the said decision does not help the applicant.
(m) Learned Counsel for the applicant has relied on the decision in case of Shraddha
Aromatics Pvt. Ltd. vs. Official Liquidator for Global Arya Industries Ltd (2011 [6]
SCC 207). In the said decision the Court has observed, inter alia, that: "15. We have
considered the respective submissions and carefully perused the
record. Ordinarily, the Court is loathe to accept the offer made by any bidder or a
third party after acceptance of the highest bid / offer given pursuant to an
advertisement issued or an auction held by a public authority. However, in the peculiar
facts of this case, we are inclined to make a departure from this rule."
Thus, in the said decision it is clarified that Hon'ble Apex Court made departure from
normal rule (i.e. that the Court would be loathe to accept the offer made by any bidder
after acceptance of highest offer given in response to the advertisement or at the
auction.) In view of the peculiar facts of the case Hon'ble Apex Court
observed that in view of peculiar facts of the case departure from the ordinary rule is being
made. However, even as per the said decision the normal and ordinary rule is still the
same which is mentioned in paragraph No.15 of the decision and which is consistently
followed since Navalkha Brothers (supra). This decision also, thus,
does not help the applicant.
12. The principle which can be deduced from the above quoted observations by Hon'ble
Apex Court can be summarized thus:
(a) Court acts as a trustee and custodian of the property of the company. Therefore
it is duty of the Court to constructively apply mind to all facts and attending
circumstances and relevant aspects while ascertaining the market value of the
properties / assets and while settling the reserve price and to satisfy itself that the
reserved price so determined is reasonable and adequate.
(b) Once the reserved price is settled to the satisfaction of the Court, sale of the
properties / assets should be effected by public auction and after giving wide publicity in
sufficient number of daily newspapers having wide circulation in both scripts i.e.
vernacular (local language) and English language.
(c) It is also Court's duty to ensure that the sale auction is conducted in fair and transparent
manner and the Court should endeavour to ensure that best and highest price is fetched
for the properties / assets of the company.
(d) Once the sale is confirmed after following the procedure and upon being
satisfied about adequacy of the price, ordinarily the confirmed sale and concluded
contract should not be interfered with by cancelling sale confirmation order.
(e) Merely on the ground that after confirmation of sale, someone comes forward
and offers higher price, the confirmed sale and concluded contract, without anything
more, should not be cancelled because mere offer for higher price is not a good and valid
ground to interfere with and to cancel confirmed sale and concluded contract.
(f) If any fraud is perpetrated or if any other similar illegality is committed or any
serious irregularity which would vitiate the sale process has occurred, then the Court
would be, in given case, justified in interfering with and cancelling confirmed sale
and concluded contract.
(g) The other reason or circumstance in which the Court may interfere with and may
cancel the confirmed sale and concluded contract is that the Court, upon
consideration of relevant facts, finds unto its satisfaction, that the price offered
and received / accepted in the sale process is grossly inadequate.
(h) If Court were to interfere with the confirmed sale upon subsequently receiving
higher offer, then a moderate or slight variation or increase over accepted price, without
anything more, cannot lead the Court to the conclusion that accepted price
is grossly inadequate.
12.1 It is pertinent that the sale (of assets and properties of company in
liquidation) by the Court is a measure of safeguard against the assets of the company
being sold at inadequate price or at price less than the realizable market value.
