Balleshwar Greens Pvt Ltd vs Official Liquidator Of M/S Omex ... on 11 August, 2014

[Cites 56, Cited by 0]

Gujarat High Court

Balleshwar Greens Pvt Ltd vs Official Liquidator Of M/S Omex ... on 11 August, 2014

1. By this application, the applicant seeks direction to recall the order dated 17.12.2013 passed by this Court in Official Liquidator's Report No.43 of 2013, whereby opponent No.9 herein emerged to be highest bidder and has offered Rs.148 crores for the lands belonging to the Company under liquidation for sale and has, interalia, prayed as under: "(I) YOUR LORDSHIPS may be pleased to allow this application, in the interest of justice by permitting the applicant herein to apply afresh for the bid in question since it is ready and willing to purchase the land in question at the higher price than what was fixed earlier.

(II) YOUR LORDSHIPS may be pleased to recall the order dated 17.12.2013 passed by this Hon'ble Court in Official Liquidator Report No.43 of 2013 in Official Liquidator Report No.36 of 2011 in Official Liquidator Report No.136 of Page 2 of 205 O/OJMCA/89/2014 CAV JUDGMENT 2010 and pass appropriate order afresh in the matter, in the interest of justice, after considering the plea of the applicant herein;

(III)YOUR LORDSHIPS may be pleased to grant such further and other reliefs as may be deemed fit and proper by this Hon'ble Court in the interest of justice."

DETAILS OF EARLIER PROCEEDINGS IN A NUTSHELL:

2. A Company named M/s. Omex Investors Ltd. was ordered to be provisionally wound up by an order dated 26.10.1989 passed by this Court in Company Petition No.156 of 1989 and the Company was thereafter ordered to be wound up by an order dated 6.3.1990 and the Official Liquidator attached to this Court came to be appointed as liquidator of the said Company. This Court, while passing the order of winding up of the Company, directed the Official Liquidator to take possession of all properties of the Company in liquidation as provided under Sections 456 of the Companies Act, 1956 (hereinafter referred to as "the Act").

3. Thereafter, applications and reports were filed for disposal of the plant and machinery as well as the building structure as well as the lands belonging to the Company under liquidation. It would be appropriate to mention that the leaseholders claimed their right over the properties belonging to the Company under liquidation and the said proceedings, as informed by the Official Liquidator, Page 3 of 205 O/OJMCA/89/2014 CAV JUDGMENT are pending before the Apex Court. It is a matter of record that the plant and machinery of the Company in liquidation was sold for Rs.1,40,40,000/ and the building structure was sold for Rs.85,00,000/ as per the order passed by this Court in Misc. Civil Application No.37 of 1991 dated 19.12.2000.

4. As aforesaid, taking into consideration various orders passed in applications/reports filed in case of the Company under liquidation, this Court vide order dated 21.9.2010 passed in Company Application No.97 of 2010 was pleased to direct the Official Liquidator to put to sell freehold land keeping aside the leasehold land which can separately be dealt with after the outcome of the proceedings before the Apex Court.

5. The record indicates that this Court by an order dated 27.2.2012 passed in Official Liquidator Report No.36 of 2011 earmarked land admeasuring 13,895 sq. mtrs. as completely freehold land and therefore, this Court was pleased to issue further directions to the Official Liquidator to issue a predecision advertisement and was pleased to issue appropriate directions as observed in Paragraph 6 of the order dated 27.2.2012 passed in Official Liquidator Report No.36 of 2011. The record further reveals that the Official Liquidator issued a pre decision advertisement on 4.4.2012 in Gujarati daily "Divya Bhaskar", and English daily "Times of India"

Page 4 of 205 O/OJMCA/89/2014 CAV JUDGMENT

inviting objections from concerned parties along with necessary documents upto 25.4.2012 for freehold land admeasuring 13,895 sq. mtrs. situated at T.P. Scheme No.18 (Ahmedabad), Final Plot No.32/Part bearing survey No.25, 27B/1, 31, 38 of Mouje Rajpur-Hirpur, Outside Raipur Gate, B/h. New Cloth Market, Opp. Hirabhai Market, Diwan Ballubhai Road, Raipur, Ahmedabad.

6. The record further indicates that thereafter, further applications were filed being Company Application No.475 of 2011, wherein this Court by an order dated 26.3.2013 directed the Official Liquidator to put freehold land as discussed hereinabove for sale by inviting offers from intending purchasers in a sealed cover. This Court was also pleased to further provide that the usual terms and conditions for such auction shall be similar to the matter of Ahmedabad Manufacturing and Calico Printing Mills Co. Ltd. (O.J. Civil Application No.183 of 2012). This Court was pleased to fixed the upset price under auction at Rs.55 crores and EMD was fixed at 10% thereof. This Court further directed the Official Liquidator to give public advertisement for sale in two daily Gujarati newspapers having wide circulation in the State of Gujarat and in the city of Mumbai and also in one English newspaper "Times of India" in the State of Gujarat and in the city of Mumbai. It further appears from the record that accordingly, the Page 5 of 205 O/OJMCA/89/2014 CAV JUDGMENT Official Liquidator published advertisement on 10.4.2013 in Gujarati dailies "Gujarat Samachar" and "Divya Bhaskar" and "Mumbai Samachar" and "Gujarat Samachar" in the city of Mumbai and "Times of India"

in the State of Gujarat and city of Mumbai for sale of the aforesaid lands of the Company under liquidation. The record further reveals that in response to the said advertisements, 12 tender forms were sold, however, only 1 tender was received from M/s. Jay Bholenath Project Pvt. Ltd. in a sealed cover. It further appears that thereafter, Company Application No.151 of 2013 was filed, wherein it was prayed by the said offerer to accept the offer of Rs.45 crores. Considering the said application, this Court was pleased to refix the upset price at Rs.45 crores and directed the Official Liquidator to issue a fresh advertisement in the same newspapers in English and Gujarati as provided in the earlier order, inviting offers for sale of the lands in question on same terms and conditions and the Official Liquidator was further directed to set out the time schedule for different stages for the public auction.

7. The record indicates that accordingly, the Official Liquidator issued fresh advertisement in daily newspapers "Gujarat Samachar" and "Divya Bhaskar" in Gujarati and "Mumbai Samachar" and "Gujarat Samachar" in the city of Mumbai and "Times of India" in State of Gujarat and city of Mumbai on Page 6 of 205 O/OJMCA/89/2014 CAV JUDGMENT 10.7.2013. Pursuant to the said advertisements, 13 tenders forms were sold, out of which, 3 tenders were received from the intending purchaser in a sealed cover upto last date i.e. 22.7.2013. The Official Liquidator filed Official Liquidator Report No.43 of 2013 and interalia prayed as under: "(A) This Hon'ble Court may be pleased to consider the views of the secured creditors of the company in liquidation in respect of the highest bid that may be received in the interse bidding and may also be pleased to confirm the sale in favour of the highest bidder on the terms and conditions of sale as per tender document and/or such other and further terms and conditions as may be considered appropriate by this Hon'ble Court, 'or' if this Hon'ble Court finds that the highest offer received in the interse bidding is not the appropriate offer looking to the fair market price and the valuation of assets of the Company in liquidation, this Hon'ble Court may be pleased to direct the Official Liquidator to readvertise the sale on such terms and conditions and with such further orders and directions as in the facts and circumstances of this case, may be considered appropriate and expedient by this Hon'ble Court.

(B) This Hon'ble Court may be pleased to permit the Official Liquidator to make payment of Rs.7,69,498/ from the fund available in Company's A/c. to M/s.

Navnitlal & Co., Advertising Agency being the advertisement expenses incidental to Page 7 of 205 O/OJMCA/89/2014 CAV JUDGMENT sale proceedings, as per advertisement agency's Bill dated 13.04.2013 at Annexure"C" (Colly.) to this report.

Over and above the aforesaid 3 offerers, other 8 bidders made offer and deposited EMD along with late fee charges, which came to be permitted by this Court. It would also be appropriate to mention here that two applications were filed by the other applicants claiming that they have leasehold right over the lands in question. However, after hearing those applications and after calling for details from the Town Planning Department of the State of Gujarat, those applications came to be disposed of and ultimately, the lands in question were determined to be freehold lands of the Company in liquidation.

8. The Official Liquidator Report No.43 of 2013 was heard on 17.12.2013 and this Court was pleased to conduct the auction accordingly in the open Court, wherein 11 participants including the present applicant and the present opponent No.9 - Vedica Procon Pvt. Ltd. participated and ultimately, after 12 rounds of interse bidding, opponent No.9 - Vedica Procon Pvt. Ltd. emerged to be the highest bidder at Rs.148 crores. This Court passed the following order on 17.12.2013: Page 8 of 205 O/OJMCA/89/2014 CAV JUDGMENT "1. This Court (Coram: C.L.Soni, J.) by common order dated 26.03.2013 passed in Company Application No.475 of 2011 in Official Liquidator's Report No.36 of 2011 and allied matters, was pleased to direct the Official Liquidator to put the freehold land of the Company (in Liquidation) 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, to auction for sale by inviting offers from the intending purchasers in a sealed cover. The relevant para20 of the above mentioned order is quoted hereinbelow.

"[20] The Official Liquidator is directed to put the freehold land of the company admeasuring 13895 square meters to auction for sale by inviting offers from the intending purchasers in sealed cover. The usual terms and condition for such auction shall be similar to the matter of M/s.Ahmedabad Manufacturing and Calico Printing Mills Co. Ltd. (Civil Application No.183 of 2012).

The upset price of the land under auction shall be fixed at Rs.55 Crores and earnest money deposit shall be fixed at 10% thereof.

The Official Liquidator shall give public notice of the sale in the two daily Gujarati newspaper having wide circulation in the State of Gujarat and in the city of Mumbai as also in one English newspaper Times of India in the State of Gujarat and in the city of Mumbai.

Page 9 of 205 O/OJMCA/89/2014 CAV JUDGMENT

The schedule of program of sale shall be as under:

 Sr.  Description                        Date
 No.

   1      Date of Advertisement          10/04/13

   2      Date   of   issue   of   Tender 15/04/13
          Forms

   3      Date   of   inspection   of 22/04/13
          property

   4      Last   date   of   receipt   of 29/04/13 upto 
          offer   in   the   office   of 4.30 P.M.
          Official Liquidator

   5      Opening   of   offers   and 03/05/13 at

auction/intersebidding 11.00 A.M. in the High Court of and onwards Gujarat The matter shall be now listed on 3rd May 2013 for further action."

2. It further appears that pursuant to the said order, the Official Liquidator gave advertisement in the Gujarat Samachar, Gujarati Daily, in all editions, Divya Bhaskar, Gujarati Daily, in all editions, Mumbai Samachar, Gujarati daily in Mumbai Edition and the Times of India, English Daily, in Ahmedabad and Mumbai editions.

3. At the outset, it may be noted that in pursuance of the tender notice, two bidders viz. M/s.JPS Entrade International Pvt. Ltd. and M/s.Siddhi Developers through Shri Page 10 of 205 O/OJMCA/89/2014 CAV JUDGMENT Mehulbhai Patel, submitted their offers along with EMD in sealed covers to the office of the Official Liquidator. It may be noted that, thereafter, the matter came to be adjourned because of the fact that various bidders had filed applications for making their offers after obtaining the permission of the Court. Nine other bidders have deposited EMD along with late fee charges. It is also pertinent to note that the applications filed by the objectors were disposed of by order dated 16.12.2013 and the proceedings for auction were undertaken today.

4. Before the offers were permitted to be made by the bidders, at the request of the Court, Ms.Amee Yajnik, learned counsel for the Official Liquidator was asked to read the tender notice in open Court and accordingly, Ms.Yajnik read the whole notice in English language and thereafter, both the envelopes were opened in the Court. Ms.Yajnik also handed over two sealed covers containing offers made by M/s.JPS Entrade International Pvt. Ltd. and M/s.Siddhi Developers for perusal of the Court.

5. It may be noted that in all, there were total 11 bidders, who have participated in the auction proceedings.





Sr.  Name and Address of        Name of the Bank    Pay       Amount (Rs.)
No. Intending Purchasers        and Branch          Order/ 
                                                    D.D.No    EMD




                            Page 11 of 205
 O/OJMCA/89/2014                                       CAV JUDGMENT



1     M/s.JPS          Entrade  State Bank of India  365489   1,20,00,000
      International Pvt. Ltd.

State Bank of India 365490 2,58,00,000 501, Panchsheel residency, Opp. Bank of Baroda 077656 72,00,000 Dr.Nathubhai Hospital, Usmanpura, Ahmedabad.

                                                              

                                                              4,50,00,000/


2     Mehul B. Patel, M/s.        Dena Bank         (0991)    4,50,00,000
      Siddhi Developers, 1st 
      Floor, Arohi Complex,                         360351
      Bopal, Ahmedabad


3     Advance Space Link Pvt.  Kotak Mahindra Bank 226258     4,50,00,000
      Ltd., 2122, Advance 
      Plaza, Outside Delhi                                    (EMD)
      Gate, Shahibaug, 
      Ahmedabad380 004
                                                              + 4,80,822 
                                                              late fee @ 15% 
                                                              for delayed 
                                                              period i.e. 26 
                                                              days 


4     Aashita Construction        HDFC Bank         000448    4,50,00,000
      Pvt. Ltd.
                                                              (EMD)+ 
      12021, Narayan                                        4,81,500/ 
      Chambers,                                               late fee @ 15% 
                                                              for delayed 
      B/h.Patang Hotel,                                       period i.e. 26 
      Ashram road, Ahmedabad.                                 days




5     Rushay Commodities Pvt.  HDFC Bank            000082    4,50,00,000
      Ltd. B/9, S.F.Sardar 
      Mall, Nikol Gam Road,                                   (EMD)+ 
      Ahmedabad                                               6,41,000/ 
                                                              late fee @ 20% 
                                                              for delayed 
                                                              period i.e. 26 
                                                              days 


6     Sparkling Tradefin Pvt.  Kotak Mahindra Bank 411585     4,50,00,000
      Ltd. 508509, Shilp 
      Building, C.G.Road,                                     (EMD)+ 
      Ahmedabad                                               15,53,425/ 
                                                              late fee @ 15% 
                                                              for delayed 
                                                              period i.e. 84 
                                                              days




                              Page 12 of 205
 O/OJMCA/89/2014                                          CAV JUDGMENT



7     M/s.Vision Impex              BOI UCO Bank        036869    2,70,00,000/

      Room No.29, Second                                950434    1,80,00,000/
      Floor, Bharaja Bhavan, 
      110/14, Kika Street,                                        (EMD)+ 
      Gulalwadi,                                                  21,08,219/ 
                                                                  late fee @ 15% 
      Mumbai400 004.                                             for delayed 
                                                                  period i.e. 
                                                                  114 days


8     Balleshwar Greens Pvt.        Axis Bank           025061    4,50,00,000
      Ltd.
                                                                  (EMD)+ 
      801A, Mahalaya                                             23,50,000/ 
      Building, Opp. Hotel                                        late fee @ 15% 
      President, Swastik                                          for delayed 
      Cross Road, Ahmedabad                                       period i.e. 
                                                                  127 days


9     DeoPiyo Textiles Pvt.        Kotak Mahindra Bank 625130    4,50,00,000
      Ltd.
                                                                  (EMD)+ 
      9/10,   Shyamal   Raw                                       24,04,500/ 
      House,   Satellite   AD,                                    late fee @ 15% 
      Ahmedabad                                                   for delayed 
                                                                  period i.e. 
                                                                  127 days


10    Ajay Kumar Tehelyani          Indian Bank         896139    4,50,00,000

      3, Chandra Palace,                                          (EMD)+ 
                                                                  24,04,700/ 
      Jawahar Nagar, Nadiad                                       late fee @ 15% 
                                                                  for delayed 
                                                                  period i.e. 
                                                                  127 days


11    Vedica Procon Pvt. Ltd.       Dena Bank           105291    4,50,00,000


      25,   4th  Floor,   Shukan                        105292    (EMD)+ 
      mall,           Rajasthan                                   26,26,637/ 
      Hospital,   Shahibaug,                            105293    late fee @ 15% 
      Ahmedabad.                                                  for delayed 
                                                                  period i.e. 
                                                        105294    127 days

                                                        105295

                                                        517750

6. Today, the auction proceedings are undertaken in the open Court and after interse bid of 12 rounds, M/s.Vedica Procon Pvt. Ltd. has offered highest amount Page 13 of 205 O/OJMCA/89/2014 CAV JUDGMENT of Rs.148 crores as the sale consideration. It may further be noted that the applicant of Company Application No.295 of 2013, M/s.Balleshwar Greens Pvt. Ltd. is the second highest bidder and has offered Rs.146 crores for the land in question. It may be noted that rest of the bidders withdrew their bids at various stages of 12 rounds.

7. In view of the aforesaid, it transpires that M/s.Vedica 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 RajpurHirpur, 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.6Union, Mr.U.R.Bhatt, learned counsel for respondent No.1State 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.

10. Mr.Vimal Purohit, learned counsel for the applicant appearing in Company Application No.304 of 2013, has expressed Page 14 of 205 O/OJMCA/89/2014 CAV JUDGMENT that the Court may permit one nominee. However, considering the conditions of the tender notice, no orders are passed today. It would be open for the applicant to approach this Court by way of filing a proper application. It may further be noted that as per condition No.29 of the tender notice, EMD price of second highest bidder viz. M/s.Balleshwar Greens Pvt. Ltd. applicant of Company Application No.295 of 2013 shall be retained by the Official Liquidator. The Official Liquidator shall take appropriate actions as envisaged under the conditions of the tender notice, more particularly conditions No.29, 32 and 33. As per the conditions of the tender notice, the Official Liquidator shall return EMD if any paid by the applicants of the unsuccessful bidders, except the applicant of Company Application No.295 of 2013, as stated above, within the time prescribed in the tender notice. The envelopes containing offers given by M/s.JPS Entrade International Pvt.Ltd. and M/s.Siddhi Developers are returned back to the Official Liquidator in a sealed cover.

11. In view of the aforesaid, the present report stands disposed of. It is, however, clarified that the prayers prayed for in the prayer (B) is not granted as the Official Liquidator has already filed separate report being Official Liquidator's Report No.76 of 2013. Ordered accordingly."

EVENTS AFTER THE ORDER DATED 17.12.2013:

9. The Official Liquidator thereafter informed the highest bidder Vedica Procon Pvt. Ltd. - opponent No.9 herein to deposit 25% of the sale consideration as per conditions of tender on or before 16.1.2014 and the balance remaining amount being 75% i.e. Page 15 of 205 O/OJMCA/89/2014 CAV JUDGMENT Rs.106.50 crores on or before 16.4.2014 after adjusting Rs.4.5 crores being EMD amount in final payment of the sale proceeds by a communication dated 19.12.2013. The record indicates that the successful bidder i.e. opponent No.9 Vedica Procon Pvt. Ltd. deposited an amount of Rs.37 crores on 16.1.2014. It is also a matter of record that as per condition No.29, the present applicant who happens to be the second highest bidder has been refunded the EMD amount of Rs.4.5 crores by the Official Liquidator on 13.1.2014, on the request made by the applicant itself on 9.1.2014. The record further indicates that the successful bidder opponent No.9 Vedica Procon Pvt. Ltd. has also been permitted by the Official Liquidator to deploy its security guards on condition that it can post its security the lands in question to protect their interest.

10. Opponent No.9 thereafter filed Misc. Civil Application No.53 of 2014 with a prayer to grant extension of 4 months to deposit the balance consideration of Rs.106.50 crores. After hearing the Official Liquidator, the Secured Creditors and the Trade Union, this Court by an order dated 31.3.2014 was pleased to dispose of the said application by passing the following order: "(1) Heard Mr.S.N.Soparkar, learned Sr. Counsel, with Mr.S.P.Majmudar, and Mr.Vimal A. Purohit, learned advocates for the applicant, Mr.Gaurang Bhatt, Page 16 of 205 O/OJMCA/89/2014 CAV JUDGMENT learned advocate for opponent No.1 Official Liquidator, Mr.Uday R. Bhatt, learned advocate for opponent No.2 State Bank of India, Mr.D.S.Vasavada, learned advocate for opponent No.7 Textile Labour Association, and Mr.Vishal Patel, learned Assistant Government Pleader for opponent No.8 Competent Officer and the Deputy Collector.


    (2)   Learned advocate for the     ap
    plicant has also tendered         un

dertaking dated 31.03.2014 signed by the director of the applicantCompany, which is taken on record.

(3) It may be noted that by order dated 17.12.2013 passed in Official Liquidator Report No.43 of 2013 this Court accepted the bid of the applicant as the applicant was the highest bidder, who has offered Rs.148 crores for the land mentioned in the tender notice as per the tender conditions on "as is where is basis and whatever there is basis." As per the conditions, the applicant, has deposited 25% of the bid amount, which comes to Rs.37 crores on 16.01.2014 with the Official Liquidator. It is pointed that the applicant in all has deposited Rs.41,76,26,637/ as on date. However, the present application is filed for extension of four months' time in making payment of the remaining amount of Rs.106.5 crores, as per the agreed terms and conditions. As stated above, the applicant has also filed undertaking dated 31.03.2014 before this Court wherein the applicant has agreed as under:

Page 17 of 205 O/OJMCA/89/2014 CAV JUDGMENT

"1. We shall make the payment of re maining amount of Rs.106.50 crores as per following schedule, subject to ap proval of this Hon'ble Court with in terest @ 10% P.A. for the extended term on unpaid amount.

a) We will deposit Rs.34 crores on or before 30.04.2014.

b) We will deposit Rs.24 crores on or before 30.05.2014.

c) We will deposit Rs.24 crores on or before 30.06.2014.

d) We will deposit Rs.24.5 crores on or before 30.07.2014.

2. Above payment will be made with interest @ 10% P.A. for the extended term on delayed amount."

(4) In light of the aforesaid un dertaking and as per the statement made by Mr.Gaurang Bhatt, learned advocate for opponent No.1Official Liquidator, Mr.Uday R. Bhatt, learned advocate for opponent No.2 State Bank of India, Mr.D.S.Vasavada, learned advocate for opponent No.7Textile Labour Association, that they have no objection if the time as prayed for is granted by this Court, as per the undertaking given by the applicant, this application is allowed.

(5) The applicant shall adhere to the aforesaid undertaking dated 31.03.2014 and make payment of remaining amount of Rs.106.50 crores as under:

a) Rs.34 crores on or before 30.04.2014;

b) Rs.24 crores on or before 30.05.2014;

Page 18 of 205 O/OJMCA/89/2014 CAV JUDGMENT

c) Rs.24 crores on or before 30.06.2014; AND

d) Rs.24.5 crores on or before 30.07.2014."

(6) It is further provided that the applicant shall pay 10% interest per year starting from 16.04.2014 till the last installment of Rs.24.5 crores is paid, the same shall be calculated proportionately on the outstanding/ unpaid amount. It is further provided that the applicant shall pay such interest along with the last installment, which the applicant has undertaken to pay on or before 31.07.2014.

(7) No further extension shall be granted by this Court to the applicant.

(8) With the aforesaid directions, the application stands disposed of."

OTHER PROCEEDINGS AFTER GRANT OF EXTENSION OF TIME TO DEPOSIT:

11. The present applicant challenged the order dated 31.3.2014 passed by this Court in Misc. Civil Application No.53 of 2014 by filing an appeal being O.J. Appeal No.9 of 2014, which came to be disposed of by the Hon'ble Division Bench of this Court vide judgment and order dated 17.4.2014, wherein it has been observed as under: "4. We have perused the judgment in Page 19 of 205 O/OJMCA/89/2014 CAV JUDGMENT the case of Shradhha Aromatics Pvt. Ltd. vs. O.L. of Global Arya Indus tries Limited & Ors., reported 2011(6) SCALE 330. Para10 of the above decision reads as under:

"10. We have considered the re spective submissions and care fully perused the record. Ordin arily, the Court is loathe to ac cept 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 pub lic authority. However, in the pe culiar 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 im portant district of Gujarat. It is also not in dispute that the area has been substantially de veloped in 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. 127 lakhs. After accept ance of the revised offer by the learned Company Judge, the appel lant stepped in and made an offer to pay Rs. 141 lakhs. The first application filed by it was dis missed but the second ap plication was allowed and the in creased offer of Rs. 151 lakhs 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 Page 20 of 205 O/OJMCA/89/2014 CAV JUDGMENT learned Company Judge. If the order of the Division Bench is sus tained, the creditors of the Com pany are bound to suffer because the amount available for repayment of the dues of the creditors would be a paltry sum of Rs.127 lakhs. As against this, if the offer made by the intervenorcumpromoter is ac cepted, 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 Di vision Bench of the High Court. In a somewhat similar case - FCS Soft ware Solutions Ltd. v. La Medical Devices Limited and others (supra), this Court approved the acceptance of revised bid of Rs.3.5 crores given by the appellant with a direction to compensate the earli er highest bidder by payment of the specified amount."

5. It is stated by Mr. S.N. Soparkar learned Senior Advocate appearing with Mr. S.P. Majmudar that the possession is given to them at 11.30am. However, we had directed at 12.00 noon to the parties to maintain statusquo which we propose to continue till the application is made before the learned Single Judge because we had directed to maintain statusquo on the oral statement made by the Deputy Official Liquidator that the possession was not given and the same was confirmed by Mr. S.P. Majmudar by consulting his client. Be that as it may. The appellant may file Page 21 of 205 O/OJMCA/89/2014 CAV JUDGMENT an application before the learned Single Judge within a period of one week from today and the statusquo shall remain in operation till the appellant files the application. Mr. Soparkar submits that no such application is maintainable before the learned Single Judge, we do not enter into this controversy as it is for the learned Single Judge to decide this issue on the pleadings before him. As and when an application is filed by the appellant before the learned Company Judge, an advance copy shall be given to the Official Liquidator and the contesting respondent no.1 herein.

6. We are proposing to dispose of this appeal on the following consensus that:

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 finalised and it still re quires 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 enure for the benefit of present appellant. The parties are directed to maintain statusquo till the appellant files an ap plication before the learned Single Judge and the learned Com pany Judge shall decide the ques tion of interim relief on mer its.

Page 22 of 205 O/OJMCA/89/2014 CAV JUDGMENT

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 Of ficial 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 Liquid ator 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 statusquo thereafter will be sub ject to the order which may be passed by the learned Single Judge after hearing the parties.

5) The order dated 31.3.2014 passed in Misc. Civil Application No. 53 of 2014 by the learned Company Judge is interfered with to the above extent only.

7. With this consensus, this ap peal is disposed of."

12. It further appears that thereafter, opponent Page 23 of 205 O/OJMCA/89/2014 CAV JUDGMENT No.9 herein filed Misc. Civil Application No.90 of 2014 in O.J. Appeal No.9 of 2014, which came to be disposed of by the Hon'ble Division Bench of this Court vide order dated 22.4.2014, wherein it is observed as under: "7. In view of the above discussion, the modification application stands partly ALLOWED with the modification that the word 'CONSENSUS' stands DE LETED from second line of PARA6 of the judgment dated 17.04.2013, whereas, the other submissions being devoid of merit, they are REJECTED.

8. It goes without saying that the learned Single Judge shall decide the main matter on merits and while doing so he shall consider the decision in the case of "SHRADHHA AROMATICS PVT. LTD." (Supra) and other decisions as well.

9. The order with regard to status quo, which is clarified by us today, does not need, any further delving in the matter, as we have requested the learned Single Judge to decide the main matter on merits, as observed by us in the judgment dated 17.04.2014. No other points were urged / raised by the ap plicant before us, except, the three points, as stated above. This ap plication stands DISPOSED OF, ac cordingly. No order as to costs."

THE PRESENT APPLICATION FOR RECALL:

13. The present applicant being the second highest bidder has filed this application with the aforesaid prayers mainly praying for recall of the order dated Page 24 of 205 O/OJMCA/89/2014 CAV JUDGMENT 17.12.2013 and as per the pleadings of the application, the applicant has filed this application on two main grounds which are more particularly enumerated in Paragraphs 2.9, 2.10, 2.11 and 3 of the present application which are discussed hereinafter in detail.

14. The applicant herein has mainly contended in the present application as under:

(i) That while passing the order dated 17.12.2013, the successful bidder Vedica Procon Pvt. Ltd. - opponent No.9 herein requested for permission of one nominee, but such a request was declined as observed in Paragraph 10 by this Court in its order dated 17.12.2013. It is contended that in disregard to condition No.31 as well as the order dated 17.12.2013, Vedica Procon Pvt. Ltd. has surreptitiously undergone a material change and has changed its registered office as well as share capital of Vedica Procon Pvt. Ltd. and the earlier Directors Tamanna Paras Pandit and Paras Chamanlal Pandit who were Directors of Vedica Procon Pvt. Ltd. since its inception have resigned and one Narendra Natwarlal Patel and Jayesh Tansukhlalbhai Kotak have become Directors of the said Company with effect from 17.1.2014. It is alleged that such material aspect has been suppressed and such aspect has been resorted to in total disregard with the condition of auction as well as the order dated 17.12.2013 and Page 25 of 205 O/OJMCA/89/2014 CAV JUDGMENT hence, it is alleged that the same is fraudulent in nature vitiating the order dated 17.12.2013 and also the subsequent order dated 31.3.2014.

(ii) It is contended by the applicant herein that there is a change in the development regulations of Ahmedabad Urban Development Authority with effect from 4.3.2014, whereby the Floor Space Index has been enhanced from 1.0 to 1.8 which would entitle the developer of the land for more construction. It is contended that the applicant is ready and willing to shell out an amount of Rs.160 crores for the land in question which has already been deposited as per the order passed by the Hon'ble Division Bench.

(iii)In Paragraph 3 of the application, as such factual aspects are contended by the applicant and it is contended that the applicant has filed this application to apply for a fresh bid as per the order of the Hon'ble Division Bench. It is also contended that even though Vedica Procon Pvt. Ltd. has deposited the entire amount on 16.4.2014, the sale of the land in question is not yet confirmed by this Court and no sale deed is yet executed. It is also reiterated that Vedica Procon Pvt. Ltd. has committed gross material irregularity by not adhering to the terms and conditions of the tender documents more particularly, as regards nomination. It is also reiterated that during the interregnum period, there is increase in Floor Space Index which Page 26 of 205 O/OJMCA/89/2014 CAV JUDGMENT has enhanced the original value of the property in question. The applicant has candidly submitted that the order dated 31.3.2014 has lost its efficacy in view of the subsequent development and it is specifically contended by the applicant that the said order dated 31.3.2014 has now become infructuous. The applicant has also contended that this Court is the custodian of the interest of the Company and its Creditors.

