In Re: Oswal Agro Furane Ltd. (In Liquidation) <BR> Balaji Disposals

Mukul Mudgal, C.J.—This judgment shall dispose of Company Appeals Nos. 4 and 7 of 2009. Company Appeal No. 4 of 2009 has been filed by the rival bidder, while Company Appeal No. 7 has been filed by the workers union of the company in liquidation. For the sake of convenience, facts are being extracted from C.A. No. 4 of 2009. This appeal has been filed against the order of the learned single judg Oswal Agro Furance Workers Union Vs. Oswal Agro Furance Ltd. (in Liqn.), confirming the sale made in favour of respondent No. 1 even while dismissing the application for setting aside the sale moved at the instance of the appellant as well as the workers'' union.

Originally the property was sold by the liquidator appointed by this court in favour of respondent No. 1 for an amount of Rs. 13.80 crores and the said sale was confirmed on September 22, 2003. On September 25, 2003, the appellant filed an application for setting aside the sale offering Rs. 10 lakhs more than the highest bid of respondent No. 1. Despite the objections of counsel for respondent No. 1 that the sale in its favour had already been confirmed (by order dated September 22, 2003), the said sale was set aside and the bid of the appellant at Rs. 14.80 crores, i.e., Rs. 1 crore more was accepted by order dated November 3, 2003. Within three days thereof, i.e., on November 6, 2003, respondent No. 1 filed C.A. No. 798 of 2003 praying for setting aside the sale made in favour of the appellant and offering a higher bid but the said application was dismissed by order dated November 20, 2003. In the meantime, the official liquidator moved C.A. No. 608 of 2003 praying for confirmation of the sale in favour of the appellant and in response thereto, respondent No. 1 filed objections dated November 19, 2003. During the hearing of these objections, the learned company judge recorded that respondent No. 1 was ready to pay Rs. 1 crore more than what was paid by the appellant, i.e., Rs. 15.80 crores and, therefore, issued notice. By a detailed order dated December 8, 2003, the objections of respondent No. 1 were upheld and the sale was ordered in its favour at the increased price of Rs. 15.80 crores.

It is not disputed that since the date of the aforesaid order, respondent No. 1 has been in possession of the property now for the last more than six years. The said order was challenged by the appellant by way of Company Appeal No. 21 of 2003 and the same was disposed of on August 27, 2008, with the following order:

Learned counsel for the parties are agreed that the instant appeal be disposed of in terms of the order dated August 5, 2008, passed by this court in C.M.A. No. 106 of 2008 and C.A. No. 3 of 2007. Learned counsel for the parties are also one in requiring this court to clarify that all interim orders passed in the present appeal, i.e., C.A. No. 21 of 2003 should be allowed to continue till the readjudication of the matter, and additionally, that status quo as it exists today should continue till the final disposal of the matter at the hands of the company judge.

While accepting the aforesaid prayer made by learned counsel for the parties and setting aside the order dated December 8, 2003, we hereby clarify that the instant order has not been passed on the merits, but at the behest of learned counsel for the parties.

Company appeal stands disposed of in the aforesaid terms.

C.A. No. 798 of 2003 shall be listed by the registry of this court before the learned company court on December 18, 2008.

On the re-hearing (in view of the aforesaid order), the learned single judge has again reiterated the order dated December 8, 2003, i.e., to say he has set aside the sale in favour of the appellant and has confirmed the sale made in favour of respondent No. 1 and that is how the parties are before us.

The main ground of attack of Shri Jaspal Singh, senior advocate for the appellant is that the sale having been confirmed in favour of the appellant and rather the application to set aside the same having been dismissed, the sale could not have been set aside in the objections, particularly when it was not disputed that the price offered by the appellant was not wholly inadequate and that there was no irregularity or fraud in the sale process. He has drawn the attention of this court to the order dated November 3, 2003, wherein it was recorded that counsel for respondent No. 1 had unequivocally stated that his client was not willing to pay more than Rs. 14.80 crores. He also drew our attention to the order dated November 20, 2003, dismissing the application of respondent No. 1 for setting aside the sale wherein the learned single judge had specifically recorded that the application of the appellant offering an additional sum of Rs. 1 crore had come up for consideration on a number of dates after notice to respondent No. 1, viz., October 9, 2003, October 17, 2003, October 22, 2003, October 28, 2003 and November 3, 2003, on which date it had been categorically stated that respondent No. 1 was not willing to pay Rs. 14.80 crores. In view of these findings, learned senior counsel has argued that the sale made in favour of the appellant at Rs. 14.80 crores could not have been set aside.

As regards the argument that the confirmed sale could not have been reviewed, we are in agreement with the conclusion of the learned single judge that if this were to be accepted than the confirmed sale in favour of respondent No. 1 also could not have been re-opened at the behest of the appellant. Having chosen the said route, the appellant cannot now deny the use thereof to respondent No. 1. As regards the argument that the sale could not be re-opened merely because a higher price had been offered, the learned single judge found as follows (page 533 of [2009] 151 Comp Cas):

The conspectus of all the decisions referred to by both counsel must be understood as laying down the following principles: (i) the courts have inherent powers to reopen even confirmed sales; (ii) a confirmed sale need not be reopened only because a higher offer is made; (iii) the court while applying its power of review and setting aside a sale need not be guided only by proof of fraud or irregularity. Even in the absence of fraud or irregularity, a confirmed sale could be set aside; (iv) the best price after due publicity shall be the watch word and the benefit to the company in liquidation and the ultimate advantage of all the stakeholders shall be the guiding spirit for concluding the sale; and (v) subsequent event shall also be relevant and execution of sale deed and delivery of possession to a purchaser shall normally be taken to cast the curtains down.

In our opinion, the learned single judge has drawn the correct conclusions from the conspectus of the judgments of the hon''ble Supreme Court particularly in Divya Manufacturing Company (P) Ltd. Vs. Union Bank of India and Others, FCS Software Solutions Ltd. Vs. LA Medical Devices Ltd. and Others, and Valji Khimji and Company Vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. and Others, ] 11 Scale 287. It must be noticed that the price offered by respondent No. 1 was not an insubstantial increase but was a hike of Rs. 1 crore. Additionally, it cannot also be lost sight of that now for the last six years, respondent No. 1 has been in possession of the property.

As regards the appeal of the workers union, it is not disputed that the entire amount due to them has been paid. Their only plea is that the property has been sold at a price less than its actual value. However, a perusal of the judgment of the learned single judge reveals that various opportunities were granted to them in 2003 to produce a buyer who would pay a higher price but to no avail. Even before this court, it was specifically inquired from learned counsel appearing for the workers union as to whether in the event of the sale in favour of respondent No. 1 being set aside and a fresh sale being ordered, the workers would refund the amount received by them so as to reimburse the expenses incurred by respondent No. 1, but they declined the same. In these circumstances, we endorse the judgment of the learned single judge and dismiss these appeals with no order as to costs.