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Judgment
B. Manohar, J.—This application is filed under Rule 9 of the Companies (Court) Rules 1959 by the Ex-Promoter Director of the first Respondent M/s. Manikya Plastichem Private Limited which is under liquidation, seeking for reopening the auction conducted by this Court on 4-3-2011 and to permit the second applicant to submit his offer for Rs. 4.10 Crores before confirmation of sale of the assets of the first Respondent-Company in liquidation.
In the application he has contended that he was Promoter Director of the first Respondent-company. He tendered his resignation to the post of Directorship on 9-5 2006 and he has transferred all his shares to the existing shareholders during November 2006. Immediately after his resignation, he informed the same to the State Bank of India. Commercial Branch, Saraswathipuram. Mysore requesting them to discharge him from the guarantee. The said issue is pending in O.S. No. 790/2008.
He claims that he was out of station for 25 days and during his absence, the property of the first Respondent-Company was auctioned for Rs. 3,90;00,000/- which is far below the market value. Subsequently, he found that the second applicant is ready to purchase the assets of the first Respondent-Company for Rs. 4,10,00,000/-. Hence, he filed this application seeking for reopening the case and to permit the second applicant to participate in the proceedings before confirmation.
The few facts of the case are as follows:
One Mohan Singh, Proprietor of M/s. Mohan Engineering filed a winding up petition against the first Respondent-company for non-payment of the dues of Rs. 2,47,671/- u/s 431(a) of the Companies Act. On 27-8-2008, the first Respondent-company submitted before the Court that it has closed its business and settled its dues with its employees and they are unable to pay the debts due to the Petitioner in the winding up petition. This Court admitted the petition and ordered for advertisement of the petition in The Hindu'' daily newspaper. Thereafter, winding up order has been passed 18th December 2008. The Official Liquidator attached to this Court was allowed to take charge of the company. Thereafter, efforts have been made to sell the Company thrice. At last, this Court on 4-3-2011 auctioned the property in the Court. Paragraphs 15 and 16 of the order dated 4-3-2011 reads as under:
Having heard the learned Counsel for the parties and on perusal of the earlier orders passed by this Court, it is noticed that there were three attempts as on date made by this Court to secure the best possible price for the assets of the company in liquidation. The details of the said attempts made are as
No of Attempts Dale of Publication In News Paper Date of Auction No of tenders received highest offer (in crores) Highest bidder Remarks
1 7-10-2009 23-10-2009 12 4.31 Arun Engineering Projects (P) Ltd., Bangalore. Offer rejected
2 28-7-2010 19-8-2010 3 3.75 MGM Pooja Infra (P) Ltd., Mysore Offer Rejected
3 2/3-2-2011 21-02-11 6 3.32 increased the bid to 3.90 crores in court action K.N. Shivas swamy, Mysore Yet to be confirmed
A perusal of all valuation reports available on file would go to show that as on date of 1st valuation i.e.. 6.6.2009 the valuation fixed for all the assets of the Company in liquidation by the valuer was Rs. 5,14,11,155/-. Thereafter, Official Liquidator as well as secured creditor both have obtained the valuation reports (Rs. 3.40 Crores & Rs. 3.99 Crores) respectively which are placed on record, which would clearly go to show that value of the assets of the Company in liquidation has been reduced from Rs. 5.14 Crores to 3.99 Crores. The valuation of the assets as per valuation report by Sri.S.V. Srinivas submitted on behalf of the secured creditor is at Rs. 3.99 Crores and valuation of the assets as per valuation report submitted by Sri.B.S. Sheshagiri submitted on behalf of the Official Liquidator is at Rs. 3.40 Crores. In the bids submitted by the bidders pursuant to the advertisement dated 2-2-2011 published by the official liquidator the highest bid that was received was at Rs. 3.32 Crores by Sri.K.N. Shivaswamy. The said report of the Official Liquidator in OLR 94/2011 is placed for approval by this Court and for permitting Court auction. In pursuance to the notices issued by the O.L to the six (6) bidders who had participated in the public auction conducted by the O.L on 212-2011 three bidders have appeared before the Court and participated in the Court auction As per minutes recorded of even date (which is part and parcel of this order) in the said Court auction conducted as noted herein above Sri.K.N. Shivaswamy has given the highest bid for Rs. 3.90 Crores.
