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Wednesday, August 19, 2015

No sale is to be set aside due to increase of prices subsequently pending confirmation of sale = The highest bid of the appellant herein was accepted by the Company Court and all the stake-holders of the company in liquidation were heard before such an acceptance. Nobody ever objected including the first respondent herein at that stage on any ground whatsoever, such as, that there was any fraud or irregularity in the sale nor was there any objection from any one of them that the price offered by the appellant herein was inadequate. No doubt, the property in question became more valuable in view of the subsequent development. = that the order dated 17.12.2013 only accepted the highest bid but it did not confirm the sale and, therefore, the Court is at liberty to decline confirmation of the sale in view of the subsequent developments. In our opinion, the said submission is to be rejected because there is no specific format in which a sale conducted by the official liquidator is to be confirmed by the Company Court. The mere absence of the expression “that the sale is confirmed” in the order dated 17.12.2013 is not determinative of the question. = The first respondent kept on adding new grounds from stage to stage for attacking the order dated 17.12.2013. The conduct of the first respondent is understandable. The value of the property in question must have escalated substantially in view of the developments subsequent to the order dated 17.12.2013 but allowing such an attempt, in our opinion, would rob the sales conducted by the Courts of all sanctity For all the abovementioned reasons, we allow the appeals of the appellant Vedica Procon Private Limited, with costs.

                                                                  Reportable

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 6165 OF 2015
                                    (Arising out of Special Leave Petition
                          (Civil) No.2198 of 2015)

Vedica Procon Private Limited                            ...  Appellant

            Versus

Balleshwar Greens Private Limited & Others         …  Respondents



                                    WITH

                     CIVIL APPEAL NO. 6166-6167 OF 2015
                                           (Arising out of Special Leave
                  Petition (Civil) Nos.10148-10149 of 2015)

Vedica Procon Private Limited                            ...  Appellant

            Versus

Balleshwar Greens Private Limited & Others         …  Respondents





                               J U D G M E N T



Chelameswar, J.



1.    Leave granted.

2.    M/s Omex Investors Ltd. was ordered to be  wound  up  by  the  Company
Judge of the Gujarat High Court by an order dated  6.3.1990.   The  Official
Liquidator  attached  to  the  Gujarat  High  Court  was  appointed  as  the
Liquidator of the said company.

3.    By order dated 26.3.2013, the official liquidator was directed to  put
the freehold land of the company admeasuring 13895 sq. mtr. to  auction  for
sale by inviting offers from the intending purchasers in sealed covers.   By
the said order, the High Court also fixed an upset  price  at  Rs.55  crores
and earnest money deposit (EMD) at 10% thereof.

4.    Tender Notice (containing the terms and conditions of  sale)  inviting
offers  from  the  prospective  purchasers  in  sealed  covers  was   widely
published.   11  prospective  purchasers  responded  to  the  notice.     On
17.12.2013, an auction  was  held  in  the  open  court.     After  inter-se
bidding of 12 rounds, the appellant in  Civil  Appeal  arising  out  of  SLP
(Civil) No.2198  of  2015  [“Vedica  Procon  Private  Limited”,  hereinafter
referred to as “the appellant”) became the highest bidder with an  offer  of
Rs.148 crores[1] –whereas the first respondent  (Balleshwar  Greens  Private
Limited) in the abovementioned SLP  made the second highest bid.   The  High
Court accepted the bid of the appellant.

5.    By the same order the High  Court  recorded  that  the  earnest  money
deposit by the appellant  and  the  first  respondent  be  retained  by  the
official liquidator and  the  earnest  money  deposits  made  by  the  other
unsuccessful bidders be returned.

6.    On 19.12.2013, the official  liquidator  addressed  a  letter  to  the
appellant referring to the order dated 17.12.2013  of  the  High  Court  and
informed the appellant as under:

“With reference to the subject cited above, I have to  state  that  pursuant
to order dated 17.12.2013 passed by the Hon’ble High  Court  of  Gujarat  in
Official Liquidator Report No.43 of 2013, the sale of Freehold land  of  the
company in Liquidator (sic liquidation) admeasuring 13895 sq. mtrs.  approx.
at T.P. No.18, F.P. No.32/P, bearing Survey  No.25,  27-B/1,  31,  38,  Moje
Rajpur –  Hirpur,  Outside  Raipur  Gate,  behind  New  Cloth  Market,  Opp.
Hirabhai Market, Diwan Ballubhai Road, Raipur,  Ahmedabad  is  confirmed  in
your favour for Rs.148 Crores.  A copy of said order  is  enclosed  herewith
for your  ready  reference  and  perusal.    In  this  connection,  you  are
requested to deposit sale proceed 25% i.e.  Rs.37.00  Crores  on  or  before
16.02.2014 and balance remaining 75% i.e.  Rs.106.50  Crores  on  or  before
16.04.2014, after adjusting Rs.4.50 Crores behind EMD in  final  payment  of
sale proceed.  You are, therefore, requested  to  kindly  deposit  the  sale
proceed with this office, within stipulated time given by the  Hon’ble  High
Court of Gujarat in terms of order dated 17.12.2013 and Tender document.”

                                                         [emphasis supplied]

7.    Pursuant to the said letter, the appellant deposited on 06.01.2014  an
amount of Rs.37 crores being 25% of  the  purchase  price  by  Demand  Draft
drawn on ICICI Bank.

8.     By  letter  dated  09.1.2014,  the  first  respondent  requested  the
official liquidator to refund  its  earnest  money  deposit.   The  relevant
portion of the letter reads as follows:

“5.   As per condition no.29 of Tender Document, the EMD of  second  highest
bidder i.e. Baleshwar Greens Pvt. Ltd. was to be returned after 25%  of  the
sale consideration is deposited by the successful bidder.

6.    We have come to know that successful bidder  M/s.  Vedia  Procon  Pvt.
Ltd. has deposited 25% of the sale consideration in the office  of  Official
Liquidator.

