Punjab-Haryana High Court
M/S Oswal Agro Furane Workers Union ... vs M/S Oswal Agro Furane Ltd. (In Liqn.) on 12 February, 2009
Author: K. Kannan
Bench: K. Kannan
C.A. No.798 of 2003 (O&M) -1-
in C.A. No. 608 of 2003 in
C.P. No.173 of 2000
IN THE HIGH COURT FOR THE STATES OF PUNJAB AND
HARYANA AT CHANDIGARH
C.A. No.798 of 2003 (O&M)
in C.A. No. 608 of 2003 in
C.P. No.173 of 2000
Date of Decision: 12.02.2009
In the matter of
M/s Oswal Agro Furance Limited (in liqn.)
2. C.A. No.940 of 2008 in C.P. No.173 of 2000
3. C.A. No.19 of 2009 in C.A. No.940 of 2008
in C.P. No.173 of 2000
In the matter of
M/s Oswal Agro Furane Workers Union through President
............Applicant
Versus
M/s Oswal Agro Furane Ltd. (in liqn.) ...........Respondent
Present: Mr. Biswajeet Bhattacharya, Sr. Advocate with Mr. Anand Chhibbar, Advocate.
Mr. Mohan Jain, Sr. Advocate with Mr. Manish Jain, Advocate.
Mr. Puneet Kansal, Advocate for Official Liquidator.
Mr. Vivek Bhandari, Advocate.
CORAM:HON'BLE MR. JUSTICE K. KANNAN
1. Whether Reporters of local papers may be allowed to see the judgment ? Yes
2. To be referred to the Reporters or not ? Yes
3. Whether the judgment should be reported in the Digest ? Yes
-.-
K. KANNAN J.
1. The disposal of the property of plant and machinery in the premises of the company-in-liquidation and the resolution of a dispute of inter se claims of purchaser of the property in competitive bids between two applicants namely M/s KRBL Ltd and M/s Balaji Disposals constitute the core controversy in this case. The application C.A. No.798 of 2003 (O&M) -2- in C.A. No. 608 of 2003 in C.P. No.173 of 2000 of Oswal Agro Furane Workers Union seeking for impleadment and objection to the conclusion of sale in favour of either one of the parties adds the third dimension to this controversy.
2. As a prefatory note, it must be observed that the sale of properties in liquidation through the intervention of the Official Liquidator could never be the same as a sale through private negotiations of private individuals having ownership over property. Auction sales through Court processes in respect of assets belonging to companies-in-liquidation or properties sold for enforcement of a decree-debts are notorious instances where fair market prices are seldom the concluded bargains. Human sentiments attached to having the property sold in Court disputes themselves constitute a damper to the operation of healthy market forces to secure best price. Litigations abound galore on the alleged existence of fraud in the conduct of sale, absence of adequate notices to secure wide publicity for the sales, improper valuation adopted for arriving at the upset price etc. and any or all these grounds are too familiar in this genre of litigation. The sales through Court or Official Liquidator in relation to property of the company-in-liquidation do not conclude by the fall of the hammer but they wait to be confirmed by a final tick of approval by the Court. Even here, there seems to be no finality, for, an order that approves the sale is still opened with better offers before the execution of the sale deed. When the curtains shall be downed and the deal should be taken as finally sealed have gone through many forensic exercises through several pronouncements that have touched various contours C.A. No.798 of 2003 (O&M) -3- in C.A. No. 608 of 2003 in C.P. No.173 of 2000 of judicial opinions.
3. Both the counsel for the rival bidders namely M/s KRBL Ltd. and M/s Balaji Disposals have cited decisions to the effect that once the sale is confirmed by the Court, it cannot be reopened again. As lancer's stand drawn today, we have a fait accompli of a transaction of sale having been confirmed by this Court for Rs.15.8 crores in favour of M/s KRBL Ltd. where possession of the property had been handed over through Court on 10.12.2003 and sale deed executed in favour of the offerer on 02.05.2005. The business is being run at the premises and the workers are continuing with the purchaser. The previous bidder, in whose name there had been an earlier order of confirmation, M/s Balaji Disposals has withdrawn the money, which it had deposited.
4. Now to more facts: M/s Oswal Agro Furane Limited was ordered to be wound up on 04.12.2001 and the Official Liquidator attached to this Court was appointed as its Liquidator. In C.P. No.269 of 2002, this Court had permitted the Official Liquidator to dispose of the assets and Justice A.L.Bahri, former Judge of this Court was requested to conduct and supervise the sale. Later by an order dated 15.05.2002 passed in C.P. No.124 of 2003, the Official Liquidator was permitted to invite tenders for the sale of movable and immovable property of the company in liquidation as per the Valuation Report and to conduct the sale under the supervision of Hon'ble Mr. Justice A.L. Bahri.
5. An advertisement for the sale of the properties had been C.A. No.798 of 2003 (O&M) -4- in C.A. No. 608 of 2003 in C.P. No.173 of 2000 published in various newspapers and the sale had been presided over by Justice Bahri and on opening the tenders found the offer of M/s Guru Nanak Sugar Industries Limited, New Delhi at Rs.7.50 crores to be the highest. Inter se bidding was permitted between the parties to secure a better price and after 45 rounds of bids M/s Balaji Disposal was found to be the highest bidder.
