TMI Blog2000 (4) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... r the same.The Official Liquidator is directed to resell the property after obtaining fresh valuation report from other reliable expert and after giving a copy of the said valuation report to secured creditors - CIVIL APPEAL NO. 3109 OF 1998 - - - Dated:- 26-4-2000 - M.B. SHAH AND R.P. SETHI, JJ. JUDGMENT Shah. J. - This appeal is filed against the judgment and order dated 24-12-1996 passed by the Division Bench of the Calcutta High Court dismissing the Appeal No. GA 708 of 1996 arising out of Company Petition No. 316 of 1981 whereby the learned Single Judge had confirmed the auction sale of the property of Messrs. Kolay Biscuits Company (P.) Ltd. - Company under liquidation. 2. In the present case, it is admitted fact that on 9-7-1965 Messrs. Kolay Biscuits Company (P.) Ltd. created a mortgage of its land and building in favour of Union Bank of India for the loan granted in its favour. The factory of the company was closed down in 1980. On 20-3-1991 under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), the company was declared as sick unit by the Board for Industrial and Financial Reconstruction Regulations, 1987 ("B.I.F. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor was directed to issue fresh advertisement in the same newspapers on 22-8-1996 fixing the date for auction sale on 13-8-1996 for the assets of the company as a going concern . 5. On 20-9-1996, the matter was placed before the Court and it was stated on behalf of the State Government Corpn. that it was not agreeable to purchase with the condition of re-employing workmen. Therefore, they withdraw their offer to purchase the company as a going concern. The Court also considered the Valuation Report which was placed before it wherein the assets of the company were valued at Rs. 66,90,032. On the basis of the said valuation Indrani Soft Drinks - respondent No. 1 whose offer was Rs. 40 lakhs raised the same to Rs. 67 lakhs and agreed that they would take the company as a going concern and all eligible employees would be re-employed. Hence, the Court accepted the said offer. The learned advocate appearing on behalf of the secured creditor - Union Bank of India prayed for stay of the operation of the order but the same was rejected on the ground that no useful purpose would be served if the stay of the operation of the order was granted. Thereafter, it appears that on behalf of Syn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng place in a Court of law ought to be given a final shape, as quickly as possible, so that rehabilitation of the employees can be effected without any loss of time because Court was informed that "more than 100 employees have already died". Against that order this appeal is filed. 8. Mr. G.L. Sanghi, the learned senior counsel for the appellant-Bank submitted that the order passed by the Company Judge which is confirmed by the Division Bench is, on the face of it, erroneous and is based on total non-application of mind. He submitted that in sale of company s property it is the duty of the Court to see that the properties are sold at a reasonable price and not at a throw away price. He pointed out that without there being anything on record merely relying upon the oral statement by some persons stating that he represents some workers the orders are passed by the Company Judge and confirmed in appeal by the Division Bench. It had been pointed out that company was closed since 1980 and, therefore, there was no question of 1200 employees working in the said company. He further pointed out that apart from the company being closed since years the BIFR AIFR, both statutory expert b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 11. From the facts narrated above, it is apparent that the attention of learned Company Judge was not focussed to the fact that since 1980 company was closed and that there was no question of selling the company s assets as a going concern. Not only that it was the duty of the Court to verify the statement made by some applicant that sale of the company on "as is where is basis" will affect 1200 workers and for that proper notice was required to be issued to the secured creditors for whose benefit the property was to be auctioned. To straightaway rely upon such statement was, to say the least, not judicious. The C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the custody of the Court for the benefit of the secured creditors and if anything remains, thereafter for other creditors and its shareholders. In the present case, without disclosing the valuation report to the creditors and without fixing its reserve price, the properties were auctioned and the sale was confirmed. This approach is unjustifiable by any judicial standard and is against the normal procedure for auctioning the immovable property of the company which is to be wound up. 14. Further, it appears that learned Judge has not applied his mind to the valuation report itself. He has only considered the last figures given in the valuation report which says that total valuation of the property was Rs. 66,19,032. Had the Court considered the report, it would have immediately noticed that valuation report was not at all reliable. This would be clear from the following facts narrated in the valuation report : " Valuation : On enquiry from the local people, it is understood the land price in this particular varies between Rs. 2 lakhs to 2.5 lakhs per katta depending on size, position, Road Frontage, low and or high land etc. However, after considering all aspects, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served thus : "The principles which should govern confirmation of sales are well established. Where the acceptance of the offer by the Commissioner 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 interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonableness of the price offered may amount to material irregularity in conduct of sale. Thereafter the Court pertinently observed : "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." It is further observed "what is expected of the Judge is not to be 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." As discussed above, in the present case, there is total non-application of mind to the material which is required to be considered for auction sale of the assets of the company. 18. The learned counsel for respondent No. 2 referred to the decision of this Court in Ram Maurya v. Kailash Nath 1999 (9) SCC 276 and submitted that as secured creditors have not brought appropriate pleading before the learned Company Judge, this Court should not interfere in such sale. In our view, the said decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en filed within the period of limitation. Expenditure incurred during this period could not render the appeals, in effect, infructuous. The same would apply to expenditure incurred subsequent to the filing of the appeals and until the time that they were heard. The second respondent knew that the appeals were pending and that they could end in the order of the sale being set aside. Such expenditure as it incurred with this knowledge was at its risk. In the third place, and most important, the interests of the creditors of the company, particularly the unsecured creditors, overweighted such equities, if any, as might have been considered to be in favour of the second respondent. It was, in our view, the obligation of the Division Bench to have struck down the order of sale, having regard to what it found wrong with it." (p. 394) 22. Thereafter the Court has directed refund of the amount without any interest and has permitted the auction purchaser to apply to the High Court and specify it firstly that expenditure was incurred and secondly that in law it was entitled to recover it. 23. For the reasons stated, same would be the position in the present case. Further, in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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