TMI Blog1997 (9) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... official liquidator, this court vide order dated January 10, 1997, directed the movable and immovable assets of the company (in liquidation) to be sold jointly along with the State Bank of India, which was one of the secured creditors of the company, by inviting sealed tenders on the terms and conditions to be settled by the official liquidator, after giving due publicity in the following newspapers : 1. Economic Times published from New Delhi; 2. Times of India published from New Delhi; 3. Dainih Jagran published in Hindi from Gorakhpur; 4. Nav Bharat Times published in Hindi from New Delhi; 5. Auction Journal published from New Delhi. The notices were duly published in the aforesaid newspapers and the journal. In pursuance thereof, inspection of the assets were made by 15 prospective buyers on March 14 and 15, 1997. However, only three tenders were received of which the offer of Chauri Chaura Steels Ltd. of Rs. 94 lakhs for the entire lots Nos. 1 to 10 was the highest. As in the said offer the party had also indicated that they were prepared to negotiate and increase their offer, when asked to do so and they increased their offer to Rs. 1 crore 5 lakhs. The court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept the offer of Rs. 94 lakhs as adequate specially when the area of the land has now been shown as at least three acres more. Learned counsel has, therefore, contended that taking into consideration the facts and the circumstances, the offer made by the proposed purchaser is not liable to be confirmed as otherwise it would go against the interest of the company and the creditors. I have carefully considered the submissions made by learned counsel for the applicant. Rule 273 of the Companies (Court) Rules, 1959, relates to the procedure of sale. It lays down that all sales shall be made by public auction or by inviting sealed tenders or in such manner as the judge may direct, subject to such terms and conditions, if any, as may be approved by the court. On a report made by the official liquidator, the movable and the immovable assets of the company (in liquidation) were ordered to be sold by calling for tenders after giving wide publicity in the four newspapers and the auction journal as already indicated above. On the first occasion when the advertisements were published, only four tenders were received out of which the tender of Jalan Iron and Steel Co. (applicant) for Rs. 91 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l monthly instalments. The court also accepted the cheque for Rs. 9,41,000 which was submitted along with the tender as earnest money. It would be evident, therefore, that there was no re-auction or fresh negotiations of the assets as submitted by the objector-applicant but as the said party had given an indication of increasing its offer, the court even though the offer of the said party was the highest indicated that it could increase its offer in the light of the valuer's report and it did so by increasing it to Rs. 1 crore 5 lakhs. There was no question of any prejudice being caused to the applicant who had offered only Rs. 64,91,000 for lots Nos. 2 to 10. That apart, it is noteworthy that the offer made by the proposed purchaser is for the entire unit and it had been stated on their behalf in application No. A-33 that they proposed to run the said factory again after carrying out the necessary renovations therein. This would also give employment to about 500 workmen apart from contributing towards the Government revenue when the factory started functioning. On the other hand, the fact that the applicant-objector had offered only to purchase lots Nos. 2 to 10, the machineries, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... official liquidator that the said instalment was paid on May 1, 1997, instead of April 21, 1997, but the purchaser has deposited Rs. 5 lakhs more than what was required to be deposited in the first instalment. In my view, this little delay in deposit of the first instalment will not prejudice the company in any manner if the said party is required to pay interest at 15 per cent. for the delay in depositing the said amount. Consequently, I am of the view that for these minor defaults committed by the purchaser it would not be in the interest of the company, its creditors and contributories to cancel the sale. I, therefore, do not find any substance in the second submission made by learned counsel either. So far as the third submission is concerned, learned counsel has strongly contended that the price offered by Chauri Chaura Steels Ltd. is not adequate and the applicant is prepared to pay Rs. 5 lakhs more than what has been offered by the said party. He has also contended that as the sale has not yet been confirmed, this court can always accept the higher bid in the interest of the company and its creditors and the applicant could have given its offer on the date when the tenders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of S. Soundararajan v. Khakha Mohd. Ismail Saheb, AIR 1940 Mad 42, it has been held that the sale is subject to confirmation of the court. It is not meant that the court shall accept the higher bid because at a later stage someone else is willing to pay more. The condition is only a safeguard against the irregularity or fraud in connection with the sale and against the property being sold at an inadequate price. In case the bid made by the auction purchaser is adequate and there being no irregularity or fraud, the sale should be confirmed even though at a later stage some other person is willing to pay more. The decision of our court in the case of Brindaban Agarwala v. Official Liquidator of Saraswati Soap and Oil Mills Ltd. [1952] 22 Comp Cas 75 ; AIR 1952 All 113, has been followed by the Andhra Pradesh High Court in the case of Taj Clay Works Ltd. v. Official Liquidator, AIR 1960 AP 429 and a Division Bench of the Mysore High Court in the case of Premier Insurance Company Ltd. v. Bharat Commerce and Industries Ltd., AIR 1962 Mys 185. A Division Bench of our court in the case of Saudhayan Singh v. State of U. P. [1983] ALJ 931, where an auction s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake 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 business men before the auctioneer are quite on the cards. More so when the subject-matter 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...Businessmen make uncanny calculations before striking a bargain and that circumstance must enter the judicial verdict before deciding whether a better price could be had by a postponement of the sale." Learned counsel has also invited the court's attention to the following observations made by the Calcutta High Court in Elvoc (P.) Ltd., In re [1982] 52 Comp Cas 308 (headnote): "In deciding a question of considerable public importance relating to the principle and procedure for the sale of the assets of a company in liquidation as to whether the only object of such sale is to fetch a maximum price or whether the court, in its discretion, having regard to the prevailing socio-economic questions, which are involved in a welfare State should ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been confirmed. A fresh sale cannot be ordered by-setting at naught the sale already confirmed by the court after taking into consideration all the facts and circumstances merely because an offerer who was outbidden changes his mind and offers a higher price subsequently. Unless it is shown that the discretion of the court in the matter has been exercised unreasonably, capriciously or by adoption of an unjudicial approach or on wrong principles, there would be no ground to interfere." On the other hand, Shri M.K. Gupta, learned counsel for the applicant, has placed strong reliance upon two decisions of the Supreme Court in the case of Lica (P.) Ltd. (No. 1) v. Official Liquidator [1996] 85 Comp Cas 788 and the subsequent decision in this very case Lica (P.) Ltd. (No. 2) v. Official Liquidator [1996] 85 Comp Cas 792 . It was held in the first case while allowing the appeal that the purpose of open auction is to get the most remunerative price. It is the duty of the court to keep the auction open so that intending bidders would be free to participate and offer higher prices. If that part were closed, the possibility of fraud or hand-bidding would loom large. The court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he presence of learned counsel for the petitioning creditor and the other parties who had given the offers. The factory of the company (in liquidation) is lying closed since the year 1991. It is situated in a remote area and not in the town of Gorakhpur. There is no suggestion of any irregularity or fraud in inviting offers. Except the valuer's report there is no independent evidence that the price is inadequate. The applicant himself offered Rs. 64 lakhs which was Rs. 60 lakhs less than what was offered by the proposed purchaser. Taking into consideration the facts and the circumstances of the case, the court was satisfied while accepting the highest offer of Rs. 1.05 crores that the same was adequate, and taking into consideration the tests laid down in the cases noted above, this court is of the view that the subsequent offer of Rs. 1.10 crores given by the applicant at this stage cannot be taken into consideration or the highest offer of the proposed purchaser be set aside. For the foregoing reasons, Application No. A-31 filed by Jalan Iron and Steel Company is hereby rejected. The proposed purchaser, Chauri Chaura Steels Ltd., have in their Application No. A-33 prayed that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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