7.    Therefore we hereby request you to kindly refund our EMD of Rs.4.5  Cr
and late fees of Rs.23.5 lakhs at the earliest.

                                                         [emphasis supplied]

9.    Admittedly, the EMD of the first respondent was returned.

10.   On 16.01.2014, the appellant informed  the  official  liquidator  that
they had deputed  security  persons  to  “protect  the  possession”  of  the
property in question for various reasons detailed in the  said  letter.   In
response, the official liquidator by its letter  dated  24.01.2014  informed
the appellant inter alia as follows:

“Besides this it is brought to your notice that the office of  the  Official
Liquidator has already deployed  security  at  the  mills  premises  of  the
company  in  Liquidation.   However,  keeping  in   view   the   facts   and
apprehension stated by you in the aforesaid letters, if you so  desire,  you
can post your security outside the premises  purchased  by  you  to  protect
your interest and avoid the possibility of any casualty  under  the  control
and supervision of the security posted by  official  liquidators  office  at
your  risk,  cost  and  consequence  in  addition   to   existing   security
arrangement made by this office.”



11.   On 25.03.2014, the appellant filed  an  application  before  the  High
Court seeking extension of time to  deposit  the  balance  consideration  of
Rs.106.5 crores.   The  said  application  was  allowed  after  hearing  the
secured creditors, by an order dated  31.03.2014,  extending  the  time  for
payment up to 31.07.2014.   However,  the  appellant  deposited  the  entire
balance amount  of  Rs.106.5  crores  on  16.04.2014  without  availing  the
benefit of the extended time by the order of the  High  Court  (referred  to
supra).  The said fact is acknowledged by the  official  liquidator  in  his
letter dated  16.04.2014  calling  upon  the  appellant  to  take  over  the
possession of the said land on 17.04.2014 at 11.30 am  in  presence  of  the
representatives of the official liquidator.  The  relevant  portion  of  the
letter reads as follows:

“Accordingly, you have deposited the entire  full  sale  consideration  i.e.
Rs.148.00 Crores with this office.  In this connection,  you  are  requested
to depute your authorized representative at freehold land admeasuring  13895
Sq. Mtrs. Approx. situated at  T.P.  No.18,  F.P.  No.32/p,  bearing  Survey
No.25, 27-B/1, 31, 38 Moje Raipur-Hirapur, Outside Raipur Gate,  behind  New
Cloth market, Opp. Hirabhai market, Diwan Ballubhai Road, Raipur,  Ahmedabad
for taking over possession of the said land on 17.04.2014 at  11.30  am,when
the representatives of this office will  remain  present  for  handing  over
possession of the said land to you,  in  terms  of  order  dated  17.12.2013
passed by the Hon’ble High Court of Gujarat in  Official  Liquidator  Report
No.43 of 2013.”

                                                         [emphasis supplied]



12.   The first respondent preferred OJ Appeal No.9/2014 against  the  order
dated 31.03.2014 of the High Court granting extension  of  time  to  deposit
the balance amount  by  the  appellant.   In  the  said  appeal,  the  first
respondent expressed its willingness to raise its  offer  to  an  amount  of
Rs.160 crore for the land in question and also offered to deposit  the  said
amount within 72 hours.

13.   On 17.04.2014, a possession memo was drafted  purporting  to  handover
the property in question.  It appears from the copy of the  said  possession
memo that it was signed by two UDC officials of the Official  Liquidator  by
name S.R. Meena, STA and C.G. S. Karki  and  one  Ganesna  Venkataramana  on
behalf of the appellant.  The first respondent disputes the  fact  that  the
possession  of  the  property  in  question  was  infact  delivered  to  the
appellant herein.   However,  the Division Bench of the High  Court  by  the
impugned order found no substance in the objection of the first respondent:

“... Though it is disputed by the present application,  the  record  reveals
that on 17.4.2014 when O.J. Appeal  No.9  of  2014  came  to  be  heard  and
disposed of by the Division Bench of this  Court,  the  Official  Liquidator
handed over the possession of  the  lands  in  question  to  opponent  No.9.
However, it is an admitted position that the  sale  deed  is  not  executed.
...”



14.   The first respondent’s appeal (OJ Appeal No.9/2014)  was  disposed  of
by an order[2] dated 17.04.2014 by issuing directions.  The substance is:

That the first respondent  herein  would  move  an  application  before  the
learned Company Judge showing his desire “to apply afresh for the bid”;

That the parties are directed to maintain status quo till such a period;

The respondent herein is directed to handover a DD of Rs.160 crores  to  the
Deputy Official Liquidator;

That it would be open to the learned Single Judge to decide the  application
of the respondent herein (if made) on merits.



15.   In order to complete the narration  of  facts,  it  may  be  mentioned
herein that the appellant herein moved a review application Misc.  CA  No.90
of 2014 O.J. Appeal No.9 of 2014 before  the  Division  Bench  of  the  High
Court which was partly allowed making some minor modification in  the  order
dated 17.04.2014, the details of which may not be relevant for our  purpose.


16.   Pursuant to the order dated 17.04.2014, the first respondent moved  an
application OJMCA 89 of 2014 seeking recall of the  order  dated  17.12.2013
on various grounds.  The said application was  allowed  by  an  order  dated
11.08.2014.  By the said order, the learned Single Judge had  set-aside  the
sale made in favour of the appellant herein on 17.12.2013  and  ordered  the
return of the amount already paid by  the  appellant.   The  learned  Single
Judge also directed a fresh auction of the property in question.    He  also
directed the first respondent to  pay  an  amount  of  Rs.25  lakhs  to  the
appellant herein.

17.   Aggrieved by the order dated 11.08.2014,  the  appellant  carried  the
matter to the High Court in O.J. Appeal No.36 of 2014  which  was  dismissed
by the Division Bench vide order dated 04.12.2014.  The said  order  is  the
subject matter of SLP (Civil) No.2198 of 2015.  The appellant also chose  to
prefer  SLP  (Civil)  No.10148-10149  of  2015  against  the   order   dated
17.04.2014 passed in O.J. Appeal No.9 of 2014 as modified vide  order  dated
22.04.2014 passed in Review Application (Misc. Civil  Application  No.90  of
2014).

