TMI Blog2006 (8) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... ficial Liquidator was restrained from taking any further action with regard to the sale, he may now proceed in completing all the requisite formalities in favour of the auction purchaser. A sum of Rs. 2 crores which was ordered to be deposited by respondent No. 10 with the Official Liquidator shall now be returned to it on an application to be moved in this regard. Any interest if accrued thereupon, shall also be paid to respondent No. 10 along with the aforesaid amount. - CIVIL APPEAL NOS. 3490 AND 3491 OF 2006 - - - Dated:- 8-8-2006 - H.K. SEMA AND R.V. RAVEENDRAN, JJ. A. Dushyant Dave, R.F. Nariman, Senthil Jagadeesan, Manu Nair, Mark D Souza and V. Bhandari for the Appellant. C.A. Sundaram, Dhruv Mehta, Harshvardhan Jha, Yashraj Singh Deora, Mannoj Mehta, Deepak Suri, Ravindra Kumar and Yash Pal Dhingra for the Respondent. Atul Sharma and Amit Swami for IDBI. Ms. Suruchii Aggarwal for PSB. ORDER Leave granted. These appeals arise from the order dated 6-10-2005 of the Punjab Haryana High Court in Company Appeal No. 11/2005. 2. Punjab Wireless Systems Employees Union (the appellant in the first batch and 11th respondent in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Item No. 17. Rs. 4.5 lakhs for Item No. 19 and Rs. 15.5 lakhs for Item No. 20. At its meeting held on 27-7-2004, the Sale Committee decided to retain the offer of WINSOME in regard to Item No. 17 until the machinery, furniture and fittings (Item Nos. 18, 19, 20) kept in the premises were disposed of. At its further meeting held on 28-7-2004, the Sale Committee resolved to invite WINSOME to buy Item Nos. 17, 18, 19 and 20, (that is, the three items for which it had made offers as also Item No. 18 (- machineries installed in Item No. 17) at a total price of Rs. 5 crores, the price being subject to negotiations, if WINSOME so desired. WINSOME did not agree. On 10-12-2004 there was an inter se bidding among WINSOME and two other tenderers, namely, M/s. Star Point Financial Services Ltd. and M/s. S.K. Khaitan Pvt. Ltd., WINSOME increased the offer in respect of Item No. 17 to Rs. 3.16 crores. There was no increase in its offer for ItemNos. 19 and 20. The learned Company Judge, by his order dated 10-12-2004, accepted the offer of WINSOME at Rs. 3.36 crores for Item Nos. 17, 19 and 20 and confirmed the sale of these items in favour of WINSOME. The order dated 10-12-2004 was clarified o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e refund of the sale price along with the interest paid by it to its bankers on the loans taken by it, on submission of a bill for interest based on actuals. The court directed that SUNGROUP should bear and pay the said interest as also the expenses relating to re-auction of Item Nos. 17, 19 and 20. 8. The said order was challenged by WINSOME, in Company Appeal No. 11/2005. A Division Bench of the Punjab Haryana High Court by order dated 6-10-2005 allowed the said appeal, set aside the order dated 30-3-2005 of the learned Company Judge and restored the order dated 10-12-2004 (as clarified on 13-1-2005) confirming the sale in favour of WINSOME. The Division Bench directed the Official Liquidator to complete all formalities in regard to the sale in favour of WINSOME and further directed the return of Rs. 2 crores to SUNGROUP. The order of the Division Bench is challenged by the Employees Union in the first batch of appeals and by SUNGROUP in the second batch of appeals. 9. SUNGROUP contends that the sale price at which Item Nos. 17, 19 and 20 were sold to WINSOME was very low. It relied on the minutes of the meeting dated 28-7-2004 of the Sale Committee to get a fair indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meeting of the Sale Committee on 28-7-2004, it was submitted that the Committee had merely suggested that WINSOME should be requested to purchase Item Nos. 17 to 20, which included the machinery for which it had not made any offer, for Rs. 5 crores making it clear that it was only an asking price, open to negotiations. It is contended that the sum of Rs. 5 crores referred to by the Sale Committee was not an indication of the market price of Item No. 17 as Rs. 4.5 crores but only an attempt by the creditor banks to maximize the sale price receivable for Item Nos. 18 to 20. Strong reliance was also placed on the fact that SUNGROUP itself had offered only Rs. 3.53 crores for Item No. 17 in February, 2005, when it sought the setting aside of the sale in favour of WINSOME which showed that the price was only around Rs. 3 crores when it made its offer in July, 2004. It is contended that as there were no irregularities in the sale, the sale could not be set aside even if for any reason, the price paid by it is held to be marginally lower than the then prevailing market price. Insofar as the purchase of the adjoining plot by SUNGROUP on 20-4-2006 for Rs. 11.6 crores, it was contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , obviously