Delhi High Court
M/S. Jainsons Exports India vs Binatone Electronics Ltd. And Another on 17 August, 1995
Equivalent citations: AIR1996DELHI105, AIR 1996 DELHI 105, (1996) ILR(DEL) 1 DEL 292, (1996) ILR 1 DEL 292, (1996) 85 COMCAS 802, (1995) 34 DRJ 657, (1996) 22 CORLA 239, (1995) 59 DLT 688, (1995) 4 COMLJ 500
Author: M. Jagannadha Rao
Bench: M. Jagannadha Rao
ORDER
M. Jagannadha Rao, C. J.
1. This company appeal is directed against the order of the learned Company Judge dated 31-3-1995 in Company Petition 93 of 1992. The appellant is the auction purchaser of the sale of the property which is located in Bombay. The sale was confirmed in favour of the appellant on 25-5-1993 for Rs. 11,10,000. But the said sale confirmation was re-opened by the learned Company Judge on the ground that the earlier order was passed as a result of misstatement of facts and by misleading of the Court. In fact, after the sale in favour of the appellant was re-opened, a fresh sale was held in which the same property fetched Rs. 55 lakhs in 1995.
2. The point raised in this appeal is whether the learned Company Judge could have re-opened the matter on the ground that the Court was misled on account of misstatement of facts. The appellant contends that the Court has no such power.
3. The following are the facts.
M/s. Binatone Electronics Limited was ordered to be wound up by the Company Court on the recommendations of the Board of Industrial and Financial Reconstruction. An Official Liquidator was appointed. In the course of the winding up, one property of the company measuring 615 square feet situated at Ground Floor, Silpa Apartment, which is a multistoried complex at Prabha Devi, Bombay was put up for sale. The order dated 25-5-1993 confirming the sale in favour of the appellant for ks. 11,10,000/- (Annexure-B) discloses that the showroom-cum-office situated at Prabha Devi, Bombay was purchased by the company for Rs. 7.7 lakhs and after evaluating its book value given by the Directors in the Statement of Affairs, the value was fixed at Rs. 8,79,295. On 25-5-1993 a representation was made to the Court that the Income-tax Department fixed the valuation at ks. 11,07,000. The following is the representation made by Mr. B. N. Nayar, Advocate appearing along with Mr. Arvind Shukla, Assistant Official Liquidator. As recorded in the ordsr, it reads as follows:--
"..... It is stated that the company had approached the Income-tax authorities for Income-tax Clearance Certificate and at that time, the Income-tax authorities had valued the premises at Rs. 11,07,000/-."
The Court proceeded on the assumption that there was a valuation and it was in and around 1993 and passed the order on 25-5-93. The order dated 25-5-1993 then states that the advertisements regarding the sale of the property were made in various newspapers and in response thereto only three offers were received and the highest offer was Rs. 8,88,888/-. The Official Liquidator also resorted to inter se bidding, between the said three offerers and as a result of such inter se bidding the highest offer received was for Rs. 11,10,000. On that basis the sale in favour of the appellant was directed to be confirmed. It also appears that the appellant paid the requisite amount as directed in the order, C. A. 874/93 in which the said order was passed was disposed of in that manner.
4. Thereafter, the Assistant Official Liquidator went out of the picture and the Official Liquidator came in and certain third parties, also filed applications stating that the Court salt of 25-5-1993 in favour of the appellant was very much undervalued on account of misrepresentation. The learned Company Judge held that the matter had to be inquired into and, therefore, he stayed the handing over of possession of the property to the appellant. The learned Judge observed that what had weighed earlier with him on 25-5-93 was the statement of Mr. B. N. Nayar, counsel for the Assistant Official Liquidator, that the Income-tax authorities had assessed the market value of the premises at Rs. 11,07,000 and it was on that basis that the sale was confirmed for Rs. 11,10,000. But when the matter came up before the learned Company Judge on 31-3-1995. Counsel, Mr. B. N. Nayar, stated that there was in fact no such valuation report forthcoming on the record and that his earlier statement made to the Court on 25-5-1993 that there was a valuation report of the Income-tax authorities for Rs. 11,07,000 was on the basis of instructions given to him and that he had not himself verified these facts from the record. The learned Judge then took up the matter with the Official Liquidator, who had now come into the picture and who accepted that there was no valuation report of the Income-tax authorities fixing the value at Rs. 11,07,000. The learned Company Judge, therefore, made the following observations :--
"..... Now Mr. Nayar states that there is no such valuation report forthcoming on record and that he had made this submission only on what was told to him and without himself verifying this fact from the record. I have checked up with the liquidator who confirms that no such valuation report of the Income-tax authorities is forthcoming on record. Mr. Nayar further states that even original record was not made available to him by the Liquidator. It is very unfortunate that Mr. Nayar did not verify the facts from the records of the Official Liquidator before making statement before the Court recommending acceptance of the bid thereby defeating the very purpose of his appointment."
Learned Judge then also observed that a number of parties had since come forward with substantially high offers, the highest being Rs. 26.5 lakhs. Later even an offer of Rs. 33 lakhs was received. But apart from these offers, the learned Company Judge thought that inasmuch as the Court was misled into believing that there was a valuation by the Income-tax authorities for Rs. 11,07,000, the earlier order of confirmation of the sale in favour of the appellant for Rs. 11,10,000 should be recalled. After all, the very object of the auction was for the purpose of ensuring that the company which was being wound up got the best price from their sale of the property. If the earlier confirmation of sale was passed on misstatement of facts, the Court was certainly competent to recall the order under its inherent powers. The learned Company Judge observed as under:--
"....In the ordinary circumstances, this proposition may have been accepted, but in a situation where on the face of it, the order of confirmation is obtained by misstating the facts and in the light of the offers which have been received not very much later in time than the date of confirmation of sale it has become clear that the price offered by the auction-purchaser was far below the market price, this submission /contention cannot be accepted."
