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TMI Blog2005 (7) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... uch further terms and conditions as this Court may deem just and proper or otherwise. 2. The Official Liquidator has also prayed for other directions with regard to ratification of action taken by the Sale Committee in not holding auction for residential plot situated at Diamond Garden, Chembur, Mumbai and ratification of the action taken by the Sale Committee in making ad hoc payment of Rs. 4,68,778 to M/s. MITCON Consultancy Services Ltd., against its bill for Rs. 10,33,187 for Valuation and title investigation report produced at Annexure G to the report and also with regard to seeking permission to make the payment of balance amount of Rs. 5,64,409 to the said party, also with regard to the payment of Rs. 73,504 to M/s. Navnitlal & Co., being charges for advertisement expenses as well as ratification of action taken by the Official Liquidator in making the payment of Rs. 39,000 to "Green House Restaurant & Bar, Ville Parle, Mumbai" for hiring venue for auction and other incidental expenses for conducting the auction at Mumbai on 9-4-2005 and also with regard to making payment of Rs. 7,000 to Mr. P.C. Kavina, advocate against his bill dated 8-4-2005 and also with regard to ratif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate in the inter se bidding before this Court. The Official Liquidator was further directed to inform the intending purchasers to deposit the EMD along with late entry charges @ 18 per cent p.a. and it was to be made clear that in any case, late entry charges would not be refunded. 5. Pursuant to the order passed by this Court on 13-5-2005, the Official Liquidator has issued letter on 3-6-2005 to 9 parties which are as under:- (i)Mr. Pravin Kheni, (ii)M/s. Videocon Atithi Shelters Pvt. Ltd., (iii)M/s. Hindustan Petroleum Corporation Limited., (iv)M/s. Runwal Group, (v)M/s. Regency Construction Co., (vi)M/s. Om Adhirath Properties Pvt. Ltd., (vii)M/s. Gaurang Developers, (viii)M/s. Rahab Enterprises, (ix)M/s. Rockline Construction Co. 6. Out of the above 9 parties, nobody was present on behalf of parties mentioned at Serial Nos. 1, 2, 5 and 8. The Official Liquidator has pointed out that over and above these 9 parties, he has received letter from Lok Prakashan Ltd., expressing its desire to participate in the bid and demand draft of Rs. 5 crores has been given. However late entry charges have not been paid. Mr. Shaktisinh Gohil, learned advocate appearing for the said par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bidder on that very day and hence, they have requested to grant some time to file reply to the said affidavit of HPCL. The Court has also heard the parties on the issue regarding late entry charges. The matter was thereafter adjourned to 13-7-2005 for considering the issues and contentions raised by HPCL in its affidavit dated 28-6-2005 as well as the objections raised by the highest bidder against further bidding before the Court. 10. On 13-7-2005, an affidavit is filed on behalf of the highest bidder, namely, M/s. Rockline Construction Company. The Court has taken the decision that amount of late entry charges will not be refunded to the parties and the Court has also overruled the objections raised by the highest bidder, namely, M/s. Rockline Construction Company against the inter se bidding before the Court. The Court has also overruled the objections raised by HPCL for giving them preferential treatment being the Government Company and the property in question being required by them for expansion and development of their Refinery project which is by and large in public interest. On 13-7-2005, the inter se bidding between the parties has started from 2.15 p.m. and it has last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the matter, out of the five parties who have participated on 13-7-2005, only two bidders now remain and they are M/s. Gaurang Developers who stood highest on 13-7-2005 making offer of Rs. 212 crores and HPCL who stood second making offer of Rs. 211.50 crores. The inter se bidding, therefore, started from Rs. 212 crores onwards at the next jump of Rs. 1 crore. Both the parties have slowly and gradually raised their offers and ultimately, HPCL has raised its offer to Rs. 239 crores. Mr. Pavan Godiawala has thereafter stopped raising further offer and wished Good luck to HPCL. Since there was no higher offer than Rs. 239 crores, the sale is decided to be confirmed in favour of HPCL. 15. Before recording the terms and conditions on which the sale is confirmed, it is necessary to deal with several issues raised by the parties during this proceeding. These issues are as under:- I.Once the sale is approved by the Sale Committee after undergoing the inter se bidding between the bidders, whether it is permissible to again hold inter se bidding amongst the bidders before the Court at the time when report for confirmation of sale is filed by the Official Liquidator ? II.Whether HPCL be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected. 