Bombay High Court
Shakharamseth Employees Union vs Icici Bank Limited on 6 November, 2009
Author: P.B. Majmudar
Bench: P. B. Majmudar, R. C. Chavan
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 302 OF 2008
Shakharamseth Employees Union )
a registered and recognised union in Pal-Peugeot Limited )
having its office at B 140 Kasturi Plaza, Dombivali (East) )..Appellant
versus
1. ICICI Bank Limited, a Banking Company incorporated )
under the Companies Act, 1956 and a Scheduled Bank )
within the meaning of the Reserve Bank of India
ig )
Act, 1934 and having its registered office at Landmark, )
Race Course Circle, Vadodara-390 007 and a )
corporate office at ICICI Towers, Bandra-Kurla Complex, )
Bandra (East), Mumbai-400 051 )
2. The Official Liquidator, High Court, having office at Bank )
of India Building, 5th floor, Mahatma Gandhi Road, )
Fort, Mumbai-400 023 as Liquidator of Pal Peugeot )
Limited having its office at Kalyan Shil Road, )
Manpada, Dombivli, Thane-421 204 )
3. Citra Developers Limited, a Company duly incorporated )
under the Companies Act, 1956, and having its office )
at S.P. Centre,C- Wing, 41/44 Minoo Desai Marg, )
Near Radio Club, Colaba, Mumbai-400 005 )..Respondents
Mr. J.P. Cama, Senior Advocate, with Mr. Venkatesh Mishra, instructed by M/s.
Vimadalal & Co., for the appellant.
Mr. Sachin Chandarana with Mr. Swayam Chopda & Ms. Pranika Bhatia,
instructed by M/s. M.K. Ambalal & Company, for respondent No.1.
None for respondent No.2.
Mr. Janak Dwarkadas, Senior Advocate, with Mr. V.B. Naik and Mr. Ashish
Kamat, instructed by M/s. Kartikeya Associates, for respondent No.3.
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Mr. K.L. Vyas, Court Receiver, present.
WITH
APPEAL (LODGING) NO. 336 OF 2008
with
PETITION NO. 477 OF 2008
WITH
CHAMBER SUMMONS NO. 1000 OF 2008
WITH
CHAMBER SUMMONS NO. 1193 OF 2008
WITH
NOTICE OF MOTION NO. 671 OF 2009
Metropolitan Infrahousing Private Limited, )
a Company duly incorporated under the Companies Act, )
1956, and having its registered office at Gammon House, )
Veer Savarkar Marg, Prabhadevi, Mumbai-400 025 )...Appellant
versus
1. ICICI Bank Limited, a Banking Company incorporated )
under the Companies Act, 1956 and a Scheduled Bank )
within the meaning of the Reserve Bank of India )
Act, 1934 and having its registered office at Landmark, )
Race Course Circle, Vadodara-390 007 and a )
corporate office at ICICI Towers, Bandra-Kurla Complex, )
Bandra (East), Mumbai-400 051 )
2. The Official Liquidator, High Court, having office at Bank )
of India Building, 5th floor, Mahatma Gandhi Road, )
Fort, Mumbai-400 023 as Liquidator of Pal Peugeot )
Limited having its office at Kalyan Shil Road, )
Manpada, Dombivli, Thane-421 204 )
3. Citra Developers Limited, a Company duly incorporated )
under the Companies Act, 1956, and having its office )
at S.P. Centre,C- Wing, 41/44 Minoo Desai Marg, )
Near Radio Club, Colaba, Mumbai-400 005 )..Respondents
Mr. Aspi Chinoy, Senior Advocate, with Mr. Prakash Shah, Mr. P.J. Shah, Mr.
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Sumit Raghani and Mr. Hardik Sanghavi, instructed by M/s. PDS & Associates,
for the appellant in Appeal and in Petition No. 477 of 2008.
Mr. Sachin Chandarana with Mr. Swayam Chopda & Ms. Pranika Bhatia,
instructed by M/s. M.K. Ambalal & Company, for respondent No.1.
None for respondent No.2.
Mr. Janak Dwarkadas, Senior Advocate, with Mr. V.B. Naik and Mr. Ashish
Kamat, instructed by M/s. Kartikeya Associates, for respondent No.3.
Mr. K.L. Vyas, Court Receiver, present.
Mr. N.M.Ganguli, for the applicant - Association of Engineering Workers - in
Chamber Summons No. 1000 of 200.
Mrs. Suchitra Patra for the applicants- Haresh M. Sampat and two others - in
Chamber Summons No. 1193 of 2008.
None for the Applicant - State of Maharashtra - in Notice of Motion No. 671 of
2009.
WITH
APPEAL (LODGING) NO. 337 OF 2008
WITH
PETITION NO. 478 OF 2008
WITH
CHAMBER SUMMONS NO. 1002 OF 2008
WITH
CHAMBER SUMMONS NO. 1196 OF 2008
WITH
NOTICE OF MOTION NO. OF 2008
Metropolitan Infrahousing Private Limited, )
a Company duly incorporated under the Companies Act, )
1956, and having its registered office at Gammon House, )
Veer Savarkar Marg, Prabhadevi, Mumbai-400 025 )...Appellant
versus
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1. ICICI Bank Limited, a Banking Company incorporated )
under the Companies Act, 1956 and a Scheduled Bank )
within the meaning of the Reserve Bank of India )
Act, 1934 and having its registered office at Landmark, )
Race Course Circle, Vadodara-390 007 and a )
corporate office at ICICI Towers, Bandra-Kurla Complex, )
Bandra (East), Mumbai-400 051 )
2. The Official Liquidator, High Court, having office at Bank )
of India Building, 5th floor, Mahatma Gandhi Road, )
Fort, Mumbai-400 023 as Liquidator of Pal Peugeot )
Limited having its office at Kalyan Shil Road, )
Manpada, Dombivli, Thane-421 204 )
3. Citra Developers Limited, a Company duly incorporated )
under the Companies Act, 1956, and having its office
at S.P. Centre,C- Wing, 41/44 Minoo Desai Marg,
Near Radio Club, Colaba, Mumbai-400 005
)
)
)..Respondents
Mr. Aspi Chinoy, Senior Advocate, with Mr. Prakash Shah, Mr. P.J. Shah, Mr.