Therefore, the Court has to maintain strict vigil, from the very inception, over the
sale process. So as to ensure that complete fairness and transparency in sale process is
maintained, all measures and steps which can be reasonably perceived and
contemplated to eliminate formation of cartel or syndicates and / or
undervaluation of the assets (in given case even by valuer) should be taken so as to ensure
that best and highest price for company's properties can be fetched. If a
valuer is engaged to suggest valuation of the property then instead of mechanically
relying on such report and before accepting and acting upon such report, the Court
should examine as to whether relevant factors such as the age and physical
condition of the property in question, working performance, market demand of the
property and its utility, the brand / make of the property in question (in case of plant
and machinery fixtures etc.), location of the plot and its surrounding,
existing and prospective development of the area and its surrounding, infrastructure
facilities, nature of ownership, encumbrances (if any), sale instances for last 23
years, valuation declared by government etc. (in case of land of the company), or
the quality of construction, future life of the construction,
requirements (if any) for repairs, salvage value, cost of construction, dimension and
physical condition of the assets (in case of constructed property) are duly taken into
consideration by the valuer or not. While settling the reserved price and / or
while accepting highest offer the Court is not expected to be a prophet but the Court should
make realistic assessment of all factors and circumstances. Unless the Court
is satisfied about adequacy of price at the auction, the order of confirmation of sale
should not be made inasmuch as such order would not be proper exercise of judicial
discretion. Failure to apply mind to relevant factors having bearing on
reasonableness of price would amount to material irregularity.
12.2 Mere offer for higher price should not be the yardstick and guiding factor for the Court to
cancel confirmed sale and concluded contract inasmuch as in many cases even
business rivalry and strange commercial considerations may tempt someone
to come forward and offer some higher price as against the amount of sale consideration
and in cases where after sale confirmation, offer for higher price is made, then the
Court should consider as to whether the reserved priced and / or price offered
received at the sale process can be said to be grossly inadequate. The extent of the
gap between the higher offer and accepted price (i.e. price accepted at auction) in itself should
be the convincing factor evidence to satisfy the Court that the
accepted price is grossly inadequate. Once the Court is satisfied about adequacy of
the price then mere higher offer will not be good and valid ground to cancel
confirmed sale / concluded contract.
12.3 Court has to keep in focus that despite inherent presence of competition in
process of auction it often does not yield best price and therefore Court has to allow
some leeway a margin to take care of and hedge against this possibility eventuality.
Confirmation of sale should not be interfered with easily or quickly
and at a fall of hat or frequently and it should not be disturbed / deconfirmed without
good reason and strong justification otherwise it may prove self defeating as the
bidder / prospective bidder will tend to lose faith in sale /
auction by Court, for its uncertainty.
12.4 While the Court should endeavour to ensure that the price fetched is the
highest and best price, in temptation to receive and secure still higher and better
price confirmed sale and concluded contract should, ordinarily, not be quickly
interfered with and cancelled and it should be kept in focus that while it is Court's
duty to best serve the interest of company, creditors and workers by securing best price,
it is also Court's obligation to maintain the sanctity of concluded contract because if
concluded contract is lightly and / or repeatedly interfered with, and that too
merely because someone subsequently comes with higher offer, then such interference by
the Court and cancellation of concluded contract would
result into erosion of faith in the system and sanctity of the contract. Whilst in the event of
demonstrable mischief or fraud during the sale process Court may readily
cancel the sale because fraud would vitiate everything, the higher price factor may be
entertained only if the quantum of the amount offered as higher price is so high and the
extent of the gap between the received price and subsequently offered
price is so large that it in itself (i.e. the gap itself) would ex facie establish and make it
apparent that the received price is grossly inadequate and that the
process of settling reserved price was done mechanically or that valuer's report was
mechanically relied on.
12.5 Ordinarily, only Court's satisfaction about grossly inadequate price or perpetration
of fraud or occurrence of irregularity (which is serious enough to vitiate the sale)
can be good and valid ground for cancelling the confirmed sale.
However, in a given case offer for higher price even in cases where there is no
allegation about fraud or irregularity may provide a good and justiciable ground to
cancel the confirmed sale, however that would be only in exceptional and rare case
where the subsequently offered higher price is significantly higher than the received price
whereas moderate increase or slight variation cannot and should not be allowed to be a
substitute of the paramount requirement viz. grossly in adequate price.