having regard to the fact that everyone is benefited by the said arrangement. In view of the above we consider it a fit case to exercise our power under article 142 of the Constitution, and accept the settlement as proposed in the larger interest of parties and to benefit the workmen. We make it clear that the sale which has already been confirmed in favour of WINSOME, is set aside, not on merits, but in pursuance of the negotiated settlement arrived at among SUNGROUP, the Employees Union and WINSOME. Accordingly, we allow these appeals in part accepting the settlement on the following items : ( i )SUNGROUP shall pay a sum of Rs. 6.36 crores to WINSOME towards the refund of the sale price and as compensation for depriving WINSOME from the enduring benefit of its capital asset, in the following manner : ( a )Rs. 1.64 crores by demand draft drawn in favour of Canara Bank, Sector 35B, Chandigarh, to the account of WINSOME, in repayment of the loan taken for purchasing item 17. ( b )Rs. 1.38 crores by demand draft drawn in favour of State Bank of Patiala, Commercial Branch, SCO 103-107, Sector 8C, Chandigarh, to the account of WINSOME, in repayment of the loan taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Liquidator; ( d )do all acts as may be reasonably required by SUNGROUP and at the cost of SUNGROUP, to ensure Item 17 is transferred to SUNGROUP. ( vii )SUNGROUP shall make all the payments within one week from today. The Official Liquidator and WINSOME shall issue necessary NOCs./request letters within one week thereafter. ( viii )SUNGROUP shall pay ex gratia a sum of Rs. 50 lakhs to the Employees Union, by a demand draft made out in the name of the Union, for equal distribution to the employees who were in the employment of PUNWIRE during June, 1999 (when employees were last paid salaries by the company). In respect of any employees who died subsequently, their LRs. shall be paid the employee s share. The entire distribution shall be done by the Employees Union independent of these proceedings. ( ix )SUNGROUP will have the option to purchase Item Nos. 19 and 20 separately by paying the price of Rs. 4.50 lakhs and Rs. 15.50 lakhs respectively to the Official Liquidator to the account of PUNWIRE. ( x )On the sale of Item No. 17 being set aside and leasehold in respect of Plot No. B-77, being transferred in favour of SUNGROUP, it is open to WINSOME to seek refund o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Punwire which comprised of the Official Liquidator and representatives of the secured creditors. It was decided that the assets and properties of Punwire were to be auctioned by inviting sealed tenders in the office of the Official Liquidator by creating separate lots as prepared by the sale committee. A valuation report is also prepared. A tender notice was consequently floated on June 15, 2004, which was published on June 25, 2004, in various leading newspapers, viz. , the Economic Times (All India Edition), Times of India (All India Edition), The Tribune (All India Edition), Punjab Kesri (Hindi) Ambala, Delhi and Jalandhar editions and Jagbani (Punjabi) Jalandhar edition. According to the tender notice, the properties and assets of Punwire were divided into 25 lots. The reserve price of each lot along with earnest money in respect thereof was also specified. The date of opening the tenders was also fixed. The requirement as per the tender notice was that the tenderers were required to submit separate tenders for each lot along with earnest money through bank draft in favour of the Official Liquidator. The Official Liquidator and the Committee were given the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores. The appellant was, therefore, asked to come forward for further negotiations in that regard. The Official Liquidator then moved an application on September 30, 2004, under section 455 of the Act read with rules 6 and 9 of the Companies (Court) Rules, 1959 (for short "the Rules"), requesting the court to call the prospective bidders namely the appellant, M/s. Star Point Financial Services Pvt. Ltd., Panchkula and M/s. S.K. Khaitan and Company for inter se bidding with regard to land and building comprised in lot No. 17. In respect of lot No. 19, a recommendation was made to consider the offer received by the Official Liquidator by the appellant. With regard to lot No. 20, the Official Liquidator stated in the aforesaid application that the appellant had offered Rs. 15.50 lakhs but with certain conditions. It was also mentioned in the said application that the offer of the appellant was sent back with a counter-offer of the Committee to give a bid of lot Nos. 17, 19 and 20 collectively at least for Rs. 5 crores. The secured creditors also stepped in before the learned company judge before the confirmation of the sale. These are Indian Overseas Bank-respondent No. 2, Canar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offering to purchase the entire assets