In light of the aforesaid facts and contentions, the applicant has preferred this application.

15. Opponent No.9 - Vedica Procon Pvt. Ltd. has filed its reply and has denied the contentions raised by the applicant. It has been contended that the present application is not maintainable in law and no grounds are made for recall of the order. It is also contended that the application is barred by limitation and hence, it is not maintainable. It is also contended that the application suffers from gross delay and laches. Opponent No.9 has contended that it was declared as the highest bidder and it has paid the full amount on 16.4.2014. It is further contended that Vedica Procon Pvt. Ltd. having paid 25% of the sale consideration, the applicant herein accepted the EMD amount which came to be returned by the Official Liquidator and therefore, the applicant has lost its right to recall or review the order Page 27 of 205 O/OJMCA/89/2014 CAV JUDGMENT dated 17.12.2013 by way of waiver, estoppel and acquiescence and hence, the present application is liable to be rejected. It is contended that there is no violation of the principles of natural justice while passing the order dated 17.12.2013. It is contended that no allegation of fraud is alleged against Vedica Procon Pvt. Ltd. It is contended that the applicant has not challenged the order dated 17.12.2013. It is further contended that the Official Liquidator has already given possession of the land in question and the same has been taken over by Vedica Procon Pvt. Ltd. on 17.4.2014 at 11:30 a.m. in presence of the representatives of the Official Liquidator, Textile Labour Association and personnel of Watch and Ward Staff.

16. Opponent No.9 herein has contended that it is not the case of the applicant that Vedica Procon Pvt. Ltd. was not a successful bidder or that consideration amount was not paid by Vedica Procon Pvt. Ltd. or that the possession of the land was handed over by the Official Liquidator to some other person and entity other than Vedica Procon Pvt. Ltd. It is contended that the Company in law is equal to a natural person and hence, a legal entity of its own. It is further contended that entity of a Company is entirely separate from that of its Shareholders and it bears its own name and has a seal of its own. Its assets are separate and distinct of those of Shareholders and therefore, Page 28 of 205 O/OJMCA/89/2014 CAV JUDGMENT merely by change of registered office of Vedica Procon Pvt. Ltd. or its share holding pattern or the Directors could not bring out any change in the legal entity and that Vedica Procon Pvt. Ltd. would continue to be in possession of the land handed over by the Official Liquidator. It is contended that even otherwise, there is no restriction in this regard either in the order dated 17.12.2013 or in any of the terms and conditions of the auction. It is contended that equating the change in the Shareholders/Directors of a Company with Clause 31 of the terms and conditions of the auction is baseless, misleading and devoid of any merits. It is denied that there is any material change or that the same is surreptitiously affected as alleged. It is also denied that there is suppression or that there is any disregard of condition of auction of the order dated 17.12.2013. It is also denied that this Court declined the request of Vedica Procon Pvt. Ltd. It is also denied that there is any fraud or that the order dated 17.12.2013 or 31.3.2014 is vitiated as alleged. It is denied that there is any fraud and it is contended that in facts of the present case, there are no ingredients of fraud.

17. It is specifically contended that change of FSI which is a subsequent event would not give any right for recall of the order dated 17.12.2013. It is contended that in commercial venture, the bidder runs the hazard if any loss happens and equally, he Page 29 of 205 O/OJMCA/89/2014 CAV JUDGMENT may make a profit of the transaction at the end of the day. It is contended that the applicant decided not to increase its bid, to match with the bid of Vedica Procon Pvt. Ltd. and having so decided earlier, is barred from seeking rebid in respect of the property under the garb of recall application and if such a course, as suggested by the applicant, is given credence, in such a case, there would never be any finality in any auction proceedings. It is contended that thus, the entire attempt of the applicant to reopen the concluded transaction on the basis of subsequent facts is impermissible. It is contended that a bidder, having participated in the auction and after consciously deciding not to go higher than the highest bid, cannot be heard to complain that his business/commercial decision turned out to be incorrect on second thought and that it should be permitted to improve its offer. It is contended that such action would be against the basic concept of auction where the fall of hammer crystallizes the rights of the parties and any subsequent facts affecting the valuation of the property thereafter are only irrelevant to determine the adequacy of the price. It is contended that it would be impermissible for a bidder to deprive the purchaser of the benefit of a subsequent fact which may increase the valuation of the property, otherwise, there would be no sanctity or closure to auction proceedings at all.

Page 30 of 205 O/OJMCA/89/2014 CAV JUDGMENT

18. Opponent No.9 has also relied upon the proceedings of handing over of the land in question which is part of the record of this application.

19. The Official Liquidator has also filed its report dated 23.4.2014. The Official Liquidator has narrated the earlier proceedings which led to passing of the order dated 17.12.2013. The Official Liquidator has also contended that as per the tender conditions, Vedica Procon Pvt. Ltd. deposited 25% of the sale consideration i.e. Rs.37 crores on 6.1.2014. The Official Liquidator further submitted that the present applicant addressed a communication dated 9.1.2014 requesting the Official Liquidator to refund the EMD of Rs.4.50 crores as per condition No.29 of the tender documents, wherein it is specifically stated by the present applicant that as successful bidder, Vedica Procon Pvt. Ltd. has deposited 25% of sale consideration and that such EMD amount is to be returned as per condition No.29 of the tender documents. The Official Liquidator has further contended that the applicant has never raised objections regarding auction of the proceedings at that relevant point of time and accordingly, the Official Liquidator refunded the EMD amount of Rs.4.5 crores to the present applicant through RTGS mode on 13.1.2014. The Official Liquidator has further submitted that on a request made by Vedica Procon Pvt. Ltd. by a communication dated 16.1.2014, the Official Liquidator has allowed Page 31 of 205 O/OJMCA/89/2014 CAV JUDGMENT the auction purchaser for deploying their security guards on condition that it can post its security outside the premises purchased by them to protect their interest and to avoid the possibility of any casualty under the control and supervision of security posted by the Official Liquidator at their own risk and consequences in addition to the existing security arrangement made by the Official Liquidator.

20. The Official Liquidator has further submitted that Vedica Procon Pvt. Ltd. deposited a Demand Draft of Rs.1,06,50,00,000/ vide communication dated 16.4.2014 and requested the Official Liquidator to hand over the possession of the land in question. The Official Liquidator has averred that the said amount came to be deposited by the Official Liquidator on 16.4.2014 and thus, the Official Liquidator has already received full sale consideration amounting to Rs.148 crores within stipulated time given as per the order dated 17.12.2013. It is further submitted that as per the request made by Vedica Procon Pvt. Ltd., the Official Liquidator informed Vedica Procon Pvt. Ltd. to remain present for handing over the possession of the land in question on 17.4.2014 at 11:30 a.m. and accordingly, the possession of the land in question is handed over to Vedica Procon Pvt. Ltd. on 17.4.2014. The Official Liquidator has also relied upon the possession memo dated 17.4.2014. The Page 32 of 205 O/OJMCA/89/2014 CAV JUDGMENT Official Liquidator has further submitted that the Deputy Official Liquidator was present in the Court before the Hon'ble Division Bench. However, no submissions have been made by Deputy Official Liquidator and the Hon'ble Division Bench has passed the order dated 17.4.2014 without hearing the Official Liquidator. It is further submitted that as per the order dated 17.4.2014 passed by the Hon'ble Division Bench, the Official Liquidator has deposited the amount of Rs.160 crores deposited by the present applicant in the Bank on the same day and has kept the said amount in Fixed Deposit Receipt as per the order passed by the Hon'ble Division Bench.

21. The Official Liquidator has also contended that the applicant has not challenged the order dated 17.12.2013 passed by this Court before any forum. It is contended that the present application is misconceived and not maintainable as the auction process was duly conducted and completed with active participation of the present applicant and the sale was confirmed in favour of the highest bidder by this Court. It is contended that the present application is not legally tenable at this stage after completion of whole sale process by this Court, only because of increase in FSI by the Government. The Official Liquidator has contended that the present application is not maintainable and the same deserves to be rejected. The Official Page 33 of 205 O/OJMCA/89/2014 CAV JUDGMENT Liquidator has further contended that if such applications are entertained, there would be no finality of auction process and the same would delay the winding up proceedings.

22. The Textile Labour Association, the Trade Union

- opponent No.7 herein has also filed its reply. Opponent No.7 has contended that the Company in liquidation was ordered to be wound up vide order dated 16.3.1990 passed by this Court in Company Petition No.156 of 1989. It is contended that the claim of the workmen of the Company in liquidation lodged by it was verified by the Chartered Accountant through his report dated 7.10.1999. It is contended that as per the said report, the Chartered Accountant has verified the claims and has found that an amount of Rs.14,40,33,438/ is due and payable to 1874 workers. The Union has further submitted that the workmen have been paid Rs.60 lacs as per the order dated 6.9.2000 passed by this Court in Company Application No.219 of 1999. The Union has further submitted that by a further order dated 18.9.2002, the workmen have been paid further amount of Rs.55 lacs and thus, in all, out of Rs.14,40,32,438/, the workers have been paid an amount of Rs.1.10 crores and a net amount of Rs.13,30,32,438/ is still payable and thus, the workmen have received only 7.64% of their total dues. The Union has further averred that about 600 workmen have expired and there is no disbursement Page 34 of 205 O/OJMCA/89/2014 CAV JUDGMENT after 2002. The Union has therefore prayed that out of the amount deposited by the present applicant as well as Vedica Procon Pvt. Ltd. - opponent No.9, this Court may pass an interim order for disbursement to the workers. It is specifically averred in Paragraph 8 as under: "8. ... ... This is the essence and object of Section 529(A) of the Companies Act and therefore, the hungry stomach of 1874 workmen or their widows may be satisfied. This is the prayer that the answering respondent No.7 is making to this Hon'ble Court on behalf of 1874 workmen who are suffering from agony of starvation and they are being laid into the morass of moribund and only this Hon'ble Court can place them on firm ground and cross roads."

23. The applicant herein has filed its rejoinder to the affidavitinreply filed by opponent No.9 and has denied the contentions raised by opponent No.9 in its reply. The applicant herein has categorically contended that the possession of the land in question shown to have been given to Vedica Procon Pvt. Ltd. - opponent No.9 on 17.4.2014 is nothing but a paper possession and the same is in fragrant disregard of the Hon'ble Division Bench order dated 17.4.2014. It is contended that merely making of payment of consideration does not give any vested right in favour of opponent No.9 more particularly, when the same is subject to confirmation by this Court and in addition to this, the applicant has Page 35 of 205 O/OJMCA/89/2014 CAV JUDGMENT denied the contentions raised by opponent No.9 in its affidavit. Similarly, the applicant has also filed reply to the report of the Official Liquidator and as such, has denied the contentions raised against the applicant in the report submitted by the Official Liquidator.

24. The applicant has also filed an additional affidavit dated 24.4.2014 to bring on record the fact of the order dated 22.4.2014 passed by the Hon'ble Division Bench in O.J. Misc. Civil Application No.89 of 2014.

25. During the course of hearing of this application, the applicant has filed a further affidavit dated 9.5.2014. By the said affidavit, the applicant sought permission of this Court to effect further deposit of Rs.40 crores with the Official Liquidator by way of Demand Draft making total offer at Rs.200 crores for the lands in question, instead of Rs.160 crores as against the upset price of Rs.45 crores originally fixed by this Court as per the order dated 10.5.2013. In addition to that, the applicant has made a statement through his learned Senior Counsel that it shall deposit an amount of Rs.14 crores with the Registry especially towards dues of the workmen which will be subject to further orders of this Court and accordingly, the following order was passed on 9.5.2014: Page 36 of 205 O/OJMCA/89/2014 CAV JUDGMENT "(1) The matter was listed before this Court on 24.04.2014 and thereafter it was listed on 06.05.2014 and since then the learned Senior Counsel / counsel for the respective parties have been heard in length.

(2) Today the matter is heard and when learned Senior Counsel for the applic ant was at the stage of giving rejoinder to the arguments made by the learned Senior Counsel / Counsel for the other sides, due to paucity of time and in light of the fact that the court is closed because of ensuing summer vaca tion, the matter is adjourned.

(3) Mr.Kamal B. Trivedi, learned Senior Counsel for the applicant, has tendered further affidavit dated 09.05.2014, which is taken on record, wherein in Paragraph No.2 the applicant has stated that the applicant has now enhanced its bid from Rs.160 crores to Rs.200 crores. This order is passed only because of the fact that the matter is pending for hearing and the same would not create any right in favour of the applicant and the same is passed in line of the obser vations made by Division Bench of this Court vide order dated 17.04.2014 in O.J. Appeal No.9 of 2014. Mr.Kamal B. Trivedi, learned Senior Counsel for the applicant, has tendered demand draft / pay order of Rs.40,00,00,000/ bearing No.022859 dated 09.05.2014 of Axis Bank Ltd. in favour of Official Liquidator of M/s. Omex Investors Ltd. (in liquida tion), a photocopy thereof is taken on record. Deputy Official Liquidator, who is present in the court, is directed to accept the same.

Page 37 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(4) During course of hearing Mr.D.S.Vasavda, learned counsel for the opponentTLA, and Ms.Amee Yagnik, learned counsel for the opponentOL, have taken this Court through the pe culiar facts, more particularly both the learned counsel have asserted that since 1989 the workmen are waiting for their dues. Mr.Kamal B. Trivedi, learned Seni or Counsel for the applicant, states that the applicant shall deposit a further amount of Rs.14 crores with the Registry of this Court, especially towards the dues of the workmen, which will be subject to further orders of this Court. The applicant shall de posit such amount within a period of 02 (two) weeks from today. Such deposit of Rs.14 crores by the applicant would be subject to further orders of this Court. It is also further clarified that such deposit made by the applicant shall not create any right in their fa vour. Mr.S.N.Soparkar, learned Senior Counsel for opponent No.9 - the success ful bidder, states that amount of Rs.148 crores is already deposited, which is more than enough to meet with the dues of the workmen.

(5) As pointed out by Mr.S.N.Soparkar, learned Senior Counsel for opponent No.9, time to execute the sale deed is to get over on 15.05.2014 as per order of this Court dated 17.12.2014. Consid ering the fact that this application is being heard since 06.05.2014 and is now kept on 10.06.2014 for further hearing, the same shall not be insisted upon by opponent No.9. S.O. to 10.06.2014 at 2:30 p.m."

Thus, the applicant has offered a price of Page 38 of 205 O/OJMCA/89/2014 CAV JUDGMENT Rs.214 crores for the lands in question.

26. Heard Mr. Kamal B. Trivedi, learned Senior Advocate with Ms. Sangeeta Vishen with Mr. Harsh Jani with Mr. Vinay Vishen for the applicant, Dr. Amee Yajnik, learned advocate for the Official Liquidator, Mr. Uday R. Bhatt, learned advocate for respondent No.2, Mr. D.S. Vasavada, learned advocate for respondent No.7, Mr. Alkesh N. Shah, learned Assistant Government Pleader for respondent No.8 and Mr. Saurabh N. Soparkar, Mr. Mihir J. Thakore, Mr. Mihir H. Joshi, Mr. Shalin N. Mehta, learned Senior Advocates with Mr. Killol V. Shelat, Mr. Sandeep Singhi, Mr. S.P. Majmudar, Mr. Vimal A. Purohit, learned advocates for opponent No.9.

In addition to the oral arguments, the applicant and opponent No.9 M/s. Vedica Procon Pvt. Ltd. were also permitted to submit written arguments.

CONTENTIONS RAISED BY THE APPLICANT:

27. Mr. Kamal B. Trivedi, learned Senior Advocate appearing for the applicant has taken this Court through the basic pleadings as pleaded in the application and has submitted that the present application is an application for recall of the order dated 17.12.2013 and the present application is not an application for review and has raised the Page 39 of 205 O/OJMCA/89/2014 CAV JUDGMENT following contentions:

(i) The present application is maintainable as an application for recall of the order and it is not an application for review. It was submitted that Rule 9 of the Companies (Court) Rules, 1959 provides for inherent powers for doing complete justice in the matter.

(ii) Mere acceptance of highest offer vide order dated 17.12.2013 does not and cannot amount to confirmation of sale.

(iii)There is a difference between acceptance of highest offer and confirmation of sale in favour of bidder making the highest offer.

(iv) If the confirmation of sale has not taken place, then in that case, if this Court comes across a better and concrete offer, then, this Court would always like to go for it, while undertaking exercise to get adequate price of the property.

(v) Assuming that the confirmation has taken place, this Court would like to deconfirm the sale when offer with a sizable difference and not moderate difference comes before this Court. In the instant case, at the first instance, the difference is of Rs.12 crores and the applicant is also ready to go Page 40 of 205 O/OJMCA/89/2014 CAV JUDGMENT higher.

27.1 As regards point No.(i), it was submitted that the application is not a review application, nor is it filed under the guise of a review application. It was submitted that Rule 9 of the Companies (Court) Rules, 1959 provides for inherent powers of the Company Court to do complete justice in the matter. It was also submitted that in view of the fact that it is an application for review, principles of waiver, estoppel and acquiescence or the limitation for entertaining a review application are not applicable. It was also contended that there is major difference between review of the order on one hand and recall thereof on the other hand. It was contended that in review, the High Court is to enter into merits of the case to find out whether an error apparent on the face of the record has been committed, whereas in case of recall, what is required to be seen with reference to the order under reference is a violation of principles of natural justice, illegality, material irregularity, suppression of facts and exercise of fraud. It was, however, contended that the scope of recall application filed under the provisions of the Companies (Court) Rules, 1959 is wider than the normal recall applications as provided under Rule 9 of the Companies (Court) Rules, 1959.

On the aforesaid submissions therefore, it was Page 41 of 205 O/OJMCA/89/2014 CAV JUDGMENT contended that the present application for recall is maintainable.

27.2 As regards point Nos.(ii) and (iii), it was contended that the order dated 17.12.2013 is an order of acceptance of bid and event of confirmation is to take place. Relying upon the judgment of the Apex Court in the case of Provash Chandra Dalui & Anr. Vs. Biswanath Banerjee & Anr., reported in 1989 Supp. (1) SC 487 and Rajasthan State Industrial Development and Investment Corporation & Anr. Vs. Diamond & Gem Development Corporation Ltd. & Anr. reported in (2013) 5 SCC 470, it was contended that the contract is to be interpreted by giving actual meaning to the words contained therein and it is not permissible for the Court to make a new contract, however reasonable it may be. It was contended that the conditions No.9, 17, 33, 27 and 23 of the terms and conditions of public auction are read in seriatim, in a purposive and harmonious fashion then, it would become clear that there is vast difference between acceptance of highest offer in a public auction on one hand and confirmation of sale on the other hand and the words "confirmation" and "acceptance" are to be interpreted literary. It was further contended that so long as the full price is not paid, the property remains within the possession of the Official Liquidator and it is only after full payment, confirmation of sale takes place, whereby Page 42 of 205 O/OJMCA/89/2014 CAV JUDGMENT sale becomes absolute which may lead to grant of possession followed by execution of the sale deed. It was contended that the principles enunciated by the Apex Court does not borne out from the order dated 17.12.2013 and therefore, the order dated 17.12.2013 is simply an order of accepting the highest offer of opponent No.9 and neither the sale has become absolute nor the contract is concluded. It was contended that in every auction, reserve price is fixed not on the basis of the dues, but the same is fixed on reasonable market price which the property is capable to fetch. It was contended that adequacy and/or inadequacy of price depends upon and is related to the market value which the property would fetch. It was further contended that when the highest bidder - opponent No.9 herein applied for extension, the applicant realized that its commercial wisdom was not correct. It was contended that confirmation of sale has not taken place and sale deed is admittedly not executed and according to the applicant, the possession has not been taken over. On coming to know these facts, the applicant approached this Court by way of an appeal. It was contended that though the amount of total consideration is paid, the applicant has also deposited Rs.160 crores and there being a sizable difference, the same suggests inadequacy of price. It was contended that the Company Court is always interested to see that the maximum price is fetched and therefore, no prejudice would be caused to Page 43 of 205 O/OJMCA/89/2014 CAV JUDGMENT opponent No.9 if the higher market price is fetched by recall of the order and by treating Rs.160 crores as upset price and by passing an order of reauction of the property in question, which has been raised as aforesaid to Rs.214 crores by the applicant.

27.3 As regards point No.(iv), it was contended that there is no confirmation of sale in favour of opponent No.9 as on 17.12.2013 and before the same would have been confirmed in favour of opponent No.9, the applicant has given a higher offer of Rs.160 crores and has also deposited the same. It was contended that even thereafter during the course of hearing on 9.5.2014, the applicant has further deposited an amount of Rs.40 crores. Considering the issue of the dues of the workers, the applicant has also deposited a further amount of Rs.14 crores taking into consideration the dues of the workers as per the order dated 9.5.2014. It was therefore contended that the offer of Rs.214 crores now made by the applicant be treated as upset price and it was prayed that the auction be conducted afresh.

27.4 As regards point No.(v), it was contended that the fundamental principle which is to be taken care of by the Company Court while conducting the public auction is to see that the maximum higher market price of the property in question is fetched. It was contended that the market price is to be decided with reference to its best price on a given day that Page 44 of 205 O/OJMCA/89/2014 CAV JUDGMENT could be accepted to be offered and not with reference to total dues of the workers and creditors. It was contended that on 17.12.2013, all the bidders were aware that there is possibility to increase in FSI which would result into increase in the value of the property in question and because of the said reason, the correct market price of the property in question was not brought to the notice of this Court and as such the public auction could have been postponed. It is therefore contended that the same would amount to material irregularity even if it is construed that by the order dated 17.12.2013, the sale is confirmed in favour of opponent No.9, which would be one of the valid ground for recall of the order even by deconfirming the said alleged confirmation of sale. Relying upon the judgment of the Apex Court in the case of Shraddha Aromatics Pvt. Ltd. Vs. O.L. of Global Arya Industries Ltd., reported in (2011) 6 SCC 207 as well as in the case of Divya Manufacturing Co. Pvt. Ltd. Tirupati Woollen Mills Shramik Sangharsha Samity Vs. Official Liquidator, reported in (2000) 6 SCC 69, it was contended that in view of the facts and circumstances that the price quoted by the applicant is significantly higher than the price received, the said fact is suggestive of the fact that the price quoted and fetched on 17.12.2013 was inadequate which calls for recall of the order.

Page 45 of 205 O/OJMCA/89/2014 CAV JUDGMENT

27.5 The learned Senior Advocate for the applicant has relied upon the following judgments:

(a) Provash Chandra Dalui (supra)

(b) Rajasthan State Industrial Development and Investment Corporation (supra)

(d) Divya Manufacturing Co. Pvt. Ltd. Tirupati Woollen Mills Shramik Sangharsha Samity (supra)

(e) Fertilisers and Chemicals Travancore Ltd., Udyogmandal Vs. Official Liquidator, High Court of Kerala, reported in (1996) 4 CLJ 380 (Ker)

(f) Vishnu Agarwal Vs. State of U.P., reported in AIR 2011 SC 1232.

(g) G.T. Swamy Vs. Goodluck Agencies, reported in 1990 (69) Comp. Cases 819.

(h) Girish Bhagwatprasad HUF through Karta and Manager Aastik & Anr. Vs. Industrial Development Bank of India, rendered in Misc. Civil Application No.187 of 2012 in Company Application No.414 of 2007 in Company Petition No.21 of 1984 dated 28.1.2014 passed by this Court (Coram: C.L. Soni, J.).

Page 46 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(i) Maharana Mills Rashtriya Kamdar Sangh Vs. OL of Maharana Mills Ltd. & Ors., reported in 2011 (3) GLH

399.

(j) Industrial Reconstruction Bank of India Vs. Bengal Potteries Ltd. (in Liquidation) in Application in Appeal in Matter No.93 of 1993, decided on 31.7.1995.

(k) U. Nilan Vs. Kannayyan, reported in AIR 1999 SC 3750.

(l) LICA (P) Ltd. (No.1) Vs. Official Liquidator, reported in 1996 Comp. Cases 788.

(m) LICA (P) Ltd. Vs. Official Liquidator, reported in (2000) 6 SCC 82.

(n) FCS Software Solutions Ltd. Vs. LA Medical Devices Ltd. & Ors. reported in (2008) 10 SCC 440

(o) Nileshbbai Ramanbhai Patel Vs. Official Liquidator & Ors. (Gujarat) (DB) rendered in O.J. Civil Application No.299 of 2013 vide order dated 25.7.2013

(p) Sadashiv Prasad Singh Vs. Harendar Singh & Ors. reported in AIR 2014 SC 1078.

Page 47 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(q) Chaudhary Brothers Vs. Official Liquidator of Bhagwati Glass Container Ltd., reported in 2014 (2) GLH 271.

CONTENTIONS RAISED BY OPPONENT NO.9:

28. Mr. S.N. Soparkar, learned Senior Advocate appearing for opponent No.9 in whose favour the bid is accepted by this Court being the highest bidder has mainly raised the following points:

(i) Recall application filed by the applicant is not maintainable in law.

(ii) The application filed by the applicant suffers from gross delay and laches.

(iii)The applicant has suppressed material fact from this Hon'ble Court and that the applicant's right to seek recall/review of the order dated 17.12.2013 is lost by waiver, estoppel and acquiescence.

(iv) Whether an unsuccessful bidder can open up a confirmed sale by stating that it is willing to pay more.

(v) The argument of the applicant that this Hon'ble Court by its order dated 17.12.2013 has not Page 48 of 205 O/OJMCA/89/2014 CAV JUDGMENT confirmed the sale in favour of opponent No.9 is baseless and without any merit.

(vi) Inspite of this Hon'ble Court declining the request of opponent No.9 for nomination, opponent No.9 has changed its shareholding pattern and the Directors thereby violated the terms and conditions as well as the order dated 17.12.2013 passed by this Court.

(vii)Whether the applicant is entitled to reopen the concluded transaction on the basis of subsequent facts, namely, proposed increase of FSI by which the value of land in question is likely to fetch more price.

28.1 As far as point No.(i) is concerned, it was contended that the order can be recalled under certain specific grounds and circumstances and it was argued that even if the same is not confirmed, there should exist circumstances which would justify recall of the order. It was contended that as far as the present application is concerned, the following circumstances are pleaded:

(a) Subsequent higher bid.

(b) Request for extension of time for payment of remaining 75% of the price by opponent No.9.

Page 49 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(d) Change in FSI.

It was contended that it is not even pleaded by the applicant that the price of the property was inadequate on the date of the auction. It was further contended that it is speculative attempt on the part of the defeated bidder because of business rivalry. It was contended that it is not even spelt out by the applicant that under which provision, the present application is filed. It was further contended that there is no provision in law for recall, except by way of review. It was also contended that it is not the case of the applicant that the order dated 17.12.2013 is passed exparte. It was further submitted that the present application is filed very skillfully by terming it as an application for recall and if it is considered as review, it would be grossly time barred. It was further contended that the principles enshrined in Order 47 Rule 1 of the Code of Civil Procedure, 1908 would apply and for the same, the applicant has to show that there is an error apparent on record. Relying upon the Apex Court judgment in the case of Cine Exhibition Private Limited Vs. Collector, District Gwalior. reported in (2013) 2 SCC 698, in the case of Budhia Swain Vs. Gopinath Deb reported in (1999) 4 SCC 396 as well as in the case of Zahira Habibullah Sheikh Vs. State of Gujarat, reported in (2004) 5 SCC 353, it was contended that it is not Page 50 of 205 O/OJMCA/89/2014 CAV JUDGMENT open to party to circumvent review proceeding by labeling it as recall and it is not the case of the applicant that there is any error apparent on the record. It was contended that there is no error in the order dated 17.12.2013 and as such in the wisdom which has dawn on the applicant afterwards would not invalided the order. It was contended that withdrawal of EMD by the applicant establishes the fact that the applicant has acquiesced and that he does not want to participate and the moment it is said that the order dated 17.12.2013 was proper when it was passed, the applicant ought to have given higher bid. It was thus contended that no grounds required for recall of an order has been raised in the application itself. It was contended that it is not the case of the applicant that the order dated 17.12.2013 has been obtained by any fraud practiced upon this Court or that the Court has been mislead by any party or that the Court has committed any mistake which prejudices any party. It was contended that the applicant has not raised any ground in the application that the order dated 17.12.2013 suffers from inherent lack of jurisdiction or that a necessary party had not been served at all or has not represented and therefore, the application itself is not maintainable. It was contended that realizing that the review application is not maintainable, the applicant in order to achieve the review of order dated 17.12.2013 has labeled it as application for recall. It was submitted that what Page 51 of 205 O/OJMCA/89/2014 CAV JUDGMENT cannot be done directly, cannot be permitted to be done indirectly and the present application is an abuse of process of law and hence, liable to be rejected.

28.2 As regards point No.(ii), it is contended that the applicant was very much aware about the proceedings of this Court and passing of the order dated 17.12.2013. The applicant has participated in the interse bidding before this Court on 17.12.2013 and the present application is filed almost after 4 months and no explanation worth the name is given by the applicant for delay in filing the present application. It was submitted that except two grounds that the Directors of opponent No.9 has undergone change with effect from 17.1.2014 which would vitiate the order dated 17.12.2013 and that by a notification dated 4.3.2014, the FSI is changed, no other grounds are raised in the application. It was contended that the applicant was aware that the change of Directors has taken place on 17.1.2014. However, there is no explanation why the applicant took more than 3 months to approach this Hon'ble Court. Similarly, the proposed change in FSI became public as per notification dated 4.3.2014. However, no explanation is given in respect of delay in filing the present application on 21.4.2014. It is therefore contended that the present application suffers from gross delay and laches.