6. On 21.08.2003, the Official Liquidator moved an application before this Court for confirmation of sale. At that time, there had been higher offer placed before the Court when M/s KRBL Ltd. offered to pay Rs.10.25 crores and deposited a portion of the amount before the Court. The Workers Union also joined the trail, not so much to bid for any price but objecting that the sale was for inadequate price. The Union however offered to bring better buyers offering higher prices. The Official Liquidator was directed by this Court to inspect the factory premises to verify the factual position of the assets lying there. The Valuation Report itself was questioned and therefore, the personal inspection of the premises and verification of the existence or otherwise of the various items set out in the Valuation Report became relevant. On 22.09.2003, the hot bids seemed to close at Rs.13.80 crores offered by M/s KRBL Ltd. and this was accepted. The Court passed an order on 22.09.2003 stating that the sale shall be deemed to be confirmed on deposit of the entire sale consideration. M/s KRBL Ltd. also deposited the entire sale consideration on 26.09.2003. If the order was to be taken as concluding all bids on that day, there would have been no litigation today.
C.A. No.798 of 2003 (O&M) -5-in C.A. No. 608 of 2003 in C.P. No.173 of 2000
7. This was not to be. M/s Balaji Disposals filed C.A. No.730 of 2003 when it offered Rs.10 lacs more and the issue was unfortunately opened again. Since the offer of M/s KRBL Ltd. had already been accepted and confirmation order had been issued, the Court thought it fit to reopen the case and to issue notice to M/s KRBL Ltd. Decisions were cited on both sides to the effect that even after a confirmation of the sale, the Court could still review the same before delivery of possession of property and execution of the sale deed in favour of the highest bidder. M/s KRBL Ltd. stalled for some time and M/s Balaji Disposals made the deposit to outbid M/s KRBL Ltd. On 03.11.2003, the Court reopened the issue again. The increase of Rs.10 lacs, which M/s Balaji Disposals had made was not to be final one but at the very first hearing of the application, there was a bid to enhance it to a further amount of Rs.1 crore with the permission of the Court. The Court found that the offer of M/s Balaji Disposals to increase the bid by another Rs.1 crore was substantial and therefore, accepted the bid of M/s Balaji Disposals. Consequently, the sale which had been originally confirmed in favour of M/s KRBL Ltd. was reviewed by an order of this Court by acceptance of a higher price offered at the instance of M/s Balaji Disposals. Not to be outbid, M/s KRBL Ltd. filed C.A. No.787 of 2003 offering to pay a sum of Rs.1 lac over and above the amount offered by M/s Balaji Disposals. Notices were again issued to M/s Balaji Disposals and their application was dismissed on 20.11.2003. M/s KRBL Ltd filed C.A. No.798 of 2003 again on 19.11.2003 C.A. No.798 of 2003 (O&M) -6- in C.A. No. 608 of 2003 in C.P. No.173 of 2000 seeking to increase the bid to 13.91 crores that was Rs.11 lacs higher than the offer made by M/s Balaji Disposals. This was done on the premise that the Court had not pronounced its order in C.A. No.786 of 2003 where M/s KRBL Ltd. offered to pay Rs.1 lac over and above the amount offered by M/s Balaji Disposals. On 20.11.2003, when the matter came up before the Court, M/s KRBL had offered an increase by a whooping Rs.2 crores over the price previously concluded i.e. for a price of Rs.15.80 crores. To express bona fides, it had also deposited the excess money. This was objected again by M/s Balaji Disposals on the ground that the sale in its favour had been earlier concluded and confirmed by the Court, there was no scope for reopening it again. A review of an order, which was already reviewed, was not permissible. This Court ordered the application on 08.12.2003 accepting the bid of M/s KRBL Ltd and this was challenged in Company Appeal bearing No.21 of 2003. The matter came to be remanded to this Court again on consent of all the parties that the case could be reopened for further arguments of all counsel afresh.
8. Learned counsel appearing for the M/s Balaji Disposal has referred to several decisions of Hon'ble Supreme Court and other Courts to contend that the provisions of Civil Procedure Code are applicable in so far as it deals with the power of Company Court to review its decisions. To him, an order finalizing the sale in favour of M/s Balaji Disposals while accepting its bid for Rs.13.9 crores on 25.09.2003 had become final, and the review made by setting aside C.A. No.798 of 2003 (O&M) -7- in C.A. No. 608 of 2003 in C.P. No.173 of 2000 the sale already confirmed in favour of M/s KRBL Ltd. cannot be subjected to a second review. The learned counsel refers to Ramesh B. Desai and others Vs. Bipin Vadilal Mehta and others (2006) 5 SCC 638 to contend that the provisions of Code of Civil Procedure would be applicable under the Companies Act, 1956. The observation finds a further confirmation in another judgment of Hon'ble Supreme Court in Sangramsingh P. Gaekwad and others Vs. Shantadevi P. Gaekwad (dead) through LRs and others (2005) 11 SCC 314 where the Hon'ble Supreme Court had held that the provisions of Code of Civil Procedure would be applicable in proceedings under the Companies Act. He has further referred to the Section 10FZA that expressly brought out through the Amendment Act of 2002, a specific reference to the power of the Tribunal, which in its present situation continues to be the Court, to review its own decisions.