of Punwire as a going concern for Rs. 12 crores. A notice of the application was given to the appellant which submitted its detailed reply reiterating that there was no occasion to reopen the chapter at that stage as the sale has already been confirmed. The learned company judge vide order dated January 28, 2005, directed the Sun Group to deposit a sum of Rs. 2 crores with the Official Liquidator within a stipulated period and restrained the Official Liquidator from executing the sale deed in the meanwhile in favour of the appellant. Thereafter, on February 11, 2005, the Punwire Employees Union (for short the union) through its President and General Secretary also filed objections praying for modification/recalling/setting aside the order or confirmation of sale on the ground that under section 529A of the Act, the dues of the employees are at par with the dues of the secured creditors and thus, they are to be treated pari passu along with them. The grouse shown by the union was that the Official Liquidator had not associated it as no communication was ever received by the union in connection with the sale of assets of Punwire. The sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Director with M/s. Star Point Financial Services (P.) Ltd. was a former employee of M/s. Winsome Yarns Ltd. and after his retirement as an advisor from the said company, he is still continuing with the same number and he has now joined as Director with M/s. Star Point Financial Services Pvt. Ltd. We have heard Mr. L.M. Suri, learned senior advocate assisted by Mr. Deepak Suri and Mr. Neeraj Khanna, advocates for the appellant auction purchaser, Mr. Alok Jain, advocate for the Official Liquidator respondent No. 1, Mr. Manish Jain, advocate for IFCI, the main secured creditor respondent No. 9, Mr. Vivek Bhandari, advocate for M/s. Sun Group Enterprises Pvt. Ltd. respondent No. 10 and Mr. S.C. Nagpal, advocate for Punwire Employees Union respondent No. 11. With their assistance, we have gone through the entire record available to us. Mr. Suri vehemently contends that the order passed by the learned company judge is without jurisdiction as after confirmation of sale by the court the company court has no jurisdiction to entertain further higher bids for the already auctioned property as it becomes functus officio and does not have the power to review or recall the order of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so that the production could be restarted. This, according to learned counsel, clearly shows that the real intention of Sun Group was not to buy lot Nos. 17, 19 and 20 but to scuttle the sale already confirmed in favour of the appellant. Referring to the marginal difference of price with regard to lot Nos. 17, 19 and 20, Mr. Suri contends that the learned company judge has failed to appreciate that even as per the revised offer giving lot-wise bifurcations, the offer of the Sun Group for these three lots was higher by Rs. 20.65 lakhs only and this difference, not being substantial, should not have influenced the mind of the learned company judge to review his order confirming the sale especially when the prices of the immovable properties are known to rise on day-to-day basis and therefore, a higher offer of just negligible margin after three months is of no consequence. Thus, learned counsel contends that even the revised bid ought to have been rejected at the very outset. He points out that it was at a much later stage that the petitioner s oral bid of Rs. 3.75 crores for lot Nos. 17, 19 and 20 had been entertained. Mr. Suri highlighted another material aspect submitting tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the workmen observing that their interest is not inferior to the interest of secured creditors in the company under liquidation and therefore, the earlier order dated December 10, 2004, requires to be recalled. According to learned counsel, the finding of the company judge in favour of workmen is not only contrary to the provisions of company law but also runs counter to the facts. Mr. Suri then submits that the miscellaneous application moved by the union to create an impression that a fraud has been played upon the Court by the appellant by introducing M/s. Star Point Financial Services Pvt. Ltd. as one of the bidders to show competitive bidding whereas aforesaid Star Point is the sister concern of the appellant, has in fact no substance in it as the bidding was conducted by the company court itself in which no one else except the appellant, M/s. Star Point Financial Services Pvt. Ltd. and one M/s. S.K. Khaitan and company had participated. There is neither any allegation nor any finding by the Court that the appellant or M/s. Star Point had entered into any arrangement to prevent any other person from participating in the open bidding. Even otherwise a company is a legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the stage of proceedings. Relying heavily on the decision of this