18.   The order dated 17.04.2014 of the Division Bench of the High Court  is
passed in appeal (OJA No.9  of  2014)  preferred  by  the  first  respondent
against the order dated 31.03.2014 with leave of the  Division  Bench.   The
only ground on which the respondent challenged  the  order  of  the  learned
Single Judge granting extension of time in favour of  the  appellant  herein
for depositing the balance sale consideration was that the first  respondent
had been deprived  of  making  a  better  offer.   According  to  the  first
respondent, he believed that the appellant herein  would  faithfully  comply
with the tender conditions and the earlier order of the Court  in  terms  of
which the appellant was bound to deposit the entire  sale  consideration  on
or before 16.01.2014.  If only  the  respondent  had  known  that  the  time
schedule for  the  payment  of  sale  consideration  is  flexible  even  the
respondent would have offered  price  higher  than  what  had  been  offered
(Rs.148 crores) by the appellant.

19.   The Division Bench without  examining  or  recording  any  finding  in
regard to the tenability of the submissions made by the respondent chose  to
dispose of the matter with certain directions which  are  already  extracted
in the earlier part of this judgment.  The  reason  given  by  the  Division
Bench for such an order is that  the  Division  Bench  has  adopted  such  a
course of action in view of an earlier decision of this  Court  in  Shradhha
Aromatics Private Limited v. Official Liquidator For Global Arya  Industries
Limited & Others, (2011) 6 SCC 207.

20.    The  Division  Bench  recorded  the  submission  made  by  the  first
respondent that by order dated 17.12.2013, the Company Judge  accepted  only
the offer of Rs.148 crores made by the appellant  herein  but  no  order  of
confirmation of sale was made.  But the Division Bench did  not  record  any
finding whether such a submission was accepted or not.  From the  order,  it
appears that the Division Bench was greatly influenced by the fact that  the
first respondent was willing to enhance the bid to Rs.160 crores.

21.   From direction No.3 contained in the  order,  it  is  clear  that  the
Division Bench did not adjudicate the rights of the respective parties.   At
the cost of repetition, we reproduce direction No.3 as under:
“3.   It goes without saying that we have not entered  into  the  merits  of
the matter and the deposit of Rs.160  crores  with  Official  Liquidator  is
without prejudice to the rights and contentions of the parties and  we  have
adopted this only because of the view expressed by the  Apex  Court  in  the
case of Shradhha Aromatics Private Limited (supra).”
                                                         [emphasis supplied]



A procedure which is  not  very  desirable.  It  is  inconsistent  with  the
principle that the judicial process and adjudication  demand  certainty  and
finality.

22.   Pursuant to the abovementioned direction of the  Division  Bench,  the
learned Company Judge, on an application filed by the first  respondent,  by
his order dated 11.08.2014, recalled the  order  dated  17.12.2013  and  set
aside the sale made in favour of the appellant.  When  the  said  order  was
challenged by the appellant herein before the Division  Bench  of  the  High
Court, the same was dismissed by the impugned judgment.

23.   It is interesting to notice that the  respondent  in  its  application
took various grounds (for setting aside the order dated  17.12.2013  of  the
Company Judge) other than the ground which the  respondent  pleaded  in  its
earlier appeal OJA No.9 of 2014.  This time the respondent pleaded:

1.    That there was a change in the share-holding pattern of the  appellant
company which amounted to the violation of condition  no.31  of  the  tender
notice which provided that the  nomination  would  not  be  allowed  by  the
successful bidder;

2.    That by virtue of  a  subsequent  event  the  value  of  the  land  in
question was likely to fetch a much higher price than  the  price  at  which
the property was sold on 17.12.2013.    The  event  being  the  revision  of
certain regulations (the Gujarat Town Planning and  Urban  Development  Act,
1976) whereby the Floor Space Index (FSI)  for  construction  applicable  to
the area in which the property in question is  located  had  been  increased
from 1.0 to 1.8.  In other words, in view of  the  revised  regulations,  it
would be open to construct a much larger built up area on  the  property  in
question than what was permissible as on 17.12.2013.

24.   Two factors weighed heavily before the  Company  Judge  for  recalling
the earlier Order dated 17.12.2013 by  his  Order  dated  11.8.2014.    They
are: (i) by a notification dated 04.03.2014 of the  Government  of  Gujarat,
the FSI applicable to the area in which the land  is  located  is  increased
from 1.0 to 1.8.  As a consequence, the value of the  property  in  question
increased  considerably,  (ii)  that  during  the  pendency  of  the  recall
application, the first respondent  herein,  who  had  already  deposited  an
amount of Rs. 160 crores as a condition  precedent  for  filing  the  recall
application, further enhanced his offer by another Rs. 40  crores,  pursuant
to the order of the Company Court dated  9.5.2014  and  deposited  the  said
amount, and it appears that the respondent agreed  to  further  enhance  the
offer by another Rs.14 crores, making it a total of Rs. 214 crores.

25.   In view of the above-mentioned two facts, the High Court recorded  the
conclusion that the Company Judge’s order dated  17.12.2013  (accepting  the
bid of the appellant herein of  Rs.  148  crores)  is  vitiated  (i)  by  an
irregularity inasmuch as the Company  Judge  failed  to  take  note  of  the
potential value of the land and the possibility of  its  fetching  a  higher
price than Rs. 148 crores, (ii) the bid of the appellant herein of  Rs.  148
crores was an inadequate price to the property in  question,  (iii)  because
of the failure  of  the  company  court  to  discharge  its  obligation  (as
custodian of the properties of a company in  consideration)  to  secure  the
best price possible, when the assets  of  the  company  in  liquidation  are
sold, (iv) when the facts and circumstances indicate that  the  property  in
question is in fact capable of securing a much higher  price,  the  sale  of
the property at a lesser price also resulted in an injury  to  the  interest
of various stakeholders  who  are  entitled  for  the  distribution  of  the
proceeds of the sale of the assets of the company in liquidation.

