TMI Blog2007 (1) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant. Arvind Kumar Nigam, Ms. Kamini Jaiswal, Ms. Shomila Bakshi, Mrs. Sunita Dwivedi and Arvind Kumar Tewari for the Respondent . JUDGMENT Introduction S.B. Sinha, J. - Application of terms and conditions of sale of properties in terms of the provisions of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (for short, the Act ) is in question in these appeals which arise out of the judgments and orders dated 22-6-2006, 31-7-2006 and 23-6-2006 passed by the Special Court (Trial of Offences Relating to Transactions in Securities) at Bombay in Intervention Application No. 131 of 2006 filed in Misc. Petition No. 4 of 2001, Report No. 12 of 2006 in Misc. Application No. 131 of 2006; and Misc. Petition No. 41 of 1999 respectively. 2. Before adverting to the questions as also the fact involved in each of these matters, we may at the outset notice that one Harshad Mehta was a person notified under the Act. The private respondents herein being his relatives were also notified (hereinafter referred to as the notified parties ). Apart from late Harshad S. Mehta, the Custodian had notified 29 entities in terms of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty to bring the same to the notice of the learned Special Court which shall also be taken into consideration by the learned Judge, Special Court." (p. 140) Order of the Special Court 5. Pursuant to or in furtherance of the said directions, the question as to whether the auction sale should be confirmed or not came up for consideration before the learned Judge, Special Court. By reason of the impugned order dated 22-6-2006 passed in Intervention Application No. 131 of 2006 in Misc. Petition No. 4 of 2001, it was held that as the auction purchaser had not deposited the balance amount within the period stipulated under the terms and conditions of the auction, the earnest money deposited by the bidder was to be forfeited. By reason of the impugned order dated 23-6-2006 passed in Misc. Petition No. 41 of 1999, with the consent of the Custodian and the notified parties, a fresh auction sale was directed to be held. Terms and Conditions of Sales 6. In the aforementioned backdrop of events, we may notice the relevant terms and conditions of sale : "3.The offers should be submitted in a sealed envelope superscribed with the words "Bid for sale in respect of Residential F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed to resell the said property by public auction at such time subject to such conditions and in such manner as the Custodian shall deem fit and proper without previously giving any notice to the purchaser and the deficiency in price if any, occasioned by such resale together with all costs charges and expenses pertaining to the resale shall be made good by the defaulting purchaser and be recovered by the Custodian with interest on the amount of deficiency at the rate of 18 per cent per annum from the expiration of the date of the aforesaid sanction of sale till payment and in the event of non-payment of the whole or any part or any part thereof such sum, the same shall be recoverable by the Custodian from the defaulting Purchaser as and by way of liquidated damages while any excess on such resale shall not be available to such defaulting Purchaser as and by way of liquidated damages while any excess on such resale shall not be available to such defaulting purchaser. This condition shall be without prejudice to Custodian s right and remedies, which the Custodian shall otherwise have in law and/or under these conditions. 13.The Purchaser shall not be liable to pay outgoings if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the flat had been fixed at Rs. 60,00,000 (Rupees sixty lakhs), but his bid was of Rs. 85,00,000 (Rupees eighty five lakhs). By an order dated 22-1-2004, the learned Judge, Special Court while accepting the bid, inter alia, directed : ". . .Accordingly, the bid submitted by Mr. Madhu Suri and Shiv Kumar Suri of Rs. 16,00,000 (Rupees sixteen lakhs) is provisionally accepted , subject to final order to be passed by the Hon ble Supreme Court. The highest bidder whose bid has been accepted shall comply with the terms and conditions on which the bid is submitted. The Highest bidder shall be at liberty to appear before the Hon ble Supreme Court on the appointed date. The initial deposit made by all the unsuccessful bidders shall be refunded to the bidders." [Emphasis supplied] 8. This Court thereafter by an order dated 30-1-2004 directed : "The learned counsel for the Custodian brings on record the result of the bids and the order of the Special Court dated 17-12-2003 and 20-1-2004. The learned counsel for the Appellants proposes to offer his comments on the bids and the two orders of the Special Court. Let it be done within two weeks. The process of finalizing the bids ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liged to deposit the balance amount of consideration, in my opinion, has no substance. For getting possession, the Applicant will have to create an entitlement in him to get possession. For creating that entitlement, he has to deposit full amount of consideration. The learned Counsel for the Applicant then submitted that the Supreme Court has observed that the question of confirmation of the bid should be considered by the Court after deciding the main application. In my opinion, that question will arise only in relation to those bidders who have complied with the Order accepting their bids and not in case like the Applicant, who has lost the rights that may have been created in his favour because of his default in complying with the terms of the bid. The Applicant, therefore, has no right in relation to the property which is the subject-matter of the main application filed by the custodian. Therefore, the Applicant has no right to intervene. As I find that the Applicant was liable to deposit the balance amount of consideration as per the terms of the bid, the custodian is directed to consider whether the amount of earnest money deposited by the Applicant is to be forfeited or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs) from