Court rendered in Oswal Agro Furance Ltd., In re (In Liquidation) (C.A. No. 608 of 2003, decided on December 8, 2003 [2004] 2 PLR 1, Mr. Bhandari contends that the confirmed sale was set aside by this court merely on the basis of inadequacy of price relying upon Divya s case [2000] 102 Comp. Cas. 66 ; [2000] 6 SCC 69. He has also referred to the relevant observations made therein to strengthen his submissions. According to Mr. Bhandari, the company judge, never becomes functus officio , as contended by Mr. Suri and is fully competent to reverse/set aside his earlier order of confirmation of sale on this ground. Mr. Bhandari then contends that once the company judge is of the view that the earlier sale which was confirmed was not proper the same can be set aside even after handing over of possession. In support of his contentions, Mr. Bhandari relies on two judgments of the Apex Court rendered in Allahabad Bank v. Bengal Paper Mills Co. Ltd. [1999] 96 Comp. Cas. 804 ; [1999] 4 SCC 383 and Union Bank of India v. Official Liquidator High Court of Calcutta [2000] 101 Comp. Cas. 317 ; [2000] 5 SCC 274. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant and therefore, the company judge after entering into detailed discussion especially on the aforesaid three lots has come to the conclusion that the confirmed sale is liable to be set aside. Stretching the wings of his arguments, Mr. Bhandari then contends that even though the bid offered by the Sun Group was higher than the accepted bid of the appellant, still the learned company judge has not confirmed the sale in its favour. He has merely ordered the reauction of three lot Nos. 17, 19 and 20 at the expense of the Sun Group and even interest on loans raised by the appellant is to be borne by it. Therefore, the appellant possibly should not have any grouse to it as the chapter is still open and the appellant can enter into re-auction by putting its claim along with other bidders. Mr. Nagpal representing the union (respondent No. 11) also joins issue and vehemently submits that the order of the learned company judge deserves to be upheld as the interest of the workmen, being in no way different from the interest of the secured creditors, has not been taken care of by the Official Liquidator as he has failed to associate the workmen in the process of sale of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company in liquidation which is adverse to the interest of the workmen and the auction, therefore, deserves to be set aside on this ground as well. In support of this contention, he has placed reliance on the judgment of the Supreme Court in Gurmukh Singh v. Amar Singh [1991] 3 SCC 79. With regard to inadequacy of price, Mr. Nagpal adopts the offer made by the Sun Group and fairly states that the union was not able to bring a better buyer. On the question of possession, Mr. Nagpal submits that only symbolic possession was given to the appellant and not physical possession and therefore, there is no flaw in the impugned order. Mr. Munish Jain appearing for the secured creditors, on the other hand, has supported the case of the appellant and submits that earlier also when the sale was confirmed by the company judge, the secured creditors had preferred no objection to its confirmation. The order setting aside the confirmed sale, according to Mr. Jain, is not sustainable as the same is adverse to the interest of the secured creditors. Mr. Jain then submits that a workman is not a secured creditor for all purposes by virtue of section 529A of the Act. He steps in only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated January 4, 2003, a sale committee was constituted for the auction of the properties of the company in liquidation, which comprised of the representatives of the secured creditors and the Official Liquidator. The auction of the assets of the company was conducted by inviting sealed tenders in the office of the Official Liquidator, Chandigarh, in respect of the separate lots as prepared by the sale Committee. The tenders were opened on June 20, 2003, July 27, 2003 and July 28, 2003, in the presence of all the members of the Sale Committee and the representatives of the prospective buyers and in that regard details have been furnished in the application. All those proceedings have been placed on record and exhibited as Annexure A2. In respect of land and building situated at B-77, Phase VII, Industrial Area, Mohali, highest bid of Rs. 3.14 crores was received from M/s. Winsome Yarns Limited. The sale committee has recommended that the offer of the auction purchaser may be retained and same decision may be taken in respect of furniture and fixtures and other miscellaneous items as those items have to be disposed of for handing over the vacant possession of the property to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y M/s. Star Point Financial Services Pvt. Ltd. and M/s. S.K. Khaitan Pvt. Ltd. Co. be returned forthwith which is retained