Thus taking into consideration that assets of the Company in (liquidation) has been valued as per its valuation made in June 2009 and September 2010, this Court is of the considered view that any further delay would result in further deterioration in the value of the assets in question as is evident from the records. The bid offered by Sri. K.N. Shivaswamy is in the proximity with the valuation of the assets of the Company made by the valuer Sri. S.V. Srinivas (valuation submitted on behalf of the secured creditor which is at Rs. 3.90 Crores). Secured Creditor has not furnished or secured any other offer from any prospective purchasers by a higher offer than one offered by Sri. K.N. Shivaswamy. There is no justifiable reason to either postpone the Court auction or reject the offer made by Sri. Shivaswamy. There are no other person/s present who intend to give higher bid than one received today in Court auction. In view of the same the bid offered by Sri. K.N. Shivaswamy. deserves to be accepted and also in view of the fact that other two bidders being present before the Court having confined their claims to the extent of offer made by them as stated herein above. Accordingly bid offered by Sri. K.N. Shivaswamy. for Rs. 3.90 Crores is accepted which would be sale consideration for the sale of land, building, plaint and machinery, office equipment, Furniture & Fittings, Finished Goods and Vehicles as reflected in the notice inviting bid which is at Annexure B 1 to OLR 94/2011.
After completion of the auction, one more effort was made to stall the confirmation of auction in C.A No. 309/2011 by one MGM Pooja Infra (Pvt) Limited stating that the said company is ready to pay Rs. 5.00 lakhs more than the offer accepted by one K.N. Shivaswamy for Rs. 3.90 crores. This Court after considering the prayer made by MOM Pooja Infra (Pvt) Limited in paragraphs 6 and 7 observed as under:
The applicant company which is represented by Sri. S.P. Srinivasa Murthy was also present in the Court auction that was conducted on 4-3-2011 and it was elicited from all the participants including the present applicant as to whether they would increase the bid over and above the offer made by Sri. K.N. Shivaswamy, for which the answer from all the bidders was in the negative and taking this fact also into consideration the bid offered by the highest offer (namely Sri. K.N. Shivaswamy) came to be accepted. The very same representative of the applicant company who was present in the court auction conducted by 4-3-2011 and who was also the participant in all other earlier bids has now come up with the present application contending that at the time of Court auction, Sri.K.N. Shivaswamy has stated that he would utilise the property in question for charitable purpose and now it is proposed to be utilised for commercial purposes. No material is placed in this regard by the present applicant. This Court would not go into such a contention inasmuch as it is concerned only with securing the best price for the assets of the company in liquidation. As such contention of the applicant cannot be accepted.
One another aspect which also requires to be noticed is that applicant in question who had participated in the auction proceedings on 4-3-2011 is an engineering graduate conversant with all worldly affairs and is also aware about the proceedings that was conducted in the open Court on 04.03.2011 and having consciously participated, offered its bid, accepted the same and having not increased the bid even before the bid came to be accepted and having agreed not to increase the bid has now come up with the present application on a ground which does not merit consideration. The said plea put forward by the applicant is hereby rejected and the attempt made by the applicant to stall the auction proceedings conducted by this Court on 4-3-2011 by mailing a show of increasing the bid by offering five lakhs above the bid offered by Sri. K.N. Shivaswamy would clearly go to show the sinister motive with which the present application is filed. As such application not only deserves to be dismissed, but applicant is to be mulcted with exemplary costs. Accordingly application is dismissed with costs of Rs. 20,000/- payable by the applicant to the O.L within a period of four weeks failing which the O.L is at liberty to recover the same by filing the execution proceedings.
The said application was dismissed with cost of Rs. 20,000/-. Thereafter, the Ex-Director made one more effort by filing the present application.
The main contention of the applicants is that the market value of the assets of the first Respondent-Company was assessed at Rs. 5,14,11,155/- (Rupees five crores fourteen lakhs, eleven thousand one hundred and fifty five only) as on 6-6-2009. However, there was no bidder for the said valuation. The bid offered by M/s. Arun Engineering is for Rs. 4,31,00,000/- (Rupees four crores thirty one lakhs only) which was less than the valuation price, and the same was rejected. Thereafter, the auction has been accepted for Rs. 3.90 crores. The second applicant is ready to pay Rs. 20.00 lakhs (Rupees twenty lakhs only) more than the accepted price i.e. Rs. 4.10 crores. Further, it is also alleged that successful bidder has not paid the amount within 30 days from the date of auction. He asserted that cheque has been drawn for the balance amount and the same has to be deposited on or before 3-4-2011. However, the cheque was presented to the Official Liquidator on 5-4-2011 and the same was sent for collection on 6-4-2011 and collection was made on 8-4-2011, hence the amount has not been deposited within 30 days and violated the Clause 15 of the Notification. Hence, requested the court to cancel the bid offered by the successful bidder and to permit the second applicant to make his offer.