Page 52 of 205 O/OJMCA/89/2014 CAV JUDGMENT

28.3 As far as point No.(iii) is concerned, it is contended that the applicant participated in the interse bidding, wherein opponent No.9 was declared to be the highest bidder and the applicant herein was the second highest bidder. It was contended that as per condition No.29 of the terms and conditions issued by the Official Liquidator, the EMD amount of the second highest bidder i.e. the applicant was to be retained by the Official Liquidator till the time opponent No.9 deposits 25% of the sale consideration and such EMD amount was to be returned to the applicant only thereafter. It is the case of opponent No.9 that it deposited 25% of the sale consideration on or about 6.1.2014. That, on 9.1.2014, the applicant addressed a letter to the Official Liquidator requesting the Official Liquidator that as this Court has accepted the bid of opponent No.9 and that opponent No.9, as a successful bidder, has deposited 25% of the sale consideration, the EMD amount of the applicant along with late fee charges be refunded at the earliest and accordingly, the Official Liquidator refunded the EMD amount to the applicant on 31.1.2014. It was contended that this fact and the conduct of the applicant clearly suggests that the applicant has no objection regarding auction of property or inadequacy of the price at the relevant point of time and these vital facts have been suppressed by the applicant in the application. It was further contended that the applicant was not aggrieved by Page 53 of 205 O/OJMCA/89/2014 CAV JUDGMENT the order dated 17.12.2013 and no appeal even till date has been preferred by the applicant and thus, having waived its right, the applicant cannot be permitted to agitate the issue under the garb of the present application. It was contended that thus, the applicant has lost its right to seek recall/review of the order dated 17.12.2013 by waiver, estoppel and acquiescence.

28.4 As far as point No.(iv) is concerned, it was contended that this Court vide order dated 26.3.2013 fixed the upset price of the lands in question at Rs.55 crores and subsequently, by an order dated 10.5.2013, this Court has fixed the upset price at Rs.45 crores. Referring to the order dated 17.12.2013, opponent No.9 contended that this Court conducted the auction proceedings, wherein the applicant also participated and the offer of the applicant after 12 rounds of interse bidding was Rs.146 crores and that of opponent No.9 was Rs.148 crores and therefore, this Court by order dated 17.12.2013 accepted the bid of opponent No.9 and directed the Official Liquidator to take appropriate actions. It was contended that there is no averment of the applicant that the price offered by opponent No.9 was inadequate. On the contrary, a statement has been made on behalf of the applicant before this Court that it is not the case of the applicant that the price offered by opponent No.9 on the date of auction was inadequate. It was contended that it is Page 54 of 205 O/OJMCA/89/2014 CAV JUDGMENT not even the case of the applicant that this Court as a custodian has not taken into consideration the interest of the creditors, workers, etc. while passing the order dated 17.12.2013. It was also contended that it is not the case of the applicant that wide publicity to the intended sale was not given to invite competitive offers or that the valuation carried out by the valuer was not proper. It was further contended that there is no averment in the application that the order dated 17.12.2013 suffers from inherent lack of jurisdiction or that there was any fraud or that a necessary party was not heard or that the applicant was precluded from participating in the bid. It is also not the case of the applicant that any such party is prejudiced by the order dated 17.12.2013. In light of the aforesaid contentions, it was contended that the sale subject to confirmation of the Court does not mean that the Court shall set aside the confirmed sale in favour of the highest bidder because at a later stage, someone on second thought says that he is wiling to pay more.

It was contended that the judgments relied upon by the applicant to the effect that the confirmed sale can be set aside are all decided on facts of such case and the judgments relied upon by the applicant are not applicable to the present case.

The aforesaid judgments would not be applicable Page 55 of 205 O/OJMCA/89/2014 CAV JUDGMENT to the facts of the present case. The learned Senior Advocate for opponent No.9 has distinguished the aforesaid judgments in light of the facts stated in the present application.

28.5 As regards point No.(v), it was contended that by an order dated 17.12.2013, this Court accepted the bid of opponent No.9 as being the highest bidder as per the tender conditions. It was further contended that by the said order, the sale is confirmed in favour of opponent No.9. It was contended that nowhere in the order dated 17.12.2013, it is stated by this Court that the sale is not confirmed in favour of opponent No.9 or that the sale would be confirmed subsequently. It was contended that on the contrary, in the aforesaid order, this Court has directed the Official Liquidator to take appropriate action as envisaged under conditions of tender including execution of sale deed within one month from the payment of the date of full consideration. It was contended that as per the said order dated 17.12.2013, neither opponent No.9, nor the Official Liquidator is required to approach this Court for sale confirmation of the execution of the sale deed. It was contended that there is no provision in the terms and conditions which stipulates that the acceptance of bid by this Court is separate and distinct from confirmation of sale by the Court. It was thus contended that the order dated 17.12.2013 Page 56 of 205 O/OJMCA/89/2014 CAV JUDGMENT speaks for itself and as such the application lacks complete factual background. It was contended that the magical phrase "confirmation" and the question of confirmation at the future date is imaginary. It was further contended that the conduct of the applicant itself was to show that the bid of opponent No.9 came to be accepted and confirmed by the authority and thus, the contention that there is no concluded contract is factually incorrect and legally unsustainable and the present application is bereft of any contention in the application. It is further contended that on perusal of Clauses 5, 8, 9, 13, 17, 20, 23, 29 and 33 of the terms and conditions of sale, it would be evident that on acceptance of the highest bid by this Court, this Court confirmed the sale in favour of the highest bidder and such a fact is reflected from the letter dated 9.1.2014 addressed by the applicant to the Official Liquidator.

28.6 As regards point No.(vi), it was contended that it is not the case of the applicant that opponent No.9 was not a successful bidder or that sale consideration amount was not paid by opponent No.9 or that the Official Liquidator has handed over possession of the lands in question to any other person or entity. It was contended that a Company in law is equal to a natural person and hence, a legal entity of its own. It was contended that the entity of the Company is entirely different and separate Page 57 of 205 O/OJMCA/89/2014 CAV JUDGMENT from that of its Shareholders or the Directors. It bears its own name and as a seal of its own and its assets are different and separate from its Shareholders. It was contended that mere change of registered office of opponent No.9 or its shareholding pattern or the Directors would not bring about any change in the legal entity. It was contended that the issue of nomination was not foreclosed and that opponent No.9 has not sought or intended to seek nomination. It was contended that the allegation of nomination is without any basis and lacks factual background. It was contended that the change in structure is not provided in conditions of sale and as per the conditions of sale, it was not required to maintain the shareholding pattern. It was reiterated that Vedica Procon Pvt. Ltd. remains Vedica Procon Pvt. Ltd. and that there is no change in the legal entity. It is further contended that opponent No.9 would continue to be in possession of the land which according to opponent No.9 has been handed over by the Official Liquidator and it is opponent No.9 who would be entitled to all the rights flowing from the order dated 17.12.2013. It was contended that the attempt on the part of the applicant to equate the change in Shareholders/Directors of the Company with Clause 31 of the conditions of auction is baseless, misleading and devoid of any merits. It was contended that Clause 31 restrains the offerers by intimating them that the nomination will not be allowed only in Page 58 of 205 O/OJMCA/89/2014 CAV JUDGMENT order to ensure that the revenues of the statutory authorities are not lost. It was also contended that the contention raised by the applicant that the Court declined the request of opponent No.9 for nomination is false as in Para 10 of the order dated 17.12.2013, it is clearly provided by this Court that opponent No.9 can approach this Court by way of filing a proper application.

28.7 As regards point No.(vii), it was contended that the proposed change in FSI on 4.3.2014 would not give any right for recall of the order dated 17.12.2013. It was submitted that the attempt to reopen the concluded transaction on the basis of subsequent fact is impermissible and the auction which is complete cannot be opened. It was contended that there is not even a suggestion that the right price is not fetched. On the contrary, it was contended that the price was adequate on the date of auction and thus, the auction which is complete cannot be opened on the basis of the subsequent events. It was contended that the applicant as a bidder participated in the auction and after consciously deciding not to go higher than the highest bid cannot be heard to complain that its business/commercial decision turned out to be a second thought and that it should be permitted to improve its offer. It was contended that such a contention is against the basic concept of auction, where at the fall of hammer, the same crystallize Page 59 of 205 O/OJMCA/89/2014 CAV JUDGMENT the rights of the parties. It was contended that it is not even pleaded that there is material irregularity as regards the adequacy of the price on the date on which the auction proceedings were undertaken. Neither there is any allegation of fraud, nor the price now given has any bearing for reopening a concluded contract. It was contended that the reliance placed upon by the applicant on the judgment of the Apex Court in the case of Shraddha Aromatics Pvt. Ltd. (supra) would not be applicable in the present case and no case for re auction is made out. It was contended that the judgment has to be read in context of the controversy and not logical and the Apex Court was called upon to decide the matter on different factual matrix, wherein the successful bidder has not raised any dispute and therefore, it does not lay down that in every case, a subsequent higher price can upset the concluded contract and thus, strong reliance placed on the same is misplaced. It was contended that any subsequent fact affecting the valuation of the property thereafter are only irrelevant to determine the adequacy of the price when the hammer fell and it would be at the risk and consequence of the purchaser. Elucidating this aspect further, it was contended by opponent No.9 that a concluded contract cannot be revisited on the factual basis which is pleaded by the applicant. It was contended that subsequent increase in FSI might have increased the price and as a matter of fact, it Page 60 of 205 O/OJMCA/89/2014 CAV JUDGMENT is not a subsequent event, but this aspect of FSI was discussed even in the earlier order and during the auction process. It was further contended that in case of decrease in FSI, can a successful bidder come for reduction of the price paid and thus, change in FSI is no ground for reopening a concluded contract and such a contention and the higher bid which is given by the applicant is because of subsequent events. It was contended that when it is not pleaded and it is not the case of the applicant that the price is inadequate as on date i.e. on 17.12.2013, a concluded contract cannot be revisited by the present application which is filed after 40 days, which is time barred. It was also contended that if any event adversely affecting the valuation of the property namely reservation etc. had happened post the auction, the purchaser could not have reviewed to back out from the turn and therefore, it is inevitable and impermissible for a bidder to seek to deprive the purchaser of the benefit of a subsequent fact which may increase the valuation of the property. It was contended that in both cases, parties take the consequence of a business decision, its consequential loss or benefit and would be held bound by it. Otherwise, there would be no sanctity or closure to auction proceedings at all. Opponent No.9 has relied upon the judgment rendered in the case of Ganga Retreat & Towers Limited & Anr. Vs. State of Rajasthan & Ors. reported in (2003) 12 SCC 91 as well as in the case of Alopi Parshad & Sons Page 61 of 205 O/OJMCA/89/2014 CAV JUDGMENT Ltd. Vs. Union of India, reported in AIR 1960 SC

588. 28.8 It was contended that the judgments relied upon by the applicant are not applicable in the facts of the present case and the case before the Apex Court were based on different factual background and would not be applicable in the instant case. It is thus contended that the application is misleading and bereft of any material and without there being any justifiable ground for recall of the order and hence, the application deserves to be dismissed.

28.9 It was contended that escalation in price is not a fraud and as such, there is no substantive increase as offered by the applicant increase of Rs.12 crores is insignificant which would mean hardly 8% after 4 months which would amount to 1% per month and price now given has no bearing for reopening a concluded contract. It was therefore submitted that the application deserves to be dismissed.

28.10 In support of the aforesaid contentions, opponent No.9 has relied upon the following judgments:

(a) Navalkha and sons Vs. Ramanuja Das & Ors., reported in (1969) 2 SCC 537.

Page 62 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(b) Kayjay Industries (P) Ltd. Vs. Asnew Drums (P) Ltd. reported in (1974) 2 SCC 213

(d) Valji Khimji & Co. Vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd., reported in (2008) 9 SCC 299.

(e) Sarvariya Exports Limited Vs. Official Liquidator of Urmi Oil Limited, reported in (2009) 147 Comp Cases 336 (Gujarat) (DB).

(f) Arasmeta Captive Power Company Private Limited Vs. Lafarge India Private Limited, reported in (2014) 1 Comp.L.J. 209 (SC).

(g) Ganga Retreat & Towers Ltd. (supra).

(h) M/s. Alopi Parshad & Sons Ltd. (supra).

(i) Cine Exhibition Private Limited (supra).

(j) Ram Kishun & Ors. Vs. State of Uttar Pradesh, reported in (2012) 11 SCC 511.

Page 63 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(k) Chaudhary Brothers (supra).

(l) Zahira Habibullah Sheikh (supra)

(m) Riverfront Properties Private Limited Vs. IDBI Bank Ltd. & Ors. decided on 7.2.2014 in O.J. Appeal No.2 of 2014.

(n) Budhia Swain (supra).

Contentions raised by the Official Liquidator:

29. Dr. Amee Yajnik, learned advocate for the Official Liquidator submitted that the Official Liquidator is attached to this Court and submitted that the winding up order was passed in the year 198990 and since then, the workers are not paid. It was submitted that the Secured Creditors, till date, have not filed any claim. It was contended on behalf of the Official Liquidator that the order dated 17.12.2013 is legal and proper and that the same has been done after complete process. It was contended that the present application for recall is filed on frivolous grounds. It was contended that the applicant and opponent No.9 are in reality business and if they have any rivalry, they may resolve it amongst themselves. It was contended that when the order is passed, the sale is confirmed. It was contended that the order dated 17.12.2013 is not challenged. It was also further contended that what Page 64 of 205 O/OJMCA/89/2014 CAV JUDGMENT is wrong with the order is not pointed out by the applicant. It was contended that having accepted the EMD back suddenly in order to take advantage of change in FSI, everything is attempted to be stalled. It was contended that increase of Rs.12 crores is not even 10% increase. It was also contended that the applicant did not increase at the time when the auction took place though he participated in the same. It was therefore contended that the present offer is mockery of price and it amounts to stalling the proceedings, whereby ultimately, the workers would be deprived. It was contended that after much difficulty, the auction was carried out and in fact, 600 workers have already died. It was contended that the Official Liquidator has onus duty to perform as far as workers' dues are concerned. It was contended that instead of permitting the Official Liquidator to sell the property of the Company under liquidation, the Official Liquidator is dragged into litigation by two parties who are in real estate business for business rivalry or private gains. It was also contended that the fact in reality remains that despite efforts by this Court directing the Official Liquidator to see that some property is put to sale out of huge parcel of land and workers may get their legal dues, it has not been fortified. It was contended that all these factors may be taken into consideration. It was contended that the applicant has not challenged the order and in fact has found Page 65 of 205 O/OJMCA/89/2014 CAV JUDGMENT nothing wrong in the order dated 17.12.2013 and that the applicant was also a party to the order. It was contended that the applicant, at the time of auction, did not even raise its bid by Rs.2 crores and thereafter, the applicant has approached this Court after 4 months by increasing it to Rs.160 crores taking into consideration the risk factor involved. It was contended that GDCR issue was already on record and having failed to increase the bid, the applicant cannot be permitted to say that the order dated 17.12.2013 be recalled as more price is fetched mainly on the following points:

(i) It was contended that as small parcel of huge land were leasehold lands, nondemarcation of freehold land in a way prevented the Official Liquidator to put the land for sale to fetch the legal dues of workers and it could not be materialized for almost 20 years.

(ii) That exercise of coming out with proper demarcation of freehold parcel of land without there being any encumbrance to 4 years as can be seen from various orders passed by this Court.

(iii)In view of multiple litigations by lessors including before the Apex Court, effort of the Official Liquidator to put property for auction took sometime and when the auction took place, it fail.

Page 66 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(iv) All these facts show that the workers have waited for almost two decades for their legal dues and so when the auction was confirmed by this Court, the amount fetched was such that it covered not only the dues of the workers, but also of the Secured Creditors and Unsecured Creditors.

29.1 It was contended that the aforesaid 4 points and two predecision advertisements in newspapers widely circulated were definitely in the knowledge of all those who came to bid including the Official Liquidator. While the auction was confirmed by this Court, the Court could finally see hope for those workers. It was contended that on these points, the Official Liquidator rests its case by saying that primafacie, there is no point made out for recall of the order dated 17.12.2013. It was contended that there is no substantial offer raised by the applicant and as such the applicant should be directed to deposit Rs.14 crores for the workers of the Company, which came to be wound up in the year 1990.

29.2 It was contended that in order to substantiate the aforesaid points as well as in order to establish that huge efforts have gone into exercise undertaken to cull out this small parcel of land for sale, this Court has kept in mind that despite such huge property of the Company in liquidation because of nonclarity of freehold land and leasehold land Page 67 of 205 O/OJMCA/89/2014 CAV JUDGMENT and the complex litigations by the lessors seeking relief for their rights, the order dated 17.12.2013 which has fetched a substantial amount, whereby the dues of the workers shall be satisfied, should not be recalled only because another business entity comes with a higher offer which is not even 10% of the offer given by the auction purchaser should not be entertained, specifically when the whole procedure of auction is taken before the Court where the applicant was a party. It was contended that the applicant withdrew its EMD and has not challenged the order by way of an appeal and therefore, the applicant should show its bonafides and should deposit the amount towards workers' dues.

29.3 It was contended that in glaring facts of this case, the order need not be recalled and the Official Liquidator, despite having received Rs.148 crores from this parcel of land, is unable to disburse the amount to the workers. It was contended that this Court may either ask the applicant to deposit Rs.15 crores towards workers' dues forthwith and this Court, in view of circumstances of this particular matter where applicant was a bidder who appears to be a prudent businessman, has stalled the property and fairly held auction and as such, this litigation is causing injustice to the workers. It was contended that the Official Liquidator is not in the business of real estate and if this practice is Page 68 of 205 O/OJMCA/89/2014 CAV JUDGMENT continued, there shall never be any finality to auction where the Official Liquidator puts a property of the Company in liquidation to sale with an objective of seeking all stakeholders of erstwhile alive Company be paid their dues shall never be able to pay the same. It was contended that the adequacy of offer is always decided by this Court. It was also contended that the auction was conducted before the Court which was a Company Court and it is not an ordinary auction which is conducted in common parlance. It was lastly contended that taking into consideration the aforesaid aspects, the application deserves to be dismissed.

CONTENTIONS RAISED BY TEXTILE LABOUR ASSOCIATION:

30. Mr. D.S. Vasavada, learned advocate for opponent No.7 - Textile Labour Association has taken this Court through the fact that this Court passed an order of winding up of the Company in liquidation on 16.3.1990. It was pointed out that the plant and machinery and building of the Company under liquidation were disposed of in the year 2002 and lastly, in the year 2002, two orders of disbursement were passed whereby the workers received only an amount of Rs.1.15 crores. It was contended that 20 years have rolled by and the workmen of the Company in liquidation are waiting for their legal dues. It was further submitted that it is a hard reality that because of such a long span, 600 workmen of the Company in liquidation have expired. Relying upon Page 69 of 205 O/OJMCA/89/2014 CAV JUDGMENT the judgment of this Court reported in the case of Textile Labour Association Vs. State, reported in 1995 (1) GLH 12, Mr. Vasavada contended that from the amount which is received by the Official Liquidator, the workers should be paid after the ratio is worked out. Mr. Vasavada relying upon the facts and figures submitted that in all, Rs.48 crores is due and payable, out of which about Rs.14 crores is to be paid to the workers and therefore, it was contended that no prejudice would be caused to any stakeholders and therefore, this Court may pass appropriate orders to disburse the amount to the workers from the sale proceeds received.

CONTENTIONS RAISED BY OTHER SECURED CREDITOR:

31. Mr. U.R. Bhatt, learned advocate appearing for opponent No.2 - State Bank of India, one of the Secured Creditor, contended before this Court that the State Bank of India has lodged its claim before the Official Liquidator and this Court may pass appropriate orders taking into consideration the interest of the Secured Creditor. No other Secured Creditors have represented before this Court.

REJOINDER ON BEHALF OF THE APPLICANT:

32. Mr. Kamal B. Trivedi, learned Senior Advocate for the applicant, in rejoinder, has submitted that the application is maintainable. It was contended that in substance, the prayer is to reauction. It Page 70 of 205 O/OJMCA/89/2014 CAV JUDGMENT was submitted that this Court has inherent powers to recall and such powers are traceable from Rules 6 and 9 of the Companies (Court) Rules, 1959. It was contended that everybody works for gain, however, within 4 corners of law. Mr. Trivedi, reiterating the contentions raised in the initial argument, submitted that the price is not fixed on the basis of dues and the test is that when auction takes place in Company Court, attempt should be made to fetch best price. It was contended that the property in question is capable of fetching more price on the date on which the order is passed by this Court i.e. on 17.12.2013 and the present application is filed with a purpose to see that the property could fetch more price and it was contended that there is no confirmation. It was further contended that the price on the date of the order was as per the perception of the applicant on that day.

32.1 Mr. Trivedi referring to the Apex Court judgment in the case of Cine Exhibition Private Limited (supra) and in the case of Budhia Swain (supra) submitted that both the judgments are under the Supreme Court Rules. It was contended that in exercise of inherent powers, this Court can exercise Suo Motu powers and the bottom line is to do complete justice in the matter. It was contended that the judgment is not to be read as a statute. However, the facts as well as the statement of law cannot be considered without referring to the facts.

Page 71 of 205 O/OJMCA/89/2014 CAV JUDGMENT

It was further contended that Rule 9 of the Company (Court) Rules, 1959 empowers the Court to do complete justice and this Court can also Suo Motu take such a view and therefore, principles of waiver, estoppel and acquiescence will not apply. It was further contended that if the Court feels that on 17.12.2013, it was only an acceptance of higher offer and if today, it is felt that the price would have gone more and more particularly, as it is coming on record that the price could have been more, this Court would like to exercise its jurisdiction while seeing that workers' interest is taken care of and in such type of case, recall application is to be dealt with in this manner only. It was contended that the judgment of the Apex Court in the case of Zahira Habibullah Sheikh (supra) is not applicable to the present case. It was also contended that in Review Application, the Court enters into merits of the case and tries to find out whether there is any error apparent, however, so is not the requirement in case of recall. It was contended that the principles such as breach of principles of natural justice exercising material irregularity or fraud are the principles, which is normally available in a Writ Petition, but before the Company Court, spectrum of recall is wider. Referring to the judgments of the Apex Court in the case of Vishnu Agarwal (supra), G.T. Swamy (supra) and Fertilisers and Chemicals Travancore Ltd. (supra), it was contended that Rule 9 empowers the Page 72 of 205 O/OJMCA/89/2014 CAV JUDGMENT Court to recall and such a power is an inherent power. It was further contended that the present application is filed within 4 corners of this power and the application is thus maintainable. It was contended that if it is maintainable, then, it is to be decided on merits and nonsuiting the applicant on the ground of maintainability would amount to travesty of justice as well as turning blind eyes to the propositions of the Rules. It was contended that the contract is to be interpreted literary and each word has its purpose. Referring to the conditions of sale and more particularly, condition Nos.9, 17, 23, 27 and 33, it was contended that the terms and conditions fixed cannot be treated superfluously, but it has to be given purposeful interpretation. Referring to the aforesaid conditions, it was contended that the value of word "confirmation" cannot be reduced and payment of full amount does not amount to confirmation of sale. It was contended that if the said conditions are read in order as indicated above, it brings out that the sale was not confirmed, but it was only confirmation of highest offer. It was contended that only after the full payment, occasion of sale deed would occasion and the main thing as to whether the maximum price is obtained or not and the price has no relation with the dues of the Company. Mr. Trivedi also relied upon the judgment of the Apex Court in the case of U. Nilan (supra) and has contended that the aforesaid terms are of specific connotations. It was Page 73 of 205 O/OJMCA/89/2014 CAV JUDGMENT lastly contended that the judgments cited by opponent No.9 in the case of Ganga Retreat & Towers Limited (supra) and in the case of M/s. Alopi Parshad & Sons Ltd. (supra) cannot be made applicable to the present case. It was contended that in these circumstances, the application deserves to be allowed and this Court may be pleased to hold the fresh auction fixing Rs.214 crores as upset price and even workers can be disbursed the amount.

FURTHER ARGUMENTS ON BEHALF OF OPPONENT NO.9:

33. Mr. Saurabh N. Soparkar, learned Senior Advocate for opponent No.9 contended that the applicant is in some confusion in placing reliance upon the judgment relied upon by opponent No.9 in the case of Vishnu Agarwal (supra) and it was contended that either it wholly support or it does not apply. It was submitted that it does not say that it can tinker with the concluded matter between the parties by, bypassing the provisions of the Act. It was contended that the recall has very narrow and limited connotation.

33.1 Referring to the judgment in the case of G.T. Swamy (supra), it was contended that the same is not applicable. Referring to the facts of the present case, it was contended that there is no question of doing justice between the parties.

Page 74 of 205 O/OJMCA/89/2014 CAV JUDGMENT

33.2 Referring to the judgment in the case of Fertilisers and Chemicals Travancore Ltd. (supra), it was contended that the same is not applicable in the instant case and the said judgment is not connected with the power of recall and the said case is decided on merits of the case and the same has no relevance once the bid is accepted and the confirmation is made. It was further submitted that reliance put forward upon the judgment of Shraddha Aromatics Pvt. Ltd. (supra) is misconceived and the said judgment is on facts.

33.3 It was further contended that the day on which the order was passed, there was no error on the part of the Court and there is no patent error in the same. It was contended that the same does not cause any injustice between the parties more particularly, if a party chooses not to bid higher, he must thank himself and there is no injustice to the applicant and really, it was applicant's error in not giving higher bid, which has resulted into injustice and therefore, the said judgment does not apply. It was contended that there is no injustice, nor any error. Similarly, it was contended that the principles laid down by the Apex Court in the case of Provash Chandra Dalui (supra) and in the case of Rajasthan State Industrial Development and Investment Corporation (supra) would not apply to the present Page 75 of 205 O/OJMCA/89/2014 CAV JUDGMENT case. It was further contended that by the order dated 17.12.2013, the two important ingredients namely "offer" and "acceptance" is there and the contract is concluded. Referring to condition Nos.29, 32 and 33 of the terms and conditions of the auction sale, it was contended that there is no formal set of judgments that in absence of word "confirmation", once sale deed is to be executed after full payment is received, the argument that the sale is not confirmed is completely fallacious. It was further contended that the return of EMD means confirmation of sale and therefore, the argument that there is no confirmation of sale is wrong and concluded contract does not require any confirmation of sale. It was contended that the Apex Court has not held that the judge has to say confirmation of sale and the provisions of Order 21 Rule 89 and 90 does not apply to the present case and the same is wholly irrelevant. Referring to the judgment of the Division Bench of Calcutta High Court in the case of Sharawan Kumar Agarwal (supra), it was contended that it is in favour of opponent No.9 and the applicant has not been able to show that it is in whose public interest, recall is necessary. Reiterating the contentions raised earlier, it was submitted that most importantly, the applicant has not dealt with the case of Valji Khimji (supra). It was further submitted that even the judgment of Lica (P) Ltd. (supra) is based on Page 76 of 205 O/OJMCA/89/2014 CAV JUDGMENT Clause 11 which is followed in Sarvariya Exports Limited (supra). It was contended that if Clause 11 goes, automatically, all will fall. It was contended that on the basis of subsequent events and change in law, the present application cannot be entertained and the same deserves to be dismissed more particularly, on the grounds which are raised in the application and the application deserves to be dismissed.

34. Before considering the submissions made by the learned Senior Advocates appearing for the applicant, opponent No.9 in particular and the learned counsel appearing for the other opponents, it would be appropriate to refer to the various judgments cited by both the sides.

DECISIONS RELIED UPON BY LEARNED COUNSEL APPEARING FOR THE APPLICANT, OPPONENT NO.7 AND OPPONENT NO.9:

(a) In the case of Provash Chandra Dalui (supra), it has been observed in Paragraphs 10 to 14 as under: "10 'Ex praecedentibus et consequentibus optima fit interpretation'. The best interpretation is made from the context. Every contract is to be construed with reference to its object and the whole of its terms. The whole context must be considered to ascertain the intention of the parties. It is an accepted principal of construction that the sense and meaning of Page 77 of 205 O/OJMCA/89/2014 CAV JUDGMENT the parties in any particular part of instrument may be collected 'ex antecedentibus et consequentibus;' every part of it may be brought into action in order to collect from the whole one uniform and consistent sense, if that is possible. As Lord Davey said in N. E. Railway V/s. Hastings, (1900) AC 260 (267), "... the deed must be read as a whole in order to ascertain the true meaning of its several clauses, and ... the words of each clause should be so interpreted as to bring them into harmony with the other provisions of the deed if that interpretation does no violence to the meaning of which they are naturally susceptible...".

In construing a contract the Court must look at the words used in the contract unless they are such that one may suspect that they do not convey the intention correctly. If the words are clear, there is very little the Court can do about it. In the construction of a written instrument it is legitimate in order to ascertain the true meaning of the words used and if that be doubtful it is legitimate to have regard to the circumstances surrounding their creation and the subject matter to which it was designed and intended they should apply.

11. The habendum in the lease states:

"Upon the prayer of the second party Lessee to take the said land in arrangement and settlement for a stipulated period for starting factories, Lathe works, manufacturing and repairing of Motor Car parts, manufacturing and repairing Electric Fans and various manufacturing businesses, constructing pucea buildings on the said land or in portion thereof or subletting Page 78 of 205 O/OJMCA/89/2014 CAV JUDGMENT houses etc. and for constructing shop rooms etc. under the following terms and provisions, to which he agreed and upon giving possession of the said land to the second party Lessee, the second party Lessee hereby admit and promise that."

12 Particulars and four boundaries of the property in Schedule "Ka" are given as :

"In the District of 24 Parganas, within the Police Station Bhowanipore, in Mouza Bhowanipore Village, within the jurisdiction of the SubRegistry Alipore, in Government Khas Mahal, in Division 6, Sub Division "E" (E) relating to Dihi 55 gram, in holding No. 224 within the surplus land of scheme No. 4 of the Calcutta Improvement Trust, a portion of the plot No. 62 of the said scheme, the rent free land measuring more or less 065,30 six kathas, five chittaks, thirty square feet together with foundation of the wall together with all fittings and fixtures and easement and other rights etc. with all rights and entire right is the property whose current Municipal premises No. 5/2A, Russa Road and the second party Lessee have taken the said property on lease for a stipulated period of twenty years".