in form of bank drafts, which are attached to the papers supplied to this court in sealed covers. On the direction issued, the Bench Secretary has opened the envelops and handed over the respective drafts to the respective learned counsel." The aforesaid order was ultimately clarified with regard to lot Nos. 19 and 20 on January 13, 2005, as there was some ambiguity with regard to confirmation of sale qua these two lots. We have perused the impugned order dated March 30, 2005, also. The learned company judge has referred to rule 272 of the Rules vis-a-vis section 447 of the Act with regard to effect of a winding up order and then relying upon Navalkha Sons v. Ramanuja Das [1969] 3 SCC 537; [1970] 40 Comp. Cas. 936 , Union Bank s case [2000] 101 Comp. Cas. 317 ; [2000] 5 SCC 274, Allahabad Bank s case [1999] 96 Comp. Cas. 804 ; [1999] 4 SCC 383 and Divya s case [2000] 102 Comp. Cas. 66 ; [2000] 6 SCC 69 ultimately set aside the confirmed sale. The relevant observations anent to the controversy involved in this case for reference are reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt to consider the offers received by the official liquidator for sale of land and building from the aforementioned three firms/companies. On December 10, 2004, inter se bidding was held in the court between the two participants who were the auction purchasers and M/s. Star Point Financial Services Limited. Against, the offer of Rs. 3.14 crores, M/s. Star Point Financial Services Limited made an offer of Rs. 3.15 crores which was further toppled by the auction purchaser by offering higher bid of Rs. 3.16 crores. According to the advertisement, reserve price for lot No. 17, was Rs. 3 crores. Similarly, in respect of lot Nos. 19 and 20, a reserved price of Rs. 4 lakhs and Rs. 15 lakhs, respectively, was kept. The auction purchaser in their tender for lot No. 20, which comprises of air-conditioners, had offered Rs. 15.50 lakhs on the condition that lot No. 17 be sold to it at the price offered by it. It has also made an offer in respect of lot No. 19 for which it had offered Rs. 4.50 lakhs. It is evident that lot No. 17, which comprises of land and building is the prime lot. The official liquidator received only three offers and in the inter se bidding, only two bidders, namely, " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Bank of India [2000] 101 Comp. Cas. 317; [2000] 5 SCC 274, Divya Manufacturing Co. [2000] 102 Comp. Cas. 66 ; [2000] 6 SCC 69 and Allahabad Bank [1999] 96 Comp. Cas. 804 ; [1999] 4 SCC 383, cannot be accepted. It is true that the reserve price and the price according to the valuation report are less than the price offered by the auction purchaser but it appears to be equally true that the land and the building price of lot No. 17 is worth much more as the difference is huge. The other argument based on the judgment of the Supreme Court in the case of State of Punjab v. Yoginder Sharma Onkar Rai Co. [1996] 6 SCC 173, cannot also be accepted because in that case the controversy related to the auction of liquor vend in the State of Punjab. There is no provision equivalent to rule 272 of the Rules requiring that the sale by the official liquidator or the agent appointed by the court is subject to confirmation by the court. There cannot be a parallel situation between the sale of liquor vend and the present case. Therefore, I regret my inability to read the aforesaid judgment for the purpose of applying the same to the facts of the present case. I am unable to persuad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02 Comp. Cas. 66 ; [2000] 6 SCC 69 was that the fresh offers received was indicating that the earlier offer was totally inadequate. Another fact which is worth noticing is that in Divya s case [2000] 102 Comp. Cas. 66; [2000] 6 SCC 69 neither the possession had been handed over nor the sale deed executed. Besides this, there was a clause in the terms and conditions for sale reflecting that the sale could be reopened. The said clause was as under (page 71 of 102 Comp. Cas.) : "11. The Hon ble High Court may set aside the sale in favour of purchaser/purchasers even after the sale is confirmed and/or purchase consideration is paid on such terms and conditions as the court may deem fit and proper for the interest and benefit of creditors, contributories and all concerned and/or public interests." In Oswal Agro Furnace Ltd., In re (In Liquidation) [2004] 2 PLR 1, this court while relying upon Divya s case [2000] 102 Comp. Cas. 66 ; [2000] 6 SCC 69 had set aside the confirmed sale observing that the price offered by another company (M/s. KRBL Ltd.) was higher by Rs. One crore. It is also pertinent to mention here that in Oswal s case [2004] 2 PLR 1 (P H), possession was not h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge observed that the offer matches with the valuation report and the grievance of inadequacy of the prices cannot be accepted and for this reason the sale was ordered to