Sumit Raghani and Mr. Hardik Sanghavi, instructed by M/s. PDS & Associates,
for the appellant in Appeal and in Petition No. 477 of 2008.
Mr. Sachin Chandarana with Mr. Swayam Chopda & Ms. Pranika Bhatia,
instructed by M/s. M.K. Ambalal & Company, for respondent No.1.
None for respondent No.2.
Mr. Janak Dwarkadas, Senior Advocate, with Mr. V.B. Naik and Mr. Ashish
Kamat, instructed by M/s. Kartikeya Associates, for respondent No.3.
Mr. K.L. Vyas, Court Receiver, present.
Mr. N.M. Ganguli, for the applicant - Association of Engineering Workers - in
Chamber Summons No. 1002 of 200.
Mrs. Suchitra Patra for the applicants- Haresh M. Sampat and two others - in
Chamber Summons No. 1196 of 2008.
None for the Applicant - State of Maharashtra - in Notice of Motion No. 671 of
2009.
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WITH
APPEAL (LODGING) NO. 347 OF 2008
WITH
NOTICE OF MOTION NO. 2380 OF 2008
Shakharamseth Employees Union )
a registered and recognised union in Pal-Peugeot Limited )
having its office at B 140 Kasturi Plaza, Dombivali (East) )..Appellant
versus
1. ICICI Bank Limited, a Banking Company incorporated )
under the Companies Act, 1956 and a Scheduled Bank )
within the meaning of the Reserve Bank of India )
Act, 1934 and having its registered office at Landmark, )
Race Course Circle, Vadodara-390 007 and a
corporate office at ICICI Towers, Bandra-Kurla Complex,
Bandra (East), Mumbai-400 051
)
)
)
2. The Official Liquidator, High Court, having office at Bank )
of India Building, 5th floor, Mahatma Gandhi Road, )
Fort, Mumbai-400 023 as Liquidator of Pal Peugeot )
Limited having its office at Kalyan Shil Road, )
Manpada, Dombivli, Thane-421 204 )
3. Citra Developers Limited, a Company duly incorporated )
under the Companies Act, 1956, and having its office )
at S.P. Centre,C- Wing, 41/44 Minoo Desai Marg, )
Near Radio Club, Colaba, Mumbai-400 005 )..Respondents
Mr. J.P. Cama, Senior Advocate, with Mr. Venkatesh Mishra, instructed by M/s.
Vimadalal & Co., for the appellant.
Mr. Sachin Chandarana with Mr. Swayam Chopda & Ms. Pranika Bhatia,
instructed by M/s. M.K. Ambalal & Company, for respondent No.1.
None for respondent No.2.
Mr. Janak Dwarkadas, Senior Advocate, with Mr.Ashish Kamat, instructed by
M/s. Kartikeya Associates, for respondent No.3.
Mr. K.L. Vyas, Court Receiver, present.
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CORAM: P.B. MAJMUDAR &
R.C. CHAVAN, JJ.
DATE: NOVEMBER 06, 2009.
ORAL JUDGMENT (Per P.B. Majmudar, J.)
Appeal No. 302 of 2008 and Appeal (Lodging) No. 337 of 2008 are directed against the order of the learned single Judge dated 27th June, 2008 by which the learned single Judge permitted the highest bidder to withdraw its bid in respect of the land admeasuring 5,41,436 sq.mtrs. and directed a fresh public auction by disposing of the Court Receiver's Report. Appeal (Lodging) Nos. 336 and 347 of 2008 are directed against the order of the learned single Judge dated 12th March, 2008, fixing the reserve bid at Rs. 1650 crores for sale of land admeasuring 5,41,436 sq.mtrs.
2. Since the point involved in all these appeals being common, all these appeals are disposed of by this common judgment at the admission stage itself.
3. The ICICI Bank instituted a suit being Suit No.3636 of 1999 as debenture holders of the Company in liquidation i.e. Pal Peugeot under debenture deed dated 21st December, 1997 for Rs. 136.79 crores. The said suit was filed on 12th May, 1999. On 30th June, 1999, the Court Receiver was ::: Downloaded on - 09/06/2013 15:16:30 ::: -7- appointed in connection with the suit properties. By an order dated 8th February, 2002, the Receiver was directed to sell the property. On 5 th July, 2002, the first auction sale was held and 41 offers were received but the same were rejected as all the bids were below the reserve price. On 3rd September, 2002, second auction was held and it seems that 5 offers were received in connection with the aforesaid second auction. The learned single Judge did not accept the said offers. Even the third and the fourth auctions which were held on 5th May, 2003 and 17th January, 2004 respectively met with the same fate. Since bid received in the aforesaid auctions did not exceed Rs. 60 crores and since it was much below the reserve price fixed by the Court, the said auction proceedings were ultimately resulted into a failure. Subsequently, by an order dated 4th March, 2008, the learned single Judge directed sale of 5,41,436 sq.mtrs. of land. Four valuation reports were submitted and the learned single Judge fixed the reserve price by a separate order. The said order was passed on 12th March, 2008. The learned single Judge at the time of fixing the reserve price for sale of the aforesaid land directed that the envelope containing the reserve price should not be opened during the auction sale. Subsequently, the auction was held on 22nd April, 2008. Citra Developers Ltd., hereinafter referred to as the "highest bidder", gave its bid at Rs. 676 crores. The Court Receiver accordingly accepted the said bid on the ground that the same is the highest bid and the said bidder was treated as successful bidder by the Court Receiver. In ::: Downloaded on - 09/06/2013 15:16:30 ::: -8- view of clause 16 of the terms and conditions of the sale, the highest bidder deposited Rs. 139 crores, in addition to the earnest money of Rs. 30 crores, to make 25 per cent of the purchase price of Rs. 676 crores. The Court Receiver thereafter submitted his Report No. 162 of 2008 and sought various directions as to whether the offer of highest bidder should be accepted or not and whether the sale should be concluded on that basis. In case if the said offer is not accepted, whether the Court Receiver should re-advertise the sale and re-auction the said property. The matter thereafter came up for hearing before the learned single Judge on 5th May, 2008. The learned single Judge found that the amount offered by the highest bidder is much below the reserve price fixed by the Court and, therefore, the same cannot be accepted. The matter was adjourned to 6th May, 2008. At the request of the highest bidder and another bidder, the Court disclosed the reserve price to the parties. Accordingly, the Court opened the sealed cover and pointed out that the reserve price is fixed at Rs. 1650 crores. The Court passed the following order on 5th May, 2008.
