Calcutta High Court
M/S. Dunlop India Limited vs Unknown on 4 May, 2022
Author: Moushumi Bhattacharya
Bench: Moushumi Bhattacharya
OD-1
IA NO. CA/89/2022
In
CP/233/2008
IN THE HIGH COURT AT CALCUTTA
Original Jurisdiction
IN THE MATTER OF :
M/S. DUNLOP INDIA LIMITED
BEFORE:
The Hon'ble JUSTICE MOUSHUMI BHATTACHARYA
Date : May 4, 2022.
Appearance:
Mr. Abhrajit Mitra, Sr. Adv.
Mr. Soumabho Ghose, Adv.
Mr. Ankur Singhi, Adv.
Ms. Riti Basu, Adv.
Ms. Piyali Pan, Adv.
Mr. Tilak Bose, Sr. Adv.
Ms. Smita Das De, Adv.
Mr. Arindam Mondal, Adv.
The Court: The present application has been filed by an individual carrying on
business under the name and style of Texworth International for an injunction
restraining the Official Liquidator from treating the last bid submitted by the
applicant for Rs. 418.11 crores as the applicant's bid against an e-auction Sale
Notice for Lot-1 of the property mentioned in the Said Notice. The applicant
also seeks a direction on the Official Liquidator for setting aside of the e-
auction conducted on 10th and 11th March, 2022 for sale of the properties of
Dunlop India Limited, the Company (in liquidation). The applicant says that it
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accidentally bid for Rs. 418.11 crores instead of the intended bid of Rs. 41.81
crores.
The issue is whether appropriate terms should be imposed on the
applicant for grant of the relief sought for.
The subject matter of the e-auction Sale Notice dated 21.02.2022 issued
by the Official Liquidator of this Court were Lot-1 and Lot-2 of the factory units
of the Company (in liquidation) situated at Sahagung, West Bengal and
Ambattur, Tamil Nadu respectively. The e-auction was to be conducted by the
selling agent, M/s Railtel Corporation of India Limited. The reserve price for
bids was Rs. 13.21 crores and the auction was opened from 10:30 hours on
10th March, 2022 upto 18:00 hours on 11th March, 2022. The applicant paid
the earnest money deposit of Rs. 2.70 crores as required under the terms and
conditions of sale. The present dispute relates only to sale of Lot-1 property i.e.
the Plant & Machinery in the factory unit situated at Sahagung, Hooghly, West
Bengal and the applicant participating in the said e-auction as a prospective
buyer.
The case sought to be made out by the applicant is that the applicant,
through his representative, joined the bidding process and submitted a bid for
Rs. 20.31 crores and thereafter submitted further bids to outbid the highest
bidder whose offer was showing on the online portal auction. The second-last
bid by the applicant was for Rs. 41.31 crores at 17:54 hours on 11th March,
2022 which was outbid by the highest bid received at Rs. 41.71 crores. At
17.54 hours, in order to outbid Rs. 41.71 crores, the applicant intended to
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submit his bid for Rs. 41.81 crores but added an extra '1' through inadvertence
and hence made a bid for Rs. 418.11 crores. The applicant came to know of
such error on 11th March, 2022 itself and sent an email to the Official
Liquidator on the following day to point out the error.
According to the learned counsel appearing for applicant, this is a case of
an obvious mistake which would be evident from the auction log of 11th March,
2022. Counsel submits that the Official Liquidator cannot be allowed to take
any step on such obvious mistake and must be restrained from treating the
sum of Rs. 418.11 crores as the applicant's bid. Counsel offers to take the
property described in the Sale Notice for Lot-1 for the intended bid of Rs. 41.81
crores. Counsel also offers to have the earnest money of Rs. 2.71 crores
forfeited as compensation.
Learned counsel representing the Official Liquidator refers to the
numerous efforts made by the Official Liquidator to auction the property of the
Company (in liquidation) for paying off the creditors and workers of the
Company in liquidation. Counsel refers to the terms and conditions of sale of
the e-auction and urges that the applicant should be put on terms for the
negligence on its part and for seeking to frustrate the entire sale process.
Counsel also refers to the expenses which were incurred for the e-auction and
that calling for a fresh auction would result in loss of valuable time and
resources.
During the course of hearing, on 27th April, 2022, three other intending
bidders appeared in Court with offers to buy the property for 43 crores.
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Counsel representing the bidders informed the Court that they are interested to
buy the property for 43 crores (price quoted by each of the bidders) in the event
the Court directs a fresh auction.
The point which falls for consideration in the present application is
whether the bid put in by the applicant of Rs. 418.11 crores for Lot-1 as
described in the Sale Notice of the Company (in liquidation) can be treated as a
bona fide mistake. The related point is whether the applicant should be put on
terms even if the case of mistake is accepted.
The clauses relevant for the applicant as an intending bidder are as
follows.