be given final shape. The grouse shown by the appellant-bank was that the company s assets were sold at a throw away price and, therefore, the order of confirmation of sale be set aside. Countering the arguments advanced by the bank, the auction purchaser had submitted that inadequacy of price is no ground for interference. However, the gross irregularity observed in the aforesaid case by the Hon ble Supreme Court was that the valuation report was kept as a secret and confidential document and without disclosing the valuation report to the creditors and without fixing the reserve price, the properties were auctioned and the sale was confirmed. In this eventuality, the approach of the company judge was considered to be unjustifiable holding that it is against the judicial standard and the normal procedure for auctioning the immovable property of the company which is to be wound up. Another observation made by the Apex Court was that there was non-application of mind to the valuation report. The essence of the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai, AIR 1925 Mad. 318, observed in para No. 6 as under (page 941): "6. The principles which should govern confirmation of sales are well-established. Where the acceptance of the offer by the Commissioners is subject to confirmation of the court the offer 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 an 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside. Showing his grouse against the order of the Division Bench, M/s. Navalkha filed the appeal in the Hon ble Supreme Court and their Lordships while agreeing with the judgment of the Division Bench observed as under (page 942 of 40 Comp. Cas.) : "7. In the present case, the Division Bench has come to the conclusion that publicity was not as wide as originally proposed by the Commissioners in their affidavit. The publication was made in four dailies, namely. The Hindu, The Indian Express, the Hindustan Times and The Statesman . There was no publication in The Times of India . Further, out of the four newspapers in which publication was made, only in two there were two insertions and in the remaining two there was only one insertion. This was contrary to what the Commissioners have promised in their affidavit, dated July 8, 1964. No doubt, other efforts were made for giving publicity but these efforts were not sufficient to attract more than one offer. When the case came for confirmation on December 24, 1964, there was an application by Babu Khan that the property was of much higher value and that fresh offers must be invited again with wider publicity. There is also the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n our opinion, the learned judge having decided on December 24, 1964, that the property should be put to auction should have directed auction by public sale instead of confining it to two persons alone. Since there was want of publicity and there was lack of opportunity to the public to take part in the auction, the acceptance of the highest bid by the learned judge was not a sound exercise of discretion. It is contended on behalf of the appellant that confirmation was discretionary with the court and the Division Bench ought not to have interfered with the discretion exercised by the company judge. It is true that the discretion exercised by the judge ought not to be interfered with unless the judge has gone wrong on principle. As already pointed out the learned company judge having decided to put the property to auction went wrong in not holding the auction as a public auction after due publicity and this has resulted in prejudice to the company and the creditors in that the auction did not fetch adequate price. The prejudice was inherent in the method adopted. The petition of Padam Chand Agarwal also suggested that want of publicity had resulted in prejudice. In these circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this objection by observing that according to the valuation report, the value of the property which includes machinery and plant, etc. is about Rs. 20 lakhs only and the expenditure involved securing the same elsewhere would be quite meagre. Ultimately, the sale was confirmed in favour of the appellant. From the aforesaid factual backdrop, one aspect at least is very clear that the learned company judge did not find any irregularity at any stage which could possibly create any hindrance in confirming the sale and, therefore, it was confirmed. We have also re-examined the entire aspects and are of the view that the confirmation of sale was in fact in conformity with the well established guidelines/principles governing the confirmation of sale as enumerated in Navalkha s case [1969] 3 SCC 537; [1970] 40 Comp. Cas. 936 . We shall now deal with the second aspect with regard to subsequent events when on 28-1-2005, the Sun group intervened by moving an application before the company judge bearing C.A. No. 775 of 2004 making an offer of Rs. 12 crores for