"1. The reserve bid has been kept in a sealed cover by the Court Receiver. It is opened. The reserve bid is seen by the Court.
2. The offer made by the highest bidder is far below the reserve bid. Hence, it cannot be accepted.
3. Upon the request of Mr. Dwarkadas on behalf of the highest bidder requesting to disclose the reserve bid to enable the highest bidder as well as the other bidder Metropolitan Infrahousing Pvt. Ltd. To bid, the reserve bid which is sealed is ::: Downloaded on - 09/06/2013 15:16:30 ::: -9- disclosed to the parties. For the area of ,41,446 sq.meters it is fixed at Rs. 1650,00,00,000/-.
4. The property which was to be sold in auction was to be demarcated. The DILR has submitted his report. The demarcation is made. The Plaintiff has deposited Rs. 1 lac on account of costs of demarcation. The DILR's fees is shown to be Rs. 1,95,750/-. The plaintiffs shall deposit Rs. 95,750/- in the office of Court Receiver within 4 weeks from today.
5. All parties shall be entitled to take xerox copies of the DILR's report."
4. The Court Receiver's report was adjourned to 6th June, 2008. It seems that the highest bidder has raised a point before the learned single Judge to the effect that there seems to be some error in fixation of reserve price, either it may be an arithmetical or some clerical error. The said submission was made on the basis of earlier valuation reports as well as on the ground that earlier attempts for auction were made but the sale resulted into failure. On 12th June, 2008, the advocate for the highest bidder submitted a note for speaking to the minutes of the order regarding fixing the reserve price. Accordingly the matter was placed before the learned single Judge who had fixed the reserve price earlier. However, the learned single Judge who fixed the reserve price earlier came to the conclusion that there was no arithmetical or clerical error in the valuation of the land and that the reserve price was fixed consciously. It was further observed by the Court that if the reserve bid fixed is not workable it is for the learned Chamber Judge to entertain any application for modification ::: Downloaded on - 09/06/2013 15:16:30 ::: -10- thereof. Accordingly, the learned Judge found that there was no arithmetical or clerical error while fixing the reserve price and that it was fixed after considering all the relevant aspects. Subsequently, on behalf of highest bidder, a praecipe was filed requesting for placing the matter before the Court on the ground that the highest bidder was desirous of making an application for confirmation of sale in their favour. Before the learned single Judge, the Union viz. Sakharamseth Employees Union asserting its right as a recognised Union of the Company i.e. Pal Peugeot, filed an affidavit to the effect that the reserve price should be reduced to Rs. 661 crores and to accept the bid of highest bidder i.e. Citra Developers Ltd. As per the claim of the said Union, the claim was lodged on behalf of 1712 workers amounting to Rs. 122 crores. Appellant-
Metropolitan Infrahousing Pvt. Ltd. filed an affidavit requesting the Court to accept the bid of Citra Developers Ltd. at Rs. 676 crores by confirming the sale in their favour. Subsequently, the Court Receiver's report came up for consideration before the learned Judge on 27th June, 2008. On the aforesaid date, on behalf of the highest bidder i.e. Citra Developers Ltd., a request was made that it may be permitted to withdraw from the auction as it did not desire to raise their offer. The learned single Judge accordingly accepted the request and the amount of Rs. 169 crores deposited by the highest bidder in short term FDR was permitted to be refunded to the highest bidder by the learned single Judge. The learned single Judge also directed the Court Receiver to once again ::: Downloaded on - 09/06/2013 15:16:30 ::: -11- auction the suit property and accordingly the Court Receiver's report was disposed of by the learned Judge. As stated above, two separate appeals are preferred against the order dated 27th June, 2008 of the learned single Judge by which the learned single Judge has permitted the highest bidder to withdraw its bid in respect of the land admeasuring 5,41,436 sq.mtrs. and directed a fresh public auction and two separate appeals are also filed against the order dated 12th March, 2008, of the learned single Judge fixing the reserve bid of Rs. 1650 crores for sale of land admeasuring 5,41,436 sq.mtrs.
5. Earlier when these appeals came up before a Division Bench of this Court (Coram D.K.Deshmukh & R.S. Mohite, JJ.) on 23rd June, 2009, the Division Bench came to the conclusion that the learned single Judge has not considered the question about reduction of reserve price. It was also observed by the Division Bench that the learned single Judge has not taken into account as to whether the amount deposited by the highest bidder could have been refunded.
It was found that the procedure adopted by the learned Judge had caused serious prejudice to the workers, looking to the history of the matter. The Division Bench found that it was necessary for the learned Judge to decide the question whether order fixing reserve price deserved to be modified or not.
On the aforesaid basis, the Division Bench set aside the order dated 27th June, 2008 on the Receiver's report. The matter was remitted to the ::: Downloaded on - 09/06/2013 15:16:30 ::: -12- learned Judge for de novo consideration in accordance with law. It is required to be noted that in the meanwhile the highest bidder had already withdrawn the amount as per the order dated 27th June, 2008 with interest. However, the highest bidder has already given an undertaking before the Court in the Appeal to the effect that if so directed, the amount which has already been withdrawn by the highest bidder shall be re-deposited before the Court.
6. The aforesaid order of the Division Bench of this Court was carried further by the highest bidder, Citra Developers Limited, before the Hon'ble Supreme Court being Civil Appeal Nos. 5568-5571 of 2009. The Hon'ble Supreme Court by its order dated 17th August, 2009 set aside the order of the Division Bench and the matter was sent back to this Court for de novo consideration in accordance with law. The undertaking given by the highest bidder was ordered to be continued till the decision in the appeals by this Court. The said order is reproduced hereunder:
"Leave granted.