9. Learned counsel appearing for M/s KRBL Ltd also placed on record several decisions of this Court which lay emphasis to the fact that a Company Court while deciding sales of properties will invoke its inherent powers to secure what is best for the company, its workers, secured creditors and shareholders. He draws strength from rhetorical expressions of the Hon'ble Supreme Court in The Newabganj Sugar Mills Co. Ltd. and others Vs. The Union of India and others AIR 1976 SC 1152 where the Court said that though there are limitations on the powers of the Court, it cannot abandon its inherent powers. The inherent power has its roots in necessity and its breadth is co-extensive with the necessity. FCS Software Solution C.A. No.798 of 2003 (O&M) -8- in C.A. No. 608 of 2003 in C.P. No.173 of 2000 Ltd. Vs. La Medical Devices Ltd. & Ors 2008 (10) SCALE 7 reviews the decisions of the Hon'ble Supreme Court rendered earlier and placing heavy reliance on M/s Divya Manufacturing Company Vs. Union Bank of India and others 2000 (6) SCC 69 went on to hold that the resale of the property even after confirmation was always possible so long as the property is not handed over possession to the person in whose favour this sale had been confirmed earlier. The Court ruled that even in the absence of fraud, a sale could be set aside, for the only consideration is the best price under the circumstances. The said decision also spells out in paragraph 35 that even the subsequent events after the fresh auction were relevant. The fact that sale was executed and the possession was handed over was taken to be an important circumstance whether the sale could be set aside or not. The other decisions of various High Court referring to inherent power and the right of a Court to reopen sales even after confirmation cited by both the parties are not reproduced here for, all those decisions are fully addressed by the decisions of the Hon'ble Supreme Court themselves. The last of the decisions referred to above in FCS Software Solution Ltd. Vs. La Medical Devices Ltd.(supra) was referred to by the Hon'ble Supreme Court in a decision in Valji Khimji & Company Vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. and Ors. 2008 (11) SCALE 287 where the Court held that a mere offer of a higher price cannot be a ground for reopening the sale already confirmed in favour of one party. It distinguishes the decisions in M/s Divya Manufacturing Company C.A. No.798 of 2003 (O&M) -9- in C.A. No. 608 of 2003 in C.P. No.173 of 2000 Vs. Union Bank of India and others (supra) to hold that decisions have to be always seen in factual context and not treated as Euclid's formula in their application to be read and understood mechanically and that a decision must be considered on the facts of each particular case.
10. If the contentions of M/s Balaji Disposals were to be accepted that a sale, which is confirmed cannot be reviewed again, he will suffer by hoisting his own petard. M/s Balaji Disposals who had been able to reopen a confirmed sale in favour of M/s KRBL Ltd. cannot be heard to contend that the sale confirmed in its favour subsequently for Rs.13.9 crores could not have been again reopened at the instance of M/s KRBL Ltd by an offer of Rs.15.8 crores.
11. The conspectus of all the decisions referred to by both the counsel must be understood as laying down the following principles:-
(i) the Courts have inherent powers to reopen even confirmed sales;
(ii) a confirmed sale need not be reopened only because a higher offer is made; (iii) The Court while applying its power of review and setting aside a sale need not be guided only by proof of fraud or irregularity.
Even in the absence of fraud or irregularity, a confirmed sale could be set aside; (iv) the best price after due publicity shall be the watch word and the benefit to the company in liquidation and the ultimate advantage all stake holders shall be the guiding spirit for concluding the sale; (v) subsequent event shall also be relevant and execution of sale deed and delivery of possession to a purchaser shall normally be taken to cast the curtains down.
C.A. No.798 of 2003 (O&M) -10-in C.A. No. 608 of 2003 in C.P. No.173 of 2000
12. The Workers Union has filed an application for impleadment as a party. The Union was fully heard even without its impleadment as an affected party and there is no warrant for impleading the same as sought for by it. The petition of the Workers Union that the property had not been valued properly and an item of property in existence at the premises was not taken note of by the valuer and hence a resale must be done, has no force. The petition regarding the absence of reference to the machinery was taken note of by the Court earlier and it had, therefore, directed the Official Liquidator to permit all the bidders to carry out personal inspection before offering the bids. Several bids that have come about increasing the value of the property more than three times than what was determined by the valuer was only by a due consideration of the factual verification of all the machineries at the premises. The ultimate bargain that was struck is the result of a full appraisal of all the assets of property and there is no ground to set aside the sale at the instance of the Workers Union.
13. In the circumstances, the final dispensation before this Court is the sale already made in favour of M/s KRBL Ltd for Rs.15.8 crores stands confirmed. The applications for setting aside the sale moved at the instance of M/s Balaji Disposals and at the instance of Workers Union are dismissed. There shall be no direction as to costs.
(K. KANNAN)
February 12, 2009 JUDGE
Pankaj*