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Judgment
K.A. Puj, J.—Both these applicants have taken out judge''s summons praying for review and recall of the order dated December 26, 2007, passed by this Court in Official Liquidator''s Report No. 93 of 2007 and to accept the offer made by them for the purchase of assets of the company being lot No. I, i.e., plant and machinery and all other movables and immovables including land and building super structure of the company situated at village Bhateshwar, Udaipur.
So far as Company Application No. 4 of 2008 is concerned, this Court has issued notice on January 9, 2008. The said applicant has made the offer of Rs. 2.10 crores which was increased to Rs. 2.25 crores during the course of hearing of the application. Only with a view to show the bona fide of the applicant, he had shown his willingness to deposit an additional amount of Rs. 50 lakhs over and above the amount of EMD as well as late entry charges at 15 per cent. per annum with the official liquidator. At that stage, Mr. Sudhir Mehta, learned advocate appearing for respondent No. 4 in whose favour the sale was confirmed earlier, has raised serious objection and submitted that the applicant should be directed to deposit the entire amount with the official liquidator. The court thereafter directed the said applicant to deposit an amount of Rs. 50 lakhs within one week from the date of the said order, i.e., January 9, 2008, over and above the amount of EMD as well as the late entry charges at 15 per cent. per annum and on that condition, interim relief in terms of prayer (B) of the judge''s summons was granted.
Today in the morning, learned advocate Mr. Pavan Godiawala mentioned that his client, i.e., M/s. Sun Insurance Advisor P. Ltd., is also interested in participating in inter se bidding before the court and his offer is Rs. 2.35 crores and he has moved Company Application No. 36 of 2008. That is how, both these company applications are taken up for hearing.
Before proceeding with the inter se bidding between the parties, Mr. Sudhir Mehta, learned advocate appearing for respondent No. 4 has raised serious objection to proceed with the inter se bidding. He has filed a detailed affidavit. In support of his submissions, Mr. Mehta also relied on judgments of the hon''ble Supreme Court in the case of Divya Manufacturing Company (P) Ltd. Vs. Union Bank of India and Others, and in the case of Punjab Wireless Systems Employees Union v. Winsome Yarns Ltd. [2006] 134 Comp Cas 655.
Mr. Mehta has submitted that respondent No. 4 is the successful bidder before the sale committee as well as before this Court and this Court has confirmed the sale of lot No. I in favour of respondent No. 4 for Rs. 2.05 crores. At the time of confirmation of sale, the secured creditors have given their consent and have not raised any objection. As per the minutes of the meeting dated March 16, 2007, after the inter se bidding, highest bidder of purchase of lot No. I was received from respondent No. 4 of Rs. 1.95 crores. He has further submitted that the offer made by the present applicant for Rs. 2.25 crores against the offer of Rs. 2.05 crores of respondent No. 4 which was accepted by this Court is higher only by 9.76 per cent. which is quite unreasonable, improper and very low against the settled principles of law. In auction matters, once the sale is confirmed in favour of successful bidder, no question arises for review or recall or rebidding or reauction the same auction unless there is a drastic change in the amount offered by the new bidder or there is any fraud, otherwise there is no sanctity of the order of this Court. He has, therefore, submitted that it would be an endless process and some new purchaser would come for some higher amount. He has, therefore, submitted that the order confirming the sale in favour of respondent No. 4 does not call for any interference by this Court at this stage.
Mr. Mehta has further submitted that the terms and conditions do not show any clause regarding review or recall of or reauction or like this "to set aside the sale in favour of purchaser even after the sale is confirmed and/or purchase consideration is paid for the interest and benefit of creditors, contributories and all concerned and/or purchase consideration is paid with the interest and benefit of creditors, contributories and all concerned and/or public interest". He has, therefore, submitted that no question arises to review the order of this Court.
Mr. Mehta has further submitted that in similar case of Shraddha Aro-matics P. Ltd. v. O.L. of Global Arya Industries Ltd. [2009] 147 Comp Cas 322 (Guj), Company Application No. 504 of 20071, the applicant has offered Rs. 1.51 crores against Rs. 1.27 crores and this Court has allowed on deposit of full amount, i.e., Rs. 1.51 crores. The said order has been challenged by the earlier bidder before the Division Bench of this Court by way of OJ Appeal which is pending at the final hearing stage. He has, therefore, submitted that deposit of an amount of Rs. 50 lakhs is very unreasonable looking to the fact that in Company Application No. 504 of 2007, this Court has entertained the application on deposit of 100 per cent. with increase of new offer.
Mr. Mehta has further submitted that the purchase of property in court auction is a concluded contract on confirmation of sale which cannot be reversed. Even this Court cannot on the basis of inherent power, set aside a concluded contract in direct disregard or specific express provisions of law enacted by Parliament. Therefore, the concluded auction cannot be reopened after confirmation of sale unless there are very strong circumstances by which fraud is surfaced or material concealment of relevant facts are detected in the nature of the rarest of the rare.