(emphasis added) 13 In clause 9 of the lease it would be seen how and when the rent is to be paid and when the lease would be liable to be cancelled have been stated. Clause 11 stipulates that at the first instance the period of lease was made 10 years and in case the Lessee acted in accordance with what was expected of him under clause 9, the period of the lease would be extended for a further period of 5 years up to 31.03.1961 at enhanced rent of Rs. 250 per month, and if the Lessee continued to act Page 79 of 205 O/OJMCA/89/2014 CAV JUDGMENT in accordance with what was expected of him under clause 9 during this period of 5 years the period of the lease would be extended for a further period of 5 years, that is up to 3 1.03.1966 at a monthly rent of Rs. 300 and in case the Lessee continued to act during this period as expected of him under clause 9 till the end of the period of 20 years he would be entitled by serving a notice to obtain an extension for a further maximum period of one year at enhanced rent of Rs. 500 per month.

14 It is pertinent to note that the word used is 'extension' and not 'renewal'. To extend means to enlarge, expand, lengthen, prolong, to carry out further than its original limit. Extension, according to Black's Law Dictionary, means enlargement of the main body; addition of something smaller than that to which it is attached; to lengthen or prolong. Thus extension ordinarily implies the continued existence of something to be extended. The distinction between 'extension and 'renewal' is chiefly that in the case of renewal, a new lease is required, while in the case of extension the same lease continues in force during additional period by the performance of the stipulated act. In other words, the word 'extension' when used in its proper and usual sense in connection with a lease means a prolongation of the lease. Construction of this stipulation in the lease in the above manner will also be consistent when the lease is taken as a whole. The purposes of the lease were not expected to last for only 10 years and as Mr. A. K. Sen rightly pointed out the Schedule specifically mentioned the lease as "for a stipulated period of twenty years." As these words are very clear, there is very little for the Court to do about it."

Page 80 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(b) In the case of Rajasthan State Industrial Development and Investment Corporation (supra), it has been observed in Paragraphs 23 and 24 as under: "23 A party cannot claim anything more than what is covered by the terms of contract, for the reason that contract is a transaction between the two parties and has been entered into with open eyes and understanding the nature of contract. Thus, contract being a creature of an agreement between two or more parties, has to be interpreted giving literal meanings unless, there is some ambiguity therein. The contract is to be interpreted giving the actual meaning to the words contained in the contract and it is not permissible for the court to make a new contract, however is reasonable, if the parties have not made it themselves. It is to be interpreted in such a way that its terms may not be varied. The contract has to be interpreted without giving any outside aid. The terms of the contract have to be construed strictly without altering the nature of the contract, as it may affect the interest of either of the parties adversely. (Vide:

United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal, AIR 2004 SC 4794; Polymat India P. Ltd. & Anr. v. National Insurance Co. Ltd. & Ors., AIR 2005 SC 286).

24 In DLF Universal Ltd. & Anr. v.

Director, T. and C. Planning Department Haryana & Ors., AIR 2011 SC 1463, this court held:

"13. It is a settled principle in law that a contract is interpreted according to its purpose. The purpose of a contract is the Page 81 of 205 O/OJMCA/89/2014 CAV JUDGMENT interests, objectives, values, policy that the contract is designed to 82ctualize. It comprises joint intent of the parties. Every such contract expresses the autonomy of the contractual parties' private will. It creates reasonable, legally protected expectations between the parties and reliance on its results. Consistent with the character of purposive interpretation, the court is required to determine the ultimate purpose of a contract primarily by the joint intent of the parties at the time the contract so formed. It is not the intent of a single party; it is the joint intent of both parties and the joint intent of the parties is to be discovered from the entirety of the contract and the circumstances surrounding its formation.

14. As is stated in Anson's Law of Contract:

"a basic principle of the Common Law of Contract is that the parties are free to determine for themselves what primary obligations they will accept...Today, the position is seen in a different light. Freedom of contract is generally regarded as a reasonable, social, ideal only to the extent that equality of bargaining power between the contracting parties can be assumed and no injury is done to the interests of the community at large."

15. The Court assumes:

"that the parties to the contract are reasonable persons who seek to achieve reasonable results, fairness and efficiency...In a contract between the joint intent of the parties and the intent of the reasonable person, joint intent trumps, and the Judge should interpret the contract accordingly."

Page 82 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(c) In the case of Shraddha Aromatics Pvt. Ltd. (supra), it has been observed in Paragraphs 4, 5, 6, 15 and 16 as under: "4. Undeterred by rejection of one application, the appellant filed another application, which came to be registered as Company Application No.504 of 2007, for recall of order dated 30.8.2007. After considering the rival submissions, learned Company Judge vide his order dated 27.11.2007 allowed the second application. The relevant portions of that order are extracted below:

"13. If the above conduct of the applicant is to be viewed in light of the latest judgment of the Hon'ble Supreme Court in the case of Divya Manufacturing Company (P) Limited (Supra), it is clear that though the sale was confirmed in favour of respondent No.2, neither the possession of the movable properties was handed over nor the sale deed was executed in favour of respondent No.2. Unless and until these formalities are over, it cannot be said that the transaction is complete and before that, if higher offer is made, the Court would certainly consider and at that point of time, it is to be seen as to whether the earlier transaction is by virtue of fraud. The real criteria is that the property of the Company in liquidation should fetch maximum price and whether the properties can be adjudged on the basis of the offers which are received. Here in the present case, the applicant has offered Rs.1.51 Crores. If that is to be considered as market value then in that case, certainly the offer of Rs. 1.27 Crores made by respondent No.2 and accepted by the Court Page 83 of 205 O/OJMCA/89/2014 CAV JUDGMENT earlier cannot be said to be an adequate price and hence, the Court is well within its power to reconsider the case. The authorities cited by the learned advocate appearing for the respondent No.2 are confining to the facts of those cases. Even in the case of Divya Manufacturing Company (P) Limited, a distinction was sought to be drawn by submitting that there was condition laid down in the tender document empowering the Court to set aside the sale.

Irrespective of the fact whether any such condition is there or not, the Court is well within its power to reconsider its decision especially when higher amount is offered and ultimately, it is in the advantage and benefit of the Secured Creditors and workers.

14. Even the Division Bench of this Court has taken the view in O.J. Appeal No. 80 of 2007 decided on 28.06.2007 where the Learned Single Judge has rejected the application for de confirmation of sale and while considering the higher offer made by that appellant, since the original successful bidder had increased its offer to match with the offer made by the appellant in the appeal, the matter was accordingly decided.

15. Considering the over all view of the matter and looking to the facts and circumstances of the present case, the Court is of the view that since the present applicant is offering Rs. 1.51 Crores and it is already deposited with the Official Liquidator, there is no reason not to accept the said offer. Therefore, the order dated 30.08.2007 passed by this Court in OLR No. 143 of 2007 is hereby recalled and the sale of Lot No. A of the Company in liquidation confirmed in favour of respondent No.2 is hereby cancelled. The Page 84 of 205 O/OJMCA/89/2014 CAV JUDGMENT Court hereby confirms the sale of Lot No. A of the Company in liquidation in favour of the present applicant for Rs. 1.51 Crores. Since the entire sale consideration has already been deposited by the applicant with the Official Liquidator, the Official Liquidator is hereby directed to hand over the possession of the movables within one week from today and the sale deed be executed in favour of the present applicant within one week from the date of receipt of the draft of sale deed from the present applicant.

16. Since the respondent No.2 has already paid an amount of Rs. 1.27 Crores, now the said amount is required to be refunded to the respondent No.2. The equity, however, demands that the respondent No. 2 should be adequately compensated by way of interest on the said amount. The present applicant is, therefore, directed to pay interest @ 12% p.a. on the actual amount of the respondent No.2 lying with the Official Liquidator. The calculation be made accordingly and the applicant shall deposit the said amount of interest with Official Liquidator and on deposit of the said amount of interest, the possession of the property would be handed over as well as the sale deed would be executed in his favour. The amount of interest so deposited by the applicant would be refunded to the respondent No.2 along with the amount of Rs. 1.27 Lacs."

5. Respondent No.2 challenged the aforesaid order in O.J. Appeal No.248 of 2007. During the pendency of the appeal, the Division Bench of the High Court gave opportunity to the parties to give higher offers. This is evident from order sheets dated 28.2.2008, 3.3.2008 and 27.3.2008, which read as under:

Page 85 of 205 O/OJMCA/89/2014 CAV JUDGMENT

"DATE: 28.02.2008 It is stated that when the property was auctioned, offer of Rs. 1.51 crore was given by respondent No.4, and option was given to the appellant if he is prepared to pay Rs. 1.51 crores.

The Counsel for the appellant prays for time to seek instruction from his client, whether appellant is prepared to pay Rs. 1.51 crores. List on 3.3.2008.

DATE: 03.03.2008 On 28.02.2008, when some other party offered Rs.1.50 Crores, we gave the option to the appellant to offer similar amount, as the Court felt that preference should be given to the appellant, if similar amount is offered by the appellant.

Today, respondent No.1 Shradhha Aromatics Pvt. Ltd. offered Rs.1.61 Crores. Counsel for the appellant prays time to consult his client, whether he can offer the amount similar to which is offered by the respondent No.1.

List it on 05.03.2008.

DATE: 27.03.2008 On 05.03.2008, respondent no.1 was prepared to deposit Rs.1.51 crores. The parties were directed to appear in person in Court and submit their bids. However, today, the appellant has backed out and submits that he does not want to participate in the bidding.

Respondent no.1 Shradhha Aromatics Pvt. Ltd. has already deposited an amount of Page 86 of 205 O/OJMCA/89/2014 CAV JUDGMENT Rs.1.51 crores. Respondent No.1 is, therefore, directed to deposit a demand draft for the balance amount of Rs.10 lakhs within three weeks and thereafter the matter will be taken up for hearing.

However, it is made clear that as the appellant does not want to pay higher amount as has been offered by respondent no.1, he will not be permitted to submit any bid by offering a higher amount hereafter. The appellant submits that he shall only make his submissions on the next date.

List it on 22.04.2008."

6. After undertaking the aforesaid exercise, the Division Bench of the High Court considered the question whether the learned Company Judge was justified in reviewing/recalling order dated 30.8.2007 on the ground that the appellant herein had offered better price and answered the same in negative. The Division Bench opined that the confirmed auction sale cannot be set aside merely because subsequently a higher price is offered by one of the bidders.

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 Page 87 of 205 O/OJMCA/89/2014 CAV JUDGMENT substantially developed in 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.127 lakhs. After acceptance of the revised offer by the learned Company Judge, the appellant stepped in and made an offer to pay Rs.141 lakhs. The first application filed by it was dismissed but the second application was allowed and the increased offer of Rs.151 lakhs 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.127 lakhs. As against this, if the offer made by the intervenorcumpromoter 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 Limited and others (supra), 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.

16. In the result, the appeal is disposed of in the following terms:

(i) The impugned order is set aside.

Page 88 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(ii) The offer of Rs.7.60 crores including additional amount of Rs.2 lakhs made by the intervenorcumpromoterM/s. Chiripal Textile Mills Private Limited is accepted.

(iii) The Registry is directed to encash the fixed deposits of Rs.7.60 crores and get prepared a demand draft of the total amount including the interest in the name of the Official Liquidator attached to the Gujarat High Court. The latter shall depute an authorised officer to collect the demand draft from the Registry of this Court.

(iv) Within four weeks from today, the intervenorcumpromoter shall pay Rs.6 lakhs to the appellant and Rs.5 lakhs to respondent No.2 by way of compensation because on account of pending litigation, they were prevented from utilising the amount deposited with the Official Liquidator.

(v) Within four weeks from the date of receipt of demand draft by the Official Liquidator attached to the Gujarat High Court and production of receipt showing payment of money by the intervenorcum promoter to the appellant and respondent No.2 in terms of sub paragraph (iv) above, GSIIC shall execute sale deed(s) in favour of the nominee of the intervenorcum promoter, namely, M/s Chiripal Energy Ltd.

and handover possession of the land etc. to the purchaser.

(vi) The tax etc., if any, payable to the State Government and/or agencies/ instrumentalities of the State in respect of the assets of the Company shall be paid by the purchaser."

(d) In the case of Divya Manufacturing Co. Pvt.

Page 89 of 205 O/OJMCA/89/2014 CAV JUDGMENT

Ltd. (supra), it has been observed in Paragraphs 7, 9, 11 to 16 as under: "7. The Court noted that it cannot shut eyes to the fact that initially the property was proposed to be sold at the price of Rs. 37 lakhs. Thereafter the sale was confirmed at Rs. 85 lakhs which was set aside and at the intervention of the Division Bench, the amount was enhanced to Rs. 1.3 crores. The Court observed that as two applicants have come forward with a proposal to purchase the said property at Rs. 2 crores, the principle laid down in LICA (P) Ltd. (1) v. Official Liquidator1 and LICA (P) Ltd. (2) v. Official Liquidator2 applies squarely to the facts of the present case. The Court also observed that it was conscious of the fact that there should be a finality even in a company sale, but 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 interests of justice. The Court also referred to the decision in Navalkha & Sons v. Sri Ramanya Das and Ors.3. Considering all the submissions made by the learned counsel for the parties, the sale confirmed in favour of appellant for an amount of Rs. 1.3 crores was set aside with a direction that respondent Nos. 7 and 8 should compensate Divya by paying Rs. 70 thousand each for the loss suffered by it and directed for resale of the assets of the Company. That order is under challenge before this Court.

9. The learned counsel for the appellant submitted that the order passed by the High Court setting aside the confirmed sale is on the face of it illegal and erroneous. He Page 90 of 205 O/OJMCA/89/2014 CAV JUDGMENT submitted that before confirmation of sale in favour of Divya all endeavours were made by the judges and finally the offer of appellant to purchase at Rs. 1.30 crores was accepted and sale was confirmed. At that time, Jayrespondent No. 8 had not increased its offer of Rs. 1.25 crores. Respondent No. 7 was not permitted to bid as he did not comply with the requirements mentioned in the advertisement for sale and, therefore, on 2nd July, 1998 before commencement of auction sale, he was not permitted to participate in auction. It is, therefore, submitted that after the sale is confirmed, subsequent higher offer cannot constitute a valid ground for setting aside such confirmation. He referred to various decisions in support of his contention and submitted that once the sale was confirmed by the Court after applying its mind to all relevant considerations, it is not permissible to probe in retrospect and to accept subsequent offers by Jay or Sharma. He pointed out that as such initial valuation report fixed the value of the property at Rs. 37 lakhs only. Thereafter the appellant raised its offer to Rs. 85 lakhs and agreed to reemploy the workmen, so the learned Single Judge confirmed the sale in its favour. As the said order was challenged before the Division Bench, the Division Bench directed the Official Liquidator to conduct fresh sale and finally the highest offer of appellant of Rs. 1.30 crores was accepted by the Court. In such a situation the Division Bench wrongly relied upon the judgment of this Court in LICA (P) Ltd. v. Official Liquidator & Anr. (supra). It is also submitted that after disposal of the appeal, the Division Bench became functus officio and therefore also it could not review its earlier order.

Page 91 of 205 O/OJMCA/89/2014 CAV JUDGMENT

11. In our view, on facts it is apparent that the Division Bench of the High Court has considered all the relevant facts including the fact that at the initial stage, the appellant Divya offered only Rs. 37 lakhs to purchase the properties. That means, the appellant wanted to purchase at a throw away price. Thereafter, at the intervention of the Court, the price was increased to Rs. 1.3 crores by the appellant. This indicates that appellant was keen to purchase the property, however by paying only the bare minimal amount and to take advantage of sale by the liquidator in the hope that if there are no other purchasers, it would purchase the Company at a price which is abnormally below the market price. It is also true that on 2nd July 1998, the offer made by the appellant was accepted and it was ordered that sale in its favour be confirmed, but at the same time, before possession of the property could be handed over, or before the sale deed could be executed in its favour, respondent Nos. 7 and 8 pointed out that the assets and properties could be sold at Rs. 2 crores. For showing their bona fides, they were directed to deposit Rs. 40 lakhs each and also to pay Rs. 70 thousand each as damages to the appellant. Further, the application for setting aside the sale was filed within a few days of the order accepting the bid of the appellant. In these set of circumstances, 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. Appellant is also duly compensated by payment of Rs. 70 thousand each by respondent Nos. 7 and 8.

Page 92 of 205 O/OJMCA/89/2014 CAV JUDGMENT

12. The law on this subject is well settled. In the case of Navalkha and Sons (supra), after appellant s offer was accepted, a fresh offer from one Gopaldas Darak for higher amount was received by stating that he could not offer in time because he came to know of the sale only 2 days prior to the date of the application and there was possibility of higher bids. Instead of directing a fresh auction or calling for fresh offers, the learned Judge thought it proper to arrange an open bid in the Court itself on that very day as between M/s. Navalkha and higher offeror Gopaldas Darak. M/s. Navalkha thereafter offered higher bid at Rs. 8,82,000 and its bid was accepted and the learned Judge concluded the sale in its favour with a direction to pay the balance amount. Thereafter an application was filed offering Rs. 10 lakhs. A contention was raised that due publicity of the sale of the property was not made, but that application was rejected by the Court. Hence, an appeal was filed by the applicant who made an offer of Rs. 10 lakhs and another by one contributory against the order of confirmation. Both appeals were allowed by the Division Bench and the order passed by the learned Judge was set aside with a direction to take fresh steps for sale of the property either by calling sealed tenders or by auction in accordance with law. That order was challenged before this Court by M/s. Navalkha. It was contended that there was no justification for the Division Bench to interfere with the order of the learned Single Judge. In that context, after quoting Rule 273 of the Companies (Court) Rules, 1959, the Court observed :

"The principles which should govern confirmation of sales are well established.

Page 93 of 205 O/OJMCA/89/2014 CAV JUDGMENT

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. T. 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. Sadapathy Pillai (AIR 1925 Mad. 318) and S. Soundarajan v. M/s.

Roshan & Co. (AIR 1940 Mad. 42.) In A. Subbaraya Mudaliar v. K. Sundararajan (AIR 1951 Mad. 986) 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 Page 94 of 205 O/OJMCA/89/2014 CAV JUDGMENT 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."

13. From the aforesaid observation, it is abundantly clear that the Court is the custodian of the interests of the Company and its creditors. Hence, 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. As stated above, in the present case, the sale proceedings have a chequered history. The appellant started its offer after having an agreement with the Employees Samity for Rs. 37 lakhs. This was on the face of it under bidding for taking undue advantage of Court sale. At the intervention of the learned Single Judge, the bid was increased to Rs. 85 lakhs. Subsequently, before the Division Bench, the appellant increased it to Rs. 1.30 crores. At that stage, respondent No. 7, Sharma was not permitted to bid because it had not complied with the requirements of the advertisement. It is to be stated that on 26th June, 1998, the Division Bench has ordered that offers of Eastern Silk Industries Ltd. and Jay Prestressed Products Ltd. would only be considered on 2nd July, 1998 and confirmation of sale would be made on the basis of the offers made by the two parties. Further, despite the fact that the appellant Divya had withdrawn its earlier offer, the Court permitted it to take part in making further offer as noted in the order dated 2nd July, 1998. In these set of circumstances, there was no need to confine the bid between three offerors only.

14. In LICA (P) (1) v. Official Liquidator Page 95 of 205 O/OJMCA/89/2014 CAV JUDGMENT & Anr. (supra), this Court dealing with a similar question observed thus :

"The purpose of an open auction is to get the most remunerative price and it is the duty of the court to keep openness of the auction so that the intending bidders would be free to participate and offer higher value. If that path is cut down or closed the possibility of fraud or to secure inadequate price or underbidding would loom large. The Court would, therefore, have to exercise its discretion wisely and with circumspection and keeping in view the facts and circumstances in each case."

15. The matter was again brought before this Court and in LICA (P) Ltd. (2) v. Official Liquidator & Anr. (supra) and the Court held:

"Proper control of the proceedings and meaningful intervention by the court would prevent the formation of a syndicate, underbidding and the resultant sale of property for an inadequate price. The order passed by this court yielded the result that the property which would have been finalised at Rs. 45 lakhs, fetched Rs. 1.10 crores and in this court a further offer of Rs. 1.25 crores is made. In other words, the property under sale is capable of fetching a higher market price. Under these circumstances, though there is some force in the contention of Sri Ramaswamy that the court auction may not normally be repeatedly disturbed, since this court, on the earlier occasion, had limited the auction between the two bidders, the impediment will not stand in the way to direct sale afresh. Even today the parties are prepared to participate in the bid."

16. Further, there is a specific condition Page 96 of 205 O/OJMCA/89/2014 CAV JUDGMENT No. 11 in terms and conditions of sale as quoted above which empowers the Court to set aside the sale even though it is confirmed for the interests of creditors, contributories and all concerned and/or public interest. In this view of the matter, it cannot be said that the Court became functus officio after the sale was confirmed. 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 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."

(e) In the case of Fertilisers and Chemicals Travancore Ltd. (supra), it has been observed in Paragraphs 11 to 13 as under: Page 97 of 205 O/OJMCA/89/2014 CAV JUDGMENT "11. The Supreme Court in the above mentioned decision took the stand, even if there is no fraud or irregularity it is open to the Company Judge to exercise the discretion to conduct a resale so that most remunerative price should be secured. Keeping in view the interest of the creditors, workmen etc., the Company Judge exercised his discretion to reopen the auction. The Division Bench has interfered with the sale order passed by the Single Judge. The finding of the Division Bench was received by the Supreme Court and upheld the decision of the learned Company Judge. (emphasis supplied by the court)

12. The principle laid down by the Supreme Court in the abovementioned decision is applicable to the instant case as well. The question of adequacy of sale consideration is also one of the important factors to be taken note of by the Company Court. The interest of the secured creditors, unsecured creditors, shareholders, etc., is also a factor to be taken note of by the Company Judge. Even in the absence of fraud or irregularity, it is open to the Company Judge to exercise his discretion in cases where the court comes to the conclusion that there is every possibility of getting higher price. IN the instant case, it is true, that the FACT had earlier made an offer for Rs.26.76 lakhs. It is also an admitted fact that the State Bank of India has made an offer for Rs 52 lakhs. The present offer made by the FACT is Rs.66.09 lakhs. There is a difference of about Rs.14.09 lakhs. The Company Court, while exercising discretion, has to safeguard the interest of the company in liquidation as well as the creditors, etc., even if no irregularity or fraud is alleged or proved.

13. Under the abovementioned Page 98 of 205 O/OJMCA/89/2014 CAV JUDGMENT circumstances, I am, therefore, inclined to direct the official liquidator to re auction the property with wide publicity with upset price as 66.09 lakhs. I also direct the applicantFACT to deposit an amount of Rs.25,000 for meeting the preliminary expenses for conducting re auction. The official liquidator will take expeditious steps to conduct the re auction after settling the terms and conditions. The reauction will be conducted within a period of three months from the date of receipt of a copy of this order."

(f) In the case of Vishnu Agarwal (supra), it has been observed in Paragraph 9 as under: "9. Apart from the above, we are of the opinion that the application filed by the respondent was an application for recall of the Order dated 2.9.2003 and not for review. In Asit Kumar v. State of West Bengal and Ors., 2009 (1) SCR 469 : (AIR 2009 SC (Supp) 282), this Court made a distinction between recall and review which is as under: "There is a distinction between ...... a review petition and a recall petition. While in a review petition, the Court considers on merits whether there is an error apparent on the face of the record, in a recall petition the Court does not go into the merits but simply recalls an order which was passed without giving an opportunity of hearing to an affected party. We are treating this petition under Article 32 as a recall petition because the order passed in the decision in All Bengal Licensees Association v. Raghabendra Singh and Ors. [2007 (11) SCC 374] : (AIR 2007 SC Page 99 of 205 O/OJMCA/89/2014 CAV JUDGMENT 1386) cancelling certain licences was passed without giving opportunity of hearing to the persons who had been granted licences."

(g) In the case of G.T. Swamy (supra), it has been observed as under: "...A similar question about the powers of the court to issue a commission in the exercise of its powers under section 151 of the Code in circumstances not covered by section 75 and Order xxvi arose in Padam Sen v. State of Uttar, Pradesh AIR 1961 SC 218, 1961 Cri.L.J. 322, [1961] 1 SCR 884, and this court held that the court can issue a commission in such circumstances. It observed (at page 887 of SCR); at (page 219 of AIR) thus:

"the inherent powers of the court are in addition to the powers specifically conferred on the court by the. Code. They are complementary to those Powers and, therefore, it must be held that the court is free to exercise them for the Purposes mentioned in section 151 of the code when the exercise of those powers is not in any way in conflict with what has been expressly provided in the Code or against the intentions of the Legislature."

These observations clearly mean that the inherent powers are not in any way controlled by the provisions of the Code as has been specifically, stated in section 151 itself. But those powers are not to be exercised when their exercise may be in conflict with what had been expressly provided in the Code or against the intentions of the Legislature.

Page 100 of 205 O/OJMCA/89/2014 CAV JUDGMENT

...But, in this case, the applicants are not aggrieved by the order of the winding up in the sense that the same is bad in law. Their prayer is that this windingup order should not be given effect to since the petitioners have settled all the claims against the company and the company now is in a position to carry on business within the framework of the Act and if the windingup order were to be given effect to, great prejudice would be caused to the interests of the company....

...Rule 6 reads as under: "practice and procedure of the court and provisions of the Code to apply. Save as provided by the Act or by these Rules, the practice and procedure of the court and the provisions of the Code so far as applicable, shall apply to all proceedings under the Act and these Rules. The Registrar may decline to accept any document which is presented otherwise than in accordance with these rules or the practice and procedure of the court."

Rule 9 reads as under: "inherent powers of court. Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court."

A combined reading of rules 6 and 9 indicates that the inherent power of this court could be exercised in the manner provided under section 151, Civil Procedure Code, except in cases where the Act and the Rules provide otherwise. So, the line of enquiry this court has to adopt for Page 101 of 205 O/OJMCA/89/2014 CAV JUDGMENT discerning the limits of its powers under rule 9 is to see whether there is anything in the provisions of the Act or in the Rules which takes away the power of this court to recall an order of winding up in the circumstances mentioned in the company application."

(h) In the case of Girish Bhagwatprasad (supra), it has been observed in Paragraphs 14, 43, 44 and 45 as under: "14. Learned senior advocate Mr. Soparkar submitted that in substance, the present application is for review of the order dated 25.8.2008. Mr. Soparkar submitted that the contents of the application clearly suggest that the applicants want the order dated 25.8.2008 to be reviewed by this Court on more than one grounds by looking at the merits of the proceedings of Company Application No.414 of 2007. Mr. Soparkar submitted that since the application is opposed on the ground that the same is grossly delayed and barred by limitation, for which no explanation is given in the application, the applicants in second thought adopted a clever and mischievous idea of deleting word review and the prayer for condonation of delay. Mr. Soparkar submitted that under the guise of prayer for recall, the applicants want review of the order which is not permissible as held by the Hon'ble Supreme Court in the case of Cine Exhibition Private Limited Vs. Collector, District Gwalior and others reported in (2013)2 SCC

698. Mr. Soparkar submitted that unless the Court first review its order, recall of order is not possible and therefore, even if recall of the order is prayed, the law of limitation would apply. Mr. Soparkar Page 102 of 205 O/OJMCA/89/2014 CAV JUDGMENT submitted that as per the Limitation Act, application for review is to be filed within three months. Mr. Soparkar submitted that even application for recall would fall within residuary Article 137 which provides for three years time limit. Mr. Soparkar submitted that since there is no application or explanation for delay in the present application, this Court may not entertain the application even though the same is now restricted only for the prayer of recall. Mr. Soparkar submitted that since deed of assignment is a registered document, the applicants could be said to have deemed knowledge of assignment and therefore, application for recall was required to be filed within three years from the date of registration of assignment. Mr. Soparkar has relied on the judgment in the case of Dilboo (Smt)(Dead) By LRs. and others Vs. Dhanraji (Smt) (Dead) and others reported in (2000)7 SCC

702.

...      ...          ...   ...
...      ...          ...   ...

43. The Company Court has inherent powers under Rule 9 of the Rules to pass necessary orders to do complete justice to the parties by recalling its order if it finds that there was total lack of jurisdiction to deal with particular application whereon the order was made and it was not properly apprised of the correct facts or correct position of law by party in whose favour the order is passed. Present is not the case where the applicants are seeking review under the guise of seeking modification/ clarification or recalling of the order. The applicants have come with clear case that they are equity shareholders of the company under liquidation which were pledged by them with Page 103 of 205 O/OJMCA/89/2014 CAV JUDGMENT IDBI by way of security for the loan advanced by the IDBI to the company. In respect of such shares, if the IDBI wanted to get its action of assigning the rights, title and interest therein ratified with the help of the Court, the applicants were the first affected persons in whose absence no order affecting their rights could have been passed.

44. Learned senior advocate Mr. Soparkar, however, submitted that even if the application is treated only for recalling of the order dated 25.8.2008 passed by this Court, the law of limitation would apply to such application. Mr. Soparkar submitted that for such kind of application, limitation would be as per Article 137 of the Limitation Act which provides for three years time limit to prefer such application. Mr. Soparkar submitted that the present application is hopelessly time barred and no explanation for delay is given in the application. Mr. Soparkar submitted that the applicants having dropped the prayer for condonation of delay, the application cannot be entertained.

45. The above contentions of learned senior advocate Mr. Soparkar cannot be accepted for the simple reason that when the patent error is found in the order of the Court resulting into injustice to a party by not hearing such party, it is always open to the Court to exercise its inherent powers to do complete justice to such party by recalling the order for which delay cannot come in the way of the Court."

