Madhya Pradesh High Court
Century 21 Town Planners Pvt Ltd. Thr. ... vs J.M.Finance Assets Reconstruction ... on 18 June, 2018
Author: S.K. Awasthi
Bench: S.K. Awasthi
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HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE
Writ Petition No.3843/2018
D.B.:Hon'ble Shri P.K. Jaiswal
Hon'ble Shri S.K. Awasthi, JJ.
CENTURY 21 TOWN PLANNERS PVT. LTD.
Versus
J.M. FINANCE ASSETS RECONSTRUCTION CO. & OTHERS.
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Shri Vijay Assudani, Advocate, for the petitioner.
Shri S.C. Bagadiya, learned Senior counsel with Shri P.C.
Bhargava, Advocate for the respondent No.1.
Shri Vivek K. Tankha, learned Senior counsel with Shri
Rajesh Maindiretta, learned counsel for the respondent No.2.
Shri Akshat Agrawal, learned counsel for respondent
No.3.
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ORDER
(Indore dated 18.6.2018) PER P.K. JAISWAL, J:-
By this writ petition under Article 226 of the Constitution of India, the writ petitioner who was second highest bidder in E-auction conducted by the respondent No.1 on 31.3.2017 has filed this writ petition, after a period of more than one year and prayed for setting aside the order dated 31.3.2017, passed by the respondent No.1 by which highest bid of the respondent No.2 has been accepted and confirmed the sale in favour of the respondent No.2. A further direction is sought for directing the respondent No.1 to accept the bid price of the petitioner and thereafter to issue sale certificate in its favour. The petitioner is also seeking proper enquiry against the responsible { 2 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 officers and also against the respondent No.1 and 4 to 7 for causing huge loss to public exchequer.
2. The facts of the case are that the respondent No.3 had availed financial assistance from respondent No.5 - UCO Bank; respondent No.6 - LIC Housing Finance Ltd and the respondent No.7 State Bank of Indore (later merged with State Bank of India). The respondent No.3 had taken a loan of Rs.75.00 Crores from UCO Bank and against the said loan, the respondent No.3 had created first charge in favour of UCO Bank on the mortgaged property of 7.91 hectares together with all construction alongwith plant and machinery affixed thereon, situated at village Khajrana, Tehsil and District Indore.
3. The respondent No.3 defaulted in repayment of loan and was declared as Non Performing Asset (NPA) by UCO Bank and LIC Housing Finance Ltd. A notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred as 'SARFAESI Act, 2002') was issued to the respondent No.3 and its guarantors, demanding aggregate outstanding amount of Rs.120,15,77,132.18/-. The State Bank of India (SBI) one of the lenders to the respondent No.3, also issued demand notice under Section 13(2) of the SARFAESI Act, 2002, demanding an aggregate { 3 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 amount of Rs.11,82,00,000.38/-. After deciding the objections raised by the respondent No.3, the UCO Bank on behalf of consortium lenders has taken symbolic possession of the said property on 12.12.2013.
4. Thereafter, UCO Bank has assigned its financial debts to the respondent No.1 (Assets Reconstruction Company registered under Section 3 of the SARFAESI Act, 2002) along with all underlying securities with regard to the respondent No.4 by way of assignment agreement dated 26.3.2014. On 31.3.2015, after taking symbolic possession of the property of the respondent No.3, the respondent No.1 had than filed a Securitization Application being numbered as 226 of 2013, for recovery of its dues to the tune of Rs.143,92,93,040.44/- before the Debts Recovery Tribunal, Jabalpur. The aforesaid S.A. was decreed upon on 22.10.2016 and the recovery certificate has been drawn in favour of the respondent No.1.