18. So far as the second issue raised by HPCL is concerned, looking to the present case, it becomes academic as the HPCL stands as the highest bidder in the inter se bidding before this Court and their highest offer of Rs. 239 crores has been accepted by the Court and sale is confirmed in their favour. However, the issue raised by them requires special attention. Mr. B.J. Shelat, learned advocate appearing for HPCL has submitted before the Court that HPCL is the only bona fide bidder genuinely interested in acquiring the subject land in Lot No. I for their own use, as the subject land is within Industrial Zone and adjacent to an existing Refinery at present. All other bidders were property developers, whose intention was only to make profits out of the transaction by way of obtaining proportionate Transfer of Development Rights (TDR). He has further submitted that for this purpose and in order to outbid HPCL, the Developers had formed a cartel. The land in question falls in Special Industrial I-3 Zone. The very inclusion of the subject land in I-3 Zone shows the intention of the Government that only industries can be developed in this plot of land. The present highest bidd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the buildings proposed to be constructed on the lands of Calico and it will be against the public purpose. He has further submitted that the Environmental Regulations do not permit residential and housing colonies to be constructed within the vicinity of hazardous industries like petroleum refineries. It would be dangerous for the public and particularly those of the weaker section to be housed within the vicinity of various refineries and other industries adjacent to the subject land. He has further submitted that not only HPCL, but even BPCL and Tatas have their Major Refinery and Power Plant (Industries) situated within the vicinity of the subject land. 21. Mr. Shelat has further submitted that the Developers and Builders are not interested in the safety of the public at large, but are only interested in their personal profits. The Builders/Developers are only interested in the Transfer Development Rights from the subject land and only intended to profiteer. He has further submitted that the road leading to the Refineries of HPCL and BPCL as well as the Tata Power Plant are already heavily congested. If the land is permitted to be, used to set up some more residential buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is is against public interest and adversely affects entire auction process to be carried out through the Sale Committee. 24. Mr. Nanavati has further submitted that the auction was for all the parties and that there was no restriction on any one to participate in the said auction who fulfilled the terms and conditions of the said auction and, therefore, now it is not open on the part of HPCL to make an allegation of any cartel being formed merely because it could not succeed in the auction. All the bidders had liberty to bid amongst themselves and therefore it is not relevant who bid first and who bid subsequently. The material facts remain that HPCL was amongst bidders. It is also relevant to note that all the bidders are per se legal entities and have no connection whatsoever nature and just because the HPCL lost in the said auction it has now come out with the false allegation of a cartel, against all the bidders. 25. Mr. Nanavati has further submitted that HPCL want to expand their existing Refinery on the subject land with the sole purpose of making profit only despite the fact that HPCL is aware about the fact that area is a residential area and there are many housing compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be futile and if HPCL wants to acquire the said land, it being a Government Company, certainly has other remedies such as land acquisition. If HPCL is allowed to acquire the said plot in this manner, then the same will amount to back door entry by HPCL and at the cost of public interest. He has further submitted that the main object for which public auction is held is to recover maximum amount from the properties of the Company which has been wound up, so that its Creditors can be paid from such amount as are due. Thus, no property can be given to any one particular bidder who is not the highest bidder merely because it happens to be a Government Company. HPCL should not be permitted to acquire this land even by paying the maximum price as it would affect the safety and security of the residents of the said area. Mr. Nanavati has, therefore, submitted that since M/s. Rockline Construction Company stood highest before the Sale Committee, no rebid should be permitted and even if it is permitted by this Court, the said highest bidder should be given an opportunity to bid without prejudice to their rights and contentions. 