Heard both sides.
On 5.5. 2008, the bid of the Appellant herein was rejected as its bid was for Rs. 676 crores against the reserve price of Rs. 1650 crores. The question that arises for determination is - whether an unsuccessful bidder, who is allowed to withdraw its own bid, could make the appellant bound by its offer dated 22.4.2008 or face the consequence of ::: Downloaded on - 09/06/2013 15:16:30 ::: -13- forfeiture of Rs. 139 crores, particularly when the Court had committed an error in the calculation of the reserve price.
For the above reasons, we set aside the impugned order passed by the Division Bench and we remit the matter for de novo consideration by a Division Bench in accordance with law. We request the Division Bench to decide the matter expeditiously and preferably within three months from today.
Since the amount has been withdrawn by the appellant herein on its giving undertaking dated 3rd July, 2008, the said undertaking will continue till the Division Bench dispose of the appeals as directed hereinabove. We express no opinion on merits.
The Civil Appeals are disposed of accordingly."
7. All these appeals are accordingly placed before us for hearing de novo in view of the directions of the Supreme Court in the appeals which had been preferred by the highest bidder i.e. Citra Developers Ltd. During the course of hearing it is pointed out to the Court that by another order dated 4 th September, 2009, the Supreme Court clarified its earlier order in view of the application submitted by Metropolitan Infrahousing Pvt. Ltd. as well as by the Trade Union. The said application was in the nature of correction of the order dated 17th August, 2009. The Supreme Court clarified the order on 4th September, 2009, by observing as under:
" I.A. Nos. 9-12 of 2009 are moved by Metropolitan ::: Downloaded on - 09/06/2013 15:16:30 ::: -14- Infrahousing Private Limited and I.A. Nos. 5-8 are moved by the Trade Union for correction.
In our order dated 17th August, 2009 the words '139 crores' in para 1, should be read as '169 crores'.
In para 2 while remitting the matter we have used the words 'we remit the matter'. They should be read as 'we remit the matters'.
It is the case of Metropolitan Infrahousing Private Limited that in para 1 of the order dated 17th August, 2009 while framing the question for remand to the High Court, this Court has stated as follows:-
"...Whether an unsuccessful bidder, who is allowed to withdraw its own bid, could make the appellant bound by its offer dated 22.4.2008 or face the consequence of forfeiture of Rs. 139 crores (now to be read as 169 crores)"
According to the applicant(s) the word "unsuccessful" be deleted or that it should be clarified that Citra Developers Limited claim to be "unsuccessful bidders".
We make it clear that it is the case of Citra Developers Limited that they are unsuccessful bidders and on that basis they sought withdrawal of their bid and consequentially the refund of the amount deposited by them.
Subject to above clarification, Interlocutory Applications stand disposed of. "
8. At the time of hearing of these appeals, Mr. Chinoy, learned Counsel appearing for Metropolitan Infrahousing Pvt. Ltd., submitted that in view of the observations of the Supreme Court, these appeals are required to be heard de novo. He further submitted that the question about reducing the amount of ::: Downloaded on - 09/06/2013 15:16:30 ::: -15- reserve price as well as question about confirmation of the bid of the highest bidder is required to be considered by this Court in these appeals so that the matter is not further delayed. Mr. Chinoy further submitted that this Court, on its own, may consider the appropriate reserve price and, in his submission, the appropriate reserve price may be fixed at Rs. 600 crores which may be the workable reserve price, in view of the fact that in the past four times auctions were held but it could not materialise. Mr. Chinoy submitted that the Supreme Court has not concluded the issue in any manner and the entire question is kept open for consideration of this Court. It is further submitted by Mr. Chinoy that the highest bidder had already submitted a praecipe asking the single Judge to confirm their bid and at that stage it was not open for the highest bidder to withdraw from the bid. It is further submitted that it cannot be said that on 5th May, 2008 the learned single Judge rejected the bid by not confirming the sale as it was merely a tentative decision and that is why on 6 th May, 2008 the amount was ordered to be deposited in the fixed deposit initially for a period of six weeks and subsequently the said period was further extended.
The bid was not rejected outright by the learned Judge but the question was still kept open. Mr. Chinoy submitted that during the process of confirmation of the sale, the appellants were entitled to request the Court to reduce the reserve price as the appellants were also pursuing the matter in their capacity as creditors of the debtor Company. It is further submitted by Mr. Chinoy that in ::: Downloaded on - 09/06/2013 15:16:30 ::: -16- view of the same, the impugned order passed by the learned Judge on 27th June, 2008, by which the highest bidder was permitted to withdraw from the bid and further permitted to take back its deposited amount back, is required to be set aside as the same is not sustainable in law. It is further submitted that even if the highest bidder is not willing to continue with the auction proceedings, it may do the same at its own risk and peril and the amount deposited should be forfeited and re-auction is required to be held at its cost. Mr. Chinoy further submitted that as per the conditions prescribed in the terms, the amount so deposited by the highest bidder is required to be forfeited. Mr. Chinoy further submitted that this Court may examine the question of fixation of reserve price de novo by taking into consideration the facts and circumstances of the case and a realistic and workable reserve price is required to be fixed by reducing the reserve price fixed by the learned single Judge by his order dated 12 th March, 2008. In the alternative, it is submitted that if the highest bidder is not willing to proceed further with the confirmation of sale, the amount which it has deposited should be forfeited and re-auction may be ordered at its cost. Mr. Chinoy further submitted that the reserve price fixed by the learned single Judge is not at all realistic and is not workable as even in the past on four occasions, the auction could not succeed as the reserve price fixed was on a higher side.