5. After taking over the physical possession of the mortgaged properties in qustion on 31.3.2015, the respondent No.1 has published notice for auction of the aforesaid property in compliance of the provisions of the SARFAESI Act, 2002 and Rules framed there-under, ie., the Security Interest (Enforcement) Rules, 2002 (hereinafter referred as 'the Rules of 2002'). On 15.3.2017, { 4 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 the respondent No.1 for its own behalf and behalf of the respondents No.6 and 4 published E-auction notice in respect of the secured assets. The writ petitioner participated in the E-auction conducted by the respondent No.1 on 31.3.2017. The last highest bid of the petitioner was Rs.231.50 Crore. He became second highest bidder with an offer of Rs.231.50 Crore. The respondent No.2 emerged as the highest bidder with an offer of Rs.2,33,50,00,000/- (Rs.233.50 crore) as against the bid submitted by the petitioner and, therefore, the respondent No.1 declared the respondent No.2 as highest bidder and accordingly, issued a letter dated 31.3.2017, thereby conforming the sale in favour of the respondent No.2. Accordingly, 25% of the bid amount with total amount to Rs.59.00 Crore was deposited by the respondent No.2 with the respondent No.1, which was duly acknowledged vide letter dated 31.3.2017 and the respondent No.2 was further informed to deposit the remaining amount of Rs.1,74,50,00,000/- (Rs.174.50 Crore). The respondent No.2 was also informed that upon receipt of the full amount consideration, ie., Rs.233.50 Crore, the sale certificate shall be issued in its favour. On 7.4.2017 by issuing a letter the respondent No.2 requested the respondent No.1 for extension of time for depositing of balance bid amount up to 15.5.2017 under Section 9 (4) Rules of 2002.
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6. That in the meantime, two Secuiritsation Applications have been submitted before the Debt Recovery Tribunal, Jabalpur:-
(I) First by Mrs. Abha Jain and 27 others and second was by respondent No.3 vide S.A.Nos.122 of 2017 and 124 of 2017 wherein, the auction notice and sale was challenged. The DRT, Jabalpur, by order dated 8.5.2017 in both the applications had directed that the respondent No.1 shall not confirm the sale and sale certificate shall also not be issued till the next date. On account of interim order passed by the DRT on 8.5.2017, the final payment could not be received by the respondent No.1 though he was ready and willing to complete the sale transaction based on public auction conducted, which could not be concluded due to the stay order passed by the DRT, Jabalpur. In both the securitization application, the respondent No.2 was not arrayed. After coming to know about the stay, he filed an application for intervention, which was allowed on 29.7.2017 by the DRT Jabalpur. The application for vacating stay filed by him was rejected by the DRT Jabalpur vide order dated 6.11.2017. On account of the interim order dated 8.5.2017 of the DRT, Jabalpur, the balance amount of auction price / purchase price is not accepted by the respondent No.1.
7. After rejection of application for vacating stay on 6.11.2017, the respondent No.2 preferred Appeal Nos.272/2017 { 6 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 and 273/2017 before the Debts Recovery Appellate Tribunal, Delhi. The DRAT, Delhi, passed an order preponing the date of final argument before DRT, Jabalpur from 16.1.2018 to 15.12.2017. The DRAT, Delhi, further directed to dispose of the matter as early as possible, as it is already at the stage of final arguments, preferably, within six weeks. Order dated 27.11.2017 passed by the DRAT, Delhi is relevant which reads as under :-
"Today, learned senior counsel for the appellant has submitted that in view of the fact that appellant is an auction purchaser having purchased the mortgaged property for Rs.233.50 crores out of which Rs.59 crores have been paid on 31.03.2017, all that the appellant for the time being would pray before this Tribunal is to ask the DRT-II to hear the matter at an early date by preponing the date of final hearing which already is fixed in January 2018. Counsel appearing on behalf of respondents has no objection for preponment of the ate of hearing.
Learned senior counsel for the appellant says that it would be the responsibility of the appellant to inform counsel for other respondents so that they come fully prepared before the DRT on the next date of arguments.