13. The case on hand and the applicant's request have to be examined in light of the
above quoted observations, and the principles which emerge from the said
observations, by Hon'ble Apex Court. From the observations by Hon'ble Apex Court it
comes out that so as to decide whether a confirmed sale should be cancelled or not the
Court will have to first find out whether the sale is vitiated by
irregularity or fraud or illegality and / or whether the price offered and received
(at auction) is grossly inadequate
14. From the facts of the case a very pertinent aspect has emerged viz. that this
case and the applicant's request rests on only one premise viz. an intending or
prospective purchaser (belatedly) offers higher price and it has come forward with
modest increase of Rs.9.90 Lacs.
14.1 Another relevant aspect is that in present case there is no allegation or
suggestion, from any sideincluding the applicant about any irregularity and / or fraud and
/ or illegality in auction process.
14.2 The above quoted observations and the principles unanimously say that mere higher
offer, without any thing more, is not good and valid ground to deconfirm and cancel the
confirmed sale. That something more means irregularity or fraud in sale process
or grossly inadequate price.
14.3 As mentioned earlier in present case there is no allegation about fraud or
irregularity in sale process, which leaves behind the criterion of grossly inadequate price.
Actually there is no material on record of the application which would
demonstrate that the sale confirmation is hit by the said vice (i.e. by grossly
inadequate price).
18. Under the circumstances, the primary and fundamental requirement which, in light of
the observation by the Apex Court, in all decisions, consistently appear to be
sine qua non is absent in present case.
Differently put the paramount requirement viz. the price offered and received at the
auction is, grossly inadequate is found to be absent, and is not available, in present case.
18.1 The applicant has failed to establish the said aspect. Actually, the applicant
has not even expressly pleaded such case. Without such clear and specific assertion the
applicant has merely offered higher price.
18.2 In view of this Court, higher offer made after confirmation of sale will not
necessarily and automatically mean that reserved price determined on the basis of
valuer's report is grossly inadequate and / or that the price received at the auction
is grossly inadequate.
18.3 Once the Court reaches the conclusion that the two most relevant and important
factors viz. (a) illegality or irregularity or fraud in sale process; and (b) grossly inadequate
price, are absent then the request such as the applicant's request will have to be
examined in light of the principle enunciated by the Apex Court
which is consistently followed in all cases viz. mere higher offer, without anything
more cannot be a good and valid ground to deconfirm and cancel the confirmed sale.
19. Relying on the observation .....it is abundantly clear that the Court is the
custodian of the interests of the Company and its creditors. Hence, it is the duty of
the Court to see that the price fetched at the auction is an adequate price even though
there is no suggestion of irregularity or fraud.... in the decisions Divya Manufacturing
(supra) and the observations in the decision in case of FCS Software Solutions Ltd and
Shraddha Aromatics (supra) Mr. Desai, learned
Counsel for the applicant would submit that it is not always necessary that the applicant
should demonstrate fraud or irregularity or illegality in the sale process.
19.1 It is true that in the decision in case of Divya Manufacturing (supra) Hon'ble
Apex Court observed that it is the duty of the court to see that price fetched at
auction is adequate price even though there is no suggestion or irregularity or
fraud...., however, the observations which Mr. Desai, learned Counsel for the applicant
emphasized have to be read in conjunction with and in light of the
observations in the same decision i.e. the observation that ....when correct market
value of the assets was not properly known to the Court and the sale was confirmed at grossly
inadequate price, it was open to the Court to set it at naught in the interest of
the company, its secured and unsecured creditors and the employees.....
19.2 When the decision is read as a whole, it emerges that the decision explains that
even in cases where there is no suggestion or allegation about irregularity or fraud
the Court may cancel the confirmed sale but such course of action can be adopted only when it
is conclusively demonstrated that the sale was made and confirmed at grossly
inadequate price since correct market value of the assets was not properly known to the
Court and that therefore it would be in the interest of the company, secured and
unsecured creditors and the employees that the confirmed sale may be quashed so that
correct and adequate price can be received. Thus, what emerges is the clear principle that in
the cases where there is no allegation about fraud and where the sale
is not infected by fraud, it would not be just and proper for the Court to cancel the confirmed
sale unless and until it is satisfactorily established that the sale was effected at
grossly inadequate price. The said criterion is a consistent and
continuous thread which is passing thorough as a common factor in all decisions which
are referred to hereinabove.