(i) In the case of Maharana Mills Rashtriya Kamdar Sangh (supra), it has been observed in Paragraph 49 as under: Page 104 of 205 O/OJMCA/89/2014 CAV JUDGMENT "49. Having regard to the aforesaid aspects and as a result of the above noted discussion, I am of the view that Rule 9 of the Company Court Rules confers inherent jurisdiction on the Court to pass appropriate necessary order and to give such directions and pass such orders as may be necessary to meet the ends of justice and also having regard to the fact that when this Court has power to direct disbursement of the available amounts in accordance with the provision of Sections 529, 529A and 530 then such power to direct final disbursement would include power to direct ad hoc disbursement as well, therefore, having regard to all of the above discussed aspects and also having regards to the fact that :

(a) in response to the OLR dated 27th September 2005 filed in Company application No.203 of 2001 any objection either as regards to the Chartered Accountant's report and/or the details with reference to the workers' claim eligible for the purpose of Section 529 was not filed/raised by the respondent State Bank of India,

(b) Similarly, any objection was not filed/raised by the respondent State Bank of India, at the relevant time, in connection with the details of the claim of the workers eligible for Section 529A of the Companies Act, and/or with regard to the Chartered Accountant's report of which reference was made in the said OLR dated 23.01.2006,

(c) the order dated 03.10.2007 was passed by the Court wherein it was inter alia observed that, ".......the Official Liquidator shall consider the claim found to the extent of admissible limit and for Page 105 of 205 O/OJMCA/89/2014 CAV JUDGMENT the disputed claim the matter shall be considered by the Official Liquidator and the same shall be finalized by this Court at the time when disbursement is to be ordered", and the same order was not and has not been challenged by the respondent State Bank of India,

(d) and considering the fact emerging from the record of the said Company Application No.203 of 2001 that at any stage of the said proceedings, the respondent State Bank had never raised any objection or dispute with regard to the details of the claim of the workmen and/or with regard to the report of the Chartered Accountant and the "disputed claim" of which reference made in the order dated 03.10.2007 was in view of the dispute/objection recorded by the Chartered Accountant in respect of the workers' claim to the extent of Rs.5,46,55,820/ (comprising Rs.2,50,20,379/ towards privilege leave, Rs.2,58,73,673/ towards bonus and Rs.37,61,768/ towards notice pay) in the report dated 29th September 2005 and in respect of the workers' claim to the extent of Rs.5,47,50,284/ (comprising Rs.2,51,14,843/ privilege leave, Rs.2,58,73,673/ towards bonus and Rs.37,61,768/ towards notice pay) mentioned by the Official Liquidator in the report dated 23.01.2006. The said reference of "disputed claim" as mentioned in the order dated 03.10.2007 was obviously not with reference to any objection raised by the respondent State Bank of India inasmuch as at any stage in the said application, any objection was not filed/raised by the respondent State Bank of India,

(e) even in respect of present application, the respondent State Bank of India had not filed any objection until 25th July 2011 Page 106 of 205 O/OJMCA/89/2014 CAV JUDGMENT when, for the first time, the affidavit came to be filed by the respondent State Bank of India. Even in the said affidavit dated 25th July 2011 either in para 2, 3 or 4 of the said affidavit any objection with regard to the details of the claim of the workmen as mentioned in the OLR dated 11.05.2011 (at page 21) and/or as mentioned in the Chartered Accountant's report dated 13.07.2011 (at page 36), has not been raised. Actually, the only objection which is raised in the affidavit dated 25.07.2011 is with respect to its own claim and it is submitted that the Chartered Accountant is not justified in reducing its claim i.e. claim of respondent State Bank of India from Rs.5,73,99,210/ to Rs.3,62,15,578/.

In fact, the said respondent State Bank of India has also not raised any dispute with regard to the claim amount by other two secured creditors/financial institutions viz. IDBI Bank and Central Bank of India,

(f) and also having regard to the fact that though the winding up order came to be made in December 1989 and almost 22 years have rolled by since then the workers have not been paid any amount until now and

(g) also having regard to the fact that although the sale proceeds have been received since December 2010, any order with regard to disbursement could not be passed until now and the amounts are lying idle, without disbursement, with the Official Liquidator.

In view of the above noted facts and circumstances, it appears appropriate to pass order for ad hoc disbursement keeping alive all rights and objections of all secured creditors including the respondent State Bank of India as well as all the workers, as regards the quantification of Page 107 of 205 O/OJMCA/89/2014 CAV JUDGMENT the final claim and/or disbursement ratio, and that therefore I am inclined to accept the request for ad hoc disbursement of the amount available with the Official Liquidator, amongst the secured creditors and the workers."

(j) In the case of Industrial Reconstruction Bank of India (supra), it has been observed in Paragraphs 16 to 18 and 21 as under: "16. It is wellsettled that the highest bidder has no right that his bid should be accepted as a matter of course. The meaning of the word "confirmation of sale"

according to Black's Law Dictionary is:

The confirmation of a judicial sale by the Court which ordered it is a signification in some way (usually by the entry of an order) or the Court's approval of the terms, price and the condition of sale.

17. In this case excepting that the successful bidder was found to be the highest bidder, the terms and conditions of sale has not yet been approved. In other words, confirmation means a contract or written memorandum thereof, by which that which was inform or imperfect, invalid, is ratified, rendered valid and binding, made firm and unavoidable. It means to give formal approval. Ordinarily, no right accrues in favour of the highest bidder until and unless the sale is confirmed by the Court.

18. The Court, while dealing with the property and/or selling the property under compulsion, must act in public interest. It cannot act arbitrarily. The object of holding auction is generally to raise the Page 108 of 205 O/OJMCA/89/2014 CAV JUDGMENT highest and the maximum price. AH attempts must be to obtain the best available price while in such auction sale made by the Court. When such a sale is being made for the benefit of the creditors technicalities cannot be allowed to stand in the way when it is found that further auction or fresh auction is bound to fetch more price. The creditors have beneficial interest in such property and the sale thereof and the Court is under an obligation to secure the best market price available in a market economy so that more money comes into the hands of the Court for repaying the loan wholly or in part of the creditors for whose benefit the property is being sold. The disposal of the property by the Court partakes the character of a trust so the disposal in public interest must be by such method as would grant an opportunity to public at large to participate in it, as that is the way. to best sub serve the public good. Of course this may result some hardship to the highest bidder whose bid was accepted with earnest money. But such hardship or inconvenience is inevitable in such cases of public auction by the Court when the Court is not an expert auction dealer and that the principles of bid by the auctioneer in the market that as soon as the hammer finally fails sale is closed, does not and cannot apply to a sale made by the Court.

21. Under such circumstances, we are unable to attach finality to the acceptance of the bid and in the interest of the creditors, and in order to get higher price the bid, which was already been accepted, is treated as provisional and a fresh bid is to be held by us in which Sree Ganga Construction Co. Ltd. will be at liberty to participate along with the other parties, and in case it is found that other bidders Page 109 of 205 O/OJMCA/89/2014 CAV JUDGMENT are unable to bid higher, then the bid of Sree Ganga Construction Co. Ltd. would be accepted as final and his bid will be confirmed. On the contrary, if the bid increases, it will be open to any of the parties to participate in the bid and the highest bid has to be accepted and confirmed in accordance with the notice inviting offers."

(k) In the case of U. Nilan (supra), it has been observed in Paragraphs 19 to 26, 33 and 48 as under: "19 Originally, there was no provision under Order 34, Rule 5, Code of Civil Procedure enabling the defendant to deposit the mortgage money into Court at any time before confirmation of sale so as to save his property from being sold. This provision was introduced by the Transfer of Property (Amendment) Act (21 of 1929) and it was provided that if, at any time, before the confirmation of sale made in pursuance of a final decree, the defendant makes payment into Court of all amounts due from him under subrule (1) of Rule 4 of Order 34, the Court shall, on an application made by the defendant, pass a final decree and if such a decree has already been passed, it would be open to the Court to pass an order :

(a) directing the plaintiffmortgagee to deliver up the documents referred to in the preliminary decree to the mortgagor; and, if necessary,

(b) directing him to transfer the mortgaged property, as directed in the said decree and, also, if necessary, Page 110 of 205 O/OJMCA/89/2014 CAV JUDGMENT

20 Order 34, Rule 5 provides the last chance to the mortgagor to save his property from being passed on to the auctionpurchaser and avoid the disturbance of his title ensuring, at the same time, that mortgage money is paid to the person in whose favour the property had been mortgaged by depositing the entire amount in the Court, including the amount, where the property has been sold, contemplated by subrule (2) of this Rule. The whole step has to be taken before the confirmation of sale.

21 What is the meaning of the phrase "before the confirmation of sale" may now be considered in the light of other relevant provisions of the Code of Civil Procedure.

22 Now, an application to set aside the sale can be filed under Order 21, Rule 89, Code of Civil Procedure while another application for setting aside the sale on the ground of irregularity or fraud can also be given under Order 21, Rule 90, Code of Civil Procedure Similarly, if the property has been sold, it would be open to the purchaser to make an application for setting aside the sale on the ground that the judgmentdebtor had no saleable interest in the property sold in execution of the decree.

23 Order 21, Rule 92(1), Code of Civil Procedure including the proviso thereto provides as under : "R. 92. Sale when shall become absolute or be set aside. Where no Page 111 of 205 O/OJMCA/89/2014 CAV JUDGMENT application is made under Rule 89, Rule 90 or Rule 91, or where such application is made and disallowed, the Court shall make an order confirming the sale, and thereupon the sale shall become absolute :

Provided that, where any property is sold in execution of a decree pending the final disposal of any claim to, or any objection to the attachment of, such property, the Court shall not confirm such sale until the final disposal of such claim or objection."

24 The above provisions indicate that if an application is not made either under Rule 89 or Rule 90 or Rule 91 for setting aside the sale, the Court would confirm the sale. So also, where such application is made and is disallowed, the sale would be confirmed. When the "sale" thus becomes absolute, the Court is required to grant a certificate under Order 21, Rule 94 to the person in whose favour the sale has been confirmed specifying therein the details of the property sold, the name of the purchaser as also the date on which the sale became absolute. Once these steps have been taken and a certificate has been issued to the purchaser, the latter, namely, the purchaser can obtain delivery of possession of the property sold through the Court process by making an application under Order 21, Rule 95, Code of Civil Procedure or if the property is in possession of the tenant, symbolic possession would be delivered to him.

25 Art. 180 of the Limitation Act, 1908 which has since been replaced by the Limitation Act, 1963, provided for a limitation of three years for making an application for delivery of possession Page 112 of 205 O/OJMCA/89/2014 CAV JUDGMENT under Order 21, Rule 95, C.P.C.

26 In a case which was ultimately decided by the Privy Council, the question arose as to when the sale shall be deemed to have become absolute; either on and from the date on which it was confirmed or on and from the date on which the appeal, filed against an order rejecting application for setting aside the sale, was disposed of.

The Privy Council in Chandra Mani Saha V/s. Anarjan Bibi, AIR 1934 Privy Council 134, held as under : ". . . . .in construing the meaning of the words "when the sale becomes absolute" in Art. 180, Limitation Act, regard must be had not only to the provisions of O. 21, R. 92(1) of the Schedule to the Civil Procedure Code, but also to the other material Sections and Orders of the Code, including those which relate to appeals from Orders made under O. 21, R. 92(1). The result is that where there is an appeal from an order of the Subordinate Judge, disallowing the application to set aside the sale, the sale will not become absolute within the meaning of Art. 180, Limitation Act, until the disposal of the appeal, even though the Subordinate Judge may have confirmed the sale, as he was bound to do, when he decided to disallow the above mentioned application.

Their Lordships, therefore, are of opinion that on the facts of this case the sales did not become absolute within the meaning of Art. 180, Limitation Act, until 17.03.1927 and that the applications for possession of the properties purchased at the auction sales were not barred by the Limitation Act."

...      ...          ...   ...


                          Page 113 of 205
     O/OJMCA/89/2014                             CAV JUDGMENT



    ...     ...   ...     ...

33 The first part of the above extract is wholly inapplicable to the present case as it is nobody's case that the Court had been deliberately fixing dates after dates to avoid confirmation of sale or to accommodate the judgmentdebtor. The other part of the extract is relied upon by both the parties, specially the respondent in support of the contention that the deposits under Order 34, Rule 5 can be made and has to be made before the confirmation of sale.

    ...      ...          ...   ...
    ...      ...          ...   ...

48 The High Court endorsed the view of the trial Court that on the deposit of the balance amount of the mortgage money, the mortgage stood discharged. The trial Court having also allowed the application of the respondent for return of documents under Order 34, Rule 5A, C.P.C., there was no occasion for the High Court to have dismissed C.M.A. Nos. 19 and 74/84."

(l) In the case of LICA (P) Ltd. (No.1) (supra), it has been observed as under: "The purpose of an open auction is to get the most remunerative price and it is the duty of the court to keep openness of the auction so that the intending bidders would be free to participate and offer higher value. If that path is cut down or closed the possibility of fraud or to secure inadequate price or underbidding would loom large. The court would, therefore, have to exercise its discretion wisely and with circumspection and keeping in view the facts and circumstances in each case. One Page 114 of 205 O/OJMCA/89/2014 CAV JUDGMENT of the terms of the offer in this case is that even confirmation of the sale is liable to be set aside by the High Court as per Clause 11 of the conditions of offer. The sale conducted was subject to confirmation. Therefore, mere acceptance of the offer of Mr. Shantilal Malik does not constitute any finality of the auction nor would it he automatically confirmed. The appellant offered a higher price even now at Rs. 45,00,000. Keeping in view the interest of the company and the creditors and the workmen to whom the sale proceeds would he applied, the learned company judge was right in exercising her discretion to reopen the auction and directing Mr. Shantilal Malik as well to make a higher offer than what was offered by the appellant. In every case it is not necessary that there should be fraud in conducting the sale, though on its proof the sale gets vitiated and it is one of the grounds to set aside the auction sale. Therefore, the discretion exercised by the learned single judge cannot be said to be unwarranted. Under the circumstances, we are satisfied that the Division Bench of the Calcutta High Courtcommitted manifest illegality in interfering with the order of the learned single judge. The appeal is allowed. The order of the Division Bench is set aside.............."

(m) In the case of LICA (P) Ltd. (supra), it has been observed as under: "5. Proper control of the proceedings and meaningful intervention by the court would prevent the formation of syndicate, underbidding and the resultant sale of property for inadequate price. The order passed by this Court yielded the result Page 115 of 205 O/OJMCA/89/2014 CAV JUDGMENT that the property which would have been finalised at Rs.45 crores is made. In other words, the property under sale is capable of fetching a higher market price. Under these circumstances, though there is some force in the contention of Shri Ramaswamy that the court auction may not normally be repeatedly disturbed, since this Court, on the earlier occasion, had limited the auction between the two bidders, the impediment will not stand in the way of directing sale afresh. Even today the parties are prepared to participate in the bid. Accordingly we fix the upset price at Rs.1.50 crores. It is stated that Mr. S.L. Malik had already deposited a sum of Rs.45 lakhs. Bank drafts for a sum of Rs.80 lakhs are produced before us today. Therefore, we direct that the bank drafts should be deposited in the office of the learned Company Judge on or before 27.9.1993 and the balance amount of Rs.25 lakhs shall be deposited on or before 11.10.1993 making up the total sum of Rs.1.50 crores. Learned Single Judge is requested to conduct the auction afresh between the parties immediately after the reopening of pooja holidays fixing the upset price at Rs.1.50 crores. The highest bidder should deposit the balance amount on the same day before the working hours are closed. On deposit so made the Court would confirm the sale. No appeal thereon shall be entertained on any ground whatsoever."

(n) In the case of FCS Software Solutions Ltd. (supra), it has been observed in Paragraphs 28 to 37 as under: "28. Having heard the learned counsel for the parties, in our opinion, no case has been made out by the appellant against the Page 116 of 205 O/OJMCA/89/2014 CAV JUDGMENT Order passed by the High Court. 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, 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.

29. It may be observed at this stage that even before the Division Bench, such opportunity was afforded to the appellant to raise its bid but it was not availed of by the appellant. The Division Bench, in Page 117 of 205 O/OJMCA/89/2014 CAV JUDGMENT the impugned Order, noted:

"Even during the course of proceedings in this appeal, we had specifically asked the learned counsel for the appellant as to whether the appellant was willing to go for interse bidding to which he flatly declined".

30. In this connection, we may refer to some of the decisions of this Court to which our attention has been invited.

31. In M/s Navalkha & Sons v. Sri Ramanya Das & Ors., 1969 (3) SCC 337, it was held by this Court that the principles which should govern confirmation of sale are wellsettled. Where the acceptance of the offer by the Commission is subject to confirmation of the Court, mere acceptance of offer by the Commission would not confer vested right to the property in favour of the bidder. Condition of confirmation by Court operates as a safeguard against the property being sold at an inadequate price, whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. It is the duty of the Court to satisfy itself about the proper valuation. But 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.

32. In Kayjay Industries (P) Ltd. v. M/s Asnew Drums (P) Ltd. & Ors., (1974) 2 SCC 213, this Court held that it is the duty of the Court to accept the highest bid and the Court is not bound to go on adjourning the sale on the basis of valuation report. Referring to and relying on Navalkha, the Court stated that in public sales, the authority must protect interest of the Page 118 of 205 O/OJMCA/89/2014 CAV JUDGMENT parties keeping in view the fact that a Court sale is a forced sale and, notwithstanding the competitive element of public auction, the best price is not often forthcoming.

33. In Union Bank of India v. Official Liquidator, High Court of Calcutta & Ors., (2000) 5 SCC 274, this Court observed that in auction sale of the property of the Company which is Ordered to be wound up, the Company Court acts as a custodian for the interest of the Company and its creditors. It is the duty of the Company Court to satisfy itself as to reasonableness of price by disclosing valuation report to secured creditors of the Company and other interested persons. It was further held that the Court should exercise judicial discretion to ensure that sale of property should fetch adequate price. For deciding what would be reasonable price, valuation report of an expert is essential. The Company Judge himself must apply his mind to the valuation report. The Court observed that the High Court did not interfere with the auction sale on the ground of sympathy for the workers which was not proper. The auction sale was, therefore, set aside by this Court and Official Liquidator was directed to resell the property after obtaining fresh valuation report and after furnishing copy of such report to secured creditors.

34. In Divya Manufacturing Company (P) Ltd. v. Union Bank of India & Ors., (2000) 6 SCC 69, this Court held that even confirmed sale can be set aside. In that case, highest bid by a party was accepted by the Court and the sale was confirmed, but before possession was delivered to the auction purchaser and execution of sale Page 119 of 205 O/OJMCA/89/2014 CAV JUDGMENT deed, other parties offered much higher price. The High Court required the subsequent bidders to deposit an amount of 25% which was done. Considering the facts in their entirety, the High Court set aside the confirmation of past highest bid. The said action was challenged in this Court. This Court held that in an appropriate case, even confirmed sale can be set aside. The Court in this connection, relied upon earlier two decisions in LICA (P) Ltd. (1) v. Official Liquidator,5 (1996) 85 Comp Cas 788 (SC) and LICA (P) Ltd. (2) v. Official Liquidator,6 (1996) 85 Comp Cas 792 (SC).

35. The learned counsel for the appellant is no doubt right in submitting that in Divya, there was a specific condition (Clause 11) which empowered the Court to set aside confirmed sale "in the interest of creditors, contributors and all concerned and/or public interests". But the Court put the matter on principle and stated: (SCC p. 78, para 13) "13. ......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". (emphasis supplied) It proceeded to observe: (SCC p. 79, para

16) "16. ......Confirmation of the sale by a Court at 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". (emphasis supplied) Page 120 of 205 O/OJMCA/89/2014 CAV JUDGMENT

36. In Gajraj Jain v. State of Bihar & Ors.,7 (2004) 7 SCC 151, this Court reiterated that in absence of valuation report and reserve price, the auction sale becomes only a pretence. If there is no proper mechanism and if the intending purchasers are not able to know details of the assets or itemised valuation, auction sale cannot be said to be in accordance with law. If publicity and maximum participation is to be attained, all bidders must know the details of the assets and the valuation thereof.

37. In the present case, it was alleged that there were several irregularities in the first auction. The tender notice did not state valuation of movable and immovable property; reserve price was not fixed, inventory of plant and machinery was not made available, etc. If on consideration of these facts, the Company Judge Ordered fresh auction, in our considered opinion, no complaint can be made against such action."

(o) In the case of Nileshbbai Ramanbhai Patel (supra), it has been observed as under: "5.3 Learned advocate Mr. Shah emphasized that every time it is not necessary that there should be a direct evidence of fraud but as observed by the Honourable Apex Court when a property is tried to be acquired at a grossly inadequate price, that situation itself is to be construed to be sufficient to indicate fraud or some collusion.

6. Learned advocate Mr. Patel for respondent Nos.19 and 20 vehemently opposed Page 121 of 205 O/OJMCA/89/2014 CAV JUDGMENT the application and submitted that this contention about the fraud is nothing, but an afterthought and merely because the third highest bidder in the first auction happens to be brother of the present highest bidder (in second auction), can not be said to be sufficient to hold that there is collusion or there is fraud on the part of present highest bidder. The learned advocate for respondent Nos.19 and 20 submitted that the offer accepted by the Court need not be disturbed on any such application. Besides to see that sanctity of the proceedings before the Court is maintained, on such application the Court should not be interfere with the orders passed.

7. This Court having heard the contentions of both the sides and having gone through the material on record is of the considered opinion that the price which is quoted by the present highest bidder of Rs.1.40 crores cannot be said to be realistic price because the same property was offered a price of Rs.2.18 crores in the first auction. It appears that taking clue from the fact that the Court is not going to be harsh on backing out from the offer made and not honoured, the present bidder, has come forward to offer merely Rs.1.40 crores for the same property for which his own brother quoted the price of Rs.2.10 crores. Be that as it may, this Court cannot loose sight of the fact that this Court is a trustee of the property and this Court is expected to opt for such course of action which is going to fetch more money so that waiting creditors including labourers can be paid something more. Mr. Vasavada appearing for the labourers rightly invited the attention of the Court to the decision of the Honourable the Apex Court in the matter of Shradhha Aromatics Private Page 122 of 205 O/OJMCA/89/2014 CAV JUDGMENT Limited versus O.L. of Global Arya Industries Limited and Others reported in 2011 (6) SCALE 330 = 2011 (6) SCC 207. Learned advocate invited the attention of the Court to the observations made by the Honourable the Apex Court in para 10, which reads as under:

10. 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 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.127 lakhs. After acceptance of the revised offer by the learned Company Judge, the appellant stepped in and made an offer to pay Rs.141 lakhs. The first application filed by it was dismissed but the second application was allowed and the increased offer of Rs.151 lakhs 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 Page 123 of 205 O/OJMCA/89/2014 CAV JUDGMENT 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.127 lakhs. As against this, if the offer made by the intervenorcum 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 Limited and others (supra), 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.

7.1 Taking into consideration the aforesaid ruling of the Honourable the Apex Court and the facts of the case, this Court deems it proper to recall its order dated 17.04.2013. Taking into consideration the facts of the case, it is deemed proper to direct the Official Liquidator to re advertise the auction of this property on the same terms and conditions but with increased upset price of 1.60 crores in three daily newspapers, of which one is having circulation at national level.

7.2 Learned advocate Mr. Shah, on instructions of his client, submitted that the earnest money deposited by the applicant may be retained and he be permitted to pay the deficit earnest money as and when advertisement appears, within the time prescribed in the advertisement.

Page 124 of 205 O/OJMCA/89/2014 CAV JUDGMENT

7.3 The earnest money of respondent Nos.19 and 20 be refunded to them by the Official Liquidator at the earliest preferably by 05.08.2013. Civil Application is disposed of, accordingly. Rule is made absolute."

(p) In the case of Sadashiv Prasad Singh (supra), it has been observed in Para 14 as under: "14. A perusal of the impugned order especially paragraphs 8, 12 and 13 extracted hereinabove reveal that the impugned order came to be passed in order to work out the equities between the parties. The entire deliberation at the hands of the High Court were based on offers and counter offers, inter se between the Allahabad Bank on the one hand and the objector Harender Singh on the other, whereas the rights of Sadashiv Prasad Sinha the auctionpurchaser, were not at all taken into consideration. As a matter of fact, it is Sadashiv Prasad Sinha who was to be deprived of the property which came to be vested in him as far back as on 28.8.2008. It is nobody's case, that at the time of the auctionpurchase, the value of the property purchased by Sadashiv Prasad Sinha was in excess of his bid. In fact, the factual position depicted under paragraph 8 of the impugned judgment reveals, that the escalation of prices had taken place thereafter, and the value of the property purchased by Sadashiv Prasad Sinha was presently much higher than the bid amount. Since it was nobody's case that Sadashiv Prasad Sinha, the highest bidder at the auction conducted on 28.8.2008, had purchased the property in question at a price lesser than the then prevailing market price, there was no justification Page 125 of 205 O/OJMCA/89/2014 CAV JUDGMENT whatsoever to set aside the auction purchase made by him on account of escalation of prices thereafter. The High Court in ignoring the vested right of the appellant in the property in question, after his auction bid was accepted and confirmed, subjected him to grave injustice by depriving him to property which he had genuinely and legitimately purchased at a public auction. In our considered view, not only did the Division Bench of the High Court in the matter by ignoring the sound, legal and clear principles laid down by this Court in respect of a third party auction purchaser, the High Court also clearly overlooked the equitable rights vested in the auctionpurchaser during the pendency of a lis. The High Court also clearly overlooked the equitable rights vested in the auction purchaser while disposing of the matter."

(q) In the case of Kayjay Industries (P) Ltd. (supra), wherein it has been observed as under: "7. Certain salient facts may be highlighted in this context. A Court sale is a forced sale and, notwithstanding the competitive element of a public auction, the best price is not often forthcoming. The judge must make a certain margin for this factor. A valuer s report, good as a basis, is not as good as an actual offer and variations within limits between such an estimate, however careful, and real bids by seasoned businessmen before the auctioneer are quite on cards. More so, when the subjectmatter is a specialised industrial plant, which has been out of commission for a few years, as in this case, and buyers for cash are bound to be limited. The brooding fear of something out Page 126 of 205 O/OJMCA/89/2014 CAV JUDGMENT of the imported machinery going out of gear, the vague apprehensions of possible claims by the Dena Bank which had a huge claim and was not a party, and the litigious sequel at the judgmentdebtor s instance, have scare value in inhibiting intending buyers from coming forward with the best offers. Businessmen make uncanny calculations before striking a bargain and that circumstances must enter the judicial verdict before deciding whether a better price could be had by a postponement of the sale. Indeed, in the present case, the executing Court had admittedly declined to affirm the highest bids made on 1651969, June 5, 1969 and August 28, 1969, its anxiety to secure a better price being the main reason. If Court sales are too frequently adjourned with a view to obtaining a still higher price it may prove a selfdefeating exercise, for industrialists will lose faith in the actual sale taking place and may not care to travel up to the place of auction being uncertain that the sale would at all go through. The judgmentdebtor s plea for postponement in the expectation of a higher price in the future may strain the credibility of the Court sale itself and may yield diminishing returns as was proved in this very case.

9. The first respondent's counsel, Shri Parekh, drew our attention to condition No. 3 in the present proclamation of sale which is as follows : "The highest bidders for the two lots shall be declared to be the purchasers of the respective lots, provided always that he or they are legally qualified to bid, and provided that it shall be in the discretion of the undersigned Receiver holding the sale to decline acceptance of the highest Page 127 of 205 O/OJMCA/89/2014 CAV JUDGMENT bid for any lot when the price offered for any of the two lots appears so manifestly inadequate, as to make its acceptance inadvisable. The highest bid offered by any bidders for any of the two lots shall be subject to the sanction and approval of the District Judge, Thana.

Form 29 prescribed in Appendix E to the Code contains condition No. 3 which is in like terms. The Court s activist obligation to exercise a discretion to make a fair sale out of a Court auctionand avert a distress sale is underscored by this provision. In all public sales the authority must protect the interests of the parties and the rule is stated by this Court in Navalkha and Sons. v. Ramanya Das, (1970) 3 SCR 1 thus : "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 offerer 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 unreasonable. 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."

Be it by a receiver, commissioner, liquidator or Court this principle must govern. This proposition has been Page 128 of 205 O/OJMCA/89/2014 CAV JUDGMENT propounded in many rulings cited before us and summed up by the High Courts. The expressions material irregularity in the conduct of the sale must be benignantly construed to cover the climax act of the Court accepting the highest bid. Indeed, under the Civil Procedure Code, it is the Court which conducts the sale its duty to apply its mind to the material actors bearing its mind to the material factors bearing on the reasonableness of the price offered is part of the process of obtaining a proper price in the course of the sale. Therefore, failure to apply its mind to this aspect of the conduct of the sale may amount to material irregularity Mere, substantial injury without material irregularity is not enough even as material irregularity not linked directly to inadequacy of the price is insufficient. And where a Court mechanically conducts the sale or routinely signs assent to the sale papers, not bothering to see if the offer is too low and a better price could have been obtained, and in fact the price is substantially inadequate, there is the presence of both the elements of irregularity and injury. But it is not as if the Court should go on adjourning the sale till a good price is got, it being a notorious fact that Court sales and market prices are distant neighbours. Otherwise, decreeholders can never get the property of the debtor sold. Nor is it right to judge the unfairness of the price by hindsight wisdom. May be, subsequent events, not within the ken of the executing Court when holding the sale, may prove that had the sale been adjourned a better price could have been had. What is expected of the Judge is not to be a prophet but a pragmatist and merely to make a realistic appraisal of the factors, and, if satisfied that, in the given circumstances, the bid Page 129 of 205 O/OJMCA/89/2014 CAV JUDGMENT is acceptable, conclude the sale. The Court may consider the fair value of the property, the general economic trends, the large sum required to be produced by the bidder, the formation of a syndicate, the futility of postponements and the possibility of litigation, and several other factors dependent on the facts of each case. Once that is done, the matter ends there. No speaking order is called for and no meticulous post mortem is proper. If the Court has fairly, even if silently, applied its mind to the relevant considerations before it while accepting the final bid, no probe in retrospect is permissible. Otherwise, a new threat to certainty of Court sales will be introduced.

10. 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. Wellknown industrialists in the public and private sectors knew about it and turned up. Offers reached a stationary off indefinitely in recovering its dues on baseless expectations and distant, prospects. The judgmentdebtor himself, by his litigious exercises, would have contributed to the possible buyers being afraid of hurdles ahead. After all, producing around Rs. 11.4 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 Page 130 of 205 O/OJMCA/89/2014 CAV JUDGMENT 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."