This appeal is accordingly disposed of by preponing the date of final arguments before the DRT from 16.01.2018 to 15.12.2017, on which date the parties shall now appear ready with their arguments. It would also be attempted by the learned DRT to dispose of the matter as early as possible, as it has already at the stage of final arguments, preferably within six weeks."
8. In pursuance to the order passed by the DRAT, the DRT commenced hearing and matter was fixed for final hearing on 16.3.2018. On 6.4.2018, Mrs. Abha Jain and the respondent No.3, both have filed an application for withdrawal of S.A.No.122 of 2017 and S.A.No.124 of 2017.
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9. On 12.2.2018, the petitioner who was unsuccessful bidder has filed the present writ petition for setting aside of the confirmation of sale / order dated 31.3.2017, passed by the respondent No.1 by which the sale was confirmed in favour of the respondent No.2 on the ground that he finally quoted the bid of Rs.231.50 crores and now he is ready and willing to increase his bid from Rs.231.50 Crores to Rs.233.50 Crores on the ground that the respondent No.2 whose bid of Rs.233.50 Crores was accepted on 31.3.2017 deposited 25% of the sale price on the same date, but despite the sale is being confirmed in his favour vide order dated 31.3.2017, has not paid the balance 75% amount despite of expiry of more than nine months had the petitioner been granted such a facility, he would have offered Rs.6.00 Crores more, ie., Rs.239.50 Crores. It is also alleged that on account of collusion between the respondents No.1 and 2, the provision of deposit of balance of sale price amount of 75% within 15 days, the respondent No.1 till date have not deposited the balance of 75% of the sale price on the pretext that lis in this regard is pending before the DRT and the respondents No.1 and 2 in collusion with the respondent No.3 are getting the matter adjourned on one pretext or other before DRT and, therefore, the respondent No.2 after paying Rs.58.375/- Crores has not deposited 75% of the sale price.
{ 8 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 Non-deposit of 75% amount in 15 days or till the extended period or till the period was extended by the respondent No.1 lead only one conclusion that there is no sale at all.
10. It is also submitted by the learned counsel for the petitioner that Rules of game cannot be changed once the game has begun and the procedure, which the person inviting tender wants to follow has to be clearly laid down in tender document itself and such a procedure should be transparent/fair and open. He lastly submitted that even if there is no fraud, but a person approaches the court and submits that he is ready and willing to pay more price then the bid may be struck down in his favour so has to protect the interest of public exchequer. He placed reliance on the various decision of the apex court and prayed that the writ petition be allowed.
11. A preliminary objection has been raised by the respondent No.1, regarding maintainability of the writ petition on the ground of alternative effacious remedy available to the petitioner for approaching DRT under the provisions of SARFAESI Act, 2002.
12. The respondent No.2 in whose favour the sale was confirmed on 31.3.2017 has also raised a preliminary objection on the ground that the writ petitioner has no locus to file writ petition.
{ 9 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 The petitioner who was unsuccessful bidder in E-auction dated 31.3.2017 does have any legal right to assail auction proceedings. As the sale was confirmed in favour of the respondent No.2. The sale impugned is purely a private commercial transaction. The petitioner being aggreived by the inaction of the respondent No.1, the only remedy available to him is to approach the DRT by filing the secuiritsation application under the provisions of SARFAESI Act, 2002. The order dated 31.3.2017, passed by the respondent No.1 is challengeable under Section 17 of the SARFAESI Act, 2002.
13. The writ petitioner during the pendency of the writ petition filed an application for intervention in S.A.No.124 of 2017 on 6.4.2018 and has resisted the prayer for withdrawal of S.A.No.122 of 2017 and S.A.No.124 of 2017, on the ground that a fraud has been played by the respondent No.3 and the respondents No.1 and 2 as a result of which its right has seriouly been jeopardized. His contention before the DRT was that the parties to the S.A.No.122 of 2017 and S.A.No.124 of 2017 have connived with each other in order to enable the respondent No.2 to gain some time for depositing balance amount (75%). The DRT vide order dated 30.4.2018, allowed the prayer for withdrawal S.A.No.122 of 2017 and 124 of 2017 by passing a detailed order. Para 2 to 8 of order dated 13.4.2018 passed by the DRT, Jabalpur is relevant { 10 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 which reads as under :-
"2. The proposed intervener, ie., M/s. Century 21 Town Planners Pvt. Ltd., has resisted the prayer of the Applicant for withdrawal of the present SA on the ground that a fraud has been played by the applicant and the respondents as a result of which its right has seriously been jeopardized.