26.   The learned counsel for the  appellant  submitted  that  the  impugned
order is untenable for the following reasons:-

(i)   That the offer of Rs. 148 crores made by the  appellant  and  accepted
by the Company Court was the best price for the land having  regard  to  the
facts and circumstances as they existed on  that  date  of  the  order  i.e.
17.12.2013.   The fact that some two and a half months later (on  4.3.2014),
the Government of Gujarat decided to increase  the  FSI  which  resulted  in
increase in the value of the  land  in  question  can  legally  never  be  a
relevant consideration for determining the regularity and  the  legality  of
the order dated 17.12.2013, (ii) the Division  Bench  chose  to  recall  the
order  dated  17.12.2013  on  erroneous  logic  and  recorded  an  untenable
conclusion:

“….However,  it  is  required  to  be  noted  that  the  averments  in   the
application before the learned Company Court by respondent No.  1  herein  –
original applicant that everybody was aware of change/increase in  FSI,  but
it was not brought to the notice of the learned Company  Court,  considering
the submissions made by the  appellant  before  the  learned  Company  Court
recorded in the impugned order, it does not appear that  the  aforesaid  was
disputed by the appellant.   As observed herein above and even at  the  cost
of repetition it is to be noted that the learned Company Court has  recalled
its earlier order  dated  17.12.2013  accepting  the  higher  offer  of  the
appellant of  Rs.  148  crores  and  the  relevant  factors  like  potential
development of the land were not considered which had a  direct  bearing  on
the determination of the market price….”



27.   The learned counsel argued that  the  submission  made  by  the  first
respondent herein that everybody knew the fact which was  not  in  existence
as on 17.12.2013 could not have been accepted  by  the  High  Court  on  the
ground that the appellant herein did  not  specifically  dispute  the  same.
Such a logically absurd submission was made and the  first  respondent  made
no effort to prove such an assertion though in law  the  burden  of  proving
such an assertion lies on the maker of such assertion.

28.   The learned counsel submitted that assuming for the sake  of  argument
that the conclusion recorded by the Division Bench is legally tenable,  such
a conclusion is based on the plea of the respondent herein  that  “everybody
was aware of the change/increase in FSI, but  it  was  not  brought  to  the
notice of the learned Company Court……” necessarily  implies  that  even  the
first respondent herein was aware of it and he also  failed  to  bring  that
fact to the notice of the Company Court. Obviously, the only inference  that
can be  drawn  from  the  conduct  of  such  respondent  is  that  it  would
disentitle the respondent to seek any remedy from the court.

29.   It is further submitted that the conduct of the respondent in  writing
to the official liquidator on  9.1.2014  claiming  the  refund  of  his  EMD
without indicating even at that stage that the  land  in  question  is  more
valuable than Rs. 148 crores and that the first respondent  was  willing  to
make a higher offer would only go to show that all the allegations  made  in
the recall application are tailor  made  to  suit  the  convenience  of  the
respondent in view  of  the  increase  in  the  FSI  and  the  consequential
escalation of the price of the property in question.

30.   The learned counsel argued that no doubt the  subsequent  events  made
the property in question more  valuable,  but  such  subsequent  events  are
wholly irrelevant in determining either the adequacy of the bid made by  the
appellant on the relevant date or the regularity and legality of  the  order
dated 17.12.2013 of the  Company  Judge  in  assessing  the  injury  to  the
stakeholders.

31.   In the alternative, it is submitted on behalf of  the  appellant  that
in the absence of any plea and proof that sale was vitiated  by  fraud,  the
inadequacy of consideration especially when none of the stakeholders in  the
company liquidation raised such an objection on 17.12.2013 can  never  be  a
ground for recalling an order of accepting the highest bid at  the  instance
of an unsuccessful bidder on a subsequent date  on  the  ground  that  on  a
subsequent date such unsuccessful bidder is willing to offer  higher  price.
Approving such course of action would denude the proceedings of a  court  of
law and the sales undertaken in the course of judicial proceedings,  of  all
element of certainty and finality. Such uncertainty would be a  disincentive
for genuine prospective purchasers.  It adversely  affects  the  possibility
of attracting best offers in court sales and would  be  detrimental  to  the
public interest

32.   On the other hand, it is argued by the learned counsel for  the  first
respondent that (i) the substantial hike in the  offer  made  by  the  first
respondent (Rs.66 crores) is a  relevant  factor  as  the  benefit  of  such
enhanced  price  would  go  to  all  the  stakeholders  in  the  company  in
liquidation. Therefore, the High Court  rightly  recalled  the  order  dated
17.12.2013. (ii) by the impugned order, the first respondent  is  not  going
to get the property in question, but it only throws open  for  everybody  an
opportunity to participate in the fresh auction to be conducted;  (iii)  the
property would still be sold to the highest bidder, (iv) but in the  process
all the stakeholders would  be  benefited.  Therefore,  the  impugned  order
calls for no interference.

33.   It is also submitted on behalf of the first respondent that  there  is
no confirmation of the sale in favour of the  appellant  herein  though  the
order dated 17.12.2013 recorded that the highest bid  by  the  appellant  is
accepted  by  the  Court.   Acceptance  of  the  bid   is   different   from
confirmation  of  the  sale.   Confirmation  of  sale  requires  an   active
application of mind by the court to ensure that there is no irregularity  in
the conduct of the sale and the price fetched is  the  best  price  for  the
value of the property.  It is also argued on behalf of the  respondent  that
the company court being the custodian of the  property  of  the  company  in
liquidation, should always make an endeavour to secure the  best  price  for
the property put to sale in order to give maximum benefits to all the  stake
holders who are entitled for  the  distribution  of  sale  proceeds  of  the
assets of the company in liquidation.