The successful bidder represented by Sri. Thomas V. Peter filed his objections inter alia contending that since the day 3-4-2011 happens to be Sunday and 4-4-2011 happens to be the Government Holiday, next working day i.e. on 5-4-2011 the cheque was handed over to the Official Liquidator and the Official Liquidator presented the cheque on 6-4-2011 and the amount has been drawn subsequently. There is no delay on the part of the second Respondent. With a view to stall the acceptance of bid. the Ex-Director filed the present application and sought for dismissal of the same. Further, he also contended that earlier similar attempts made by MGM Pooja (Pvt.) Limited were also dismissed by this Court with cost of Rs. 20,000/-and sought for dismissal of the application with exemplary costs.
Sri. G. Krishnamurthy, learned Counsel appearing for the applicant relying upon some of the judgments reported in FCS Software Solutions Ltd. Vs. LA Medical Devices Ltd. and Others, ; Usmansab Hatel Sahab Vs. R.L. Meharwade and Others, and an unreported judgment made in C.A. No. 889/2002 disposed of on 17-11-2003, contended that the Court has power to reopen the case if there is a highest bidder who is ready to pay more money. He also relied upon the judgments reported in Rao Mahmood Ahmed Khan Vs. Sh. Ranbir Singh and others, and contended that 25% of the bid amount has to be deposited immediately and sought for allowing the application.
I have carefully gone through the arguments addressed by the learned Counsel for the panics and perused the earlier order dated 4-3-2011 passed by this Court in Co.P. No. 56/2008.
It is not in dispute that for non. payment of dues of Rs. 2,47,671/-, the first Respondent-company was wound up by this Court on 18-12-2008. However, this Court permitted to auction the property of the first Respondent-company in liquidation and permitted to give notification in the newspapers circulated at Karnataka as well as at Bombay to fetch a higher price. The efforts made to auction the property were ended with failure. Thereafter, the Court itself has taken the responsibility of auctioning the property of the first Respondent and auctioned the property on 4-3-2011. The second Respondent is the highest bidder for Rs. 3.90 crores. The auction has been conducted in the presence of secured creditors, State Bank of India. As per Clause 15 of the notification, the second Respondent has got 30 days to pay the entire amount. Accordingly, the application filed by the second Respondent for extension of time was rejected by this Court. The second Respondent, has drawn the cheque on 2-4-2011 since the last date was 3-4-2011 to deposit the amount with the Official Liquidator. Since 3-4-2011 happens to be Sunday and 4-4-2011 happens to be Government Holiday the next working day i.e. on 5-4-2011 the second Respondent has handed over the cheque to the Official Liquidator and on the next day i.e. on 6-4-2011, the Official Liquidator sent the cheque for collection. There is no violation of Clause 15 of the Notification and payment has been made within 30 days. The first applicant is fully aware of the fact that the Respondent-Company has already been wound up on 18-12-2008 and efforts are being made to sell the assets of the first Respondent-company to the highest price. In spite of the efforts made by the Official Liquidator, he could not get the market value. In view of delay in the auction process, the value of the property is decreased. The latest market value of the properly is 3,99,00,000/- crores, i.e.
(i) The valuation of the land is at Rs. 2,86,00.000
(ii) The valuation of the building and amenities is at Rs. 88,00,000
(iii) The valuation of machinery is Rs. 25,00,000
TOTAL Rs. 3,99,00,000
The highest bid offered for Rs. 3,90,00,000/- is very close to the market value accordingly it was accepted by the Court. If the applicant has any other buyers, he would have tendered his offer when the notification was issued or he could have been present before the Court on 4-3-2011 with his bid for Ps.4.10 crores. Having kept quite all these days, after depositing the bid amount the applicants cannot come before the Court and say that they were ready to pay the higher amount. This application is one more attempt to stall the confirmation of sale. There is no bonafide in the claim made by the applicants. Therefore, the application deserves to be dismissed with cost.
Accordingly, the application is dismissed with cost of Rs. 5.000/-.