TMI Blog2020 (6) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by respondent No.2, which is less than the initial reserve price of ₹ 31,00,00,000/- and which is again less than the amount offered by the appellants, cannot be accepted as the difference is about ₹ 2,79,00,000/-. The Official Liquidator is receiving almost 2.80 crore extra amount and on technicalities, such an offer cannot be thrown in a dustbin. It is certainly true that the present appellant has not participated in the process of tender but at the same time, assets of the Company, as the initial price was fixed at ₹ 31,00,00,000/-, cannot be given to a person, who has offered ₹ 28,15,00,000/- only - the prayer made in the OLR for fresh e-auction should have been allowed and not further extension could have been granted keeping in view the peculiar facts and circumstances of the case to respondent No.2 to deposit the amount. The orders dated 02.03.2020 and 04.05.2020 are hereby set aside and the prayer made by the Official Liquidator in OLR No.31/2019 for holding fresh e-auction is allowed. - Company Appeal No. 6/2020 - - - Dated:- 22-5-2020 - HON BLE SHRI JUSTICE S. C. SHARMA HON'BLE SHIR JUSTICE SHAILENDRA SHUKLA Counsel for the: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the Official Liquidator for an amount of ₹ 29,00,00,000/-. 08. The present appellant has stated in their appeal that they were not able to participate in the second round of eauction held on 04.04.2019 on account of their preoccupation, and therefore, submitted a letter to the Official Liquidator offering a much higher price than the reserve price. The reserve price was ₹ 27,90,00,000/- and the offer made by the present appellants was ₹ 30,69,00,000/-. It was certainly more than the highest bid received, as the highest bid received was for ₹ 28,15,00,000/-. 09. The Official Liquidator, after an offer was made by the appellant and by one M/s Aviral Buildcon Private Limited, submitted an OLR i.e. OLR No.31/2019 dated 25.06.2019 for confirmation of sale and I.A. No.6678/2019 was filed on 04.09.2019 for approval of sale in favour of Seabright Landmark Projects LLP. 10. The learned Company Judge has passed an order on 02.03.2020 confirming the sale in favour of respondent No.2. 11. An application was also preferred by learned counsel for respondent No.2 i.e. I.A. No.2294/2020 for extension of time to deposit the amount and time, up to 30.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant 30,69,00,000/- 2,79,00,000/- The aforesaid chart makes it very clear that the difference between the price offered by the present appellants and the respondent No.2 is ₹ 2,79,00,000/which is certainly a big amount. 16. Shri Abhinav Malhotra, learned counsel for respondent has argued before this Court that the present appellants, who were not the participants in the process of auction, are not entitled for any relief of whatsoever kind. Otherwise also, it is going to be a never ending process. He has also stated that in case, the present appellants were interest in buying the Company's property i.e. Lot No.1, they should have deposited earnest money, they should have participated in the auction process and at this juncture, merely by submitting a letter along with a cheque of ₹ 3,00,00,000/-, will not entitled them to participate in the auction process which has attained finality. He has also stated that he has also preferred a Company Appeal for extension of time to deposit the remaining amount which is likely to listed in near future. He has categorically stated before this Court that the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to confirm the sale of the properties of the Company-in- Liquidation in Lot No.1 in favour of the highest bidder M/s Seabright Landmark Projects LLP, Indore (M.P.). IA No.7202/19 has been filed by the highest bidder M/s Seabright Landmark Projects LLP for confirmation of sale and direction to the OL to execute the sale deed and IA No.6678/19 has been filed by one M/s.Om Gurudev Enterprises with a prayer to accept its offer, which is more than the offer made by the highest bidder and sale the assets in Lot No.1 to it. The brief facts are that this Court had passed the winding up order in the matter on 9.9.2016. Thereafter the attempts were made to sale the assets of Lot No.1 but since no buyer had come forward to purchase the said assets, therefore, in the meeting of the assets sale committee dated 28.8.2018 it was decided to sale the assets of Lot No.1 at a price of ₹ 27.90 Crores and EMD of ₹ 2.80 Crores. Hence the OLR No.29/2018 was filed before this Court seeking permission to sale the assets of Lot No.1 at the reserved price of ₹ 27.90 Crores and the same was allowed by this Court by order dated 17.12.2018. Thereafter the advertisement of sale notice wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the OL is that no proper explanation for submitting the bid at the time of e-auction has been given by M/s Om Gurudev Enterprises, Indore. Counsel for the Bank of India, secured creditor has also submitted that the offer made by the highest bidder be accepted and the subsequent offer may not be considered as that will effect the credibility of auction sale and in other matters after making such offers, subsequently similar applicants have later on backed out creating complications. I have heard the learned counsel for the parties and perused the record. The law in regard