Learned Judge then observed that the above facts made him suspicious about the bona fides of the sale transaction confirmed earlier. He referred to the case of Pandurangan v. Dasu Reddy, and Punjab Mercantile Bank Ltd. v. Sardar Kishan Singh, and also Pichal Ammal v. Vellaya Theyar alias Ochu Thevar, . Reference was also made to the judgment of the Supreme Court in Naulakha's case (1993(5) JT 28) (sic) for the proposition that the Court could interfere if there was misrepresentation regarding valuation or location of the properly involved. Counsel for the Official Liquidator conceded before the learned Company Judge that the above legal position was correct. Counsel sought for a revocation of the earlier order of confirmation of sale and also relied upon Rule 273 of the Company (Court) Rules and Order 21, Rule 90, CPC. Reference was also made to the judgment of the Supreme Court in LICA (Pvt) Ltd. v. The Official Liquidator (Civil Appeal No. 72 of 1993) where a similar question was dealt with by it. In that case the company Judge in Calcutta High Court had accepted the highest bid of Rs. 37 lakhs but proceeded to further auction and obtained a bid for Rs. 38 lakhs. The appellant went in an appeal before a Division Bench and the Division Bench set aside the order of further auction. The matter came up before the Supreme Court. The Supreme Court entertained the appeal and at that state the appellant offered Rs. 45 lakhs. The Supreme Court sent back the matter to the High Court with the order that Rs. 45 lakhs offer before it would be treated as the minimum price and the auction should continue further. The matter went back to the High Court and the further auction yielded Rs. 1 crore 10 lakhs. Again the matter was taken in appeal before a Division Bench which held that the above amount cannot be accepted. The matter again went to Supreme Court, when Supreme Court fixed an off-set price of Rs. 1.50 crores and observed as under :--
"The purpose of 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 the steps for conducting the sale would be moulded."
5. Basing on these legal principles and rulings, the learned Company Judge came to the conclusion that he had the necessary power to recall the earlier order as, the same was not warranted in the interests of justice and equity. Accordingly, the order dated 25-5-1993 was recalled. In fact, after a fresh sale was conducted in this matter and the same property fetched Rs. 55 lakhs. We are of the view that in the light of the rulings cited by the learned Company Judge, the Court had the inherent power to recall its earlier order when such order was passed on misrepresentation.
6. When the matter came up before us we sent for the concerned Assistant Official Liquidator, Mr. Shukla who has since been transferred to Bangalore. He came before us on 1 -7-1995 and stated that there is a file in the office of the Official Liquidator or Court which contained an Income-tax valuation of Rs. 11,07,000 and what he represented to his counsel, Mr. Nayar on 25-5-1993 on the earlier occasion was correct. Thereafter, the file was located by him and placed before this Court. But we found that the valuation report of Rs. 11,07,000 by the Income-tax Department is dated 24-10-1986 and that the Officer took into account the original agreement dated 25-5-1982 and a further agreement of 1986 regarding the furnitures and fittings and yet another agreement dated 20-3-1986 and arrived at a value of Rs. 1,07.000 as on 20-3-1986.
In our opinion, even this material will not be of any help to the appellant. The earlier order dated 25-5-1993 was passed on a representation that Rs. 11,07,000 was the value arrived at by the income-tax authorities, the assumption thereupon was that the valuation was of a date near about 1993. Otherwise and if indeed the valuation was of 1986, the learned Company Judge would not have adopted the said valuation for a sale which was of 1993. The fact still remains that there is no income-tax valuation immediately preceding 1993.
7. For the aforesaid reasons, we do not think that the additional material now placed before us by the appellant makes any difference. The sale dated 25-5-1993 was rightly set aside by the learned Company Judge under inherent powers. The subsequent sale on 31-3-1995 in fact brought in an additional sum of Rs. 44 lakhs as the property was knocked down for Rs. 55 lakhs.
8. A point has been raised before us that when the money deposited by the appellant was refunded, namely Rs. 11,10,000, learned Company Judge granted interest of only 12% per annum. Learned counsel for the appellant contends that he should get interest at 18% and not at 12%. It is argued that, if there is default on the part of the purchaser, it was stipulated that he should pay at 18% and refund should also be at the same rate of interest. We are unable to agree with this contention. We are of the view that the grant of 12% interest was a proper exercise of discretion which does not warrant any interference.
9. For the aforesaid reasons, this appeal is dismissed.
10. This order of ours has to be placed before the Secretary to the Government of India, Company Affairs for the purpose of finding out whether any action needs to be taken against Mr. Arvind Shukla, Assistant Official Liquidator (and we express no opinion on that matter) who was in-charge of the case and at whose instance a representation that there was an income-tax valuation of Rs. 11,07.000 regarding the property was made by his counsel Mr. B. N. Nayar to the Court.
11. So far as the counsel Mr. Nayar is concerned, we are accepting that he implicitly believed the instructions given by Mr. Shukla.
12. Appeal dismissed.