34.   In support of the submission that a concluded sale in  an  auction  by
the court cannot be reopened except on the ground of fraud, learned  counsel
for the appellant relied upon a judgment of this  Court  reported  in  Valji
Khimji  &  Company  v.  Official  Liquidator  of  Hindustan  Nitro   Product
(Gujarat) Limited & Others, (2008) 9 SCC 299.   It  was  a  case  where  the
properties of a company in liquidation were put to sale in an  auction.   In
the said auction, the highest bid was Rs.3.51 crores which was  accepted  by
the court and the sale  was  confirmed.   The  court  directed  the  auction
purchaser to pay the consideration in certain instalments.  Some two  and  a
half months later, a third party sent a letter to  the  official  liquidator
offering a higher amount of Rs.3.75 crores.  Almost a  year  later,  another
party offered an amount of Rs.5  crores.   Subsequently,  both  the  parties
approached the Company Judge seeking a recall of the order  of  confirmation
of the sale.  Such application  was  allowed  by  the  Company  Court.   The
auction purchaser unsuccessfully  carried  the  matter  in  an  intra  court
appeal and finally landed up in this Court.  This Court allowed  the  appeal
upholding the order confirming the sale.  This Court held:

“11.  It may  be  noted  that  the  auction-sale  was  done  after  adequate
publicity in well-known newspapers.  Hence, if anyone wanted to make  a  bid
in the auction he should have participated in the said auction and made  his
bid.  Moreover, even after the auction the sale was confirmed  by  the  High
Court only on 30.7.2003, and any objection  to  the  sale  could  have  been
filed prior to that date.  However, in our opinion, entertaining  objections
after the sale is confirmed should not  ordinarily  be  allowed,  except  on
very limited grounds like fraud, otherwise  no  auction-sale  will  ever  be
complete.”



35.   On the other hand, learned counsel for  the  first  respondent  relied
upon decisions of this Court in  Navalkha  &  Sons  v.  Sri  Ramanya  Das  &
Others, (1969) 3 SCC 537, Divya Manufacturing  Company  (P)  Ltd.  v.  Union
Bank of India & Others, (2000) 6 SCC 69, FCS Software Solutions Ltd.  v.  LA
Medical Devices Ltd. & Others, (2008) 10 SCC 440,  Shradhha  Aromatics  Pvt.
Ltd v. Official Liquidator for Global  Arya  Industries  Limited  &  Others,
(2011) 6 SCC 207 and Manoj I  Naik  &  Associates  v.  Official  Liquidator,
(2015) 3 SCC 112.

36.   In Navalkha & Sons v. Sri Ramanya Das &  Others,  (1969)  3  SCC  537,
certain moveable and immovable properties of a company in  liquidation  were
brought to sale.  The Company Court directed the sale  to  be  conducted  by
three persons jointly appointed as Commissioners for the  conduct  of  sale.
The sale was conducted.  The  appellant  before  this  Court  was  the  only
offeror.  The offer was accepted by the  Commissioners.   The  Commissioners
made an application to the Company Court for the confirmation of  sale.   At
that stage, a third party made an application claiming that he  was  willing
to offer a higher  price.   The  Company  Court  then  decided  to  put  the
property once again for auction but only between the  original  offeror  and
the objector.  In such a process, the original  offeror  once  again  became
the highest bidder.  That bid was accepted by the Company  Judge.   At  that
stage, another third party came forward objecting to the  procedure  adopted
by the High Court for confining the auction only  between  the  two  parties
without any fresh advertisement.  Such an  objection  was  rejected  by  the
Company Judge.  Aggrieved by the same, the objector carried  the  matter  in
an intra court appeal to the Division Bench successfully.  Hence the  appeal
before this Court by the original offeror.  This Court dismissed the  appeal
approving the view of the Division Bench that the procedure adopted  by  the
learned single Judge was not legally  sustainable.   In  the  process,  this
Court  indicated  the  principles  governing  the  confirmation   of   sales
conducted by the Company Courts by the official liquidators.

“6.   The principles which should govern confirmation  of  sales  are  well-
established. Where the acceptance of  the  offer  by  the  Commissioners  is
subject  to  confirmation  of  the  Court  the  offeror  does  not  by  mere
acceptance get any vested right in  the  property  so  that  he  may  demand
automatic confirmation of his offer. The condition of  confirmation  by  the
Court operates as a safeguard against the property being sold at  inadequate
price whether or not it is a consequence of any  irregularity  or  fraud  in
the conduct of the 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.  S.
Sriman Kanthimathinatha Pillai, AIR 1921  Mad  286,  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, AIR 1925 Mad 318 and  S.
Soundajan v. M/s. Roshan & Co., AIR 1940 Mad 42. In  A.  Subbaraya  Mudaliar
v. K.Sundarajan,  A.I.R.  1951  Mad  1986,  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  held  in
pursuance of its orders, should see that the price fetched at  the  auction,
is an adequate price even though there is no suggestion of  irregularity  or
fraud. 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 the Madras High Court in Roshan & Co’s case).”



37.   Divya Manufacturing Company (P) Ltd. v. Union Bank of India &  Others,
(2000) 6 SCC 69 was a case where the assets of the  company  in  liquidation
were sold in favour of the appellant before this  court  and  the  sale  was
confirmed by the Company Court.  Within a week  thereafter,  an  application
came to be filed by one of  the  participants  in  the  auction  proceedings
praying that the order of confirmation be recalled  and  the  applicant  was
willing to offer an amount higher than what was  offered  by  the  appellant
before this Court.  Subsequently, more number of  applications  came  to  be
filed before the Court offering  higher  amounts.   Therefore,  the  Company
Court recalled the order confirming the  sale.   Hence,  the  appeal  before
this Court.  This Court, while  reiterating  the  principles  laid  down  in
Navalkha case (supra), declined to interfere with the  order  of  the  court
and held as follows:

“16. ….As stated above, neither the possession of the property nor the  sale
deed was executed in favour of the appellant. The offer of Rs.1.30 crore  is
totally inadequate in comparison to the offer of Rs.2  crores  and  in  case
where such higher price is offered, it would  be  in  the  interest  of  the
Company and its creditors to  set  aside  the  sale.  This  may  cause  some
inconvenience or loss to the highest bidder but that  cannot  be  helped  in
view of the fact that such sales are conducted in Court  precincts  and  not
by  a  business  house  well  versed  with  the  market  forces  and  price.
Confirmation of the sale by a Court at a grossly inadequate  price,  whether
or not it is a consequence of any irregularity or fraud in  the  conduct  of
sale, could be set aside on the ground that  it  was  not  just  and  proper
exercise of judicial discretion. In such cases,  a  meaningful  intervention
by the Court may prevent, to  some  extent,  underbidding  at  the  time  of
auction through Court. In the present  case,  the  Court  has  reviewed  its
exercise of judicial discretion within a shortest time.”