to considering the offers after approval of the highest bid at the stage of confirmation of sale is now well settled. It has been held that a subsequent higher offer is not a valid ground for refusing confirmation of sale or offer already made. It is also well settled that if the price offered is adequate and the court is satisfied about the market value of the property and that the price offered is reasonable, then it would be appropriate to exercise the judicial discretion of confirming the sale. The Supreme Court in the matter of Vedica Procon Pvt. Ltd. Vs. Balleshwar Greens Pvt. Ltd. and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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 Dakuwala v. T. Sriman Kanthimathinatha Pillai, 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 Rathnasami Pillai v. Sadapathy Pillai and S. Soundararajan v. M/s. Roshan Co. In A. Subbaraya Mudaliar v. K. Sundararajan, 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 or refusing the highest bid at the auction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f auction through Court. In the present case, the Court has reviewed its exercise of judicial discretion within a shortest time. 39. We cannot help pointing out that their Lordships came to such a conclusion placing reliance on para 6 of Navalkha case. Their Lordships failed to take note of the last sentence of the paragraph but placed reliance on the penultimate sentence of the paragraph. No doubt, the penultimate statement of the paragraph recognises the discretion of the Company Court either for accepting or refusing the highest bid at the auction, it also emphasizes the obligation of the Court to see that the price fixed at the auction is adequate price even though there is no irregularity or fraud in the conduct of the sale. However, the penultimate sentence restricts the scope of such discretion in the following words: (Navalkha case, SCC p.541, para 6) 6. ...... It is well to bear in mind the other principle which is equally well settled namely that once the court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already received. (See the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record further reflects that the highest bid of M/s Seabright Landmark Projects LLP, Indore (M.P.) has been considered by the assets sale committee and has been accepted. Before this Court also counsel for the Bank of India has supported the confirmation of sale in favour of the highest bidder M/s Seabright Landmark Projects LLP, Indore and has opposed the consideration of the bid of M/s Om Gurudev Enterprises. It is not disputed by any party that the price which has been offered by M/s Seabright Landmark Projects LLP, Indore (M.P.), the highest bidder, is the adequate market price having regard to the value of the Lot No.1 at the time of auction and this Court is also satisfied that the price which has been offered by M/s Seabright Landmark Projects LLP, Indore is reasonable and adequate. Therefore, having regard to the law which is laid down in the case of Vedica Procon Pvt. Ltd. (supra), the OLR No.31/19 and IA No.7202/19 are allowed by confirming the sale in favour of the highest bidder M/s Seabright Landmark Projects LLP, Indore and the IA No.6678/19 filed by M/s Om Gurudev Enterprises is rejected. The highest bidder M/s Seabright Landmark Projects LLP, Indore is directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court to deposit and now the prayer for extension of time cannot be considered. He further submits that the offer of the applicant was objected by another party by offering higher amount and that applicant has not shown the bonafides by depositing any amount in pursuance to the order of this Court. He further submits that value of the assets are going up. Shri D.S. Panwar learned counsel for worker s union submits that there is no explanation for not depositing the amount between 2nd March i.e. the date of order of this Court till 25th March i.e. the date of imposition of lockdown. He further submits that workers are loosing interest on said amount which otherwise would have been earned by the OL and disbursed. Shri G.S. Patwardhan learned counsel for original promoter has submitted that the sale of the assets of the company in liquidation should be expedited and the matter should not be unnecessarily delayed. Heaving heard the learned counsel for the parties and on perusal of the record it is noticed that bid of applicant has already been approved by this court by previous order and that the applicant was required to deposit the balance consideration amount within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at Para No.6 above, if this Hon'ble Court deem fit and proper, necessary directions may kindly be issued to Highest bidder of e-auction M/s Seabright Landmark Projects LLP to raise their offer more or equal to ₹ 30.69 crores, in order to meet the highest offer for subject assets / properties of the company (In-Liqn.), if M/s Seabright Landmark Projects LLP raised the offer, sale may be confirmed in their favour with necessary directions to them, t deposit the confirmed in their favour with necessary directions to them, to deposit the balance sale consideration amount in respect of Lot No.1, after adjustment of EMD amount of ₹ 2.80 Crores, within a period of 60 days as per terms Conditions of sale or within such time as decided by this Hon'ble Court. OR (iv) In view of Para 7 (c) of this reprot, if in case, M/s Sunbright Landmark Projects LLP, is not ready to raise the offer, the dale may be confirmed in the favour of M/s OM Gurudev Enterprises, Indore (M.P.) with necessary directions to them, to deposit the balance sale consideration amount of ₹ 27,62,10,000/- in respect of Lot No.1, after realisation of Cheque No.325994 or ₹ 3,06,90, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2020 confirming sale in favour of respondent No.2 / M/s Seabright Landmark Projects LLP. 25. The Hon'ble Supreme Court in the case of LICA (P) Limited v/s Official Liquidator Another reported in (2000) 6 SCC 79 in paragraph 5 has held as under:- 5. The purpose of an open auction is to get the most remunerative price and it is the duty of the court to keep openness of the auction so that the intending bidders would be free to participate and offer higher value. If that path is cut down or closed the possibility of fraud or to secure inadequate price or underbidding would loom large. The court would, therefore, have to exercise its discretion wisely and with circumspection and keeping in view the facts and circumstances in each case. One of the terms of the offer in this case is that even confirmation of the sale is liable to be set aside by the High Court as per Clause 11 of the conditions of offer. The sale conducted was subject to confirmation. Therefore, mere acceptance of the offer of Mr. Shantilal Malik does not constitute any finality of the auction nor would it he automatically confirmed. The appellant offered a higher price even now at ₹ 45,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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(1) 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. Sadapathi Pillai(2) 'and S. Soundajan v. M/s. Roshan Ca.(1). In A. Subbaraya Mudaliar v. K.Sundarajan(4) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, in the first round of sale, the offered reserve price was ₹ 31,00,00,000/-, which was certainly much more than the reserved price offered by respondent No.2 i.e. ₹ 28,15,00,000/-. The price offered by respondent No.2 is again much lower than the price offered by the appellant. 28. Keeping in view the judgments delivered by the Hon'ble Supreme Court, it is the bounden duty of the Court to see that the price fetched at the auction is an adequate price, even though, there is no suggestion of irregularity or fraud. In the case of Punjab Wireless Systems Limited v/s Indian Overseas Bank Others reported in (2005) 126 Company Cases 554 , the Punjab Haryana High Court has held as under:- 22. Rejecting the argument that mere inadequacy of price cannot demolish every Court sale based on the earlier judgment of the Supreme court in Kayjay Industries (P) Ltd., v. Asnew Drums (P) Ltd., (1974) 2 SCC 213 , their Lordships observed as under:- In our view, this submission requires to be rejected on the ground that in the said case, the Court has reproduced the paragraph which we have quoted above from the decision in Navalkha and Sons wherein the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company, particularly the unsecured creditors, overweighed 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. 25......The second respondent knew that the appeals were pending. It should have appreciated that the order of sale was very vulnerable, given what the Division Bench of the High Court had to say about it. It consciously took the risk of incurring the expenditure and obligations and it cannot take shelter behind him. 24. The judgment in the case of Divya Manufacturing Company (P) Ltd. (supra) has clarified any doubt about setting side a sale even after confirmation holding that a subsequent higher offer can constitute a valid ground for doing so. In that case, the sale was confirmed for price of ₹ 1.30 crores but subsequently before possession of the property could be handed over or sale deed could be executed in favour of the auction purchaser, some interveners came and pointed out that the assets of the Company could fetch ₹ 2 crores. Both the interveners deposited & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, a person i.e. present appellant has offered ₹ 2,80,00,000/- more in the matter, and therefore, fresh auction is inevitable. 29. Another important aspect of the case is that the sale was confirmed on 02.03.2020 in presence of advocate of respondent No.2 with a direction to deposit entire sale consideration within a period of 60 days from the date of the order i.e. by 01.05.2020, however, respondent did not deposit any amount by 03.05.2020 and taking shelter of pandemic COVID 19, a prayer was made for extension of time. 30. In the considered opinion of this Court, as the amount offered by respondent No.2, which is less than the initial reserve price of ₹ 31,00,00,000/- and which is again less than the amount offered by the appellants, cannot be accepted as the difference is about ₹ 2,79,00,000/-. The Official Liquidator is receiving almost 2.80 crore extra amount and on technicalities, such an offer cannot be thrown in a dustbin. It is certainly true that the present appellant has not participated in the process of tender but at the same time, assets of the Company, as the initial price was fixed at ₹ 31,00,00,000/-, cannot be given to a p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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