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Judgment
Chandramauli Kr. Prasad, J.—Shree Vishwanath Chemical Priviate Limited is a Company under liquidation. Bihar State Credit & Investment Corporation Limited (hereinafter referred to as the "BICICO") is one of its secured creditors. Naresh Kumar Poddar is a share-holder and Ex-Director (hereinafter referred to as the "Ex-Management") of the Company, as also guarantor for repayment of the loan to the BICICO. The movable and immovable assets of the company under liquidation were valued by valuer of the BICICO. It valued at Rs. 12,00,000/-, the value of the land measuring 1.5 acres of land situate at Industrial Area Bela, Muzaffarpur in the district of Muzaffarpur. It determined the value of civil construction at Rs. 16,42,663/-. The plant and machinery have been valued for Rs. 12,98,850/-. Thus the total value of the movable and immovable assets of the company as assessed by the valuer is Rs. 41,59,530/-. As per direction of the Company Judge, the assets of the company were advertised for sale in two newspapers-one in English and other in Hindi. In the tender notice, the assets of the company were classified as Schedule-I and Schedule-II. Schedule-I consisted of plant and machinery alongwith main plant shed and other shed structure, whereas Schedule-II consisted of land measuring 1.5 acres. The reserve price of Schedule-I and Schedule-II was fixed at Rs. 21,14,000/- and Rs. 20,46,000/- respectively. The earnest money for each of the Schedules was fixed at Rs. 3,00,000/- and for both, the earnest money was Rs. 5,00,000/-. The intending buyer was given liberty to buy only Schedule-I property if it so chooses.
In response to the aforesaid advertisement, two offers were received-one for Rs. 8,00,000/- and odd and other by M/s Sharif Brothers for Rs. 12,00,786/ -. It had also made security deposit of Rs, 3,00,000/-. One of the secured creditor, namely, BICICO as also the Ex-Management objected to the acceptance to the offer. The Company Judge rejected both offer and directed the BICICO and the Ex-Management to procure better buyers. In the light of the aforesaid order, the assets of the company were again advertised for sale and notice was published in Economic Times, Kolkata in its issue dated 28th November, 2007 and Dainik Jagran published from Patna. Neither the BICICO nor Ex-Management procured better offer and this time only offer came from Sharif Brothers (hereinafter referred to as the ''Purchaser'') for purchase of the assets for a sum of Rs. 10,75,786/-, less than the earlier offer of Rs. 12,00,786/-. The Company Judge by order dated 13.12.2007 accepted the offer of purchaser and directed it to deposit the balance of the sale amount on or before 20th of December, 2007. Ex-Management and BICICO, aggrieved by the same, have preferred separate appeals, which have been registered as Company Appeal No. 1 of 2008 and Company Appeal No. 4 of 2008.
Purchaser as directed deposited the entire sale price and the Company Judge by order dated 20.12.2007 confirmed the sale and gave liberty to remove the subject matter of sale. Ex-Management, aggrieved by the same has preferred appeal, which has been registered as Company Appeal No. 3 of 2008.
As stated earlier, the valuer in his valuation report had valued the movable and immovable assets of the company to the tune of Rs. 41,59,513/-. It is only on 19.12.2007 Ex-Management had filed objection to the valuation report. The Company Judge by order dated 4.1.12008 overruled the objection and while doing so observed as follows:-
The objection about the valuation raised by the Learned Counsel for the Ex-Management appears to be meaningless in view of the fact that in spite of two sale notice(s) as also opportunity to the Ex-Management and the secured creditor for arranging potential buyer with better price, the same could not be arranged and this Court had no option but to accept the offer of M/s Sharif Brothers under order dated 13.12.2007.
In the circumstances, overruling the objection about the valuation report, as the same has been accepted by the secured creditor, BICICO itself.
Ex-Management, aggrieved by the same, has preferred appeal and it has been registered as Company Appeal No. 5 of 2008.
All the appeals have been heard together and are being disposed of by this common judgment.
Mr. Umesh Prasad Singh, Senior Advocate as also Mr. R.A. Singh, appear on behalf of the Ex-Management, whereas the secured creditor BICICO is represented by Mr. Nirmal Kumar, Mr. Alok Kumar Agrawal, appears on behalf of the Official Liquidator. Mr. Gautam Kejriwal has represented the purchaser.