9. Mr. Chinoy further submitted that it is no doubt true that the ::: Downloaded on - 09/06/2013 15:16:30 ::: -17- Supreme Court has made a reference in the order to the effect that the question that arises for determination is - whether an unsuccessful bidder who is allowed to withdraw his own bid, could make the appellant bound by its offer dated 22-4-2008 or face the consequences of forfeiture of Rs. 139 crores particularly when the Court committed an error in the calculation of the reserve price. He, however, submitted that the locus of the appellant- Metropolitan Infrahousing Pvt. Ltd.- was never doubted or challenged by the successful bidder at any point of time. In these circumstances it cannot be said that the appellant has no locus standi to request the Court to confirm the bid of highest bidder, more particularly when the appellant is having 90 per cent of the debenture value of the Company in liquidation. In this view of the matter, the appellant -
Metropolitan Infrahousing Pvt. Ltd.- can be said to be a decree holder and on that basis has locus standi to pursue its remedy and is entitled to request the Court to reduce the reserve price as during the process of confirmation of sale before the Court, they are entitled to make out its point in connection with the appropriate reserve price. Mr. Chinoy further submitted that because of the legal battle, the appellant- Metropolitan Infrahousing Pvt. Ltd.- as well as the workers are not in a position to get a single pie and if the reserve price fixed by the Court is not suitably reduced, the property will remain idle for years to come. It is also submitted by Mr. Chinoy that in any case even if the highest bidder is allowed to withdraw from the bid, the amount deposited by the ::: Downloaded on - 09/06/2013 15:16:30 ::: -18- highest bidder should be forfeited as looking to the conduct of the highest bidder, it is clear that the highest bidder had shown its willingness to continue with the auction proceedings before the learned single Judge. Mr. Chinoy further submitted that the learned single Judge has not considered the fact as to whether the reserve price is required to be reduced suitably, even though a point was raised in this behalf before the learned single Judge by the present appellants and even the highest bidder had also initially shown its willingness to get the sale confirmed in its favour. On these premises, it is submitted by Mr. Chinoy that the order of the learned single Judge regarding fixation of the reserve price as well as permitting the highest bidder to withdraw its bid be set aside and this Court may confirm the sale in favour of the highest bidder or alternatively the amount deposited by the highest bidder should be allowed to be forfeited and re-auction may also be ordered at the cost and risk of the highest bidder.
10. Mr. Cama, learned Counsel appearing for the appellant Trade Union i.e. Shakharamseth Employees Union, submitted that in view of the clarification of the order of the Supreme Court, the status of the highest bidder is to be considered only as an unsuccessful bidder as that was the stand taken by Citra Developers Limited before the Supreme Court and that in view of the same it is now not open for the highest bidder to argue before this Court that the bid was ::: Downloaded on - 09/06/2013 15:16:30 ::: -19- not accepted by the learned single Judge. It is submitted by Mr. Cama that the highest bidder should be treated as a purchaser in default and they cannot be allowed now to withdraw from the fray. Mr. Cama further submitted that in view of the stand taken by the highest bidder, his clients have supported the claim of the highest bidder and if the appellant trade-union had known the fact that the highest bidder is ultimately going to back out from the auction, the Union would not have supported the bid submitted by the highest bidder and might have supported the bid submitted by the Appellant - Metropolitan Infrahousing Pvt. Ltd. - at the relevant time. It is submitted by Mr. Cama that in view of the same, since the appellant trade union has changed its position in view of the assurance of the highest bidder that it was willing to get the sale confirmed that the trade union had not supported the other rival bidder and in view of the same the highest bidder is now estopped by way of promissory estoppel from changing its stand and for taking a contrary stand now. Mr. Cama further submitted that the highest bidder cannot take a contrary stand as on one hand it is argued that the bid was not accepted by the learned single Judge and on the other hand it was submitted before the Supreme Court that they are unsuccessful bidders. It is submitted that it is not in dispute that Citra Developers Limited was the highest bidder and if the reserve price is suitably reduced, naturally the said bid is required to be confirmed by the Court and at that stage if Citra Developers Limited withdraws from the proceedings, they can do it at ::: Downloaded on - 09/06/2013 15:16:30 ::: -20- their own risk and peril. Mr. Cama further submitted that this Court may, therefore, remand the matter back to the learned single Judge with a view to find out whether the single Judge really wanted to reject the bid of highest bidder as well as on the question of fixation of proper reserve price. Mr. Cama submitted that in view of this legal battle, the real suffers are the workmen as they are unable to get their legitimate dues. Mr. Cama supported the arguments of Mr. Chinoy on other points. Mr. Cama also submitted that this Court may also consider the question of reducing the reserve price and may fix proper workable reserve price and on that basis my confirm the sale in favour of the highest bidder.
11. Mr. Janak Dwarkadas, learned Counsel appearing for Citra Developers Limited, on the other hand, submitted that in view of the order of the Supreme Court dated 17th August, 2009, the order of the Division Bench was set aside by the Supreme Court by holding that the bid of his clients i.e. Citra Developers Ltd., was rejected as its bid was for Rs. 676 crores against the reserve price of Rs. 1650 crores. Mr. Dwarkadas further submitted that the Supreme Court also observed as to whether an unsuccessful bidder who is allowed to withdraw its own bid could make the appellant -Citra Developers Limited - bound by its offer dated 22nd February, 2008 or face the consequences of forfeiture of Rs. 139 crores particularly when the Court had committed an ::: Downloaded on - 09/06/2013 15:16:30 ::: -21- error in the calculation of the reserve price. It is submitted by Mr. Dwarkadas that the Supreme Court set aside the Division Bench order only on the aforesaid ground and in view of the same, the question whether the bid of Citra Developers Limited was rejected or not has attained finality by the aforesaid order of the Supreme Court and that question now cannot be re-opened in these appeals. It is submitted that this Court is required to consider the question in view of the order of the Supreme Court as to whether the appellant-Metropolitan Infrahousing Private Limited- has locus standi to file appeal against the order of the learned single Judge by which the highest bidder is permitted to withdraw from the auction proceedings and was permitted to take away the deposit amount back. Mr. Dwarkadas further submitted that even otherwise the appellant, Metropolitan Infrahousing Pvt. Ltd., cannot insist that with a view to secure its amount, the highest bidder must continue with the bid and the sale must be confirmed by the Court only with a view to see that the appellant, Metropolitan Infrahousing Pvt. Ltd., can receive its amount. Mr. Dwarkadas submitted that even otherwise, even if reserve price is reduced later on, it cannot have any retrospective effect and the fact remains that on the relevant day i.e. 5th May, 2008, when the Receiver's report came up for consideration, it was found that the offer of the highest bidder was far below the reserve price. It was specifically found that the bid of the highest bidder cannot be accepted as it is far below the reserve price fixed by the Court and the same is required to be ::: Downloaded on - 09/06/2013 15:16:30 ::: -22- rejected. The said order is not challenged by any of the Appellants by way of appeal and, therefore, the said order has attained finality. Mr. Dwarkadas further submitted that it is no doubt true that on that very day the Court has not disposed of the Court Receiver's report but his submission is that on the relevant day when the Court disclosed the reserve price the highest bidder as well as Metropolitan Infrahousing Pvt. Ltd. and the Advocates for the workers were surprised to note that the reserve price is fixed at such a high rate. Under these circumstances a genuine doubt was created in the mind of the highest bidder as well as on the part of workers and on the part of Metropolitan Infrahousing Pvt.