27. Mr. A.C. Gandhi, learned advocate appearing for M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner having regard to the realities and interest of the public and settled law clearly lay down that the Court is to see that a reasonable price is obtained and the rule is not so rigid that in every case it must be sold by public auction and fetch the highest price. The industry, commerce, commercial morality and public interest should also be taken into account before making any order. In this regard, the latest judgment of the Hon'ble Supreme Court in the case of Global Energy Ltd. v. Adani Exports Ltd. 2005 AIR SCW 2875 throws some light. This decision is of course in the context of granting exemption from payment of earnest money deposit to the Government Companies. However, these observations are equally applicable to giving some priority or preferential treatment to such Government companies when there is some marginal difference between the two bidders. The Hon'ble Supreme Court has observed that a deposit of some amount of earnest money is a normal condition of tender. The object is that only such parties who are financially sound and are serious in getting the work or contract, should make a bid. Otherwise any number of persons who have no capacity, financial or otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sale was confirmed. This fact itself shows that the Court has considered the reasonable price which can be fetched for this property and the Court is satisfied that the offer made by HPCL is quite just and proper and the same is required to be accepted and accordingly, it is accepted. Even at this stage, an attempt was made, of course, subsequently after the Court has pronounced that sale is confirmed in favour of HPCL subject to certain variation in the terms of Tender. M/s. Gaurang Developers has submitted before the Court that with such varied terms, they are prepared to raise their offer. The Court thereafter impressed upon the learned Counsel Mr. Shelat for HPCL to stick to the original terms and for such a small marginal increase in the bid which may be indicated by M/s. Gaurang Developers, the Court has not thought it fit to rebid and the sale is confirmed in favour of HPCL. 30. So far as the third issue with regard to collection of late entry charges by the Official Liquidator is concerned, this Court has already taken the view earlier in the case of Official Liquidator of Patel Mills v. Dena Bank [O.LR. No. 66 of 2003 dated 24-11-2003], that henceforth the Court will co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of forming cartel amongst the bidders and as many persons as possible can come before the Court. There is no substance in the submission that the late entry charges is collected only with a view to compensate the highest bidder as the late entry charges are required to be paid by those persons who have not paid their EMD or received back the same after the auction is concluded by the Sale Committee in favour of the highest bidder, subject to further confirmation by the Court. If the parties are really interested and are genuine to purchase the property by auction before the Court they undertake this additional burden on their shoulder and make their all efforts to purchase the properties by taking part in the inter se bidding before the Court. When they approach late to the Court, they are taking risk that in case they fail to become the successful bidder, the late entry charges paid by them would not be refunded. Even otherwise, before the Sale Committee no sooner they turn out to be unsuccessful bidder, they claim back their EMD from the Official Liquidator. Some of the bidders do not participate before the Sale Committee knowing fully well that the matter will come before the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as is where is and whatever there is basis. (b)25 per cent of the purchase consideration within 1 month and the balance amount of purchase consideration within 3 months thereafter will have to be paid by the purchaser. (c)On payment of 25 per cent of sale consideration, HPCL is permitted to carry out the work for wire-fencing and/or Compound Wall at its own cost. (d)It is open for HPCL to deploy its own security on receipt of the letter from the Official Liquidator so as to safeguard the property purchased by them today in Court Auction. (e)Purchaser shall procure himself for transfer of land by a Deed of Conveyance from the Company through Official Liquidator and shall obtain necessary permission under the Land Laws from the competent authority, and shall obtain water, electricity, telephone connection and all other necessary amenities required by them at their cost, and shall obtain all other necessary permission/quotas, if any, as may be required, at their own cost and consequences. (f)The Stamp duty, registration charges, and all other incidental charges thereto shall be borne by the purchaser. (g)The property will be conveyed and assigned to the purchaser by the vendor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to pay and shall pay full amount of taxes of all kinds, whatsoever which will have to be paid in respect of the sale of the assets or any taxes to be paid in this connection. (o)From this date of confirmation of sale of the land in favour of the purchaser, the properties shall be at the sole risk, cost and account of the purchaser as regards the destruction or any damage by earthquake or any other natural calamities whatsoever. (p)HPCL is permitted to carry out joint measurement at its own cost. 34. The sale consideration as and when received by the Official Liquidator from HPCL will be invested with IDBI, IIBI, State Bank of India, Punjab National Bank, Bank of India, ICICI Bank, State Bank of Saurashtra in equal proportion. 