(r) In the case of Sharawan Kumar Agarwal (supra), wherein it has been observed as under: "The fact that the offer was to be made by way of sealed tenders which were to be opened in court where public auction would take place was duly advertised. The conditions of sale, which were available from the official liquidator, were clear and unambiguous and had provided that the auction would take place not only amongst the offerors but also outsiders. There was thus no change or modification in the manner of sale. Under such circumstances, it was not only an auction in a public place but also a public auction and in the presence of the presiding judge.

The price which the assets ultimately fetched upon sale as a going concern on February 6, 1990, was far in excess nearly double of the reserve price. There is, therefore, no inherent evidence that the sale price was inadequate. The fact that none of the secured creditors who is keeping out of liquidation objected to the sale being knocked down at the price offered by the first respondent on the day in question and that none of them has come up in appeal nor has any creditor of other class complained or now complains about the inadequacy of price also leads to the view that the price offered by the first respondent was rightly found by the court Page 131 of 205 O/OJMCA/89/2014 CAV JUDGMENT to be adequate. There is also no other independent evidence to show that the price fetched was inadequate. It is significant to note further that on the day on which the sale was confirmed even the appellant himself was not prepared to go beyond his offer of Rs.1,80,00,000 as against Rs.1,85,00,000 offered by the first respondent.

The question then is whether the sale is favour of the first respondent should have been deconfirmed and the assets ought to have been offered for resale merely on the basis of a higher offer (Rs.2,10,00,000) made by the appellant on the day next after he was outbidden by the first respondent. In answering this question due weight must be given to the fact, firstly, that no irregularity or fraud is alleged and, secondly, that in this case the question is not whether the sale should be confirmed after the acceptance of a bid by the auctioneer or agent but whether a fresh sale should be ordered by setting at naught the sale already confirmed by the court after taking into consideration all facts and circumstances merely because an offeror who was outbidden changes his mind and offers a higher price subsequently. The relevant principles enunciated in Navalkha and Sons case [1970] 40 Comp Cas 936 (SC) and in Roshan and Co.'s case, AIR 1940 Mad 42, would apply with still greater force in such a case. Besides, the scope of interference with the discretion exercised by the court has also not to be lost sight of. Unless it is shown that the discretion has been exercised unreasonably, capriciously, or by adoption of unjudicial approach or on wrong principles, there would be no ground to interfere.

Now, it is true that the court must satisfy Page 132 of 205 O/OJMCA/89/2014 CAV JUDGMENT itself that having regard to the market value of the property, the price offered and accepted is adequate. The court being the custodian of the interests of the company and its creditors, the power to confirm a sale or to withdraw the confirmation has to be exercised with judicial discretion regard being had to the fact that the price fetched is the best that can be expected to be offered even though there may be no suggestion of irregularity or fraud. It is also true that in the present case there is a specific provision incorporated in the terms and conditions of sale that the sale in favour of a purchaser was liable to be set aside, even after the sale is confirmed and the purchase consideration is paid, the interest and benefit of creditors, contributors and all concerned and/or for public interest. However, the investment of such power does not mean that the Court should review and set aside an order confirming a sale which has already taken place nearly because at a later stage on second thought, someone, more particularly an offeror who was outbidden, says that he is willing to pay more. Once the Court has come to the conclusion that the price offered is adequate and has confirmed the sale, the subsequent higher offer made under such circumstances, without anything more, cannot constitute a valid ground for interfering with the rights arising out of sale which has already been confirmed.

As earlier discussed, there is no reason to believe that in the present case the court erred either on principle or on facts in exercising its discretion to sanction and confirm the sale in favour of the first respondent on February 6, 1990. All possible care was exercised right from the inception to ensure that having regard to Page 133 of 205 O/OJMCA/89/2014 CAV JUDGMENT the market value of the property and other circumstances, the price fetched is adequate. The record is replete with materials showing that at all relevant stages requisite steps were taken in that direction. A valuation report was obtained, the reserve price was fixed and revised upwards wide publicity to the intended sale was given to invite most competitive offers, the cooperation of workmen and secured creditors was secured so that the buyer may not have to face subsequent obstacles and the assets were sold as a going concern with the end in view of starting the manufacturing unit in the larger public interest and also in the interests of workmen, creditors and contributories. There is no suggestion of any irregularity or fraud. There is no independent evidence of the sale having taken place at an inadequate price. Between the two parties who were offering bids, the sale was ultimately confirmed in favour of the one who offered a better price. Ample opportunities were given to the appellant to outbid the first respondent but he did not avail of them on the date of sale. The price ultimately obtained was far in excess of the reserve price. No prejudice is thus apparent.

Against this background, merely because on second thoughts on the next day the appellant came forward with an offer to pay more, there would be no justification, without more, to deconfirm the sale already made in favour of the first respondent, who had meanwhile parted with ten per cent, of the purchase price, taken delivery of the assets and entered into an agreement with workmen. None complained when the sale was confirmed by the court. None other than the appellant is before us challenging the confirmation by way of appeal. True, the Page 134 of 205 O/OJMCA/89/2014 CAV JUDGMENT secured creditors appear to have extended their support to the appellant when he came forward with a fresh offer on the day next after the sale was confirmed and they have supported him in this appeal also. But this, too, apparently is a second thought. The unions with whom the agreement has been entered into by the first respondent are supporting it in the present proceedings. About 100 workmen are stated to have been employed. Having regard to all the circumstances of the case, in our opinion, there is no justification for interference with the confirmation of sale made by the court in favour of the first respondent and its refusal to set aside the same. If a higher offer made subsequently on second thoughts by someone who has outbidden when the sale was confirmed were to be regarded, without anything more, as the sole factor for withdrawing sanction already granted to a court sale, there is a real risk of such sales becoming a speculative exercise which may not inspire the confidence of persons who act on the faith and belief in the finality of actions of court. We see no reason, therefore, to set aside the orders under appeal passed by the court."

(s) In the case of Valji Khimji (supra), wherein it has been observed as under:

26. Learned counsel for the appellant Mr. Sundaram has relied upon the decision of this court in Kayjay Industries P. Ltd. V. Asnew Drums P. Ltd. [1974] 2 SCC 213 in which it was observed that mere inadequacy of price cannot demolish every court sale. The court also observed in paragraph 7, as under (page 218):

"If court sales are too frequently Page 135 of 205 O/OJMCA/89/2014 CAV JUDGMENT adjourned with a view to obtaining a still higher price it may prove a selfdefeating exercise, for industrialists will lose faith in the actual sale taking place and may not care to travel up to the place of auction being uncertain that the sale would at all go through."

27. On the other hand, learned counsel for the respondents relied upon a decision of this Court in Divya Manufacturing Company (P) Ltd. etc. vs. Union Bank of India & Ors. etc. (2000) 6 SCC 69. We have carefully perused the above decision and we find that it is clearly distinguishable.

28. The facts of the case were that at the initial stage the appellant offered 37 lakhs for purchasing the property in question. At the intervention of the court the price was raised to 1.3 crores, and ultimately it was found that the property could be sold for Rs.2 crores. It was on these facts that this Court held that even after confirmation of the sale the same could be set aside.

29. Thus, the ratio in Divya Manufacturing Company (P) Ltd. (supra) was that if there is fraud then even after the confirmation the sale can be set aside because it is wellsettled that fraud vitiates everything. On the facts of that case, the Court was of the view that that confirmed sale deserved to be set aside.

30. In our opinion the decision of this Court in Divya Manufacturing Company (P) Ltd. (supra) cannot be treated as laying down any absolute rule that a confirmed sale can be set aside in all circumstances. As observed by one of us (Hon. Katju, J.) in his judgment in Civil Appeal No. 4908/2008 (Dr. Rajbir Singh Dalal vs. Page 136 of 205 O/OJMCA/89/2014 CAV JUDGMENT Chaudhary Devi Lal University, Sirsa & Anr pronounced on 6.8.2008), a decision of a Court cannot be treated as Euclids formula and read and understood mechanically. A decision must be considered on the facts of that particular case."

(t) In the case of Sarvariya Exports Limited (supra), wherein it has been observed as under: "23. Thus, it is apparent that on reading the two affidavits together the Court ought to have, in the first instance, put the applicant to strict proof and called for further explanation as to what was the applicant doing in the interregnum, i.e. between 24.08.2007 when the applicant opted out of bidding before Sale Committee, and 25.03.2008 when the application was filed before the Company Court. It appears that the applicant was waiting till the other bidders were out of the race and thereafter, without participating in the auction, the applicant intended to steal a march over the other bidders, including the successful bidder. The learned counsel for the applicant in this context fairly stated that the applicant was trying to arrange for finance and it was only when financial arrangement could be made the applicant approached the Court. The Court appreciates the frankness of the learned counsel, but the same only goes to prove the fact that the applicant was all along aware of the stage of the proceedings and waited for an opportune time to approach the Court. Even otherwise, this cannot be a valid ground for upsetting a confirmed sale.

24. There is nothing on record either in the first affidavit dated 25.03.2008 or the second affidavit dated 27.03.2008 as to when and how the applicant derived Page 137 of 205 O/OJMCA/89/2014 CAV JUDGMENT knowledge about confirmation of sale having been made on 12.02.2008. In fact the applicant waited for the successful bidder, respondent No.3, to tender the entire sale price and approached the Court only at that late stage to contend that it was open to the Court to intervene before the O.L. executed the sale deed as, till that point of time, the sale could not be stated to have been concluded."

(u) In the case of Arasmeta Captive Power Company Private Limited (supra), wherein it has been observed as under: "28. At this juncture, we think it condign to refer to certain authorities which lay down the principle for understanding the ratio decidendi of a judgment. Such a deliberation, we are disposed to think, is necessary as we notice that contentions are raised that certain observations in some paragraphs in SPB & Co. (supra) have been relied upon to build the edifice that latter judgments have not referred to them.

29. In Ambica Quarry Works v. State of Gujarat and others, it has been stated that the ratio of any decision must be understood in the background of the facts of that case. Relying on Quinn v. Leathem it has been held that the case is only an authority for what it actually decides, and not what logically follows from it.

31. In Krishena Kumar v. Union of India and others, the Constitution Bench, while dealing with the concept of ratio decidendi, has referred to Caledonian Railway Co. v. Walker's Trustees and Quinn (supra) and the observations made by Sir Frederick Pollock and thereafter proceeded Page 138 of 205 O/OJMCA/89/2014 CAV JUDGMENT to state as follows: "The ratio decidendi is the underlying principle, namely, the general reasons or the general grounds upon which the decision is based on the test or abstract from the specific peculiarities of the particular case which gives rise to the decision. The ratio decidendi has to be ascertained by an analysis of the facts of the case and the process of reasoning involving the major premise consisting of a preexisting rule of law, either statutory or judgemade, and a minor premise consisting of the material facts of the case under immediate consideration. If it is not clear, it is not the duty of the court to spell it out with difficulty in order to be bound by it. In the words of Halsbury (4th edn., Vol. 26, para 573) "The concrete decision alone is binding between the parties to it but it is the abstract ratio decidendi, as ascertained on a consideration of the judgment in relation to the subject matter of the decision, which alone has the force of law and which when it is clear it is not part of a tribunal's duty to spell out with difficulty a ratio decidendi in order to bound by it, and it is always dangerous to take one or two observations out of a long judgment and treat them as if they gave the ratio decidendi of the case. If more reasons than one are given by a tribunal for its judgment, all are taken as forming the ratio decidendi." [Emphasis added]

32. In State of Orissa v. Mohd. Illiyas11, it has been stated thus: "12. ... According to the wellsettled theory of precedents, every decision contains three basic postulates: (i) findings of Page 139 of 205 O/OJMCA/89/2014 CAV JUDGMENT material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically flows from the various observations made in the judgment."

33. In Islamic Academy of Education v. State of Karnataka12, the Court has made the following observations: "2. ... The ratio decidendi of a judgment has to be found out only on reading the entire judgment. In fact, the ratio of the judgment is what is set out in the judgment itself. The answer to the question would necessarily have to be read in the context of what is set out in the judgment and not in isolation. In case of any doubt as regards any observations, reasons and principles, the other part of the judgment has to be looked into. By reading a line here and there from the judgment, one cannot find out the entire ratio decidendi of the judgment." [Underlining is by us]

34. The said authorities have been relied upon in Natural Resources Allocation, In Re, Special Reference No. 1 of 2012.

35. At this stage, we may also profitably refer to another principle which is of assistance to understand and appreciate the ratio decidendi of a judgment. The judgments rendered by a court are not to be read as statutes. In Union of India v.

Page 140 of 205 O/OJMCA/89/2014 CAV JUDGMENT

Amrit Lal Manchanda and another14, it has been stated that observations of courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. The observations must be red in the context in which they appear to have been stated. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes.

36. In Som Mittal v. Government of Karnataka, it has been observed that judgments are not to be construed as statutes. Nor words or phrases in judgments to be interpreted like provisions of a statute. Some words used in a judgment should be read and understood contextually and are not intended to be taken literally. Many a time a judge uses a phrase or expression with the intention of emphasizing a point or accentuating a principle or even by way of a flourish of writing style. Ratio decidendi of a judgment is not to be discerned from a stray word or phrase read in isolation.

37. From the aforesaid authorities it is luculent that the larger Bench in SBP & Co. (supra), after deliberating at length with regard to the role of the Chief Justice or his designate, while dealing with an application under Section 11(6) of the Act, has thought it appropriate to define what it precisely meant in paragraph 39 of the judgment. The majority, if we allow ourselves to say so, was absolutely conscious that it required to be so stated Page 141 of 205 O/OJMCA/89/2014 CAV JUDGMENT and hence, it did so. The deliberation was required to be made as the decision in Konkan Railway Corporation Ltd. v. Rani Construction (P) Ltd. where the Constitution Bench had held that an order passed by the Chief Justice under Section 11(6) is an administrative order and not a judicial one and, in that context, the Bench in many a paragraph proceeded to state about the role of the Chief Justice or his designate. The phrases which have been emphasized by Mr. Ranjit Kumar, it can be irrefragably stated, they cannot be brought to the eminence of ratio decidendi of the judgment. The stress laid thereon may be innovative but when the learned Judges themselves have culled out the ratio decidendi in paragraph 39, it is extremely difficult to state that the principle stated in SBP & Co. (supra) requires the Chief Justice or his designate to decide the controversy when raised pertaining to arbitrability of the disputes. Or to express an opinion on excepted matters. Such an inference by syllogistic process is likely to usher in catastrophe in jurisprudence developed in this field. We are disposed to think so as it is not apposite to pick up a line from here and there from the judgment or to choose one observation from here or there for raising it to the status of "the ratio decidendi". That is most likely to pave one on the path of danger and it is to be scrupulously avoided. The propositions set out in SBP & Co. (supra), in our opinion, have been correctly understood by the twoJudge Bench in Boghara Polyfab Private Limited (supra) and the same have been appositely approved by the threeJudge Bench in Chloro Controls India Private Limited (supra) and we respectfully concur with the same. We find no substance in the submission that the said decisions require reconsideration, for Page 142 of 205 O/OJMCA/89/2014 CAV JUDGMENT certain observations made in SBP & Co. (supra), were not noticed. We may hasten to add that the threeJudge Bench has been satisfied that the ratio decidendi of the judgment in SBP & Co. (supra) is really inhered in paragraph 39 of the judgment."

(v) In the case of Ganga Retreat & Towers Ltd. (supra), wherein it has been observed as under: "41. Every contract including one by auction is subject to provisions of law. Whenever any action is taken in performance of a contract, it must conform to the law in force at the time when action is taken. In the instant case when the appellants applied for approval of building plans it is the law that is in force at that time, which would be applicable. Doctrine of promissory estoppel is not available when any action is desired to be taken in contravention of the provisions of law. The terms and conditions of the sale as announced when the property was put to sale were in accordance with law and no guarantee was given (nor could have been given) that the law would not change, or that the terms and conditions would be enforceable even in violation of law which may be in force. FAR was a matter of law and the FAR was fixed either by the JDA or JMC in exercise of its statutory powers. The contract when entered into, the FAR approved by JDA was 2 and its subsequent reduction in 1996 to 1.75 would not invalidate the contract or by treating as a breach of the contract nor can it be treated by the Government."

(w) In the case of M/s. Alopi Parshad & Sons Ltd. (supra), it has been observed as under: Page 143 of 205 O/OJMCA/89/2014 CAV JUDGMENT "22.There is no general liberty reserved to the courts to absolve a party from liability to perform his part of the contract, merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous. That is the law both in India and in England, and there is, in our opinion, no general rule to which recourse may be had as contended by Mr. Chatterjee, relying upon which a party may ignore the express covenants on account of an uncontemplated turn of events since the date of the contract...."

(x) In the case of Cine Exhibition Private Limited (supra), it has been observed as under: "8. We are of the view that the ratio laid down in the abovementioned Judgment squarely applies to the facts of this case as well. Generally an application for correction of a typographical error or omission of a word etc. in a Judgment or order would lie, but a petition which is intended to review an order or Judgment under Order XLVII Rule 1 of the Code of Civil Procedure and in criminal proceedings except on the ground of an error apparent on the face of the record, could not be achieved by filing an application for clarification / modification / recall or rehearing, for which a properly constituted review is the remedy. Review power is provided under Order XL of the Rules, which reads as follows:

"1. The Court may review its judgment or order, but no application for review will be entertained in a civil proceeding except Page 144 of 205 O/OJMCA/89/2014 CAV JUDGMENT on the ground mentioned in Order XLVII, Rule 1 of the Code, and in a criminal proceeding except on the ground of an error apparent on the face of the record.

2. An application for review shall be by a petition, and shall be filed within thirty days from the date of the judgment or order sought to be reviewed. It shall set out clearly the grounds for review.

3. Unless otherwise ordered by the Court an application for review shall be disposed of by circulation without any oral arguments, but the petitioner may supplement his petition by additional written arguments. The Court may either dismiss the petition or direct notice to the opposite party. An application for review shall as far as practicable be circulated to the same Judge or Bench of Judges that delivered the judgment or order sought to be reviewed.

4. Where on an application for review the Court reverses or modifies its former decision in the case on the ground of mistake of law or fact, the Court, may, if it thinks fit in the interests of justice to do so, direct the refund to the petitioner of the courtfee paid on the application in whole or in part, as it may think fit.

5. Where an application for review of any judgment and order has been made and disposed of, no further application for review shall be entertained in the same matter."

(y) In the case of Ram Kishun & Ors. (supra), it has been observed as under: Page 145 of 205 O/OJMCA/89/2014 CAV JUDGMENT "25. In Navalkha & Sons v. Ramanya Das, this Court while dealing with the confirmation of sale by court, held that there must be a proper valuation report, which should be communicated to the judgmentdebtor and he should file his own valuation report and the sale should be conducted in accordance with law. After confirmation of sale, there should be issuance of sale certificate. The Court cannot interfere unless it is found that some material irregularity in the conduct of sale has been committed. The Court further held that it should not be a forced sale. A valuer's report should be as good as the actual offer and the variation should be within limit. Such estimate should be done carefully. The Court further held that 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. [See also Kayjay Industries (P) Ltd. v. Asnew Drums (P) Ltd., Union Bank of India v. Official Liquidator, B. Arvind Kumar v. Govt. of India and Transcore v. Union of India.

26. In Divya Mfg. Co. (P) Ltd. v. Union Bank of India this Court held that a confirmed sale can be set aside on the ground of material irregularity or fraud. The court does not become functus officio after the sale is confirmed. In Valji Khimji and Co. v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd., the Court held that auctionsale should be set aside only if there is a fundamental error in the procedure of auction e.g. not giving wide publication or on evidence that property could have fetched more value or there is somebody to offer substantially increased amount and not only a little over the auction price. Involvement of any kind Page 146 of 205 O/OJMCA/89/2014 CAV JUDGMENT of fraud would vitiate the auctionsale.

27. In FCS Software Solutions Ltd. v. La Medical Devices Ltd., this Court considered a case where after the confirmation of auctionsale it was found that valuation of movable and immovable properties, fixation of reserve price, inventory of plant and machineries had not been made in the proclamation of sale, nor disclosed at the time of sale notice. Therefore, in such a fact situation, the sale was set aside after its confirmation.

28. In view of the above, the law can be summarized to the effect that the recovery of the public dues must be made strictly in accordance with the procedure prescribed by law. The liability of a surety is coextensive with that of the principal debtor. In case there are more than one surety the liability is to be divided equally among the sureties for unpaid amount of loan. Once the sale has been confirmed it cannot be set aside unless a fundamental procedural error has occurred or sale certificate had been obtained by misrepresentation or fraud."

(z) In the case of Zahira Habibullah Sheikh (supra), it has been observed in paragraph 7 as under: "7. In Delhi Admn. v. Gurdip Singh Uban, it was held that by describing an application as one for "clarification" or "modification" though it is really one of review, a party cannot be permitted to circumvent or bypass the circulation procedure and indirectly obtain a hearing in the open court. What cannot be done directly cannot be permitted to be done Page 147 of 205 O/OJMCA/89/2014 CAV JUDGMENT indirectly. The court should not permit hearing of such an application for "clarification", "modification" or "recall" if the application is in substance a clever move for review."

(aa) In the case of Budhia Swain (supra), it has been observed as under: "6. What is a power to recall? Inherent power to recall its own order vesting in tribunals or courts was noticed in Indian Bank v. M/s. Satyam Fibres India Pvt. Ltd.1. Vide para 23, this Court has held that the courts have inherent power to recall and set aside an order (i) obtained by fraud practised upon the Court, (ii) when the Court is misled by a party, or

(iii) when the Court itself commits a mistake which prejudices a party. In A.R. Antulay v. R.S. Nayak & Anr.2 (vide para

130), this Court has noticed motions to set aside judgments being permitted where (i) a judgment was rendered in ignorance of the fact that a necessary party had not been served at all and was shown as served or in ignorance of the fact that a necessary party had died and the estate was not represented, (ii) a judgment was obtained by fraud, (iii) a party has had no notice and a decree was made against him and such party approaches the Court for setting aside the decision ex debito justitiae on proof of the fact that there was no service.

7. In Corpus Juris Secundum (Vo1. XIX) under the Chapter "Judgment Opening and Vacating" (paras. 265 to 284 at pages 487

510) the law on the subject has been stated. The grounds on which the courts may open or vacate their judgments are Page 148 of 205 O/OJMCA/89/2014 CAV JUDGMENT generally matters which render the judgment void or which are specified in statutes authorising such actions. Invalidity of the judgment of such nature as to render it void is a valid ground for vacating it at least if the invalidity is apparent on the face of the record. Fraud or collusion in obtaining a judgment is a sufficient ground for opening or vacating it. A judgment secured in violation of an agreement not to enter judgment may be vacated on that ground. However, in general, a judgment will not be opened or vacated on grounds which could have been pleaded in the original action. A motion to vacate will not be entered when the proper remedy is by some other proceedings, such as by appeal. The right to vacation of a judgment may be lost by waiver or estoppel. Where a party injured acquiesces in the rendition of the judgment or submits to it, waiver or estoppel results.

8. In our opinion a tribunal or a court may recall an order earlier made by it if

(i) the proceedings culminating into an order suffer from the inherent lack of jurisdiction and such lack of jurisdiction is patent, (ii) there exists fraud or collusion in obtaining the judgment, (iii) there has been a mistake of the court prejudicing a party or (iv) a judgment was rendered in ignorance of the fact that a necessary party had not been served at all or had died and the estate was not represented. The power to recall a judgment will not be exercised when the ground for reopening the proceedings or vacating the judgment was available to be pleaded in the original action but was not done or where a proper remedy in some other proceeding such as by way of appeal or revision was available but was not availed. The right to seek vacation of a judgment may be lost by Page 149 of 205 O/OJMCA/89/2014 CAV JUDGMENT waiver, estoppel or acquiescence.

11. The O.E.A. Collector was satisfied of the notice having been published. Assuming that the notice was not published in the manner contemplated by law, it will at best be a case of irregularity in the proceedings but certainly not a fact striking at the very jurisdiction of the authority passing the order."

(bb) In the case of Textile Labour Association (supra), it has been observed as under: "(20) It is submitted that if such a view is taken any creditor having a money claim against any debtor may contend that his right to life and liberty is deprived of by the debtor and instead of filing a civil suit he can bring his claim to the High Court under Article 226 of the Constitution. This is a farfetched and extreme argument. The paramount consideration mentioned by the Supreme Court regarding saving human lives would be the relevant guideline for exercising power of the High Court in such circumstances. The Supreme Court had exercised the power under Article 32 of the Constitution and that power is only for enforcement of Fundamental Rights. The question involved in this petition is of right to life and livelihood of 2700 workmen and their families. The court cannot be oblivious of the fact that on account of closure of numerous mills in Ahmedabad utterly miserable conditions have resulted for the families of the unemployed workmen. There have been instances of suicides because of utter economic hardships on account of unemployment of such mill workers. There have been cases of premature deaths because Page 150 of 205 O/OJMCA/89/2014 CAV JUDGMENT of lack of economic support medical treatment and medicines. Many other undesirable consequences follow even driving the people to criminal activities including prostitution. In such miserable circumstances if right to livelihood and a bare necessity of human dignity cannot be enforced though guaranteed by the Constitution the Court cannot justify its existence for the enforcement of Fundamental Rights. Article 21 guarantees at least that minimal.

(23) In view of the aforesaid discussion the contention that the petition is not maintainable has to be rejected."

CONCLUSION:

35. Considering the pleadings, the contentions raised by the learned counsel appearing for the respective parties, various orders passed by this Court in proceedings pertaining and relating to the Company under liquidation and the judgments cited by the learned counsel appearing for the parties, it clearly transpires that even though the Company under liquidation came to be wound up in the year 1990 by this Court, it is only in the year 2012 that the lands in question were demarcated and earmarked and the proceedings for its disposal could be undertaken by the Official Liquidator. As stated hereinabove, the leaseholders filed an application for being joined as party in Official Liquidator Report No.43 of 2013 being Company Application No.305 of 2013, wherein this Court passed an order dated 2.12.2013 and called for details from the Town Page 151 of 205 O/OJMCA/89/2014 CAV JUDGMENT Planning Officer of the State of Gujarat as well as the District Collector. Ultimately, the details were produced by the Government authorities and by an order dated 16.12.2013, this Court dismissed the said application filed by one of the applicants claiming to be the heir of the original leaseholder, wherein in Paragraphs 6 and 7, the details of the same are mentioned. Thus, it was possible for this Court to hold auction on 17.12.2013. As narrated hereinabove, the upset price came to be fixed twice, firstly at Rs.55 crores, and finally at Rs.45 crores for the area of 13,895 sq. mtrs. It is an admitted position that the lands put to auction are situated in the prime locality of Ahmedabad City, having potentiality of commercial development and it is situated in the main market area. As per the order dated 17.12.2013 which is under consideration, auction proceedings were held in open Court, wherein 12 rounds of offers were considered by the Court and opponent No.9 herein emerged to be the highest bidder at Rs.148 crores and the present applicant being second highest bidder at Rs.146 crores.

36. It may be noted that the auction is governed by the terms and conditions which are at AnnexureA to this application. Considering the terms and conditions of the sale and more particularly, condition No.5 provides that the offers received by the Official Liquidator shall be opened before this Court. Condition No.7, interalia, provides that the Page 152 of 205 O/OJMCA/89/2014 CAV JUDGMENT Official Liquidator reserves the right to accept the highest or any offer which will be subject to sanction and confirmation of this Court. Condition No.8 provides for interse bidding to be held in the Court. Condition No.9 provides that the final offer, after interse bidding so received, will be considered by the High Court for sanction or otherwise. The said condition further provides for payment of 25% excluding EMD within one month or such time as the High Court stipulates from the date of final acceptance of particular offer and the balance amount of purchase consideration will have to be paid within three months thereafter by the purchaser or within such time as may be fixed by this Court. Condition No.17 provides that the property shall be handed over to purchaser on payment of full sale price to the Official Liquidator and/or subject to such directions as the Court may issue in such matters. Condition No.27 provides for a particular declaration to be incorporated in the deed of conveyance. Similarly, condition No.29 provides for return of EMD to the unsuccessful bidders including the second highest bidder, wherein it is, interalia, provided that the EMD amount paid by the second highest bidder will be returned only after receipt of 25% of sale consideration from the successful bidder. Condition No.31 provides for a stipulation that no nomination will be allowed. Condition No.33 provides that the successful bidder will have to execute the sale deed Page 153 of 205 O/OJMCA/89/2014 CAV JUDGMENT within one month from the date of payment of full sale consideration after confirmation of sale by this Court. Thus, as per the terms and conditions of auction at the first instance, the highest bidder is to be identified. It is no doubt true that thereafter, as per the conditions, on payment of full price, the highest bidder is to be handed over the possession of the lands in question which, as per condition No.33, is to be followed by execution of a sale deed. In the instant case, opponent No.9 emerged to be the highest bidder and offered price of Rs.148 crores. The facts reveal that as per condition No.9, opponent No.9 paid 25% of the purchase price on 6.1.2014. As the facts emerge in this application thereafter, opponent No.9 approached this Court by way of filing O.J. Misc. Civil Application No.53 of 2014, which came to be disposed of on an undertaking filed by opponent No.9, whereby opponent No.9 was granted 4 installments as provided in Para 5 of the order dated 31.3.2014 and opponent No.9 was also directed to pay interest at the rate of 10% starting from 16.4.2014 till the last installment of Rs.24.5 crores is received, to be calculated proportionately on the outstanding/unpaid amount. The applicant challenged the said order dated 31.3.2014 by way of filing an appeal being O.J. Appeal No.9 of 2014 on 16.4.2014. Incidentally, on the same day opponent No.9 paid the remaining amount of consideration i.e. Rs.106.5 crores. Though it is disputed by the Page 154 of 205 O/OJMCA/89/2014 CAV JUDGMENT present applicant, the records reveal 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. In opinion of this Court, opponent No.9 and the Official Liquidator have still to adhere to condition No.33 of the terms and conditions in order to see that the sale deed is executed. The draft of such a sale deed is to be placed before the concerned Company Court for its approval and admittedly, before any such procedure as envisaged under condition No.33 could be undertaken by Official Liquidator as well as opponent No.9, the present applicant raised its offer to Rs.160 crores and as per the order dated 17.4.2014 passed by the Division Bench of this Court in O.J. Appeal No.9 of 2014, the said amount is deposited with the Official Liquidator on 17.4.2014. The applicant thus offered Rs.12 crores more than the highest bidder i.e. opponent No.9 on the said day. It may further be noted that as aforesaid, during the course of hearing of this application, the applicant again enhanced the offer from Rs.160 crores to Rs.200 crores and deposited further Rs.40 crores as per the order dated 9.5.2014 passed by this Court. It may further be noted that during the course of hearing, as learned counsel for the Official Liquidator as well as learned counsel for Page 155 of 205 O/OJMCA/89/2014 CAV JUDGMENT the Textile Labour Association pointed out that since 1990, the workmen are waiting for their legal dues, which according to the affidavit filed by Textile Labour Association comes to approximately Rs.14 crores, the applicant endeavoured to deposit further amount of Rs.14 crores as per order dated 9.5.2014. In these view of the facts therefore, today the offer given by the applicant stands at Rs.214 crores. In this set of factual background therefore, this application needs to be considered.