Clause 7 of the Terms and Conditions of Sale, which was circulated to
the intending bidders, requires the bidders to personally see the status of bids
through the 'Completed Auction' immediately after closing of e-auction. Clause
7.6 reads as:
"The Bidders shall be solely responsible for all consequences arising out of the
bid submitted by him (including any arongful bidding by him) and no
complaint/representation will be entertained by SELLER/eNivida in this regard.
Bidders must be careful to check the Bid Amount/No. Of '0'/ No. Of Digits, etc.,
and if required, rectify their bid before submitting the Bid into the live e-Auction
floor by clicking the 'Submit Bid' Button. ......"
Clause 8.1 states that acceptance of the highest bid is subject to
confirmation by the High Court of Calcutta and no bidder can demand the
automatic confirmation of sale in his/her favour.
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Clause 9 - Forfeiture of EMD - provides for forfeiture of any amount lying
with the Seller from the successful Bidder who defaults in making due
payments against the e-auction.
The 'mistake'
The fact of the applicant making an obvious error in keying in an extra '1'
to the intended bid is not as simple as it is made out to be. There are several
factors which cast a shadow of doubt over the alleged error committed by the
applicant in bidding Rs. 418.11 crores as opposed to the intended Rs. 41.81
crores.
The terms indicate that the bidders were put on notice and sufficiently
warned of any 'mistake' made during the e-auction. It is inconceivable that an
intending purchaser who is participating in an e-auction where the entire
process is being conducted online, would be careless enough to put in an extra
digit and increase the allegedly intending bid by 10 times. It is equally
unbelievable that after having discovered the so-called error on 11th March,
2022 itself, the applicant chose to wait till the next morning to point out the
fact of the error to the Official Liquidator. The Bid Summary, annexed to the
application, shows that the last bid submitted by one Bohra Exports Private
Limited was Rs. 41.71 crores. The applicant submitted its bid of 418.11 crores
immediately thereafter. This naturally became the last bid and the e-auction
closed thereafter. There were six minutes left for the closing time of the e-
auction after the applicant put in a bid of 418.11 crores.
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The effect of the 'mistake'
Dunlop India Limited went into liquidation in 2013. There have since
been umpteen litigations over sale of its assets. Even after 9 years, every
announcement of sale of the assets of the Company (in liquidation) results in
sprouting of applications by entities with a nebulous connection to the
Company (in liquidation). While some amount of progress has been made in
paying off a few of the creditors and workers, a huge number of other creditors
and stakeholders remain unpaid. The e-auction held on 10th and 11th March,
2022 was in aid of the process of sale of the properties of the Company (in
liquidation) so that a few of the remaining claims may be satisfied.
In the present context, when the applicant put in the bid for Rs. 418.11
crores at 17:54 hours on 11.03.2022 with 6 minutes left for the closing of the
e-auction, the bidding immediately stopped. This was only to be expected since
the last bid given by Bohra Exports at 17:54 hours was for Rs. 41.71 crores.
The applicant's so-called 'mistake' hence stalled the bidding before reaching the
closing time and more important, capped the price at 41.71 crores (assuming
that the last bid of the applicant of Rs. 418.11 crores was through
inadvertence). Second, the error frustrated the entire bidding process.
According to the data available with the Court, about 100 bidders had
participated in the e-auction held on 10th -11th March, 2022. The result of the
bid was disclosed to the Court on 25.03.2022 and the three highest offers were
submitted in a sealed cover by the Official Liquidator. On an application made
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thereafter, the earnest money was returned to the unsuccessful bidders. Hence
as of this date, the offers of the three highest bidders are before the Court and
the other bidders have gone. There is no certainty that the other 97 bidders
who had participated in the e-auction would respond and participate in a fresh
e-auction in the near future. The action of the applicant has resulted in the
entire process for sale of assets of the Company (in liquidation) being put back
in square one after a span of two months from the last e-auction.
Should the applicant be put on terms?
A mistake is a misguided or a wrong decision. It signifies an absence of
conscious and deliberate thought behind the commission or omission of the act
and presumes that the person did not intend to do what he did. A mistake,
whether of law or of fact, does not constitute a ground of exemption from
liability in tort. In cases of tortious liability, the test is whether a reasonable
person would have done what the defendant did. Sections 20, 21 and 22 of The
Indian Contract Act, 1872, contemplate situations where both the parties to an
agreement have proceeded on a mistaken belief of a fact essential to the
agreement and contemplate that a contract is not voidable because it was
caused by a mistake as to any law in force. Although, the present case is not
one of contract, the principle which emerges from the statute and case-law is
that a person cannot turn back on his obligations on the pretext of an act
mistakenly committed. This is particularly true where the mistake has resulted
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in certain irreversible consequences or consequences which may be reversed
but at substantial cost to the other party to the act.
Even if the case made out by the applicant is to be accepted, namely that
it was an error simpliciter, the applicant would still be liable for negligence.