19.3 In this context, it would be appropriate to recall the observation by
the Calcutta High Court wherein, the Court observed that:
"... merely because on second thoughts on the next day, the appellant came forward
with an offer to pay more, there would be no justification, without more, to
deconfirm the sale already made..."
In the said decision the Court also observed that:
".....However, the investment of such power does not mean that the Court should review and
set aside an order confirming a sale which has already taken place merely
because at a later stage on second thoughts someone, more particularly, an offeror who
was outbidden, says that he is willing to pay more. Once the Court has come to the
conclusion that the price offered is adequate and has confirmed the sale, the
subsequent higher offer made under such circumstances, without anything more,
cannot constitute a valid ground for interfering with the rights arising out of
sale which has already been confirmed...."
19.4 Therefore, the paramount criterion for considering such request is as to whether the sale
was confirmed at grossly inadequate price.
19.5 In all cases, except the cases where sale is demonstrably hit by fraud or similar
illegality or irregularity, the Court has to pause, while considering the
tempting offer for more amount and ask the question, whether the price offered and
received at the auction / during sale process was grossly adequate. If the answer
is negative then there would be hardly any room for interfering with confirmed sale.
19.6 At this stage, the Court would hasten to add that there could be an exception to the
aforesaid position. In a given case fresh offer may be very high (i.e. the gap
between the price accepted while confirming sale and the amount of fresh offer, may be
so large) which would in itself demonstrate that the sale was confirmed at grossly
inadequate price, then in such circumstance the Court, as custodian of the interest of
the company, the creditors and the workmen and having regard to the duty to protect
the interest of secured and unsecured creditors and workers, may, in appropriate case,
interfere with confirmed sale and cancel the sale confirmation order. In such
cases, the very quantum of the fresh offer itself would constitute satisfactory material to
demonstrate that the price offered and received at the sale process was grossly
inadequate and / or that the relevant aspects were not taken into
account or that there was failure to apply mind to relevant facts and sale confirmation
order was made and signed routinely. Such flaw, as observed in the decision in
case of Kay Jay Industries, amounts to material irregularity and that
would also establish that there is presence of both elements, irregularity and injury."
A similar view is taken by the Division Bench of this Court in the case of Nileshbhai
Ramanbhai Patel and Official Liquidator rendered in O.J. Civil Application No.299 of 2013
in Official Liquidator Report No.34 of 2013 vide judgment and order dated 25.7.2013,
wherein also the Division Bench has relied upon the judgment of the Apex Court in the
case of Valji Khimji (supra) and Shraddha Aromatics Pvt. Ltd. (supra).
43. The Company Court has to see that the best
price of the property is fetched, the price is not to be determined in relation to the dues
of the stakeholders, but maximum market price has to be fetched and considering
the wide gap between the price fetched and offered by the applicant in this
application, this Court has to exercise its inherent
powers under Rule 9 of the Companies (Court) Rules,
1959 and as rightly contended by the applicant, if
not considered, the same would amount to travesty of justice. It is true that even in the
case of Shraddha Aromatics Pvt. Ltd. (supra), the Apex Court
has observed that the order of acceptance of bid and
confirmation of sale cannot be interfered lightly,
but at the same time, it can be interfered because
of gap of price and the Court has reason to believe
that the price fetched in the auction is inadequate
which would constitute irregularity and injury and
under such circumstances, the order can be recalled even in absence of any fraud. Only
because the applicant was one of the bidder and in fact the second highest bidder
in the auction proceedings which were held would not justify that the price
which is fetched in the auction was adequate.