the occupants of the building. The learned counsel for occupants is present and she states that occupants are not in a position to increase the bid. The other bidder namely West Cost Exim Pvt. Ltd. is absent. I have perused the valuation report dated 24-1-2004. As per the valuation report, value of the property is about Rs. 1,60,00,000. Considering that the bid offered by the highest bidder is above the valuation given in the valuation report, as also considering that the bidders are the occupants of that building itself, in my opinion, it would be appropriate to accept the highest bid. The highest bid of the occupants as per the report is therefore tentatively accepted . Learned Counsel for the highest bidder states that the bid was given on behalf of the occupants, and therefore, Conveyance should be executed in favour of the Nominees nominated by the joint occupants/highest bidders. The custodian is accordingly so directed. In the Order dated 5-1-2004 passed in Civil Application No. D. No. 255575/03, D. No. 25620/03, D. No. 25644/03 and D. No. 25815/03, the Supreme Court has directed this Court to open the bid and place the result thereof before the Hon ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced show that the auction is held on a date fixed and is subject to a reserve price which is confidential. The officer conducting the sale declares at the fall of hammer who is the highest bidder. The highest bid is subject to the approval of the Settlement Commissioner or an officer appointed by him. A period of seven days must elapse before the bid is approved and there is also a limitation of seven days from the acceptance of the bid for making an application to set-aside the sale. If the bid is approved and if no application meanwhile for setting aside the sale is made, the highest bidder is recognised as the auction purchaser and he is required to produce a treasury challan in respect of the balance of the purchase money within a period of fifteen days (which period may be extended without limit of time) before the Settlement Commissioner or the officer appointed by him. When the full purchase price is paid a certificate issues in Form No. XXII and is sent to the Sub-Registrar for registration. If the balance of the price is not paid, the amount of advance in deposit is forfeited and the auction purchaser has no claim to the property. 9. The passing of title thus presuppose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been a completed transaction and he would have been liable for any shortfall on the re-sale. As the essential pre-requisites of a completed sale are missing in this case there is no liability imposed on the respondent for payment of the deficiency in the price." 23. When a sale would be held to be completed would, thus, depend upon the fact of each case. Indisputably, it will primarily depend upon the terms and conditions of the contract. But herein there was another supervening circumstance i.e., the interim orders passed by this Court. The core question in this case would, thus, be whether having regard to the interim orders passed by this Court, the learned Judge, Special Court could confirm the sale. The answer thereto must be rendered in the negative. It is true that the learned Judge, Special Court, in its order dated 22-1-2004 directed the highest bidder to comply with the conditions, but what escaped the notice of the learned Judge was that sanction could not have been granted on a provisional basis. If there could be only one order of sanction, the same would mean the final one and not the provisional one. That is how the parties including the Custodian und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09, wherein this Court in a case where the bidder had withdrawn its offer before the expiry of the period itself during which the bid was to remain operative, held : ". . . Stand of the learned Counsel for the respondent that another request was made after the expiry of the 45 days period does not change the situation. Clause 5( v ) clearly spells out that once a tender is tendered the offer shall be considered valid for a period of 45 days from the date of tender sale in case of tenders which are under consideration. If this clause is read with Clause 5( iv ) the position is clear that once a tender is tendered no changes can be made and no tender can be withdrawn. We are not concerned with a case of consequences after acceptance of the tender by the successful bidder. In such a situation loss sustained in the resale and the amount realised less, shall be recovered from the bidder while adjusting the amount paid by him towards earnest money deposit. In this case the acceptance of the tender was after the validity of the period. Therefore, this is not a case which could authorise the Government to recover the loss from the respondent. But it is a case of withdrawal of tender and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e essence of contract. It may or may not be so. This question is required to be considered having regard to the fact situation obtaining in each case. If the deposit was to be made from the date of final sanction of the offer, question of applicability of the said proposition of law could not arise. 35. We may, however, notice that in McDermott International Inc. v. Burn Standard Co. Ltd. 2006 (6) SCALE 220, this Court observed that in a case of this nature, time was not of the essence and, therefore, section 55 of the Contract Act was not attracted, noticing : "This Court in Hind Construction v. State of Maharashtra [1979] 2 SCC 70 stated: 7. The question whether or not time was of the essence of the contract would essentially be a question of the intention of the parties to be gathered from the terms of the contract. [ See Halsbury s Laws of England , 4th ed., Vol. 4, para 1179]. 8. Even where the parties have expressly provided that time is of the essence of the contract such a stipulation will have to be read along with other provisions of the contract and such other provisions may, on construction of the contract, exclude the inference that the completion of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