3. The counsel for the propsoed intervener referring to the sequence of the dates and events contended that the parties to the SA have connived with each other in order to enable the respondent No.4 auction pruchaser to gain some time for depositing the balance amount and now when the auction purchaser is prepared with the balance amount, the SA is being withdrawn by the appliacnt, ie., the borrower.
4. The proposed intervener though aware of the securitisation proceedings, preferred not to file application for intervention within the prescribed period of limitation of 45 days and also did not assail any action by filing separate Securitisation Application raising its grievances and therefore, the application for intervention in my considered opinion deserves to be dismissed on these grounds alone.
5. Even on merits, it is seen that the propsed intervener was the second highest bidder and the sale was confirmed in favour of the auction purchaser being the highest bidder. The applicant filed the present SA on 28.4.2017 primarily seeking quashing of the auction notice dated 15.3.2017. By order dated 8.5.2017, this tribunal directed the Bank not to confirm the sale (later apprised that sale was confirmed on 31.3.2017 itself) and not to issue sale certificate till next date. The interim relief continued on subsequent dates. Immediately thereafter, the auction purchaser (later impleaded as respondent No.4) filed an application for intervention on 24.5.2017 which was allowed vide orer dated 29.7.2017 and later, an application seeking vacation of interim relief dated 8.5.2017 was also filed which was dismissed vide order dated 6.11.2017. The auction purchaser thereafter, challenged the order dated 6.11.2017 before the Hon'ble DRAT which directed this tribunal to dispose of the SA preferably within six week. In these circumstances, the alleations being made by the proposed intervener do not appear to be true as the parties to the SA were acting in consonance with the directions passed by this Tribunal. Moreover, the propsed intervener, by no stretch imagination can be said to be a necessary or proper party for the adjudication of the issues involved in the SA in any manner. The application for intervention therefore, being devoid of merits is dismissed.
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6. The question also arise as to whether the applicant can be stopped from withdrawing its claim if it wishes to, i.e., can it be compelled to prosecute its case against its wishes ?
Order 23 Rule 1(1) CPC reads as under :-
"At any time after, the institution of a suit, the plaintiff may as against all or any of the Defendants abandon his suit or abandon a part of his claim.....
7. In support of its contention for withdrawal, the applicant has also placed reliance on case titled, Anil Dinmani Shankar Joshi Vs. Chief Officer, Panvel Municipal Counsel, AIR 2003 BOM. 238, wherein it was held that "Every plaintiff has an unconditional right to withdraw-Withdrawal is complete as soon as the plaintiff intimates his intention of withdrawal to court.
8.Considering the aforesaid facts and circumstances, the applicant is allowed to withdraw the present SA and accordingly, the SA is dismissed as withdrawn."