buying the entire assets of Punwire as a going concern which include land and building situate at B-77, Phase 7, Industrial Area, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Rs. 3.75 crores appears to have been given orally at some subsequent stage. Although we have already observed that the aforesaid application of the Sun Group deserved outright rejection, we proceed to consider as to whether the consideration for which the sale had been confirmed earlier was inadequate and as to whether the offer given by the Sun Group for three lots during the course of proceedings can be said to be substantially high so as to set aside the confirmed sale on the ground of inadequacy of price. As per the documentary evidence, the total difference with regard to the aforesaid three lots comes to Rs. 29 lakhs only which is hardly 8/9 per cent of the earlier bid confirmed in favour of the appellant. This in any manner cannot be termed to be a jump in the bid which would warrant the setting aside of the confirmed sale. Another fact which is worth consideration is that the offer is made after two months of the confirmed sale and during this period, the market price of the property may well have gone up to that extent. This is a very common phenomenon as far as immovable property is concerned. Let us now examine the present case in the light of observations made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constituted by the court had also been observing all the proceedings throughout and at no stage any irregularity was pointed out. In Union Bank s case [2000] 101 Comp. Cas. 317 ; [2000] 5 SCC 274 the grouse shown by the intervening bank (Union Bank of India) was that the property was being sold at a throw away price and the valuation report was kept as a secret and confidential document without disclosing it to the creditors. Even the reserve price was not fixed. On these grounds, the confirmed sale was set aside at the stage of handing over of possession to the auction purchaser. In the present case, that is not the situation at all. The valuation report was very much before the learned company judge. It was not kept as a secret document at any stage. The sale committee which represented the secured creditors had also perused the same and thereafter, the open auction was held. It is nobody s case that the valuation as per this report was not proper. It is also not in dispute that the accepted bid of the appellant auction purchaser was higher than the value determined in the valuation report. We are, therefore, of the considered view that the aforesaid two judgments relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason or the other. In most of the lots, the Sun Group has shown its offer much less than the reserve price whereas for lot Nos. 17, 18 and 19 and mainly for lot No. 17 (land and building), the bid is marginally increased. Another interesting feature is that for lot Nos. 1 to 6 (B-53, Phase-6, Mohali), lot Nos. 7 and 9 (B-55, Phase 6, Mohali), lot No. 12 (B-76, Phase-7, Mohali), lot Nos. 21, 22 (B-77, Phase 7, Mohali) and lot No. 24 (the stocks), no separate bid has been offered at all. This appears to be a clear attempt to grab the entire assets of the Punwire at a throw away price by scuttling the confirmed sale in favour of the appellant. The intention of the Sun Group does not seem to be fair from the very beginning. We see this aspect from another angle also. Time and again reference has been made to the suggestion of the sales committee that the auction purchaser be asked to enhance his bid to Rs. 5 crores for three lots in question. It is significant to note that even the offer made by the Sun Group for three lots was to the tune of Rs. 3.56 crores which was only marginally higher than the amount offered by the auction purchaser and much below the amount of Rs. 5 crores s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been obtained and in fact the price is substantially inadequate, there is the presence of both the elements of irregularity and injury. But it is not as if the court should go on adjourning the sale till a good price is got, it being a notorious fact that court sales and market prices are distant neighbours. Otherwise, decree holders can never get the property of the debtor sold. Nor is it right to judge the unfairness of the price by hindsight wisdom. May be, subsequent events, not within the ken of the executing court when holding the sale, may prove that had the sale been adjourned a better price could have been had. What is expected of the judge is not to be a 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. The court may consider the fair value of the property, the general economic trends, the large sum required to be produced by the bidder, the formation of a syndicate, the futility of postponements and the possibility of litigation, and several other factors dependent on the facts of each case. One that is done, the matter ends there. No speaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order of the learned company judge for reappreciating the present issue, we have felt the necessity of reproducing the relevant observation, may be at the cost of repetition : "I am further of the view that the workmen have overriding claim to that of the secured creditors as provided by section 529A of the Act. The dues claimed by the workmen and that due to the secured creditors are to be treated pari passu . The dues of the workmen have to be treated as prior to all other dues. The Official Liquidator has failed to associate the workmen in the process of sale of the company. The interest of the workmen is in no way insignificant than the interest of the secured creditors in the company under liquidation. For that reason also, the order dated 10-12-2004, requires to be recalled." Before adverting to the question we may notice the relevant provisions of sections 529 and 529A of the Act which read as under : "529. Application of insolvency rules in winding up of insolvent companies. (1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to ( a )debts provable ; ( b )the valuation of annuities and future and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reading of the aforesaid two sections makes it clear that the workmen have an overriding preferential right with regard to the debts due to the secured creditors. It cannot be said that the workmen have to be treated pari passu with the secured creditors for all purposes. The judgment rendered in Textile Labour s case [2004] 120 Comp. Cas. 505 ; [2004] (Suppl.) 1 JT 1 relied upon by Mr. Nagpal would not advance his case as in the aforesaid case, their Lordships have also held that the effect of sections 529 and 529A of the Act is that the workmen of the company become secured creditors by operation of law to the extent of workmen s dues provided there exists a secured creditor by contract. If there is no secured creditor then the workmen of the company become unsecured preferential creditors under section 529A to the extent of the workmen dues. It is further observed that the purpose of section 529A is to ensure that the workmen should not be deprived of their legitimate claims in the event of liquidation of the company and the assets of the company would remain charged for the payment of the worker s dues and such charge will be pari passu with the charge of the secured cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 SC 1814, while discussing sections 529 and 529A of the Act, their Lordships have held as under (headnote): "The language of section 529A is also clear and unequivocal to the effect that the workmen s dues or the debts due to the secured creditors to the extent such debts rank under clause ( c ) of the proviso to sub-section (1) of section 529 pari passu with such dues shall have priority over all other debts. Once the workmen s portion is worked out in terms of proviso ( c ) to sub-section (1) of section 529, indisputably the claim of the workmen as also the secured creditors will have to be paid in terms of section 529A." Following the ratio of the aforesaid judgments, it can be now safely concluded that workmen have to be treated pari passu with the secured creditors so far as their dues are concerned. They have even the preferential right. But at the same time, there is no provision in the Act or the Rules requiring the Official Liquidator to associate the workmen in the process of sale of the company. In other words, the interest of the workmen is to be watched by the Official Liquidator only when the sale is confirmed and even thereafter until the stage for dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y had played a fraud upon the court. It has been correctly pointed out that every company is a legal juridical person and has a separate distinct identity. There is neither any allegation nor any finding by the court that the appellant and its sister concern had entered into any arrangement of preventing any other person from participating in the open auction or the bidding before the court. Even otherwise no person has raised any grievance that it was prevented from participating in the auction. The decision of the Supreme Court in Gurmukh Singh s case [1991] 3 SCC 79 is clearly distinguishable on the facts and has no applicability to this case. In that case, two persons had entered into an agreement that one of them would participate in a public auction for sale of evacuee property on behalf of both of them. It was agreed that the property would be shared equally by both of them. The person participating in the public auction gave highest bid and acquired the property and sale in his favour was confirmed. He, however, did not transfer one-half of the property to the other person as per the agreement and, therefore, a suit for specific performance of contract was instituted. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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