Ltd. that there may be an arithmetical or clerical error in fixing the reserve price at such a rate and, therefore, with a view to find out as to whether there was any arithmetical error or typographical error or not, that an attempt was made by the highest bidder by way of filing an application for speaking to the minutes before the concerned Judge. It is submitted by Mr. Dwarkadas that subsequently the learned Judge came to the conclusion that there was no clerical or arithmetical error and that consciously after considering the material on record, the reserve price was fixed. The learned Judge also observed in his order that if the reserve price is not workable, it is for the concerned parties to approach the concerned Judge who has fixed the reserve price. Even though a praecipe was prepared on the relevant day, a question was asked by the Court as to whether the highest bidder is willing to raise its bid amount. However, the ::: Downloaded on - 09/06/2013 15:16:30 ::: -23- highest bidder was not willing to raise its bid and was accordingly permitted to withdraw from the bid and order of refund of the deposited amount was passed.
It is submitted by Mr. Dwarkadas that the highest bidder cannot be compelled to raise its bid at the time of considering the question of confirmation of sale. If the highest bidder is not willing to raise its bid, the natural consequences is to reject the bid and not to confirm the sale and if the order of the learned Judge which is impugned in this appeal is considered from the aforesaid angle, it is clear that the learned Judge was not willing to confirm the sale as per the amount offered by the highest bidder. When the highest bidder was not willing to raise its bid, then the natural consequences would be that the sale cannot be said to be confirmed and in that eventuality, the highest bidder cannot be penalised by forfeiting the amount in question. It is further submitted by Mr. Dwarkadas that the highest bidder who had taken part in auction proceedings is not expected to wait indefinitely and if the bid amount offered by the highest bidder is not found to be reasonable by the Court, it was open for the highest bidder to withdraw its bid. In this behalf, he has relied upon certain judgments of the Supreme Court and the High Court to substantiate his say.
12. Mr. Dwarkadas further submitted that the learned Judge who had fixed the reserve price ultimately found that it was fixed after considering the relevant materials on record and having realised the fact that the Court has ::: Downloaded on - 09/06/2013 15:16:30 ::: -24- consciously fixed the said reserve price that subsequently the highest bidder decided to withdraw from the bid, as it was impossible for them to match the reserve price fixed by the Court. Mr. Dwarkadas further submitted that his principal contention is that the bid was rejected by the learned Judge on 5th May, 2008 but in any case if the Court comes to the conclusion that the bid was still alive, then the alternative argument is that it is open to the highest bidder to withdraw from the bid at any stage. This argument is only an alternative to the first argument. It is submitted by him that so far as his client's bid before the Receiver is concerned, since his client was the highest bidder, the Receiver treated it to be successful bidder. Since its bid could not match the reserve price, it can be treated as unsuccessful bidder so far as proceedings before the Court are concerned and in that eventuality is entitled to withdraw the amount as there is no fault on their part for which the bid is not confirmed or that the highest bidder can be said to be a valid purchaser in any manner. It is submitted that it is because of the circumstances indicated above that the highest bidder was ultimately forced to withdraw from the bid. Under these circumstances there is absolutely no substance in any of the appeals and the appeals, therefore, are required to be dismissed. Mr. Dwarkadas further submitted that even otherwise the Supreme Court has set aside the order of the Division Bench by holding that on 5th May 2008, the bid is rejected and, therefore, this Court now cannot decide the said question as the same can be said to have been concluded ::: Downloaded on - 09/06/2013 15:16:30 ::: -25- and if that be so, the highest bidder is entitled to withdraw the amount which is deposited by them. Mr. Dwarkadas further submitted that in any case, even if this Court comes to the conclusion that the question of confirmation of bid was still alive, in that case, it was always open for the respondents to withdraw its bid, as the highest bidder was not expected to wait indefinitely.
13. On behalf of rival trade Union, Association of Engineering Workers, they have taken out two Chamber Summons being Chamber Summons Nos.
1000 of 2008 and 1002 of 2008. It is submitted by Mr. Ganguli that neither of the Trade Unions is recognised one and he further submitted that the reserve price fixed by the learned single Judge at Rs. 1650 crores is just and proper and the same is not required to be reduced in any manner. Mr. Ganguli further submitted that with a view to see that appropriate price is fetched, the workers or their Union are willing to even wait some more time so that the property of the Company may not be sold away at a throw away price. He submitted that however, ultimately his clients are willing to abide by the decision of this Court in the present proceedings.
14. Two more Chamber Summons viz. Chamber Nos. 1193 of 2008 and 1196 of 2008 were taken out by Haresh M. Sampat and others, shareholders, with a prayer that the sale may not be not confirmed as the price offered is too ::: Downloaded on - 09/06/2013 15:16:30 ::: -26- inadequate.