14. On merit, it is submitted by the learned Senior counsel for the respondents No.1 and 2 that petitioner being unsuccessful bidder has no locus to file the instant writ petition or challenge the auction proceedings at the later stage, as no right is created in favour of the petitioner due to mere participation. The petitioner's estopped by conduct as it has voluntarily not chosen to bid over and above Rs.233.50 Crores bid of respondent No.2 and the same was commercial decision taken by the petitioner. The respondent No.2 was declared the highest bidder with bid of Rs.233.50 Crore and paid earnest money and Rs.11.00 Crore and further Rs.48.00 Crore to make payment of 25% of the bid amount on 31.3.2017. By mutual consent, extension of time was granted to make payment up to 15.5.2017. Much prior to the expiry of the aforesaid period on 8.5.2017, interim order was passed in S.A.No.122 of 2017 and { 12 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 S.A.No.124 of 2017, that respondent No.1 shall not confirm sale and sale certificate shall not be issued till the next date. In both the S.A's, the respondent No.2 auction purchaser was not a party to the proceedings. On coming to know about the interim order dated 8.5.2017, he immediately filed intervention application on 24.5.2017, which was allowed by the DRT vide order dated 29.7.2017. Immediately after impleadment, the respondent No.2 on 6.8.2017, filed an application for vacation of stay order dated 8.5.2017, which was rejected on 6.11.2017. The appeal of DRAT against the said order dated 6.11.2017 was filed on 14.11.2017, which was heard and decided on 27.11.2017 with a direction to DRT, Jabalpur to expedite the hearing, within six week. In compliance to order pased by the Appellate Tribunal, the learned DRT, Jabalpur, commenced hearing and the matter was listed for final hearing on 16.3.2018. In the meanwhile, the interim stay granted by the DRT on 8.5.2017 was continued till 13.4.2018 and in the meantime, the stay was granted by this court on 10.4.2018 and due to the aforesaid reason balance amount could not been deposited by the auction purchaser. The delay has been caused due to interim order. The auction conducted by the respondent No.1 - Asset Reconstruction Co. Pvt. Ltd was strictly under the SARFAESI Act, 2002 and the Rules framed thereunder. On account of interim { 13 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 order passed by the DRT, Jabalpur, the final payment could not be received by the respondent No.1. The petitioner has not come with clean hands and is only attempting to delay the recovery of the dues of the respondent No.1. He having lost in the auction process, after a delay of one year, he cannot be permitted to challenge the auction proceeding under Article 226 of the Constitution, when admittedly, the auction was held under the provisions of the SARFAESI Act, 2002. The provision of Order 21 Rule 5 CPC has no application in the present fact and circumstances and prayed for dismissal of the writ petition.
15. We have heard the learned counsel for the parties at length and perused the record of the case.
16. As per sale confirmation letter dated 31.3.2017, the respondent No.2 was the highest bidder for an amount of Rs.233.50 Crore and the sale was confirmed in his favour by the respondent No.1 - Asset Reconstruction Co. Pvt. Ltd. After confrimation of the sale, the petitioner deposited more than 59.00 Crore and for depositing the rest of the 75% amount, time was granted till 15.5.2017, which is permissible under the provisions of the Rules of 2002. On 8.5.2017, DRT had directed that the respondent No.1 shall not confirm the sale and the sale certificate shall not be issued till the next date. On account of interim order { 14 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 passed by the DRT, the final payment could not be received by the respondent No.1. Though the Asset Reconstruction Company was always ready and willing to complete the sale transaction, but could not conclude it due to the stay order passed by the DRT, Jabalpur. The interim order passed by the DRT, Jabalpur was continued up to 13.4.2018. The petitioner on 12.2.2018, filed the present writ petition and on 6.4.2018, filed an application for intervention before the DRT in both the Secuiritsation Applications, which were dismissed by the learned DRT and finally on 13.04.2018, both the Secuiritsation Applications have been permitted to be withdrawn. From these facts and events, the contention of the learned Senior counsel for the respondents No.1 and 2, that the petitioner has not come with the clean hands and only attempting to delay the recovery, so that no sale deed be executed in favour of the respondent No.2. Clause 30 and 31 of the terms and conditions of the sale are relevant which reads as under :-
"30. Disputes, if any, shall be within the jurisdiction of Courts and Tribunals in Mumbai only.
31. Words and expressions used hereinabove shall have the same meanings respectively assigned to them under Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the rules framed thereunder."