37. As far as contention raised by opponent No.9 to the effect that the present application is filed as an afterthought in the garb of an application for recall and further that this application is not maintainable as an application for recall, deserves to be negatived, in view of the fact that there is a wide gap between the price fixed in the auction and the price now offered by the applicant. As provided under Rule 9 of the Companies (Court) Rules, 1959, this Court has inherent powers to consider this application in order to secure ends of justice between the parties. The Company Court while conducting the auction is the trustee and custodian of the property of the erstwhile Company more particularly, it has to protect the interest of the workers, secured creditors, unsecured creditors and the shareholders. In light of glaring difference in the price offered by the applicant and the price obtained in the auction, this Court cannot rely upon Page 156 of 205 O/OJMCA/89/2014 CAV JUDGMENT any technicalities and in opinion of this Court, on the contrary, it owes a duty to exercise inherent powers under Rule 9 of the Companies (Court) Rules, 1959. On appreciating the ratio laid down by the judgments cited by the applicant as well as opponent No.9, in facts of this case, the present application is held to be maintainable. Though the applicant herein was the second highest bidder, it cannot be nonsuited on the grounds of estoppel, waiver and acquiescence, especially in light of the judgments of the Apex Court more particularly, in the cases of Shraddha Aromatics Pvt. Ltd. (supra), Divya Manufacturing Co. Pvt. Ltd. (supra) and the judgment of this Court in the case of Chaudhary Brothers (supra) as the paramount consideration of the Company Court is to see that maximum market price is fetched and considering the gap between the price determined in the auction and the price now offered, the price fetched in the auction is grossly inadequate. As noted hereinabove, it is an admitted position that the sale deed is not executed and thus, as per the terms and conditions of auction, the sale procedure is not yet complete.

38. From bare reading of the application, it is clear that the application is for recall and not for review of the order dated 17.12.2013. It is no doubt true that the applicant has not challenged the said order. However, it is a matter of fact that the applicant's challenge is the order dated 31.3.2014 Page 157 of 205 O/OJMCA/89/2014 CAV JUDGMENT passed in O.J. Misc. Civil Application No.53 of 2014, whereby this Court extended the time to pay the remaining amount of sale consideration as per the highest bid accepted by the Court, wherein the Division Bench has clearly observed that the applicant may approach the Company Court and as per the directions issued by the Division Bench, the present application is filed and therefore, the same needs to be entertained.

39. The contention raised by opponent No.9 that what cannot be done indirectly cannot be permitted to be done indirectly and that the present application is an abuse of process of law, deserves to be negatived. Similarly, the contention raised by opponent No.9 that the present application is grossly time barred also deserves to be negatived in light of the fact that the last date of payment of the remaining amount of consideration was 16.4.2014 which came to be extended by this Court vide order dated 31.3.2014, to which, the applicant was not a party. It is an admitted position that the applicant approached the Division Bench of this Court by way of filing O.J. Appeal No.9 of 2014 on 16.4.2014 and therefore, it cannot be gainsaid that the present application for recall is grossly time barred.

40. Even if it is construed that the offer of Rs.148 crores made by opponent No.9 amounts to confirmation of sale, the fresh offer now given by Page 158 of 205 O/OJMCA/89/2014 CAV JUDGMENT the applicant who himself was also a bidder (second highest bidder) at the auction held on 17.12.2013 before this Court is very high and the same therefore demonstrates that the offer which was accepted by this Court by the order dated 17.12.2013, was accepted at a grossly inadequate price. It is true that there are no allegations of fraud or any other illegality. However, in the instant case, the offer made by the applicant is significantly higher than the price which is received in the auction and therefore, the present case falls in the exception of deconfirming the sale. Considering the ratio laid down by the Apex Court in the case of LICA (P) Ltd. (No.1) (supra), LICA (P) Ltd. (supra), Divya Manufacturing Co. Pvt. Ltd. (supra) and Shraddha Aromatics Pvt. Ltd. (supra), when the higher price which is now offered is substantially higher, it would be in the interest of the Company and its creditors to recall the order impugned in this application. Even in the case of Navalkha and sons (supra), the Apex Court has observed that if the Court is satisfied about the adequacy of price, then in such a case, the confirmation of sale cannot be deconfirmed. However, as observed hereinabove, in facts of this case, the Court is satisfied that the price was inadequate. Even considering the judgment of the Apex Court in the case of Valji Khimji (supra), the Apex Court has also considered the aspect that in Page 159 of 205 O/OJMCA/89/2014 CAV JUDGMENT the situation when the auction sale came to be finalized at a given price and subsequently, someone else offers a substantially higher price, then an inference can be drawn that the price fetched at the auction was grossly inadequate. Even in the case of Kayjay Industries Pvt. Ltd. (supra), it has been observed that when the price fetched is substantially inadequate, the element of irregularity as well as injury are present. It is no doubt true that the Company Court does not possess expertise in determination of true and correct market value of the land put to auction, however, while considering the bid in the auction, it has to consider the overall facts, circumstances as well as factors which would fetch maximum price of the land. The auction held by a Company Court is little different than the auction held in common parlance. In the instant case, the highest bid which is accepted by the Court made by opponent No.9 rests at Rs.148 crores. The facts reveal that at the initial stage, the same was increased by Rs.12 crores on 16.4.2014. However, thereafter, it is an admitted position that the same has been increased to Rs.200 crores and lastly at Rs.214 crores. Thus, the gap of price between the highest bidder and the applicant as on date is of Rs.66 crores. Thus, the gap in price of the highest bidder and the applicant is as such Rs.11 crores more than even the basic upset price of Rs.45 crores. On the date on which the highest bid came to be accepted i.e. on 17.12.2013, Page 160 of 205 O/OJMCA/89/2014 CAV JUDGMENT it is no doubt true that the FSI (Floor Space Index) of the area in which the land is situated was 1 and with effect from 17.3.2014, it has been increased to 1.8, even in the order passed by this Court while fixing the upset price, this factor was considered. With the increase in FSI even if it is roughly calculated, the extent of possible/permissible construction would increase from 13,895 sq. mtrs. to 24,840 sq. mtrs., meaning thereby, the permissible construction would be 11,040 sq. mtrs. more. On the date on which, the auction came to be held by this Court and while accepting the highest bid of opponent No.9, the change in FSI was not sanctioned but was only in offing and therefore, this Court have had no occasion to consider the said factor. While determining the market value, factor of potential development is an important factor. Considering the aforesaid development of increase in FSI which was in offing, though uncertain, could not be considered by this Court, which in opinion of this Court has led to insufficient determination of the true and correct market value of the lands in question. Though the increase in FSI is an event which has occurred after acceptance of highest bid still however, the vital factor of potentiality of development could not be considered, which has resulted into irregularity as well as injury and as held by Division Bench of Calcutta High Court in the case of Sharawan Kumar Agarwal (supra), the same constitute something more than merely a higher Page 161 of 205 O/OJMCA/89/2014 CAV JUDGMENT price.

41. It is no doubt true that opponent No.9 has canvassed that as the applicant was also one of the bidder in the auction proceedings held on 17.12.2013, the applicant could have taken risk which is as such taken by the opponent No.9 and enhanced its bid. However, such a vital factor of potentiality of development which could not be considered by this Court in the circumstances narrated hereinabove, has resulted into inadequacy of price fetched which is amply clear from the substantial gap between the price fetched at the auction held on 17.12.2013 and the price now offered as an upset price. The increase from the price offered by the highest bidder opponent No.9 at Rs.148 crores and now offered by the applicant at Rs.214 crores is a substantial wide gap which has resulted into insufficiency of price fetched which even according to Apex Court amounts to irregularity. The Company Court is custodian of the properties of the Company under liquidation and therefore, such factors need to be considered even at this stage and merely because highest bid is accepted by this Court and the Official Liquidator has formally handed over the possession of the land in question and this Court by an order dated 17.12.2013 has also ordered the Official Liquidator to adhere to the other conditions which provides for execution of a sale deed, would not preclude this Page 162 of 205 O/OJMCA/89/2014 CAV JUDGMENT Court from examining this matter as far as inadequacy of price is concerned.

42. This Court in the case of Chaudhary Brothers (supra), after considering almost all judgments which are cited even in this case has very succinctly explained the principles which are laid down by the Apex Court and has observed in Paragraphs 1, 3.11 to 3.14, 8.2, 11 to 14.3, 18 to 18.3 and 19.1 to 19.6 as under: "1. The applicant, by this application, which is registered as Company Application No. 211 of 2013 seeks that the order dated 21.6.2013 whereby sale of certain properties of the company liquidation came to be confirmed in favour of the bidder whose offer was found to be highest (Rs. 20.10 Lacs) during the auction / interse bidding before the Court (hereinafter referred to as successful bidder) may be recalled and cancelled and instead his (i.e. the applicant's) offer, which is for higher amount (i.e. about Rs. 9.90 lacs more than the highest bid which came to be accepted vide order dated 21.6.2013 during auction / interse bidding) may be accepted.

3.11 At this stage it is relevant to recall that According to the advertisement reserved price for Lot No. 2 i.e. the goods in question was fixed at Rs.16,50,000/.

3.12 On the next hearing, i.e. on 20.6.2013, the proceedings were adjourned for the reasons mentioned in the order dated 20.6.2013. On the next date, i.e. on 21.6.2013, the interse bid amongst the Page 163 of 205 O/OJMCA/89/2014 CAV JUDGMENT said six bidders was conducted and during the said interse bidding (auction) present opponent No.2 emerged as highest bidder with revised offer at Rs. 20,10,000/ as against the reserved / upset price of Rs.16,50,000/. On conclusion of the said interse bidding / auction, the Court passed the order dated 21.6.2013 confirming sale in favour of M/s. Omar Steel who was one of the said six bidders (i.e. opponent No.2 in present proceedings). The relevant part of said order dated 21.6.2013 reads thus:

1...........

2. At the outset, it is necessary to mention that the 6 bids / offers in question which are under consideration are restricted to lot No. II (i.e. only for movable such as plant, machineries, furniture, fixtures, raw materials and finished goods except records).

3. As mentioned in the order dated 13.6.2013 in response to the advertisement issued by OL pursuant to order dated 30.4.2013, OL received in all 6 bids / offers from (1) Omar Steel (2) G.K. Traders (3) Adinath Enterprise (4) Monali Textile (5) V.L. Intex and (6) Chechani Trading Company.

4.............

5. Accordingly, the said 6 bidders are given chance for interse bidding.

5.1 For the said purpose, when the learned advocate for OL called out the names of the bidders, only 5 bidders / their representatives viz. Omar Steel, G.K. Traders, Adinath Enterprise, Monali Textile and Chechani Trading Company came forward Page 164 of 205 O/OJMCA/89/2014 CAV JUDGMENT and it is reported that V.L. Intext (who had submitted offer of Rs.16,55,000/) has not remained present for interse bidding.

6. At the instruction of the Court, learned Counsel for OL informed the said 5 bidders that they may raise their bids / offers by minimum Rs.50,000/ if they want to participate and continue in the interse bidding.

7. In the process, Chechani Trading Company, gradually increased its offer from Rs.16,50,000/ to Rs.18,60,000/ whereas Adinath Enterprise gradually increased its offer from Rs.16,90,000/ to Rs.18,10,000/ and G.K. Traders gradually increased its offer from Rs.16,81,000/ to Rs.19,60,000/. Monali Textile did not increase its offer from Rs.17,10,000/ however, Omar Steel gradually increased its initial offer from Rs.16,50,000/ to Rs.20,10,000/.

8. Thereafter, none of the bidders came forward to increase their offer or to even match the offer (i.e. Rs.20,10,000/) of Omar Steel.

9. Thus, considering the fact that the increased offer of Omar Steel is highest, the said bidder is considered as highest bidder and accordingly declared as successful highest bidder for the movable properties mentioned / described in the advertisement issued pursuant to the order dated 30.4.2013 and consequential advertisement (i.e. notice inviting bids / tenders) issued by OL and the tender document (if any).

10. Therefore sale is confirmed in favour of said highest bidder viz. Omar Steel on the terms and conditions in this order and Page 165 of 205 O/OJMCA/89/2014 CAV JUDGMENT in the tender document and in the advertisement. All conditions mentioned in this order and in the tender document as well as in the advertisement will be applicable and binding to the successful bidder and are to be treated as part of present order as if they all are specifically and expressly incorporated and mentioned in this order. The conditions in this order are in addition to the conditions in the advertisement and tender document.

11. Though not necessary, so as to remove any doubts or confusion or any future dispute or controversy, it is clarified that the term plant used in the advertisement and in this order means only manufacturing facility (i.e. machines / equipments for manufacturing process) and not the building and / or permanent or temporary super structure or any material being part of or used in the building and / or permanent or temporary superstructure.

12. In view of the above following order is passed: (A) The said highest bidder i.e. Omar Steel shall, as per the condition in the advertisement / tender document pay 25% of purchase consideration to the OL within 30 days from today and balance amount of purchase sale consideration shall be paid within 3 months thereafter.

(B).........

(D) The stamp duty, registration charges, AUDA / Society charges and all other incidental charges thereto shall be borne by the purchaser.

Page 166 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(E) .........

(F).........

3.13 In pursuance of the said order dated 21.6.2013, the said successful bidder was obliged to make payment of sale consideration within and in accordance with the time schedule prescribed in the said order.

3.14 It was after completion of the entire aforesaid procedure and after the sale conformation and order dated 21.6.2013 that the present applicant preferred this application on 29.7.2013.

8.2 Ms. Yajnik, learned advocate for OL has submitted that in the facts of the case the Court may pass any appropriate order. So far as the factual aspects pursuant to the order dated 21.6.2013 is concerned, Ms. Yajnik, learned advocate for OL relied on the details mentioned in OL's reply/ report dated 7.8.2013. Mr. Dave, learned advocate for one of the secured creditors submitted that a secured creditor would be interested in securing higher price for the property in question so that more amount towards its dues can be received and disbursed by OL and therefore if there is likelihood to secure higher price for the property in question then the said opportunity may be allowed. No one has attended the hearing and no one has made submission for and on behalf of respondent No.5 and respondent No.3.

11. So as to appreciate rival contentions, it would be appropriate to take into account some relevant precedents and observations in certain decisions.

Page 167 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(a) In case of M/s. Navalkha & Sons. v. Sri Ramanya Das & Ors. [1969 (3) SCC 537], Hon'ble Apex Court considered the issue related to Court accepting highest bid and confirming the sale. The factual background of the said case is succinctly summarized by the Court in para 12 of subsequent decision in the case of Divya Manufacturing. Thus it would be useful to borrow the said summation of fact which read thus: "12..........In the case of Navalkha and Sons (supra), after appellants offer was accepted, a fresh offer from one Gopaldas Darak for higher amount was received by stating that he could not offer in time because he came to know of the sale only 2 days prior to the date of the application and there was possibility of higher bids. Instead of directing a fresh auction or calling for fresh offers, the learned Judge thought it proper to arrange an open bid in the Court itself on that very day as between M/s Navalkha and higher offeror Gopaldas Darak. M/s Navalkha thereafter offered higher bid at Rs.8,82,000 and its bid was accepted and the learned Judge concluded the sale in its favour with a direction to pay the balance amount. Thereafter an application was filed offering Rs.10 lakhs. A contention was raised that due publicity of the sale of the property was not made, but that application was rejected by the Court. Hence, an appeal was filed by the applicant who made an offer of Rs.10 lakhs and another by one contributory against the order of confirmation. Both appeals were allowed by the Division Bench and the order passed by the learned Judge was set aside with a direction to take fresh steps for sale of the property either by calling sealed tenders or by auction in accordance Page 168 of 205 O/OJMCA/89/2014 CAV JUDGMENT with law. That order was challenged before this Court by M/s Navalkha. It was contended that there was no justification for the Division Bench to interfere with the order of the learned Single Judge.

In the said factual background, Hon'ble Apex Court, after referring to Rule 273 of Company Court Rules 1959, observed that:

"6. The principles which should govern confirmation of sales are wellestablished. 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. T. Sriman Kanthimathinatha Pillai(1) 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 Page 169 of 205 O/OJMCA/89/2014 CAV JUDGMENT followed in Rathnaswami Pillai v. Sadapathi Pillai(2) 'and S. Soundajan v. M/s. Roshan & Ca.(1). In A. Subbaraya Mudaliar v. K.Sundarajan 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 wellsettled 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)"

From the above quoted decisions it emerges that in the said decision, which is, almost in all cases, consistently considered and followed by the Apex Court, it emerges that in view of the fact that the Court is the custodian of interest of the company and creditors it is not only proper but necessary for the Court to ensure that the price fetched at the auction is best and higher price though there is no suggestion of irregularity or fraud. Thus, the said observation by the Apex Court emphasizes that the paramount duty of the Court is to protect best interest of the company, creditors (i.e. shareholders and contributories) and the workers and to ensure that the Court should also ensure that highest price is received at the auction. Ordinarily, this would translate Page 170 of 205 O/OJMCA/89/2014 CAV JUDGMENT into the situation which would justify the decision to set side the confirmed sale in the event higher price is offered even after confirmation of sale. However, it may be noticed that in the very same decision the Apex Court, in the immediately next paragraph, observed that it is equally well settled that once the Court comes to the conclusion that the price offered is adequate, subsequent higher offer cannot be a valid ground to refuse confirmation of sale. Thus, the guiding and determining factor is satisfaction of the Court that adequate and reasonable price is received.

(b) In 1974, in the case between M/s Kayjay Ind. (Pvt.) Ltd. vs M/s Asnew Drums (P) Ltd (1974 2 SCC 213) Hon'ble Apex Court examined the issue related to sale of property by Court. True it is that, in the said decision, Hon'ble Apex Court examined the issue in light of the provisions under Order 21 Rule 90. However, the issue about the Court's obligation in accepting previous bid was also considered by Hon'ble Apex Court in the said decision. Hon'ble Apex Court speaking through Hon'ble Mr. Justice V.R.Krishna Iyer [as His Lordship then was] observed in the said decision that: "9.........Be it by a receiver, commissioner, liquidator or Court this principle must govern. This proposition has been propounded in many rulings cited before us and summed up by the High Courts. The expressions 'material irregularity in the conduct of the sale' must be benignantly construed to cover the climax act of the Court accepting the highest bid. Indeed, under the Civil Procedure Code, it is the Court which conducts the sale its duty to apply its mind to the material factors bearing its mind to the material Page 171 of 205 O/OJMCA/89/2014 CAV JUDGMENT factors bearing on the reasonableness of the price offered is part of the process of obtaining a proper price in the course of the sale. Therefore, failure to apply its mind to this aspect of the conduct of the sale may amount to material irregularity Mere, substantial injury without material irregularity is not enough even as material irregularity not linked directly to inadequacy of the price is insufficient. And where a Court mechanically conducts the sale or routinely signs assent to the sale papers, not bothering to see if the offer is too low and a better price could have been obtained, and in fact the price is substantially inadequate, there is the presence of both the elements of irregularity and injury. But it is not as if the Court should go on adjourning the sale till a good price is got, it being a notorious fact that Court sales and market prices are distant neighbours. Otherwise, decreeholders can never get the property of the debtor sold. Nor is it right to judge the unfairness of the price by hindsight wisdom. May be, subsequent events, not within the ken of the executing Court when holding the sale, may prove that had the sale been adjourned a better price could have been had. What is expected of the Judge is not to be a prophet but a pragmatist and merely to make a realistic appraisal of the factors, and, if satisfied that, in the given circumstances, the bid is acceptable, conclude the sale. The Court may consider the fair value of the property, the general economic trends, the large sum required to be produced by the bidder, the formation of a syndicate, the futility of postponements and the possibility of litigation, and several other factors dependent on the facts of each case. Once that is done, the matter ends there. No speaking order is called for Page 172 of 205 O/OJMCA/89/2014 CAV JUDGMENT and no meticulous post mortem is proper. If the Court has fairly, even if silently, applied its mind to the relevant considerations before it while accepting the final bid, no probe in retrospect is permissible. Otherwise, a new threat to certainty of Court sales will be introduced.

10. 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. Wellknown industrialists in the public and private sectors knew about it and turned up. Offers reached a stationary off indefinitely in recovering its dues on baseless expectations and distant, prospects. The judgmentdebtor himself, by his litigious exercises, would have contributed to the possible buyers being afraid of hurdles ahead. After all, producing around Rs. 11.4 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.

Thus, Hon'ble Apex Court has observed that material irregularity in the conduct of the sale must be benignantly construed and Page 173 of 205 O/OJMCA/89/2014 CAV JUDGMENT failure to apply mind to the material factors bearing on the reasonableness of the price would amount to material irregularity and that where the sale is conducted mechanically or where it is not examined as to whether the offer is too low and better price could be obtained or the price is substantially inadequate, then there is presence of element of irregularity as well as injury. The above quoted observations by the Apex Court clearly brings out that if relevant aspects are not taken into account at the time of determining revised / upset price before inviting bids and consequently correct and proper market value is not reflected in the reserved price then it would amount to material irregularity and that would be sufficient justification to deconfirm the sale even though there is no suggestion or allegation about fraud. The same principle would be applicable to the case of sale by company court for properties of the company in liquidation.

(c) In the decision in case of Sharawan Kumar Agarwal v. Shrineap Investment Ltd & Ors [(1990) 2 Comp LJ 231 (Cal)], Hon'ble High Court of Calcutta, speaking through the Chief Justice Hon'ble Mr. Justice P.D.Desai (as his Lordship then was) observed thus: "44. Now, it is true that the Court must satisfy itself that having regard to the market value of the property, the price offered and accepted is adequate. The Court being the custodian of the interests of the company and its creditors, the power to confirm a sale or to withdraw the confirmation has to be exercised with judicial discretion regard being had to the fact that the price fetched is the best that can be expected to be offered even Page 174 of 205 O/OJMCA/89/2014 CAV JUDGMENT though there may be no suggestion of irregularity of fraud. It is also true that in the present case, there is a specific provision incorporated in the terms and conditions of sale that the sale in favour of a purchaser was liable to be set aside, even after the sale is confirmed and the purchase consideration is paid, in the interest and benefit of creditors, contributors and all concerned and/or for public interest. However, the investment of such power does not mean that the Court should review and set aside an order confirming a sale which has already taken place merely because at a later stage on second thoughts someone, more particularly, an offeror who was outbidden, says that he is willing to pay more. Once the Court has come to the conclusion that the price offered is adequate and has confirmed the sale, the subsequent higher offer made under such circumstances, without anything more, cannot constitute a valid ground for interfering with the rights arising out of sale which has already been confirmed.

46. Against this background, merely because on second thoughts on the next day, the appellant came forward with an offer to pay more, there would be no justification, without more, to deconfirm the sale already made in favour of the first respondent, who had meanwhile parted with ten percent of the purchase price, taken delivery of the assets and entered into an agreement with workmen. None complained when the sale was confirmed by the Court. None other than the appellant is before us challenging the confirmation by way of appeal. True, the secured creditors appear to have extended their support to the appellant when he came forward with a fresh offer on the day next after the sale was confirmed and they have supported him in this appeal also. But Page 175 of 205 O/OJMCA/89/2014 CAV JUDGMENT this, too, apparently is a second thought. The unions with whom the agreement has been entered into by the first respondent are supporting it in the present proceedings. About 100 workmen are stated to have been employed. Having regard to all the circumstances of the case, in our opinion, there is no justification for interference with the confirmation of sale made by the Court in favour of the first respondent and its refusal to set aside the same. If a higher offer made subsequently on second thoughts by someone who was outbidden when the sale was confirmed were to be regarded, without anything more, as the sole factor for withdrawing sanction already granted to a Court sale, there is a real risk of such sales becoming a speculative exercise which may not inspire the confidence of persons who act on the faith and belief in the finality of actions of Court. We see no reason, therefore, to set aside the orders under appeal passed by the Court."

In the above decision by High Court of Calcutta (Coram: Honourable the Chief Justice Mr. P.D. Desai, as his lordship then was) the Court did not accept the subsequent higher offer though it had support of the secured creditors and the Court observed that power and discretion to take steps to fetch best price does not mean that the Court should review and set aside the order confirming sale which has already taken place, merely because at a later stage on second thought someone comes forward and says that he is willing to pay more. The Court emphasized the requirement of something more than merely higher offer which means infection in the decision of sale confirmation by way of illegality or fraud.

(d) In the decision between Lica (P.) Ltd Page 176 of 205 O/OJMCA/89/2014 CAV JUDGMENT v. Official Liquidator & Anr. [1996 (85) CC 788], Hon'ble Apex Court observed thus: "The purpose of an open auction is to get the most remunerative price and it is the duty of the court to keep openness of the auction so that the intending bidders would be free to participate and offer higher value. If that path is cut down or closed the possibility of fraud or to secure inadequate price or underbidding would loom large. The court would, therefore, have to exercise its discretion wisely and with circumspection and keeping in view the facts and circumstances in each case. One of the terms of the offer in this case is that even confirmation of the sale is liable to be set aside by the High Court as per Clause 11 of the conditions of offer. The sale conducted was subject to confirmation. Therefore, mere acceptance of the offer of Mr. Shantilal Malik does not constitute any finality of the auction nor would it he automatically confirmed. The appellant offered a higher price even now at Rs. 45,00,000. Keeping in view the interest of the company and the creditors and the workmen to whom the sale proceeds would he applied, the learned company judge was right in exercising her discretion to reopen the auction and directing Mr. Shantilal Malik as well to make a higher offer than what was offered by the appellant. In every case it is not necessary that there should be fraud in conducting the sale, though on its proof the sale gets vitiated and it is one of the grounds to set aside the auction sale. Therefore, the discretion exercised by the learned single judge cannot be said to be unwarranted. Under the circumstances, we are satisfied that the Division Bench of the Calcutta High Courtcommitted manifest illegality in interfering with the order of Page 177 of 205 O/OJMCA/89/2014 CAV JUDGMENT the learned single judge. The appeal is allowed. The order of the Division Bench is set aside.............."

(e) In the decision in case between Divya Manufacturing Co. Ltd. vs. Union Bank of India & Ors. [(2000) 6 SCC 69], Hon'ble Apex Court considered the decision in case of Navalkha and Sons and examined the issue whether the request to cancel sale confirmation order and to accept fresh offer after having confirmed the sale in favour of one party should be entertained or not. In the said decision Hon'ble Apex Court observed, inter alia, that: "11. In our view, on facts it is apparent that the Division Bench of the High Court has considered all the relevant facts including the fact that at the initial stage, the appellant 'Divya' offered only Rs. 37 lakhs to purchase the properties. That means, the appellant wanted to purchase at a throw away price. Thereafter, at the intervention of the Court, the price was increased to Rs. 1.3 crores by the appellant. This indicates that appellant was keen to purchase the property, however by paying only the bare minimal amount and to take advantage of sale by the liquidator in the hope that if there are no other purchasers, it would purchase the Company at a price which is abnormally below the market price. It is also true that on 2nd July 1998, the offer made by the appellant was accepted and it was ordered that sale in its favour be confirmed, but at the same time, before possession of the property could be handed over, orbefore the sale deed could be executed in its favour, respondent Nos. 7 and 8 pointed out that the assets and properties could be sold at Rs. 2 crores. For showing their bona fides, they were directed to deposit Rs. 40 lakhs Page 178 of 205 O/OJMCA/89/2014 CAV JUDGMENT each and also to pay Rs. 70 thousand each as damages to the appellant. Further, the application for setting aside the sale was filed within a few days of the order accepting the bid of the appellant. In these set of circumstances, 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. Appellant is also duly compensated by payment of Rs. 70 thousand each by respondent Nos. 7 and 8.

The Apex Court has, thus, observed that it is the duty of the Court to satisfy itself that before putting up notice / advertisement inviting bids, proper and adequate and reasonable market value of the property is determined and at later stage to satisfy itself about adequacy of the price being offered and accepted. It is also observed by the Apex Court that if the correct market value of the property was not properly known to the Court and the sale was confirmed at grossly inadequate price then even in absence of any suggestion or allegation about illegality or fraud in the sale process, the Court may, upon being satisfied, set aside the sale confirmation if it is established that the sale was confirmed at grossly inadequate price.

Page 179 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(f) In the decision in case of Lica (P) Ltd. vs. Official Liquidator [(2000) 6 SCC 82], Hon'ble Apex Court observed that:

"5. Proper control of the proceedings and meaningful intervention by the court would prevent the formation of syndicate, underbidding and the resultant sale of property for inadequate price. The order passed by this Court yielded the result that the property which would have been finalised at Rs.45 crores is made. In other words, the property under sale is capable of fetching a higher market price. Under these circumstances, though there is some force in the contention of Shri Ramaswamy that the court auction may not normally be repeatedly disturbed, since this Court, on the earlier occasion, had limited the auction between the two bidders, the impediment will not stand in the way of directing sale afresh. Even today the parties are prepared to participate in the bid. Accordingly we fix the upset price at Rs.1.50 crores. It is stated that Mr. S.L. Malik had already deposited a sum of Rs.45 lakhs. Bank drafts for a sum of Rs.80 lakhs are produced before us today. Therefore, we direct that the bank drafts should be deposited in the office of the learned Company Judge on or before 27.9.1993 and the balance amount of Rs.25 lakhs shall be deposited on or before 11.10.1993 making up the total sum of Rs.1.50 crores. Learned Single Judge is requested to conduct the auction afresh between the parties immediately after the reopening of pooja holidays fixing the upset price at Rs.1.50 crores. The highest bidder should deposit the balance amount on the same day before the working hours are closed. On deposit so made the Court would confirm the sale. No appeal thereon shall be entertained on any Page 180 of 205 O/OJMCA/89/2014 CAV JUDGMENT ground whatsoever.