Mr. Mehta has further submitted that every bidder has his own calculation for giving a particular bid amount up to a pre-deciding price to remain in the fray. It is, therefore, a business wisdom of each individual bidder, based on his calculations with risks and possibilities of loss or gain to give his bid up to a pre-decided limit on the basis of his calculation. After the auction is concluded in favour of the highest bidder, the calculations become public and the risk of loss and possibility of gain becomes known to others. On that basis, if others try to hijack the deal, it must not be entertained by this Court. He has, therefore, submitted that this application is beyond the scope and purview of the Companies Act, 1956 and the Companies (Court) Rules, 1959. Therefore, the applicant has not complied with the statutory provisions of the Act/Rules and hence, the application deserves to be rejected with costs.
Mr. N.D. Nanavaty, learned senior advocate appearing for the applicant in Company Application No. 4 of 2008, Mr. Pavan Godiawala, learned advocate appearing for the applicant in Company Application No. 36 of 2008, Mr. Nitin Mehta, learned advocate appearing for the official liquidator and Mr. N. K. Pahwa, learned advocate appearing for the secured creditor, on the other hand, submitted that the objections raised by respondent No. 4 are not sustainable in law in view of the binding judgment of the hon''ble Supreme Court in the case of Divya Manufacturing Company (P) Ltd. Vs. Union Bank of India and Others, and the court should proceed with the inter se bidding between the parties and whosoever be the highest bidder, the sale be confirmed afresh in favour of such highest bidder.
Submissions made by Mr. Sudhir Mehta, learned advocate appearing for the highest bidder, i.e., M/s. Patel Phoschem P. Ltd., in whose favour the sale was confirmed earlier, are neither convincing nor tenable at law. Respondent No. 4 has not even paid the first instalment of 25 per cent. of sale consideration. The possession is neither handed over nor the sale deed is executed in favour of respondent No. 4. In the case of Divya Manufacturing Company (P) Ltd. Vs. Union Bank of India and Others, , the hon''ble Supreme Court has clearly held that so long as possession is not handed over to the purchaser and the sale deed is not executed, the court by virtue of Clause 11 of the terms and conditions for sale can reopen the sale in the interest of justice. Here in the present case, despite the fact that there is no clause like Clause 11 of the terms and conditions for sale, the court can exercise its inherent powers to reopen the sale in the interest of justice. In this very judgment at more than one place, the hon''ble Supreme Court has observed that it is the 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. The court has also observed that when correct market value of the assets was not properly known to the court and the sale was confirmed at grossly inadequate price, it was open to the court to set it at naught in the interest of the company, its secured and unsecured creditors and the employees. The very fact that earlier the sale was confirmed at Rs. 2.05 crores and it has now reached up to Rs. 2.70 crores after permitting the other two bidders to participate in the inter se bidding before the court itself proves that earlier the sale was confirmed at much lower price. Respondent No. 4 was also permitted to participate in the inter se bidding. However, it has not availed of this opportunity and merely raised an objection on this technical ground. Had this objection been sustained by the court, the secured creditors and workers of the company in liquidation would have been deprived of an amount of Rs. 65 lakhs. It is in this view of the matter, the order dated December 26, 2007, passed by this Court in O.L.R. No. 93 of 2007 is hereby recalled and fresh inter se bidding is undertaken.
Mr. Sudhir M. Mehta, learned advocate appearing for respondent No. 4 has expressed his inability to participate in the inter se bidding and hence, there are only two bidders, namely, M/s. Manu Tiling Co. P. Ltd. and M/s. Sun Insurance Advisor P. Ltd., the applicants in Company Applications Nos. 4 and 36 of 2008, respectively. The bid started slowly and gradually and ultimately, it reaches up to Rs. 2.70 crores that was the highest bid made by M/s. Manu Tiling Co. P. Ltd., the applicant in Company Application No. 4 of 2008 and since there was no other offer exceeding this offer, the sale of lot No. I, i.e., plant and machinery and all other movables and immovables including land and building super structure of the company situated at village Bhateshwar, Udaipur is confirmed in favour of M/s. Manu Tiling Co. P. Ltd., for Rs. 2.70 crores on the same terms and conditions as contained in the sale document.
Since M/s. Manu Tiling Co. P. Ltd., has deposited Rs. 50 lakhs earlier, the balance amount of 25 per cent. of the first instalment of the sale consideration should be deposited with the official liquidator within one month from today and thereafter, remaining 75 per cent. amount should be deposited with the official liquidator within three months therefrom. The amount of EMD shall be adjusted only at the time of last instalment. The official liquidator is directed to hand over possession only after payment of full sale consideration and the sale deed shall be executed thereafter, within one week from the date of furnishing the copy of the draft sale deed by the auction purchaser to the official liquidator.
The official liquidator is directed to return the amount of EMD to M/s. Sun Insurance Advisor P. Ltd., applicant of Company Application No. 36 of 2008. However, the amount of late entry charges should be retained by him. So far as respondent No. 4 is concerned, his EMD shall be returned with interest at 15 per cent. from the date of payment by respondent No. 4 till the amount is refunded to him.
Subject to the aforesaid directions and observations, these two applications are accordingly disposed of. In view of this order, O.L.R. No. 93 of 2007 stands disposed of in the above terms.