17. The respondent No.1 could not accept or call upon for balance payment from the respondent No.2 on account of interim { 15 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 order passed by the DRT, Jabalpur. There is no irregularity in the auction conducted by the respondent No.1. The DRT by interim order dated 8.5.2017, had directed that the respondent no.1 shall not confirm the sale and sale certificate shall not be issued till the next date.
18. It is well settled that where any person is aggrieved by any notice or action pursuant thereto under the provisions of SARFAESI Act, 2002, the only remedy available to such person to approach DRT by filing appropriate application under the provisions of the SARFAESI Act, 2002. The Apex Court in the case of United Bank of India V/s. Satyawati Tondon & Ors., reported as 2010 (8) SCC 110 has held that the expression "any person used in Section 17(1) is of wide scope. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 13(4) or Section 14." In the present case, the auction was held under the provisions of SARFAESI Act, 2002, and, therefore, the objection that the petitioner is having the statutory remedy before the DRT has some force.
19. As per auction proceedings (Annexure P/6) the petitioner having voluntary chosen to bid for the amount which was less than that of respondent No.2 cannot now turn to question or challenge { 16 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 the bid of the respondent No.2, who had chosen to bid for the said property after he was declared the highest bidder and the sale was confirmed in his favour. After confrimation of sale in favour of the respondent No.2, we cannot permit him to raise his bid from Rs.231.50 crore to Rs.237.50 crores. There is no application of provisions of either Order 21, Rule 85 of CPC, 1908 or Rule 57 of second Schedule of Income Tax Act, 1961 or Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1992 in the present case. There are no such Rules in the present matter as alleged by the petitioner at all. After the auction proceeding was successfully concluded on 31.3.2017, the stay came to be passed in original application filed by the respondent No.3 and for which the respondent No.2 is not responsible or liable. The Act of DRT, Jabalpur by reason of passing of the order of stay dated 8.5.2017 cannot prejudice the settled rights of the respondent No.2 as highest bidder and declared auction purchaser of the property for Rs.233.50 crore. The petitioner during the pendency of this writ petition, secretly filed an application for intervention before the DRT in pending Secuiritsation Applications and has thus not come with clean hand. When this fact was brought to the knowledge of the court by the respondent No.2 then, only the petitioner filed additional rejoinder to the additional { 17 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 reply filed by the respondents No.1 and 2.
20. There is no collusion between the respondent No.1 and respondent No.2 as alleged by the petitioner. It is only on account of the stay order passed by the DRT, Jabalpur the balance amount was not accepted by the respondent No.1. On the date of auction, the petitioner was free to bid and once the respondent No.2 who was highest bidder was declared as successful bidder and deposited 25% of the amount on the same date, now it is too late for the petitioner to revise his offer or pay for sale of the property in question for a consideration of Rs.237.50 Crore, that too after a period of more than one year from the date of confirmation of the sale and now at this stage, he has no locus to increase offer of the bid in this writ proceeding, which was already concluded on 31.3.2017. The respondent No.2 being highest bidder, his highest bid was accepted by the respondent No.1 in presence of the petitioner. No body ever objected including the writ petitioner at that stage on any ground whatsoever, such as, that there was any irregularity in the sale nor was any objection from any one of them that the price offered by the respondent No.2 was inadequate. The Apex Court in the case of Vedica Procon Private Ltd. V/s. Balleshwar Greens Pvt. Ltd & Ors. reported as (2015) 10 SCC 94 has decided the similar issue and held that in the absence of { 18 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 any legal tenable ground for not confirming the sale, it cannot be declined to the appellant therein as no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already made. In the case of Vedica Procon Private Ltd. V/s. Balleshwar Greens Pvt. Ltd & Ors. (supra), the highest bid of the appellant therein was accepted by the Company Court and all the stake-holders of the company in liquidation were heard before such an acceptance. Nobody ever objected including the first respondent who was second highest bidder at that stage on any groundwhatsoever, such as, that there was any fraud or irregularity in the sale nor was there any objection from any one of them that the price offered by the appellant herein was inadequate. However, the same is not relevant in consideration determining the legality of the order dated 17.12.2013. The Apex Court in para 47, 51 and 53 has observed the following :-
"47. A survey of the abovementioned judgments relied upon by the first respondent does not indicate that this Court has ever laid down a principle that whenever a higher offer is received in respect of the sale of the property of a company in liquidation, the Court would be justified in reopening the concluded proceedings. The earliest judgment relied upon by the first respondent in Navalkha & Sons (supra) laid down the legal position very clearly that a subsequent higher offer is no valid ground for refusing confirmation of a sale or offer already made. Unfortunately, in Divya Manufacturing Company (supra) this Court { 19 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 departed from the principle laid down in Navalkha & Sons (supra). We have already explained what exactly is the departure and how such a departure was not justified.