(g) In the case between Union Bank of India v. Official Liquidator H.C. Of Calcutta & Ors. [(2000) 5 SCC 274], the Hon'ble Apex Court observed, inter alia, that: "6. Against that order appellant preferred an appeal before the Division Bench. Before the Division Bench a contention was raised with regard to the inadequacy of the price and the Court observed that the Court would be rather loath to interfere and intervene in a Court Sale where a question of inadequacy of the price is to be considered by observing that:

"Court sale has taken place for the benefit of the employees concerned and more than 100 employees were starving to death and the Official Liquidator was trying to sell the assets as a going concern so that the employment opportunities can be maintained in these hard days."

10. 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.

19. As discussed above, in the present Page 181 of 205 O/OJMCA/89/2014 CAV JUDGMENT case, there is total nonapplication of mind to the material which is required to be considered for auction sale of the assets of the Company.

26. Hence, if the sale is set aside in appeal, it cannot be stated that purchaser is entitled to have refund of the amount with interest.

(h) In the decision in case between Gajraj Jain vs. State of Bihar (2004 [7] SCC 151, Hon'ble Apex Court observed that: "14.In the present case, it has been urged that absence of valuation report and the reverse bid does not vitiate the sale. We do not find merit in this argument. In the case of M/s. S. J. S. Business Enterprises (P) Ltd. (supra), it has been held that the Financial Corporation, in the matter of sale under S. 29, must act in accordance with the statute and must not act unreasonably. In this case, the Corporation fails on both the counts. It has neither complied with the provisions of sub sections (1) and (4) of S. 29, nor has it acts fairly. The test of reasonableness has been laid down in the above judgment in which it is held that reasonableness is to be tested against the dominant consideration to secure the best price. Value or price is fixed by the market. In the case of going concern, one has to value the assets shown in the balance sheet (Valuation of Real Property by S. Datta page 198).In our view, if the object of S. 29 of the Act is to obtain the best possible price then the Corporation ought to have called for the valuation report. This has not been down. There is no inventory of assets produced before us. The mortgaged assets of the company could be sold on itemized basis or as a whole whichever is found on valuation to be more Page 182 of 205 O/OJMCA/89/2014 CAV JUDGMENT profitable. No particulars in that regard have been produced before us. If publicity and maximum participation is to be attained then the bidders should know the details of the assets (or itemized value). In the absence of the proper mechanism the auction sale becomes only a pretence.......

(i) In the decision in case of Valji Khimji and company vs. OL of Hindustan Nitro Product (Gujarat) Limited (2008 9 SCC 299) Hon'ble Apex Court, considered the case of the bidder who did not participate in auction proceedings but after the sale was confirmed by the Court in favour of one of the bidders (who participated in auction proceedings and whose offer was highest during auction) he belatedly came forward with higher offer coupled with request to cancel the sale. In the said decision Hon'ble Apex Court observed that:

30. In our opinion the decision of this Court in Divya Manufacturing Company (P) Ltd. (supra) cannot be treated as laying down any absolute rule that a confirmed sale can be set aside in all circumstances. As observed by one of us (Hon. Katju, J.) in his judgment in Civil Appeal No. 4908/2008 (Dr. Rajbir Singh Dalai vs. Chaudhary Devi Lal University, Sirsa and Anr. pronounced on 6.8.2008), a decision of a Court cannot be treated as Euclid's formula and read and understood mechanically. A decision must be considered on the facts of that particular case.

31. If it is held that every confirmed sale can be set aside the result would be that no auction sale will ever be complete because always somebody can come after the auction or its confirmation offering a higher amount.

32. It could have been a different matter if the auction had been held without Page 183 of 205 O/OJMCA/89/2014 CAV JUDGMENT adequate publicity in well known newspapers having wide circulation, but where the auction sale was done after wide publicity, then setting aside the sale after its confirmation will create huge problems. When an auction sale is advertised in wellknown newspapers having wide circulation, all eligible persons can come and bid for the same, and they will be themselves be to blame if they do not come forward to bid at the time of the auction. They cannot ordinarily later on be allowed after the bidding (or confirmation) is over to offer a higher price.

33. Of course, the situation may be different if an auction sale is finalized say for Rs.1 crore, and subsequently somebody turns up offering Rs. 10 crores. In this situation it is possible to infer that there was some fraud because if somebody subsequently offers 10 crores, then an inference can be drawn that an attempt had been made to acquire that property/asset at a grossly inadequate price. This situation itself may indicate fraud or some collusion. However, if the price offered after the auction is over which is only a little over the auction price, that cannot by itself suggest that any fraud has been done.

35. In the first case mentioned above, i.e. where the auction is not subject to confirmation by any authority, the auction is complete on the fall of the hammer, and certain rights accrue in favour of the auction purchaser. However, where the auction is subject to subsequent confirmation by some authority (under a statute or terms of the auction) the auction is not complete and no rights accrue until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, certain rights accrue in favour of the auction purchaser, Page 184 of 205 O/OJMCA/89/2014 CAV JUDGMENT and these rights cannot be extinguished except in exceptional cases such as fraud."

What emerges from the observations by the Apex Court in the said decision is that sanctity of the confirmed sale is important and merely because offer for higher price is placed before the Court then in absence of fraud or illegality confirmed sale ought not be disturbed and set aside otherwise any auction cannot be finalized and any auction will not attain finality. Besides the exception on aground of fraud and illegality other exception, which the Apex Court in the decision, found acceptable is grossly inadequate price with emphasis on the expression gross. This would mean that if slightly higher price is offered by any interested purchaser then the Court should not readily agree to set aside the confirmed sale.

(j) In the decision by the Hon'ble Division Bench of this Court dated 25.7.2013 rendered in OJ CA No.299 of 2013 in OLR No.34 of 2013 wherein the Hon'ble Division Bench observed that: "7.1 Taking into consideration the aforesaid ruling of the Honourable the Apex Court and the facts of the case, this Court deems it proper to recall its order dated 17.04.2013. Taking into consideration the facts of the case, it is deemed proper to direct the Official Liquidator to re advertise the auction of this property on the same terms and conditions but with increased upset price of 1.60 crores in three daily newspapers, of which one is having circulation at national level."

So far as the above referred order by Division Bench is concerned it is relevant to note that in the said decision not only the facts materially differ from the facts in present case but in the said case the Page 185 of 205 O/OJMCA/89/2014 CAV JUDGMENT Hon'ble Division Bench was satisfied that the two bidders who happened to be brothers, mislead and misdirected the auction process which, in the facts of the case, Court considered fraud or mischief with the Court. In this context, Division Bench recorded in paragraph No.4 of the the said decision: "Learned advocate Mr. Shah for the applicant submitted that it is not in dispute that the highest bidder in second auction happens to be brother of third highest bidder in the first auction. The price offered by the brother of the present highest bidder was Rs.2.10 crores whereas the price offered by the present highest bidder is only Rs.1.40 crores. Learned advocate Mr. Shah for the applicant submitted that mere price difference itself is suggestive of the fact that the present highest bidder took a clue from his brother i.e. third highest bidder and having realised that the first highest bidder of first auction who quoted price Rs.2.18 crores is not coming forward the present highest bidder may try to purchase the property at the minimum possible price."

Having regard to the said aspect and also having regard to the gap between the price subsequently offered and the previous offer and after considering the decisions in Divya Manufacturing Co. (supra) and Valji Khimji (supra) the Court set aside the sale confirmation order. In light of the facts of present case the said order would not be of assistance to the applicant in supporting its request in present case.

(k) Subsequently, in case between Abhishek Shops & Warehouse Coop. Soc. Ltd. vs. Monali Textile in O.J. Appeal No.49 of 2003, decided on 24.12.2003 the Division Page 186 of 205 O/OJMCA/89/2014 CAV JUDGMENT Bench observed that:

"7. Thus in light the above price fetched by the property/land in question has to be considered adequate or not. The impugned order as observed above has indirectly suggested that the price fetched is inadequate while observing that the property could have fetched more price and that the Company Court could have ordered for revaluation of the property under the sale. In our opinion this is sufficient to indicate whether the price fetched in the auction can be said to be adequate. We are in agreement with the observation in the impugned order that the property under sale could have fetched more price than Rs.4,05,00,000/. It need hardly be said that the effort of the Company Court has to be in the direction of obtaining the maximum price of the property in the auction for the benefit of workers, secured, unsecured creditors and the company, and the entire class of creditors would stand to benefit by the higher price received by the property under the sale."

The above mentioned observations in the said order are made in factual background which is recorded in the order. The relevant part of the order reads thus: "in the auction whereas Respondent No.1 gave offer of Rs.75,00,000/ and raised it to Rs.3,76,00,000/. The property was valued by the approved valuer in January 1998 at Rs.3,88,00,000/; that in the Court auction the appellant gave highest bid of Rs.4,05,00,000/. Respondent No.1 did not participate in Court auction. Whereas Mahavir Developers (respondent no.8) gave bid of Rs.3,86,00,000/. By the order dated 11.9.2003 Company Judge accepted the offer made by Arvindbhai Kantibhai Patel promoter Page 187 of 205 O/OJMCA/89/2014 CAV JUDGMENT / organizer of proposed society for Rs.4.05,00,000/ and confirmed the sale accordingly........After confirmation of sale in favour of the proposed society, present respondent no.1 on 1992003 moved an application being O.J.M.C.A. No.167 of 2003 praying for recall / review of the order dated 11.9.2003 accepting highest bid of Rs.4,05,00,000/ and confirming the sale as above, contending that because of some financial constraints the applicant could not bid or put any offer either before the committee or before the Court; that the applicant has now arranged the finance and applicant is ready to deposit an amount of Rs.40 lacs towards E.M.D. without any interest thereon; that the applicant is ready to pay minimum price of Rs.4.15 crores as against Rs.4.05 crores; that the sale should be confirmed in favour of the applicant by reviewing /modifying the order dated 11.9.2003."

In the said decision Court also observed that: "....it is not merely higher offer given by respondent no.1 which weighed with the Company Court in directing reauction of the property, but found necessary in light of the circumstances pointed out above and that the property would have fetched more price and with that the order dated 119 2003 has been recalled. It is a settled legal position that the discretion exercised in directing reauction by the Company Court should not be interfered with unless the impugned order is wrong on principle."

Thus, merely higher offer by the applicant was not the reason for directing reauction in said case and that therefore the said decision does not help the applicant since Page 188 of 205 O/OJMCA/89/2014 CAV JUDGMENT in present case offer of higher price is the only reason cited in support of the request. Actually the said decision reiterates the position which is maintained since the decision in Navalkha Brothers (supra) viz. merely higher offer cannot be good and valid ground to cancel confirmed sale.

(l) In the decision in case between FCS Software Solutions Ltd. Vs. LA Medical Devices Ltd (2008 (10) SCALE, Hon'ble Apex Court found that: "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, noninventory 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, ordered fresh auction. We find no illegality in the said approach."

It was in the backdrop of the said fact that order passed by learned Company Judge for fresh auction in the said decision was found to be justified. In present case the facts are materially different. Hence the said decision does not help the applicant.

(m) Learned Counsel for the applicant has relied on the decision in case of Shraddha Aromatics Pvt. Ltd. vs. Official Liquidator for Global Arya Industries Ltd (2011 [6] SCC 207). In the said decision the Court has observed, inter alia, that: Page 189 of 205 O/OJMCA/89/2014 CAV JUDGMENT "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."

Thus, in the said decision it is clarified that Hon'ble Apex Court made departure from normal rule (i.e. that the Court would be loathe to accept the offer made by any bidder after acceptance of highest offer given in response to the advertisement or at the auction.) In view of the peculiar facts of the case Hon'ble Apex Court observed that in view of peculiar facts of the case departure from the ordinary rule is being made. However, even as per the said decision the normal and ordinary rule is still the same which is mentioned in paragraph No.15 of the decision and which is consistently followed since Navalkha Brothers (supra). This decision also, thus, does not help the applicant.

12. The principle which can be deduced from the above quoted observations by Hon'ble Apex Court can be summarized thus:

(a) Court acts as a trustee and custodian of the property of the company. Therefore it is duty of the Court to constructively apply mind to all facts and attending circumstances and relevant aspects while ascertaining the market value of the properties / assets and while settling the reserve price and to satisfy itself that the reserved price so determined is reasonable and adequate.

Page 190 of 205 O/OJMCA/89/2014 CAV JUDGMENT

(b) Once the reserved price is settled to the satisfaction of the Court, sale of the properties / assets should be effected by public auction and after giving wide publicity in sufficient number of daily newspapers having wide circulation in both scripts i.e. vernacular (local language) and English language.

(c) It is also Court's duty to ensure that the sale auction is conducted in fair and transparent manner and the Court should endeavour to ensure that best and highest price is fetched for the properties / assets of the company.

(d) Once the sale is confirmed after following the procedure and upon being satisfied about adequacy of the price, ordinarily the confirmed sale and concluded contract should not be interfered with by cancelling sale confirmation order.

(e) Merely on the ground that after confirmation of sale, someone comes forward and offers higher price, the confirmed sale and concluded contract, without anything more, should not be cancelled because mere offer for higher price is not a good and valid ground to interfere with and to cancel confirmed sale and concluded contract.

(f) If any fraud is perpetrated or if any other similar illegality is committed or any serious irregularity which would vitiate the sale process has occurred, then the Court would be, in given case, justified in interfering with and cancelling confirmed sale and concluded contract.

(g) The other reason or circumstance in Page 191 of 205 O/OJMCA/89/2014 CAV JUDGMENT which the Court may interfere with and may cancel the confirmed sale and concluded contract is that the Court, upon consideration of relevant facts, finds unto its satisfaction, that the price offered and received / accepted in the sale process is grossly inadequate.

(h) If Court were to interfere with the confirmed sale upon subsequently receiving higher offer, then a moderate or slight variation or increase over accepted price, without anything more, cannot lead the Court to the conclusion that accepted price is grossly inadequate.

12.1 It is pertinent that the sale (of assets and properties of company in liquidation) by the Court is a measure of safeguard against the assets of the company being sold at inadequate price or at price less than the realizable market value. Therefore, the Court has to maintain strict vigil, from the very inception, over the sale process. So as to ensure that complete fairness and transparency in sale process is maintained, all measures and steps which can be reasonably perceived and contemplated to eliminate formation of cartel or syndicates and / or undervaluation of the assets (in given case even by valuer) should be taken so as to ensure that best and highest price for company's properties can be fetched. If a valuer is engaged to suggest valuation of the property then instead of mechanically relying on such report and before accepting and acting upon such report, the Court should examine as to whether relevant factors such as the age and physical condition of the property in question, working performance, market demand of the property and its utility, the brand / make of the property in question (in case of Page 192 of 205 O/OJMCA/89/2014 CAV JUDGMENT plant and machinery fixtures etc.), location of the plot and its surrounding, existing and prospective development of the area and its surrounding, infrastructure facilities, nature of ownership, encumbrances (if any), sale instances for last 23 years, valuation declared by government etc. (in case of land of the company), or the quality of construction, future life of the construction, requirements (if any) for repairs, salvage value, cost of construction, dimension and physical condition of the assets (in case of constructed property) are duly taken into consideration by the valuer or not. While settling the reserved price and / or while accepting highest offer the Court is not expected to be a prophet but the Court should make realistic assessment of all factors and circumstances. Unless the Court is satisfied about adequacy of price at the auction, the order of confirmation of sale should not be made inasmuch as such order would not be proper exercise of judicial discretion. Failure to apply mind to relevant factors having bearing on reasonableness of price would amount to material irregularity.

12.2 Mere offer for higher price should not be the yardstick and guiding factor for the Court to cancel confirmed sale and concluded contract inasmuch as in many cases even business rivalry and strange commercial considerations may tempt someone to come forward and offer some higher price as against the amount of sale consideration and in cases where after sale confirmation, offer for higher price is made, then the Court should consider as to whether the reserved priced and / or price offered received at the sale process can be said to be grossly inadequate. The extent of the gap between the higher offer and accepted Page 193 of 205 O/OJMCA/89/2014 CAV JUDGMENT price (i.e. price accepted at auction) in itself should be the convincing factor evidence to satisfy the Court that the accepted price is grossly inadequate. Once the Court is satisfied about adequacy of the price then mere higher offer will not be good and valid ground to cancel confirmed sale / concluded contract.

12.3 Court has to keep in focus that despite inherent presence of competition in process of auction it often does not yield best price and therefore Court has to allow some leeway a margin to take care of and hedge against this possibility eventuality. Confirmation of sale should not be interfered with easily or quickly and at a fall of hat or frequently and it should not be disturbed / deconfirmed without good reason and strong justification otherwise it may prove self defeating as the bidder / prospective bidder will tend to lose faith in sale / auction by Court, for its uncertainty.

12.4 While the Court should endeavour to ensure that the price fetched is the highest and best price, in temptation to receive and secure still higher and better price confirmed sale and concluded contract should, ordinarily, not be quickly interfered with and cancelled and it should be kept in focus that while it is Court's duty to best serve the interest of company, creditors and workers by securing best price, it is also Court's obligation to maintain the sanctity of concluded contract because if concluded contract is lightly and / or repeatedly interfered with, and that too merely because someone subsequently comes with higher offer, then such interference by the Court and cancellation of concluded contract would result into erosion of faith in the system Page 194 of 205 O/OJMCA/89/2014 CAV JUDGMENT and sanctity of the contract. Whilst in the event of demonstrable mischief or fraud during the sale process Court may readily cancel the sale because fraud would vitiate everything, the higher price factor may be entertained only if the quantum of the amount offered as higher price is so high and the extent of the gap between the received price and subsequently offered price is so large that it in itself (i.e. the gap itself) would ex facie establish and make it apparent that the received price is grossly inadequate and that the process of settling reserved price was done mechanically or that valuer's report was mechanically relied on.

12.5 Ordinarily, only Court's satisfaction about grossly inadequate price or perpetration of fraud or occurrence of irregularity (which is serious enough to vitiate the sale) can be good and valid ground for cancelling the confirmed sale. However, in a given case offer for higher price even in cases where there is no allegation about fraud or irregularity may provide a good and justiciable ground to cancel the confirmed sale, however that would be only in exceptional and rare case where the subsequently offered higher price is significantly higher than the received price whereas moderate increase or slight variation cannot and should not be allowed to be a substitute of the paramount requirement viz. grossly in adequate price.

13. The case on hand and the applicant's request have to be examined in light of the above quoted observations, and the principles which emerge from the said observations, by Hon'ble Apex Court. From the observations by Hon'ble Apex Court it comes out that so as to decide whether a confirmed sale should be cancelled or not Page 195 of 205 O/OJMCA/89/2014 CAV JUDGMENT the Court will have to first find out whether the sale is vitiated by irregularity or fraud or illegality and / or whether the price offered and received (at auction) is grossly inadequate

14. From the facts of the case a very pertinent aspect has emerged viz. that this case and the applicant's request rests on only one premise viz. an intending or prospective purchaser (belatedly) offers higher price and it has come forward with modest increase of Rs.9.90 Lacs.

14.1 Another relevant aspect is that in present case there is no allegation or suggestion, from any sideincluding the applicant about any irregularity and / or fraud and / or illegality in auction process.

14.2 The above quoted observations and the principles unanimously say that mere higher offer, without any thing more, is not good and valid ground to deconfirm and cancel the confirmed sale. That something more means irregularity or fraud in sale process or grossly inadequate price.

14.3 As mentioned earlier in present case there is no allegation about fraud or irregularity in sale process, which leaves behind the criterion of grossly inadequate price. Actually there is no material on record of the application which would demonstrate that the sale confirmation is hit by the said vice (i.e. by grossly inadequate price).

18. Under the circumstances, the primary and fundamental requirement which, in light of the observation by the Apex Court, in all decisions, consistently appear to be sine qua non is absent in present case.

Page 196 of 205 O/OJMCA/89/2014 CAV JUDGMENT

Differently put the paramount requirement viz. the price offered and received at the auction is, grossly inadequate is found to be absent, and is not available, in present case.

18.1 The applicant has failed to establish the said aspect. Actually, the applicant has not even expressly pleaded such case. Without such clear and specific assertion the applicant has merely offered higher price.

18.2 In view of this Court, higher offer made after confirmation of sale will not necessarily and automatically mean that reserved price determined on the basis of valuer's report is grossly inadequate and / or that the price received at the auction is grossly inadequate.

18.3 Once the Court reaches the conclusion that the two most relevant and important factors viz. (a) illegality or irregularity or fraud in sale process; and (b) grossly inadequate price, are absent then the request such as the applicant's request will have to be examined in light of the principle enunciated by the Apex Court which is consistently followed in all cases viz. mere higher offer, without anything more cannot be a good and valid ground to deconfirm and cancel the confirmed sale.

19. Relying on the observation .....it is abundantly clear that the Court is the custodian of the interests of the Company and its creditors. Hence, 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.... in the decisions Divya Manufacturing (supra) and the observations in the decision in case of FCS Page 197 of 205 O/OJMCA/89/2014 CAV JUDGMENT Software Solutions Ltd and Shraddha Aromatics (supra) Mr. Desai, learned Counsel for the applicant would submit that it is not always necessary that the applicant should demonstrate fraud or irregularity or illegality in the sale process.

19.1 It is true that in the decision in case of Divya Manufacturing (supra) Hon'ble Apex Court observed that it is the duty of the court to see that price fetched at auction is adequate price even though there is no suggestion or irregularity or fraud...., however, the observations which Mr. Desai, learned Counsel for the applicant emphasized have to be read in conjunction with and in light of the observations in the same decision i.e. the observation 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.....

19.2 When the decision is read as a whole, it emerges that the decision explains that even in cases where there is no suggestion or allegation about irregularity or fraud the Court may cancel the confirmed sale but such course of action can be adopted only when it is conclusively demonstrated that the sale was made and confirmed at grossly inadequate price since correct market value of the assets was not properly known to the Court and that therefore it would be in the interest of the company, secured and unsecured creditors and the employees that the confirmed sale may be quashed so that correct and adequate price can be received. Thus, what emerges is the clear principle that in the cases where there is no Page 198 of 205 O/OJMCA/89/2014 CAV JUDGMENT allegation about fraud and where the sale is not infected by fraud, it would not be just and proper for the Court to cancel the confirmed sale unless and until it is satisfactorily established that the sale was effected at grossly inadequate price. The said criterion is a consistent and continuous thread which is passing thorough as a common factor in all decisions which are referred to hereinabove.

19.3 In this context, it would be appropriate to recall the observation by the Calcutta High Court wherein, the Court observed that: "... merely because on second thoughts on the next day, the appellant came forward with an offer to pay more, there would be no justification, without more, to deconfirm the sale already made..."

In the said decision the Court also observed that: ".....However, the investment of such power does not mean that the Court should review and set aside an order confirming a sale which has already taken place merely because at a later stage on second thoughts someone, more particularly, an offeror who was outbidden, says that he is willing to pay more. Once the Court has come to the conclusion that the price offered is adequate and has confirmed the sale, the subsequent higher offer made under such circumstances, without anything more, cannot constitute a valid ground for interfering with the rights arising out of sale which has already been confirmed...."

19.4 Therefore, the paramount criterion for considering such request is as to whether the sale was confirmed at grossly Page 199 of 205 O/OJMCA/89/2014 CAV JUDGMENT inadequate price.

19.5 In all cases, except the cases where sale is demonstrably hit by fraud or similar illegality or irregularity, the Court has to pause, while considering the tempting offer for more amount and ask the question, whether the price offered and received at the auction / during sale process was grossly adequate. If the answer is negative then there would be hardly any room for interfering with confirmed sale.

19.6 At this stage, the Court would hasten to add that there could be an exception to the aforesaid position. In a given case fresh offer may be very high (i.e. the gap between the price accepted while confirming sale and the amount of fresh offer, may be so large) which would in itself demonstrate that the sale was confirmed at grossly inadequate price, then in such circumstance the Court, as custodian of the interest of the company, the creditors and the workmen and having regard to the duty to protect the interest of secured and unsecured creditors and workers, may, in appropriate case, interfere with confirmed sale and cancel the sale confirmation order. In such cases, the very quantum of the fresh offer itself would constitute satisfactory material to demonstrate that the price offered and received at the sale process was grossly inadequate and / or that the relevant aspects were not taken into account or that there was failure to apply mind to relevant facts and sale confirmation order was made and signed routinely. Such flaw, as observed in the decision in case of Kay Jay Industries, amounts to material irregularity and that would also establish that there is presence of both elements, irregularity and injury."

Page 200 of 205 O/OJMCA/89/2014 CAV JUDGMENT

A similar view is taken by the Division Bench of this Court in the case of Nileshbhai Ramanbhai Patel and Official Liquidator rendered in O.J. Civil Application No.299 of 2013 in Official Liquidator Report No.34 of 2013 vide judgment and order dated 25.7.2013, wherein also the Division Bench has relied upon the judgment of the Apex Court in the case of Valji Khimji (supra) and Shraddha Aromatics Pvt. Ltd. (supra).

43. The Company Court has to see that the best price of the property is fetched, the price is not to be determined in relation to the dues of the stakeholders, but maximum market price has to be fetched and considering the wide gap between the price fetched and offered by the applicant in this application, this Court has to exercise its inherent powers under Rule 9 of the Companies (Court) Rules, 1959 and as rightly contended by the applicant, if not considered, the same would amount to travesty of justice. It is true that even in the case of Shraddha Aromatics Pvt. Ltd. (supra), the Apex Court has observed that the order of acceptance of bid and confirmation of sale cannot be interfered lightly, but at the same time, it can be interfered because of gap of price and the Court has reason to believe that the price fetched in the auction is inadequate which would constitute irregularity and injury and under such circumstances, the order can be recalled Page 201 of 205 O/OJMCA/89/2014 CAV JUDGMENT even in absence of any fraud. Only because the applicant was one of the bidder and in fact the second highest bidder in the auction proceedings which were held would not justify that the price which is fetched in the auction was adequate.

44. In every case of an auction by the Company Court, the Company Court, while determining the upset price, relies upon the report given by the approved valuer. The facts of this case clearly reveal that at the first instance, the upset price was fixed at Rs.55 crores and then to Rs.45 crores, in comparison to same, the price now offered by the applicant at Rs.214 crores would mean that there is difference of Rs.169 crores and as observed hereinabove, the gap of price of the highest bidder and the price now offered is Rs.66 crores which establishes the fact that the bid of opponent No.9 was accepted at a grossly inadequate price and this Court as custodian of the interest of the Company, creditors and the workmen, should interfere and de confirm the acceptance of the highest bid of opponent No.9 as held by this Court in the case of Chaudhary Brothers (supra). The very quantum of the fresh offer itself constitutes satisfactory material that the price received at the sale process was grossly inadequate and the factor like FSI which has direct impact and effect on the potential development could not be considered by this Court.

Page 202 of 205 O/OJMCA/89/2014 CAV JUDGMENT

45. It is an admitted position that the workmen are waiting for their dues since the date of the winding up of the Company and an amount of approximately Rs.14 crores is due and payable. As stated by the Textile Labour Association, 600 workmen have expired by now and their heirs as the case may be are waiting for their legitimate dues since 24 years. The said contention is also reiterated by the learned counsel appearing for the Official Liquidator. In light of the fact that as per the order dated 9.5.2014, a further amount of Rs.14 crores is deposited to take care of the dues of the workmen, appropriate direction needs to be given in this order itself with regard to the same.

46. Consequently, therefore, the order dated 17.12.2013 is recalled with the following directions: [A] The Official Liquidator shall give a fresh advertisement for auction in newspapers as provided by this Court in the order dated 26.3.2014 passed in Company Application No.475 of 2011 in the same newspapers in English and Gujarati as provided in the earlier orders inviting for offer of the purchase of the land in question admeasuring 13895 sq. mtrs. on the same terms and conditions by fixing the upset price at Rs.214 crores and EMD at Rs.21.4 crores being 10% of the upset price as fixed. The Official Liquidator shall give such Page 203 of 205 O/OJMCA/89/2014 CAV JUDGMENT advertisements within a period of two weeks from the date of receipt of this order. The Official Liquidator shall set out the time schedule for different stages of public auction. The amount of Rs.214 crores deposited by the applicant herein shall be invested by the Official Liquidator in a Fixed Deposit till fresh auction process is over.

[B] The Official Liquidator shall return back the amount of Rs.148 crores to opponent No.9 forthwith. The applicant is directed to pay Rs.25 lacs to opponent No.9, as provided by the Apex Court in the case of FCS Software Solutions Ltd. (supra) within a period of two weeks from the date of receipt of this order.

[C] The applicant shall take back the possession of the lands in question from opponent No.9 forthwith.

[D] The Official Liquidator shall verify the claims of the workers and shall file an appropriate report for disbursement of the dues of the workers out of Rs.14 crores which is deposited by the applicant within 30 days from the date of receipt of this order. In case if any claim is received from the secured creditors, the Official Liquidator shall take appropriate steps to determine the same.

[E] The Official Liquidator shall also file an Page 204 of 205 O/OJMCA/89/2014 CAV JUDGMENT appropriate report for ratification of the expenses which have been made by the Official Liquidator as stated in its affidavit after the order dated 17.12.2013.

47. With these observations, clarifications and directions, this application is allowed and the order dated 17.12.2013 passed in Official Liquidator's Report No.43 of 2013 is recalled. In facts of the case, parties to bear their own costs.

(R.M.CHHAYA, J.) After the judgment was pronounced, Mr. Saurabh Soparkar, learned Senior Advocate for opponent No.9 requests for stay of the judgment.

As such as per the directions issued in this judgment two weeks' time is provided for, however, except the directions issued in Paragraph 46(D), rest of the judgment is stayed and the statusquo which prevails as on today shall continue till 28.08.2014.

[R.M.CHHAYA, J.] mrp Page 205 of 205

Unlock Advanced Research with PRISMAI

Gujarat High Court