While assailing the orders dated 13.12.2007 and 20.12.2007, Mr. Umesh Prasad Singh, contends that the BICICO is not only the secured creditor but owner of the property, hence the assets of the company ought not to have been sold at the price not acceptable to it and the Ex-Management. In support of his submission, reliance has been placed on a decision of the Supreme Court in the case of Allahabad Bank etc. etc. Vs. Bengal Paper Mills Co. Ltd. and Others, and our attention has been drawn to paragraph 13 of the judgment, which reads as follows:-
It is to be noted that no reserve price for the sale was fixed. Why this should have been so is not understood, particularly having regard to the fact that a valuer had been appointed of the assets and properties and a report obtained. The valuation report was not disclosed. The order of the learned Single Judge does not set out what the valuation of the property that was sold was. It does not even state that, in view of that valuation, the offer of Rs. 2 crores made by the second respondent was a fair and adequate price. Further, the learned Single Judge did not notice what the Division Bench did, namely:-
The Company had 15.2.73 acres of leasehold land. This was not taken into consideration by the Valuer on the ground that the lease period was only up to 14th October, 1992. The Valuer has not indicated whether he had examined the lease deed or whether there was any renewal clause in the lease agreement.
The valuation was, therefore, itself suspect.
I do not find any substance in the submission of Mr. Singh and the authority relied on is clearly distinguishable. In the case in hand, the assets of the company were valued by the valuer of the BICICO. Not only this, the reserve price for the sale of the assets was fixed. The sale was advertised in the newspaper having circulation all over the country. Earlier the pruchaser''s offer was for Rs. 12,00,786/- but the Company Judge did not accept the said offer due to the objection raised by the BICICO as also the Ex-Management. While declining to accept the offer, the Company Judge directed the BICICO and the Ex-Management to procure better offer. Both of them did not object to advertisement of the property for sale and further did not procure any offer. In the light of the second advertisement, the purchaser offer, which was for a lesser amount, was accepted. It weighed with the Company Judge that earlier two offers were received, but later on only one person came forward to purchase the assets with less offer and in case it is not accepted, in the future no purchaser may come or the offer may be of lesser amount.
In that view of the matter, I am of the opinion that the Company Judge did not err in accepting the offer of the purchaser, despite objection by the secured creditor and the Ex-Management.
While assailing the acceptance of the offer and the confirmation of sale, Counsel representing the secured creditor and the Ex-Management contend that the Ex-Management had objected to the valuation report, but without deciding the same the Company Judge had proceeded to sale the assets of the company. It has been submitted that before proceeding to sale, the assets of the company and confirming the same the Company Judge ought to have adjudicated the objection of the valuation report.
I do not find any substance in this submission. The assets of the company were advertised for sale for the first time, in which the last date to submit the offer was 4th of October, 2007. No objection to the valuation report was made. The offers received in response to first advertisement were not accepted. Thereafter also no objection was made to the valuation report. Thereafter the assets of the company was advertised for sale for the second time in which only one offer came and the learned Company Judge by order dated 13.12.2007 accepted the same and directed the purchaser to deposit the balance sale price on or before 20th of December, 2007. It is only thereafter that on 19.12.2007, the Ex-Management filed objection to the valuation report on 19.12.2000. The Company Judge deferred consideration of the objection to the valuation report. On 20.12.2007 the purchaser deposited the entire sale price in compliance of the order dated 13.12.2000 and taking note of the same the Company Judge by order dated 20.12.2007 gave liberty to the purchaser to remove the assets purchased by it. From what has been stated above, it is evident that the Ex-Management had objected to the valuation report only as a ploy to defer the confirmation of sale. The Company Judge being conscious of the fact that by passage of time the value of the assets may decrease allowed the purchaser to remove the assets of the company. In such situation, the Company Judge did not err in either passing the order dated 13.12.2007 or 20.12.2007.
it has been further contended that the order accepting the offer of the purchaser and confirming the sale of the assets of the company for a price less than the reserve price is bad in law.