35. The Official Liquidator is hereby directed to return the EMD to the unsuccessful bidders within three days from today. 36. For the reasons stated by the Official Liquidator in paras 7 & 8 of the report, the action taken by the Sale Committee in not holding auction for residential plot situated at Diamond Garden, Chembur, Mumbai is hereby ratified. 37. The action of the Sale Committee in making ad hoc payment of Rs. 4,68,778 to M/s. MITCON Consult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d machineries as well as building materials, which might possibly be not liked by the Official Liquidator or the Sale Committee. The Sale Committee is, therefore, directed to reconsider this issue of payment of Valuer's fees and take appropriate decision. 42. Before concluding this judgment, the Court considers its bounden duty to bring on surface the hidden and untold story of theft committed alarmingly on a large scale over the years and huge properties of the Company in liquidation, such as plants, machineries, office furnitures, fixtures, equipments, Tanks, Boilers, Pumps, Transformers, Electric Mo-tors etc. are stolen away despite the fact that the Official Liquidator is put in charge and possession of all these properties and security personnels were deployed immediately after winding up order is passed by this Court. The Official Liquidator has never sought confirmation of sale of any of these items. Even in the present report also, very conveniently, he has sought the confirmation of sale of 2,30,327 Sq. Mtrs. of free hold land or thereabout and all other assets of the Company situated at Anik Road, Chembur, Mumbai, without indicating any of these other assets. It is true ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition since they offered hardly any saleable material. The Staff Colony on the rear side over the hill bears a ghost look where all saleable articles and materials have been removed except multi-story R.C.C. Structures which have also been partly demolished. The entire area covered by the Unit now presents a flat landscape with debris all over the place waiting to be removed. In this view of the matter, the Valuer has observed that there is hardly any building left worth consideration and hence, he has estimated the fair market value of the buildings as Nil. 44. With regard to plant and machinery, Mr. Rastogi has observed in his report that over the years, the plant and machineries have been system-atically removed and stolen. Small equipments like pumps motors etc. which could easily be carried away have been removed by loosening nuts and bolts. The heavier equipments which could not be bodily lifted have been removed in parts from parent equipments like Steel Heat Exchangers, Reaction Vessels, Holding Tanks etc. with the help of Gas Cutting equipments. Similarly, Steam Boilers and its components which are mounted on steel structures and platforms have been totally removed inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ill-equipped reports - are some of the issues which require urgent attention of all concerned. The role of the office of the Official Liquidator in the State is required to be closely watched and scrutinized by the Central Government, Ministry of Law and Company Affairs and if necessary, this task should be assigned to the Investigating Agency like CBI and based on its finding, appropriate corrective remedial and punitive actions are required to be taken forthwith. The period which may be contemplated by such inquiry is of last about ten years during which pursuant to the winding up orders passed by the Court, the affairs of the Companies in liquidation are being looked after by the Official Liquidator, his assistants as well as subordinates. This exercise would certainly bring some positive result and there will be total transformation of the Official Liquidator's Office which looks like 'Butcher's House' at present will look like 'Pilgrimage Place' . The Registry is, therefore, directed to send writ of this order to the Central Government through Regional Director, Western Region, Mumbai for their perusal and for taking necessary steps. 47. With the aforesaid directions and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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