38.   We cannot help pointing out  that  their  Lordships  came  to  such  a
conclusion placing reliance on  para  6  of  Navalkha  case  (supra).  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:

“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 the Madras High Court in Roshan & Co’s case.”



39.   In other words, in Navalkha  case,  this  Court  only  recognized  the
existence of the discretion in the Company Court either to accept or  reject
the highest bid before an order of confirmation of the sale is  made.   This
Court also emphasized that it is equally a well-settled principle that  once
the Company Court recorded  its  conclusion  that  the  price  is  adequate,
subsequent higher offer cannot be a ground for refusing confirmation.

40.   In FCS Software Solutions Ltd. v. LA Medical Devices  Ltd.  &  Others,
(2008) 10 SCC 440, the property of a company in liquidation was  brought  to
sale and confirmed by the company court.  The  Company  Court  directed  the
official liquidator to deliver possession of the  property  after  executing
the sale deed in favour of the successful bidder after  receiving  full  and
final  payment.   The  official  liquidator  instead   of   delivering   the
possession of the property, filed an application before  the  Company  Court
saying that he had received two higher offers. Upon  such  application,  the
Company Court stayed the delivery of the possession of  the  property.   The
successful bidder moved the Company Court praying  that  the  liquidator  be
directed to execute  the  sale  deed  and  deliver  the  possession  of  the
property. However, the Company Court directed  the  official  liquidator  to
issue fresh advertisements. Pursuant to  fresh  advertisement,  much  higher
offers were received.  The original purchaser unsuccessfully  challenged  in
an intra court appeal the decision  of  the  Company  Judge  to  reopen  the
concluded proceedings and thereafter  approached  this  Court.   This  Court
rejected the case of the original  purchaser  on  the  ground  that  in  the
proceedings which culminated in the sale in favour of the  appellant  before
this Court, there were certain irregularities and  that  the  Company  Judge
failed to notice such irregularities until such irregularities were  brought
to his notice by the third parties who subsequently offered higher price.

“28. … From the facts stated above, it is clear that in November, 2004,  the
bid  of  the  appellant  was  highest  and  was  accepted  by  the  Official
Liquidator. But it is also clear that certain facts which were necessary  to
be brought to the notice of intending purchasers were not  set  out  in  the
proclamation of sale nor were disclosed at the time  of  sale  notice.  They
related to valuation  of  movable  and  immovable  properties,  fixation  of
reserve price, non-inventory of plant and machinery, etc. The  attention  of
the  Company  Judge  was  invited  by  other  bidders  by   filing   Company
Applications. The Company Judge considered the objections and  having  prima
facie satisfied himself, ordered fresh auction. We  find  no  illegality  in
the said approach. When fresh bids were received,  it  was  found  that  the
highest offer was of respondent No. 3-Society which was  of  Rs.3.5  crores.
The Company Judge extended an opportunity to  the  appellant  to  raise  its
bid. It, however,  appears  that  the  appellant  was  adamant  to  get  the
property for Rs.1.47 crores on the ground that the said  offer  was  highest
and all the proceedings taken by the Official Liquidator and  Company  Judge
thereafter  were  totally  illegal  and  unlawful.  In  our   opinion,   the
respondents are right that in such cases, the approach of the Company  Judge
should be to get highest price so as to satisfy maximum claims  against  the
Company in  liquidation.  The  procedure  followed  by  the  Company  Judge,
therefore, cannot be said to be illegal.”



41.   In Shradhha Aromatics Pvt. Ltd v. Official Liquidator for Global  Arya
Industries Ltd & Others, (2011) 6 SCC 207, the Company  Judge  approved  the
highest bid of the 2nd respondent before this Court for the purchase of  the
property of a company in liquidation.  Subsequently, an application came  to
be filed by a third party offering a higher amount for  the  property  which
was rejected by the Company Court.  However, a second application was  filed
by the same third party with a  further  enhancement  of  the  offer.   This
time, the  Company  Judge  thought  it  fit  to  recall  its  earlier  order
confirming the sale in favour of  the  above  mentioned  2nd  respondent  by
placing reliance on the  judgment  of  this  Court  in  Divya  Manufacturing
Company (supra).  Aggrieved, the original purchaser carried  the  matter  in
an intra court appeal before the Division Bench.  Once again,  the  Division
Bench permitted both the parties to give  further  offers.   However,  after
such a strange exercise, the Division  Bench  opined  that  learned  Company
Judge could not have recalled the  confirmed  sale  because  subsequently  a
higher price was offered by  somebody  else.  Even  before  this  Court,  an
intervener made a better offer.  It may be mentioned here that there  was  a
time gap of more than three years  between  the  original  confirmation  and
such subsequent higher offer  made  in  this  Court.   However,  this  Court
disposed of  the  appeal  accepting  the  much  higher  offer  made  by  the
intervener in this Court and directing the execution of  the  sale  deed  in
favour of such intervenor for the following reasons:

“15. We have considered the respective  submissions  and  carefully  perused
the record. Ordinarily, the Court is loathe to accept the offer made by  any
bidder or a third party after acceptance  of  the  highest  bid/offer  given
pursuant to  an  advertisement  issued  or  an  auction  held  by  a  public
authority. However, in the peculiar facts of this case, we are  inclined  to
make a departure  from  this  rule.  Admittedly,  total  area  of  the  land
advertised by the  Committee  is  12,500  square  meters  and  the  same  is
situated in an important district of Gujarat. It  is  also  not  in  dispute
that the area has been substantially developed in the last four  years.  The
initial offer made by M/s Patel Agro Diesel Ltd. was of  Rs.  83  lakhs  and
the highest revised offer given before the learned Company Judge was of  Rs.
1.27 crores. After acceptance of the revised offer by  the  learned  Company
Judge, the appellant stepped in and made an offer to pay  Rs.  1.41  crores.
The first application filed by it was dismissed but the  second  application
was allowed and the increased offer of Rs. 1.51 crores was accepted  by  the
learned Company Judge vide order dated 27-11-2007. That order did  not  find
favour with the Division Bench, which restored the  first  order  passed  by
the learned Company Judge. If the order of the Division Bench is  sustained,
the creditors of  the  Company  are  bound  to  suffer  because  the  amount
available for repayment of the dues of the creditors would be a  paltry  sum
of Rs. 1.27 crores. As against this, if the offer made  by  the  intervenor-
cum-promoter is accepted, the Official Liquidator  will  get  an  additional
amount of more than Rs. 4.25 crores. The availability of  such  huge  amount
will certainly  be  in  the  interest  of  the  creditors  including  GSIIC.
Therefore, it is not possible to approve the order passed  by  the  Division
Bench of the High Court. In a somewhat similar case—FCS  Software  Solutions
Ltd. v. La Medical Devices Ltd., (2008) 10 SCC 440, this Court approved  the
acceptance of revised bid of Rs. 3.5 crores given by the  appellant  with  a
direction to compensate  the  earlier  highest  bidder  by  payment  of  the
specified amount.”


                                                         [emphasis supplied]



As indicated in the above extract, such  a  decision  was  rendered  on  the
PECULIAR FACTS of that case.

42.   Manoj I Naik & Associates v. Official Liquidator, (2015)  3  SCC  112,
once again was a case where certain properties of a company  in  liquidation
was brought to sale.  The company  Judge  declined  to  accept  the  highest
offer received on the ground that the value of the property  would  be  much
higher than what was offered.  Eventually,  when  the  matter  reached  this
Court at the instance of the highest  bidder,  the  highest  bidder  himself
substantially raised  his  offer  whereas  certain  other  respondents  also
offered much higher  amounts  for  the  property.   From  the  judgment,  it
appears that there was virtually a scramble for the property,  each  of  the
parties to the proceedings offering very high prices.   While  the  original
successful bidder’s offer was only Rs.1.3 crores, by  the  time  the  matter
was heard and disposed of by this Court,  it  reached  an  amount  of  Rs.70
crores.  Once again, it must be noticed that there is a time gap  of  almost
a decade.  It is not possible to cull out from the judgment the actual  date
of the auction by the official liquidator.

43.   But the fact remains that one of the  secured  creditors  objected  to
the sale in favour of the appellant before this Court  on  the  ground  that
the value of the property even on the date of the original  sale  was  worth
around Rs.6.25 crores as against the highest offer of Rs.1.3 crores  of  the
appellant herein.  Therefore, the decision of the Company  Judge  to  reject
the highest offer is perfectly justified.

44.   A survey of the abovementioned judgments  relied  upon  by  the  first
respondent does not indicate that this Court has ever laid down a  principle
that whenever a higher offer is received in  respect  of  the  sale  of  the
property of a company in  liquidation,  the  Court  would  be  justified  in
reopening the concluded proceedings.  The earliest judgment relied  upon  by
the first respondent  in  Navalkha  &  Sons  (supra)  laid  down  the  legal
position very clearly that a subsequent higher offer is no valid ground  for
refusing confirmation of a sale or offer already  made.   Unfortunately,  in
Divya Manufacturing Company (supra) this Court departed from  the  principle
laid down in Navalkha &  Sons  (supra).   We  have  already  explained  what
exactly is the departure and how such a departure was not justified.

45.   Coming to the  decision  in  FCS  Software  Solutions  Ltd.,  we  have
already noticed that this Court rightly reopened the finalized sale  on  the
ground that there was material irregularity in the conduct of the sale.

46.    Shradhha  Aromatics  (supra),  as  already  noticed,  is  a  decision
rendered on the peculiar facts of the case and, in  our  opinion,  does  not
lay down any principle applicable across the  board.   Whereas  in  Manoj  I
Naik (supra) the Company Court itself declined to accept the highest  offer,
therefore, it has no relevance in the context of the case on hand.

47.   In our opinion, in the case on hand, the High Court was not  justified
in recalling the order dated 17.12.2013 for following reasons:

48.   The highest bid of the appellant herein was accepted  by  the  Company
Court and all the stake-holders of the company  in  liquidation  were  heard
before such  an  acceptance.   Nobody  ever  objected  including  the  first
respondent herein at that stage on any  ground  whatsoever,  such  as,  that
there was any fraud or irregularity in the sale nor was there any  objection
from any one of them that the price offered  by  the  appellant  herein  was
inadequate.  No doubt, the property in  question  became  more  valuable  in
view of the subsequent development.  In our opinion, it is  not  a  relevant
consideration in determining the legality of  the  order  dated  17.12.2013.
Imagine, if instead of increasing the floor  space  index  for  construction
from 1.0 to 1.8 the State of Gujarat had decided  to  reduce  it  below  1.0
subsequent to 17.12.2013, could the appellant be  heard  to  argue  that  it
would be legally justified in resiling from  its  earlier  offer  which  was
accepted by the Court and not bound by the  contractual  obligation  flowing
from such an offer and acceptance?

