2010 (1) TMI 581 - HC - Companies Law

Auction sale - Held that - The submission of learned counsel for Symbiosis Electronics (P.) Ltd. that the action of the BIADA amounts to waiver of its right and it is not open to it to re-agitate the question by getting the previous sale reopened and the earlier tender cancelled since the BIADA had full knowledge of the present auction cannot be accepted as in similar circumstances Divya Manufacturing Co. (P.) Ltd. which had withdrawn the earlier offer was permitted to take part in further bidding to make higher offer. Thus in the light of the aforesaid discussions the previous acceptance of offer of Rs. 50 lakhs on behalf of Symbiosis Electronics (P.) Ltd. made on October 21 2009 is withdrawn. Accept the suggestion made by the official liquidator that in case the earlier offer is withdrawn then the matter should be re-advertised for sale. The same would be necessary to ensure the widest possible participation in the tender process for the realisation of the best price.

Issues Involved:
1. Request for re-tender of the property.
2. Adequacy of the price fetched at the auction.
3. Confirmation and potential withdrawal of the sale.
4. Allegations of fraud or irregularity in the auction process.
5. Rights and interests of the company and its creditors.
6. Legal precedents and principles guiding the court's decision.

Issue-wise Detailed Analysis:

1. Request for re-tender of the property:
The interlocutory application filed by the Bihar Industrial Area Development Authority (BIADA) sought the re-tender of the schedule I property of Bahubali Cements Ltd., which was in liquidation. BIADA offered to purchase the property for Rs. 55 lakhs, higher than the previously accepted highest bid of Rs. 50 lakhs by Symbiosis Electronics (P.) Ltd.

2. Adequacy of the price fetched at the auction:
The court considered whether the price fetched at the auction was adequate. The property was initially valued at Rs. 93,54,997 by the official valuer. Despite the acceptance of the Rs. 50 lakhs bid, BIADA's subsequent offer of Rs. 65 lakhs raised questions about the adequacy of the initial bid.

3. Confirmation and potential withdrawal of the sale:
Symbiosis Electronics (P.) Ltd. argued that once the sale was confirmed, it should not be set aside for a higher offer. However, the court noted that the sale confirmation was prima facie and could be withdrawn if a higher bid was in the company's and creditors' interests.

4. Allegations of fraud or irregularity in the auction process:
Symbiosis Electronics (P.) Ltd. contended that no fraud or misrepresentation was alleged in the auction process. The court acknowledged this but emphasized that the adequacy of the price was paramount, even in the absence of fraud or irregularity.

5. Rights and interests of the company and its creditors:
The court, as the custodian of the company's and creditors' interests, had a duty to ensure the property fetched an adequate price. BIADA's higher offer was considered in this context, and the court decided that the initial bid of Rs. 50 lakhs was inadequate.

6. Legal precedents and principles guiding the court's decision:
The court relied on several legal precedents, including Divya Manufacturing Co. (P.) Ltd. v. Union Bank of India and Valji Khimji and Co. v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. These cases highlighted the court's duty to ensure an adequate auction price and the conditions under which a confirmed sale could be set aside.

Conclusion:
The court concluded that the previous acceptance of the Rs. 50 lakhs offer by Symbiosis Electronics (P.) Ltd. was withdrawn. The property would be re-advertised for sale to ensure the widest possible participation and realization of the best price. The official liquidator was directed to produce a draft sale notification, and BIADA's offer would remain pending in the meantime. The application filed by BIADA was disposed of, and the matter was scheduled for further proceedings on February 4, 2010.

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