TMI Blog2000 (7) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... is directed to take appropriate steps at the earliest, by obtaining an order from the Court for sale of the property by calling sealed tenders or by auction in accordance with law after giving due publicity in the newspapers, particularly, the newspapers having circulation in Delhi and in the State of Haryana with a reserved price fixed at Rs. 2 crores (as offered). The parties are directed to bear their respective costs. - CIVIL APPEAL NOS. 4706 AND 4707 OF 1998 - - - Dated:- 11-7-2000 - M.B. SHAH AND R.P. SETHI, JJ. Harish N. Salve, Ms. Indra Jaising, P.S. Mishra, Rana Mukherjee, Ms. Sumita Mukherjee, Rajiv Talwar, D.P. Mukherjee, Ms. Nandini Mukherjee, Janendra Lal, Ms. Yasmin Tarapore, L. Nageshwara Rao, Sanjoy Kumar Ghosh, Avijit Bhattacherjee, S. Bhowmick, P. Ghosh, Ghansham Joshi and Aruneshwar Gupta for the Appearing Parties. JUDGMENT Shah, J. - These appeals are filed against the judgment and order dated 11-8-1998 passed by the Division Bench of the High Court of Calcutta in GA No. 344 of 1988 in Appeal (ACO) No. 16 of 1998 whereby the sale of the assets and properties of the Tirupati Woollen Mills Ltd. ( Tirupati Mills ) (under liquidation) confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also noticed that appellant- Divya was agreeable to purchase the factory of the company (in liquidation) as a going concern and to provide employment to the existing workers who were out of employment since the last 12 years. Being aggrieved by the order dated 24-12-1997, respondent No. 1 - bank filed an appeal, being CA No. 22 of 1998 before the Division Bench for setting aside that order. The same was dismissed on 12-1-1998 with liberty to the bank to agitate the same before the learned Single Judge at the time of hearing of the matter. 3. In the meantime, notice for sale was issued and the Official Liquidator published an advertisement inviting offers for the sale of the assets and properties of the company (in liquidation) in newspapers. On 31-12-1997. the Union Bank of India valued the immovable properties of Tirupati Mills at Rs. 1,21,00,000. Inspection of the assets of the company was allowed and 12 intending purchasers took inspection of its assets on 2-1-1998. On 16-1-1998, about 14 parties made their offers to purchase the company. Divya enhanced its offer to Rs. 85 lakhs from Rs. 37 lakhs and it was declared as the highest bidder. In addition to its offer of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount of Rs. 85 lakhs. On 26-6-1998, the Court directed the Official Liquidator to open sealed covers containing the offers by six bidders. On that day, the Court directed the matters to be placed for hearing on 2-7-1998 for finalisation of sale either in favour of Eastern Silk Industries Ltd. or Jay Prestressed Products Ltd. Again on 2-7-1998, additional offers of three bidders were received, i.e., Eastern Silk Industries Ltd. offered Rs. 1.01 crores, Jay Prestressed Products Ltd. offered Rs. 1.25 crores and Divya offered Rs. 1.30 crores. Hence, the offer of Divya was accepted and sale was confirmed in its favour on the conditions mentioned therein. On the same day, the court also disposed of the appeals and applications accordingly. 6. On 10-7-1998, Jay, respondent No. 8 filed an application before the Division Bench praying that order dated 2-7-1998 accepting and confirm- ing the sale in favour of Divya be recalled and set aside and it be given an opportunity to submit its offer of Rs. 1.40 crores for the assets of the company in liquidation. On 23-7-1998, respondent No. 7, Shrama served upon the appellant an application inter alia praying that order dated 2-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions 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 [1969] 3 SCC 537. Considering all the submissions made by the learned counsel for the parties, the sale confirmed in favour of the appellant for an amount of Rs. 1.30 crores was set aside with a direction that respondent Nos. 7 and 8 should compensate Divya by paying Rs. 70,000 each for the loss suffered by it and directed for re-sale of the assets of the company. That order is under challenge before this Court. At the time of hearing of these appeals, on behalf of respondent Nos. 7 and 8, it was retreated that they were still prepared to purchase the property in question at the price they had offered before the High Court of Calcutta and they were eager to purchase the same for a sum of Rs. 2 crores. On behalf of Divya , it was stated that it was not prepared to make any offer or statement at present. 7. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2-7-1998, 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. 70,000 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 property known to the Court and the sale was confirmed as 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. The app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Roshan Co. AIR 1940 Mad. 42. In A. Subbaraya Mudaliar v. K. Sundarajan 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case ( 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. . . . " (p. 794) 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 interests. In this view of the matter, it c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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