51. The highest bid of the appellant herein was accepted by the Company Court and all the stake-holders of the company in liquidation were heard before such an acceptance. Nobody ever objected including the first respondent herein at that stage on any ground whatsoever, such as, that there was any fraud or irregularity in the sale nor was there any objection from any one of them that the price offered by the appellant herein was inadequate. No doubt, the property in question became more valuable in view of the subsequent development. In our opinion, it is not a relevant consideration in determining the legality of the order dated 17.12.2013. Imagine, if instead of increasing the floor space index for construction from 1.0 to 1.8 the State of Gujarat had decided to reduce it below 1.0 subsequent to 17.12.2013, could the appellant be heard to argue that it would be legally justified in resiling from its earlier offer which was accepted by the Court and not bound by the contractual obligation flowing from such an offer and acceptance?
53. The first respondent submitted that the order dated 17.12.2013 only accepted the highest bid but it did not confirm the sale and, therefore, the Court is at liberty to decline confirmation of the sale in view of the subsequent developments. In our opinion, the said submission is to be rejected because there is no specific format in which a sale conducted by the official liquidator is to be confirmed by the Company Court. The mere absence of the expression "that the sale is confirmed" in the order dated 17.12.2013 is not determinative of the question. The totality of the circumstances, such as, the very tenor of the order (Footnote 1 supra) that none of the stake-holders of the Company in liquidation ever objected to the offer of the appellant herein on the ground that it is { 20 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 inadequate consideration for the property; the fact that the official liquidator himself understood the order dated 17.12.2013 to be an order not only accepting the highest bid of the appellant herein but also as an order confirming the sale in favour of the appellant, as evidenced by his letter dated 19.12.2013, (the relevant portion of which is already extracted earlier) and the fact that the first instalment of the payment of 25% of the sale consideration was accepted both by the official liquidator and the Company Court without raising any objection for the same and the fact that the first respondent withdrew its earnest money deposit without raising any objection regarding adequacy of the price offered by the appellant herein, in our view, clearly indicate that the sale in favour of the appellant was confirmed by the order dated 17.12.2013. Assuming for the sake of argument that there is no confirmation, in the absence of any legally tenable ground for not confirming the sale, it cannot be declined to the appellant as it was observed in Navalkha case (supra) that "...no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already made."
21. The Apex Court in the case of the Valji Khimji & Company V/s. Official Liquidator of Hindustan Nicro Products (Gujrat) Ltd & Ors . reported as 2008 (9) SCC 299, held that where the properties of a company in liquidation were put to sale in an auction. In the said auction, the highest bid was Rs.3.51 crores which was accepted by the court and the sale was confirmed. The court directed the auction purchaser to pay the consideration in certain instalments. Some two and a half months later, a third party sent a letter to the official liquidator offering a higher amount of Rs.3.75 crores. Almost a year later, another party { 21 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 offered an amount of Rs.5 crores. Subsequently, both the parties approached the Company Judge seeking a recall of the order of confirmation of the sale. Such application was allowed by the Company Court. The auction purchaser unsuccessfully carried the matter in an intra court appeal and finally landed up in the Supreme Court who allowed the appeal upholding the order confirming the sale. The Hon'ble Supreme Court held thus : -
"11. It may be noted that the auction-sale was done after adequate publicity in well-known newspapers. Hence, if anyone wanted to make a bid in the auction he should have participated in the said auction and made his bid. Moreover, even after the auction the sale was confirmed by the High Court only on 30.7.2003, and any objection to the sale could have been filed prior to that date. However, in our opinion, entertaining objections after the sale is confirmed should not ordinarily be allowed, except on very limited grounds like fraud, otherwise no auction-sale will ever be complete."