15. At this stage it is required to be noted that an affidavit in reply has also been filed by one Rajesh Annasaheb Khambat, Deputy Commissioner of Sales Tax, stating that the reserve price fixed by the Court was in a proper manner and large amount are due towards the sales tax, property tax including Collector's charges, electricity dues, etc. to the tune of Rs. 24,97,55,689/- from the company in liquidation. In the said affidavit it is stated that the highest bid given by Citra Developers Limited is much lower than the reserve price fixed by the learned Judge.
16. We have heard the learned counsel for the parties at great length.
We have gone through the record and proceedings of the case. We have also gone through the order passed by the Hon'ble Supreme Court as well as the order of the learned singe Judge dated 5th May, 2008 and orders dated 12th March, 2008 and 27th June, 2008.
17. The principal question which requires consideration is as to whether the highest bidder can be said to be a defaulter so far as auction proceedings are concerned or as to whether their bid can be said to have been rejected by the learned single Judge and as to whether they are entitled to withdraw the amount ::: Downloaded on - 09/06/2013 15:16:30 ::: -27- deposited towards the bid in question?. Another question which is required to be considered is as to whether the appellant Metropolitan Infrahousing Pvt. Ltd.
has locus standi to prefer an appeal as well as as to whether in view of the order of the Supreme Court, can it be said that the bid of the highest bidder is rejected by the learned single Judge by order dated 5th May, 2008?.
18. During the course of hearing, learned Counsel Mr. Chinoy fairly submitted that if it is held that the bid of the highest bidder can be said to have been rejected by the Court by its order dated 5th May, 2008, then naturally the highest bidder cannot be penalised and they are entitled to withdraw the entire amount deposited by them towards the bid. He, however, submitted that it can never be said that the bid was rejected by the Court in view of the subsequent orders of the Court.
19. So far as the question about locus standi of the appellant -
Metropolitan Infrahousing Pvt. Ltd.- is concerned, the said question is kept open by the Supreme Court for the consideration of this Court as ultimately it is not concluded by the Supreme Court while sending the matter to this Court. In our view, considering the fact that the appellant - Metropolitan Infrahousing Pvt.
Ltd. - is also a creditor of the Company i.e. Pal Peugeot as they are holding 90 per cent of the debentures and to that extent they are also creditors of the ::: Downloaded on - 09/06/2013 15:16:30 ::: -28- Company as well as in view of the fact that the Trade Union i.e. Shakharamseth Employees Union, is also filed an appeal against the impugned order of the learned single Judge, instead of dismissing the appeal preferred by Metropolitan Infrahousing Pvt. Ltd. on the ground that the same is not maintainable, we have to examine the order of the learned single Judge on its own merits. Though it is true, that since the appellant being the unsuccessful bidder is not permitted to monitor the further proceedings and cannot compel that the bid of highest bidder should be accepted by the Court, yet in view of what is stated above, we have to examine the present appeals on its own merits. .
20. We are also not in a position to agree with the submission of Mr. Dwarkadas that the point in issue about the status of the highest bidder is already concluded by the order of the Supreme Court, nor we are in a position to agree with the submission of Mr. Cama that the highest bidder should now be treated as an unsuccessful bidder as the Hon'ble Supreme Court has clearly observed that the appeal may be decided by this Court de novo and no opinion is expressed by the Hon'ble Supreme Court on merits.
21. So far as the factual aspect of the case is concerned, it is required to be noted that at the time when the auction took place, none of the bidders were knowing the reserve price fixed by the Court as the same was kept in a sealed ::: Downloaded on - 09/06/2013 15:16:30 ::: -29- cover. The bidders were, therefore, kept in dark in connection with the reserve price fixed by the Court. On 5th May, 2008, the Court observed that the offer made by the highest bidder is far below the reserve price and hence it cannot be accepted. In the aforesaid order, the Court has also observed that at the request on the part of the highest bidder as well as at the request of M/s. Metropolitan Infrahousing Pvt. Ltd., the reserve bid which is in sealed cover is disclosed to the parties and it was pointed out that the reserve bid which is fixed at Rs. 1650 crores and that is how the bidders after giving their bid came to know the reserve price fixed by the Court. It is required to be noted that the bid of the highest bidder on the face of it is far below the reserve price fixed by the Court.
In view of the same, on 5th May, 2008 when the Receiver's Report came up for consideration, the learned single Judge did not confirm the sale and the bid of the successful bidder was not accepted by the Court as the said bid was liable to be rejected. However, as argued by Mr. Dwarkadas, both the bidders as well as even the Trade Union were under the impression that perhaps the reserve price must not have been fixed at such a high rate and there may be some mistake in fixing the said reserve price. It cannot be ruled out that the concerned parties must have some reasonable belief that while fixing the purchase price, some arithmetical or clerical error might have crept in. Accordingly, the highest bidder preferred an application by way of speaking to the minutes before the learned single Judge who had fixed the reserve price. In these circumstances, even if no ::: Downloaded on - 09/06/2013 15:16:30 ::: -30- prayer was made before the Court on 5th May, 2008 to allow the highest bidder to withdraw its amount, it cannot be presumed that the highest bidder was willing to get the sale confirmed as per the reserve price fixed by the Court. On the next day i.e. 6th May, 2008, the Court kept the proceedings pending and adjourned the matter to 6th June, 2008 and with a view to see that the amount is not blocked without interest, that an order for investment was passed for a limited period which was further extended by another order. Subsequently, on 12th June, 2008, the learned single Judge who had fixed the reserve price, considered the question about speaking to the minutes note filed on behalf of the highest bidder. It is required to be noted that at that time even the second highest bidder i.e. Metropolitan Infrahousing Pvt. Ltd. supported the case of the highest bidder that there may be an arithmetical or clerical error in fixing the reserve price. However, the learned single Judge who had fixed the reserve price by earlier order dated 12th March, 2008 came to the conclusion that there is no clerical or arithmetical error and the reserve bid was fixed consciously. The said order dated 12th June, 2008 is reproduced hereunder .
"The matter has been placed before me for speaking to the minutes of the order in view of an order dated 6th June, 2008 passed by Smt. R.S. Dalvi, J.
The order requires no clarification. There is no arithmetical error. The reserve bid was fixed consciously.