Negligence, in its general and non-tortious sense, is an absence of exercise of
due care which results in consequential damage to the party who expected a
reasonable standard of care to be taken by the negligent person. The terms and
conditions, referred to above, clearly cautioned the applicant to carefully check
the bid amount and warned the bidders of the consequences of any wrongful
bidding. The applicant was hence under an obligation to exercise due care
while keying-in a number for the bid, all the more so since the entire process
was being conducted online and the applicant was well aware that it would not
have the opportunity to immediately rectify its bid or take corrective measures
as in a court sale. The case pleaded by the applicant of the possibilities of
computer hacking and cyber crime is curious to say the least. Pushing a
button on the key-board was a manual act undertaken solely by the applicant
and/or his representative and there was no scope of any third party
intervention or alteration of the numbers on the Internet.
Moreover, the fact that three other bidders appeared in Court on the last
day when this matter was heard to make their offers of buying the property at
Rs. 43 crores, is significant. These bidders chose to appear, out of the
woodwork as it were, only at a time when the option of calling for a fresh bid
was suggested to the Court. There was no sign of these bidders when the e-
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auction was concluded and the three highest bids were received in sealed
covers or even when the applicant first moved the present application for
cancellation of the e-auction. The uniform offer of 43 crores by all bidders who
have now appeared in the proceedings raises the spectre of a price-cartel which
is inimical to receiving the best-price for sale of the property in question.
The circumstances put together amount to a reasonable apprehension
that the 'mistake' was not a bona fide mistake on the part of the applicant. The
applicant is also guilty of negligence in failing to exercise due diligence during
the bidding process. This Court is hence of the view that the applicant must be
made to compensate for the act.
The authorities cited on behalf of the applicant on 'mistake' are factually
distinguishable from the present case. In Guinness Peat Properties Ltd. Vs.
Fitzroy Robinson Partnership; (1987) 2 All ER 716, the England and Wales Court
of Appeal (Civil Division) found that the plaintiffs' experts and solicitors had
knowingly taken advantage of an obvious error on the part of the defendants'
solicitors in including a letter in the list of documents offered by the defendants
for inspection. In Chandigarh Administration Vs. Naurang Singh; (1997) 4 SCC
177, the Supreme Court was of the view that a mistake committed by the
administration in terms of the revision of pay-scale of storekeepers cannot
furnish a legitimate ground for the court to direct the administration to go on
repeating the mistake. In both these cases, the court accepted the fact of a
genuine mistake having been committed by one of the parties before it. In MBL
Infrastructure Limited Vs. Rites Limited; AIR 2020 Cal 155 a Division Bench of
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this Court held that the earnest deposit in a tender document cannot be
forfeited since the party forfeiting should not be entitled to a windfall without
there being any loss or damage suffered by that party. The case before the
Division Bench involved a breach of contract pertaining to construction of a
road in Jharkhand and subsequent defects discovered after expiry of the defect
liability period. In the present case, the Official Liquidator has not demanded
forfeiture of the earnest money deposit. Hence, the cases cited do not assist the
applicant.
Since the facts point to a frustration of the e-auction by an artificial
price-ceiling at Rs. 41.71 crores (being the last bid before the applicant's
418.11 crores) this Court is of the considered view that a fresh e-auction
should be conducted for sale of Lot-1 property of the factory unit of the
Company (in liquidation) at Sahagunj, West Bengal. In order to show its bona
fides, the applicant is directed to compensate for cancellation of the last e-
auction by way of the following measures.
1.The applicant shall bear all expenses for conducting the e-auction including advertising for the same by way of public notices in 1 English, 1 Bengali and 1 Hindi newspaper having wide coverage all over India.
2. The applicant shall also bear the necessary operational expenses for conducting the fresh bid and pay the same to Railtel Corporation and the Official Liquidator of this Court.
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3. The applicant shall also protect the sale price which was last reached in the e-auction by putting in Rs. 41.81 crores (being the amount which the applicant intended to bid) in the form of a bank guarantee with the Official Liquidator within 7 days for being treated as the base-price of the fresh e- auction. The Official Liquidator shall use the bank guarantee as the starting price/reserve price from which the bids shall be invited. The bank guarantee shall remain valid for 3 months or until further orders of this Court, whichever is later.
4. The Official Liquidator / Railtel Corporation shall prepare the sale notices accordingly. The Official Liquidator and Railtel Corporation shall try their best to hold the e-auction within 3 weeks from today.
5. As suggested by the parties, the Official Liquidator shall indicate the operational/incidental expenses for the e-auction to the advocate-on-record of the petitioner by 12 noon tomorrow, i.e., 5th May, 2022.
6. The Official Liquidator will consider whether the earnest money deposited by the petitioner can be adjusted in the future e-auction.
These measures are required for ensuring sufficient safeguards in the form of price-protection for sale of the assets of the Company (in liquidation).
C.A 89 of 2022 is disposed of in accordance with the above. The parties shall be at liberty of applying before this Court for appropriate relief after conclusion of the fresh e-auction.
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Urgent Photostat certified copies of this order, if applied for, be supplied to the respective parties upon fulfillment of requisite formalities.
(MOUSHUMI BHATTACHARYA, J.) sg.