I do not find any substance in this submission of the Learned Counsel Mere inadequacy of price cannot be a ground for setting aside the sale. Advertisement for sale was widely circulated. In fact in response to the first advertisement, offers made by the intending purchasers were not accepted, being objected by the secured creditor and the Ex-Management and they were directed to procure better offer. Thereafter the assets of the company were advertised for sale again and the secured creditor did not bring any higher offer. Not only this, in response to the second advertisement only one offer, came and that too for a lesser amount, than what was offered in response to the first advertisement. It is worth mentioning here that the purchaser has purchased the property as mentioned in Schedule-I of the notice and its reserve price has been fixed as Rs. 21.14 lacs. The secured creditor i.e. BICICO was asked to take instruction as to whether it is prepared to purchase the property at the reserve price. The secured creditor, through its Counsel had not responded to it positively. In the background of the aforesaid facts, I am of the opinion that the Company Judge did not err in accepting and confirming the offer of the purchaser for a lesser amount.
The view which I have taken finds support from the judgment of the Supreme Court in the case of Kayjay Industries (P) Ltd. Vs. Asnew Drums (P) Ltd. and Others, in which it has been held as follows:-
So viewed, we are satisfied that the District Court, had exercised a conscientious and lively discretion in concluding the sale at Rs. 11.5 lakhs. If the market value was over 17 lakhs, it is unfortunate that a lesser price was fetched. Mere inadequacy of price cannot demolish every Court sale. Here, the Court tried its best, time after time, to raise the price. Well-known industrialists in the public and private sectors knew about it and turned up. Offers reached a stationary level. Nor could the Corporation be put off indefinitely in recovering its dues on baseless expectations and distant prospects. The judgment-debtor himself, by his litigious exercises, would have contributed to the possible buyers being afraid of hurdles ahead. After all, producing around Rs. 11.5 lakhs openly to buy an industry is not easy even for apparently affluent businessmen. The sale proceedings had been pending too long and the first respondent could not, even when given the opportunity, produce buyers by private negotiation. Not even a valuer''s report was produced by him. We are satisfied that the District Judge had committed no material irregularity in the conduct of the sale in accepting the highest offer of the appellant on September 3, 1969.
It has been contended that when consideration of objection to the valuation report was deferred by the Company Judge, the sale ought not to have been confirmed. In support of the same, reliance has been placed on a judgment of the Supreme Court in the case of Union Bank of India Vs. Official Liquidator H.C. of Calcutta and Others, and our attention has been drawn to paragraph 10 of the judgment, which reads as follows:-
At the outset we would state that in proceedings for winding up of the Company under liquidation, the Court acts as a custodian for the interest of the company and the creditors. Therefore, before sanctioning the sale of its assets, the Court is required to exercise judicial discretion to see that properties are sold at a reasonable price. For deciding what would be reasonable price, valuation report of an expert is must. Not only that, it is the duty of the Court to disclose the said valuation report to the secured creditors and other interested persons including the offerors. Further, it is the duty of the Court to apply its mind to the valuation report for verifying whether the report indicates reasonable market value of the property to be auctioned, even if objections are not raised.
I do not find any substance in the submission of the Learned Counsel. It is relevant here to state that the offer of the purchaser was accepted on 13.12.2007 and it was directed to deposit the balance amount on or before 20.12.2007. It is only thereafter that an objection to the valuation report was filed on 19.12.2007. It is not the case of the Ex-Management that it objected to the valuation report after the valuer submitted its report or the Company Judge directed for sale of the assets of the company. It is only after the offer of the purchaser has been accepted that the Ex-Management has filed the application as a ploy to defer the same. I am afraid in case the sale is set aside, the price of the assets of the company would further go down.
While assailing the sale and confirmation, it has also been contended that orders do not indicate as to which of the properties have been sold. This argument has been noted only to be rejected. The assets of the company were advertised for sale in two lots i.e. Schedule-I and Schedule-II. The purchaser had made offer for purchase of Schedule-I property and in that view of the matter, there is no hesitation in coming to the conclusion that Schedule-I property has been sold to the purchaser.
While assailing the order dated 4.1.2008, Mr. Singh points out that the assets of the company were not properly valued and, as such, the valuation report is fit to be rejected. It is worth mentioning that in spite of issuance of advertisement twice as also opportunity to the Ex-Management and several circulars to procure better offer, they did not bring better offer. Not only this, the offer coming later was also for a lesser amount. It is relevant here to state that the secured creditor has accepted the valuation report. I have found that the Ex-Management has made objection to the valuation report only to defer the sale.
Accordingly, I am of the opinion that the Company Judge did not err in overruling the objection filed by the Ex-Management to the valuation report. All the appeals are thus devoid of any merit and deserve to be dismissed and they are dismissed accordingly, but without any order as to costs.
Jayanandan Singh, J.
I agree.