44. In every case of an auction by the Company Court, the Company Court, while
determining the upset price, relies upon the report given by the approved valuer.
The facts of this case clearly reveal that at the first instance, the upset price
was fixed at Rs.55 crores and then to Rs.45 crores,
in comparison to same, the price now offered by the
applicant at Rs.214 crores would mean that there is difference of Rs.169 crores and as
observed hereinabove, the gap of price of the highest bidder and the price now offered is
Rs.66 crores which establishes the fact that the bid of opponent No.9
was accepted at a grossly inadequate price and this
Court as custodian of the interest of the Company,
creditors and the workmen, should interfere and de confirm the acceptance of the highest
bid of opponent No.9 as held by this Court in the case of
Chaudhary Brothers (supra). The very quantum of the
fresh offer itself constitutes satisfactory material that the price received at the sale
process was grossly inadequate and the factor like FSI which has direct impact and effect
on the potential development could not be considered by this Court.
45. It is an admitted position that the workmen are
waiting for their dues since the date of the winding up of the Company and an amount
of approximately Rs.14 crores is due and payable. As stated by the
Textile Labour Association, 600 workmen have expired by now and their heirs as the
case may be are waiting for their legitimate dues since 24 years. The said
contention is also reiterated by the learned counsel appearing for the Official
Liquidator. In light of the fact that as per the order dated 9.5.2014, a further
amount of Rs.14 crores is deposited to take care of the dues of the
workmen, appropriate direction needs to be given in this order itself with regard to the same.
46. Consequently, therefore, the order dated 17.12.2013 is recalled with the
following directions: [A] The Official Liquidator shall give a fresh advertisement for
auction in newspapers as provided by this Court in the order dated
26.3.2014 passed in Company Application No.475
of 2011 in the same newspapers in English and Gujarati as provided in the earlier orders
inviting for offer of the purchase of the land in question admeasuring 13895 sq. mtrs. on the
same terms and conditions by fixing the upset price at Rs.214 crores and EMD at
Rs.21.4 crores being 10% of the upset price as fixed. The Official Liquidator shall give
such advertisements within a period of two weeks from the date of receipt of this
order. The Official Liquidator shall set out the time schedule for different stages
of public auction. The amount of Rs.214 crores deposited by the applicant herein shall
be invested by the Official Liquidator in a Fixed Deposit till fresh auction process is over.
[B] The Official Liquidator shall return back the amount of Rs.148 crores to
opponent No.9 forthwith. The applicant is directed to pay
Rs.25 lacs to opponent No.9, as provided by the Apex Court in the case of FCS
Software Solutions Ltd. (supra) within a period of two
weeks from the date of receipt of this order.
[C] The applicant shall take back the possession of the lands in question from opponent
No.9 forthwith.
[D] The Official Liquidator shall verify the claims of the workers and shall file an
appropriate report for disbursement of the dues of the
workers out of Rs.14 crores which is deposited by the applicant within 30 days from the date
of receipt of this order. In case if any claim is received from the secured creditors, the
Official Liquidator shall take appropriate steps to determine the same.
[E] The Official Liquidator shall also file an appropriate report for ratification of
the expenses which have been made by the Official
Liquidator as stated in its affidavit after the order dated 17.12.2013.
47. With these observations, clarifications and directions, this application is allowed
and the order dated 17.12.2013 passed in Official Liquidator's Report No.43 of
2013 is recalled. In facts of the case, parties to bear their own costs.
(R.M.CHHAYA, J.) After the judgment was pronounced, Mr. Saurabh
Soparkar, learned Senior Advocate for opponent No.9 requests for stay of the judgment.
As such as per the directions issued in this
judgment two weeks' time is provided for, however, except the directions issued in
Paragraph 46(D), rest of the judgment is stayed and the statusquo which prevails as
on today shall continue till 28.08.2014.
[R.M.CHHAYA, J.] mrp