22. From the aforesaid, it is not in dispute that the respondent No.1 - Assets Construction Company secured best price for the property in question in auction from the respondent No.2 and it knocked down the maximum bid of respondent No.2 in presence of the petitioner and after receipt of 25% of the bid amount, issued sale letter in his favour. There is no allegation of fraud, irregularity and inadequacy of price, etc when highest bid of the respondent No.2 was accepted. At that relevant point of time, the petitioner { 22 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 was present in person was ample opportunity to raise his bid, but he gave the last offer, which was lower than the highest bid of the respondent No.2 and thus, the sale was confirmed in his favour. There is no irregularity in conducting the sale and the price fetched is the best price for the value of the property. In the case of Navlakha & Sons V/s. Ramanya Das, reported as 1969 (3) SCC 537 indicated the principles governing the confirmation of the sales conducted by the Company Court by the Official Liquidators:-
"6. The principles which should govern confirmation of sales are well- established. Where the acceptance of the offer by the Commissioners is subject to confirmation of the Court the offeror does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion. In Gordhan Das Chuni Lal v. S. Sriman Kanthimathinatha Pillai, AIR 1921 Mad 286, it was observed that where the property is authorised to be sold by private contract or otherwise it is the duty of the Court to satisfy itself that the price fixed 'is the best that could be expected to be offered. That is because the Court is the custodian of the interests of the Company and its creditors and the sanction of the Court required under the Companies Act has to be exercised with judicial discretion regard being { 23 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 had to the interests of the Company and its creditors as well. This principle was followed in Rathnaswami Pillai v. Sadapathi Pillai, AIR 1925 Mad 318 and S. Soundajan v. M/s. Roshan & Co ., AIR 1940 Mad 42. In A. Subbaraya Mudaliar v. K.Sundarajan, A.I.R. 1951 Mad 1986, it was pointed out that the condition of confirmation by the Court being a safeguard against the property being sold at an inadequate price, it will be not only proper but necessary that the Court in exercising the discretion which it undoubtedly has of accepting or refusing the highest bid at the auction held in pursuance of its orders, should see that the price fetched at the auction, is an adequate price even though there is no suggestion of irregularity or fraud. It is well to bear in mind the other principle which is equally well- settled namely that once the court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already received. (See the decision of the Madras High Court in Roshan & Co's case)."
23. It is not the case of the petitioner that there is any foul play or irregularity in the sale nor there was any objection that the price offered by the respondent No.2 was inadequate. The respondent No.1 - Assets Construction Company in it's reply very categorically stated that in view of the stay granted by the DRT, he could not deposit the balance amount and prior to withdrawal of the Securitization Application before the DRT a stay was granted by this court and, therefore, it had not accepted the amount from the respondent No.2.
24. In the present case, the auction having been confirmed { 24 } HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.3843/2018 on 31.03.2017 by the respondent No.1, it cannot be set aside unless some fraud or collusion has been established by the petitioner. We are satisfied that no fraud or collusion has been established by any one in this case.
25. For the above mentioned reasons, the writ petition filed by the petitioner has no merit and is, accordingly, dismissed.
26. There shall be no order as to costs.
(P.K. JAISWAL) (S.K. AWASTHI)
JUDGE JUDGE
SS/-
Digitally signed by Shailesh
Sukhdev
Date: 2018.06.21 16:05:00
+05'30'