49.   Certain incidental  questions  raised  by  the  first  respondent  are
required to be answered at this stage.

50.   The first respondent submitted that the order  dated  17.12.2013  only
accepted the highest bid but it did not confirm  the  sale  and,  therefore,
the Court is at liberty to decline confirmation of the sale in view  of  the
subsequent developments.  In our opinion,  the  said  submission  is  to  be
rejected because there is no specific format in which a  sale  conducted  by
the official liquidator is to be confirmed by the Company Court.   The  mere
absence of the expression “that the sale is confirmed” in  the  order  dated
17.12.2013 is not determinative  of  the  question.   The  totality  of  the
circumstances, such as, the very tenor of the order (Footnote 1 supra)  that
none of the stake-holders of the Company in  liquidation  ever  objected  to
the offer of the appellant herein  on  the  ground  that  it  is  inadequate
consideration for the  property;  the  fact  that  the  official  liquidator
himself understood the order dated  17.12.2013  to  be  an  order  not  only
accepting the highest bid of the appellant  herein  but  also  as  an  order
confirming the sale in favour of the appellant, as evidenced by  his  letter
dated 19.12.2013, (the  relevant  portion  of  which  is  already  extracted
earlier) and the fact that the first instalment of the  payment  of  25%  of
the sale consideration was accepted both by the official liquidator and  the
Company Court without raising any objection for the same and the  fact  that
the first respondent withdrew its earnest money deposit without raising  any
objection regarding adequacy of the price offered by the  appellant  herein,
in our view, clearly indicate that the sale in favour of the  appellant  was
confirmed by the order dated 17.12.2013.  Assuming for the sake of  argument
that there is no confirmation, in the absence of any legally tenable  ground
for not confirming the sale, it cannot be declined to the  appellant  as  it
was observed in Navalkha case (supra) that “…no subsequent higher offer  can
constitute a valid ground for refusing confirmation of  the  sale  or  offer
already made”.



51.   The other submission made before the Division Bench of the High  Court
and before us by the first respondent that there was a change in the  share-
holding pattern of the appellant  company  subsequent  to  the  order  dated
17.12.2013 and that such a change would virtually amount to a nomination  by
the successful bidder in favour a of third party contrary to the  conditions
of the tender notice, in our opinion, does not  deserve  any  consideration.
This was not the ground on  which  the  first  respondent  initially  sought
recall of the order dated 17.12.2013.  Such a recall was sought only on  one
ground, the details for which are already noted earlier  in  this  judgment.
The first respondent kept on adding new grounds  from  stage  to  stage  for
attacking the order dated 17.12.2013.  The conduct of the  first  respondent
is understandable.   The  value  of  the  property  in  question  must  have
escalated substantially in view of the developments subsequent to the  order
dated 17.12.2013 but allowing such an attempt, in  our  opinion,  would  rob
the sales conducted by the Courts of all sanctity.



52.   For all the abovementioned  reasons,  we  allow  the  appeals  of  the
appellant Vedica Procon Private Limited, with costs.



                                                             ….………………………….J.
                                                             (J.
Chelameswar)



                                                             …….……………………….J.
                                             (Abhay Manohar Sapre)

New Delhi;
August 13, 2015



                                                     -----------------------
[1]    In order of the High  Court  dated  17.12.2013,  it  is  recorded  as
follows:

      7.    In view of the aforesaid, it transpires that  M/s  Vedia  Procon
Pvt. Ltd. being the highest bidder, has offered Rs.148  Crores  (Rupees  One
Hundred Forty Eight  Crores)  for  the  land  admeasuring  13895  Sq.  Mtrs.
Approx. situated at T.P.  No.18  of  F.P.  No.32/P,  bearing  Survey  No.25,
27/B/1, 31, 38, Moje Rajpur Hirpur, Outside Raipur Gate,  behind  New  Cloth
Market, Opp. Hirabhai Market, Diwan Ballubhai Road, Raipur, Ahmedabad.

      8.    Ms. Amee Yajnik, learned counsel for  the  Official  Liquidator,
Mr. D.S. Vasavada, learned counsel for respondent No.6  –  Union,  Mr.  U.R.
Bhatt, learned counsel for respondent No.1 – State Bank  of  India  and  Mr.
Anip Gandhi, learned counsel for the ARCIL, have expressed that the  bid  of
M/s. Vedica Procon Pvt. Ltd. may be accepted.

      9.    In view of the above discussion, the bid of M/s.  Vedica  Procon
Pvt. Ltd. being the highest bidder, who has offered Rs.148  Crores  for  the
land mentioned in the tender notice deserves to be accepted  and  is  hereby
accepted as per the tender conditions on as is where is basis  and  whatever
there is basis.



[2]     1.  The appellant before us will move  before  the  learned  Company
Judge within a period of one week with an  appropriate  application  showing
his desire to apply afresh for the bid, as according  to  Mr.  Trivedi,  the
order dated 17.12.2013 is not finalized and it still  requires  confirmation
of the learned Single Judge.  Be that as it may, if the application  is  not
made within one week, the benefit of this order  will  not  ensure  for  the
benefit of present appellant.  The parties are directed to maintain  status-
quo till the appellant files an application before the learned Single  Judge
and the learned Company Judge shall decide the question  of  interim  relief
on merits.

      2.    The appellant shall handover the Demand Draft of  Rs.160  crores
to Mr. R.C. Mishra, Deputy  Official  Liquidator,  who  is  present  in  the
Court, today itself.  The Deputy Official Liquidator  has  accepted  it  and
shall pass the receipt of the same to the present appellant.   The  Official
Liquidator shall see that the amount is kept in Fixed Deposit at  least  for
one month so that there is no loss of interest.

      3.    It goes without saying that we have not entered into the  merits
of the matter and the deposit of Rs.160 crores with Official  Liquidator  is
without prejudice to the rights and contentions of the parties and  we  have
adopted this only because of the view expressed by the  Apex  Court  in  the
case of Shradhha Aromatics Private Limited (supra).

      4.    It goes without saying that once the  application  is  made,  it
will be open for the learned Single Judge to  decide  the  same  on  merits.
The status-quo thereafter will be subject to the order which may  be  passed
by the learned Single Judge after hearing the parties.

      5.    The order dated 31.03.2014 passed  in  Misc.  Civil  Application
No.53 of 2014 by the learned Company Judge is interfered with to  the  above
extent only.





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