2. Despite my clear recollection to this effect, Mr. Chinoy ::: Downloaded on - 09/06/2013 15:16:30 ::: -31- insists that it was an arithmetic error and suggested that my recollection was inaccurate.
3. It has been the experience of this Court in several matters that the properties sold pursuant to sales ordered by the Court fetched an amount far in excess of the value fixed by the Valuers. For this reason probably a practice has long been in use in this Court to permit the bidders to increase their bids even in open court or to readvertise the sale or to invite fresh offers in other ways. In this exercise, prices far in excess of the amount fixed by the valuers have in fact been realized.
4. Valuation reports are but an aid to the court in fixing the reserve bid. They do not limit the exercise of the Courts judgment in fixing the reserve bid. Courts are not expected to blindly follow the valuation reports and sanction sales on the basis thereof. Mr. Chinoy's insistence on the inaccuracy of my recollection is based on the erroneous presumption that courts ought to fix the reserve bid in all cases solely on the basis o the valuation reports.
5. If the reserve bid fixed is not workable it is for the learned Chamber Judge to entertain any application for modification thereof. As this is not my assignment, it is not open for me to do so."
22. Thereafter the matter came up before the learned Judge before whom the question about accepting Receiver's report was pending on 27th June, 2008. On that day, the court passed the following order.
"1. Affidavits of Mr. Avinash Puntambekar, Assistant Manager of the Plaintiffs, Mr. Umesh B. Upadhyay, Joint Secretary of Sakharamseth Employees' Union and Mr. Dinesh Patel, Director of Metropolitan Infrahousing Pvt. Ltd. Are taken on record.::: Downloaded on - 09/06/2013 15:16:30 ::: -32-
2. Mr. Dwarkadas on behalf of the highest bidder M/s. Citra Developers Limited, states that they do not desire to raise their offer and that they desire to withdraw from the auction. M/s. Citra Developers Limited are allowed to withdraw from the auction.
3. The amount of Rs. 169 crores deposited by the highest bidder- M/s. Citra Developers Limited - in a short term FDR of the Plaintiffs shall be returned to them by the Plaintiffs along with the accrued interest.
4. The Court Receiver shall once again auction the suit property.
5. The Court Receiver's Report is disposed of."
23. On going through paragraph 2 of the aforesaid order, it is clear that the counsel for the highest bidder has clearly pointed out to the Court that they did not desire to raise the offer. The highest bidder was asked to raise the bid and ultimately shown its willingness to withdraw from the auction proceedings that the Court permitted the highest bidder to withdraw from the auction and permitted withdrawal of the amount.
24. On reading the aforesaid order dated 27th June, 2008, it is clear that the Court was not willing to accept the bid of the highest bidder at the rate of Rs. 676 crores and, therefore, it can be said that the Court has refused to confirm the sale at Rs. 676 crores. The Court also did not think it fit to even reduce the reserve price in view of the fact that the Court permitted the highest bidder to withdraw from the bid and, therefore, it can be easily said that the Court was not ::: Downloaded on - 09/06/2013 15:16:30 ::: -33- inclined to confirm the sale which may amount to non-confirmation of the sale.
Even an attempt was made by the Court asking the highest bidder to raise its bid but the highest bidder was not willing to raise the bid at all. Under these circumstances, it can be said that the auction proceedings resulted into failure and there was no question of confirmation of sale in favour of the highest bidder.
In that view of the matter, there is nothing wrong if the Court permitted the highest bidder to withdraw its amount, as the highest bidder cannot be penalised for no fault on its part as ultimately the Court had not confirmed the sale in their favour.
25. It is required to be noted that as per clause 15 of the terms, a successful bidder is required to deposit 25 per cent of the actual amount of the bid within 10 days from the acceptance of their offer. However, acceptance of such offer by the Receiver is subject to final confirmation of the Court. It is not in dispute that the aforesaid offer of the highest bidder has not been accepted by the Court and in that view of the matter it is not possible for us to accept the submission of Mr. Chinoy that since on subsequent date the amount was ordered to be deposited in Fixed Deposit for some time, it cannot be said that the offer is rejected and the highest bidder is still required to continue in the fray even though as per the material on record it is clear that there is disparity to a great extent between the reserve price fixed by the Court which is 1650 Crores and the ::: Downloaded on - 09/06/2013 15:16:30 ::: -34- amount of highest bid offered by the highest bidder which is Rs. 676 crores. It is required to be noted that in view of the factual scenario of the matter, it is impossible for us to believe that the highest bidder is a defaulter and is required to face the consequences of forfeiture of the amount in toto. As per clause 20 of the terms and conditions of sale, the time being is the essence, and if the sale is not concluded by reason of any default on the part of the purchaser, the Court Receiver was entitled to forfeit the entire amounts deposited by the purchaser.
It is required to be noted that considering the factual background of the case it cannot be said that the highest bidder can be branded as a defaulter, as on the relevant day i.e. 5th May, 2008, if the highest bid offered by the highest bidder was found to be in consonance with the reserve price fixed by the Court, naturally the sale was required to be confirmed and in such an eventuality there was no option available to the highest bidder to withdraw from the bid and the amount deposited by the highest bidder was required to be forfeited on the ground that it was not ready and willing to proceed further with the auction. It may be noted that at the time when the bid was given, no bidders knew what is the reserve price fixed by the Court as it was kept in a sealed cover and in that view of the matter, ultimately when it was realised that the reserve price is on a higher rate and in such an eventuality if the highest bidder is not in a position to match reserve price or is not willing to raise its bid, it cannot be compelled to continue with the auction proceedings. It, therefore, cannot be said that the ::: Downloaded on - 09/06/2013 15:16:30 ::: -35- highest bidder is a defaulting purchaser.
26. Simply because speaking to the minutes of the order was filed to find out whether there was arithmetical or clerical error in the reserve price fixed by the Court and in order to await the decision of the Court in this behalf, if the amount is not withdrawn and if it is invested by the Court, it cannot be presumed that the highest bidder was willing to continue in the fray by raising its bid which could match the reserve price fixed by the Court. It is required to be noted that since the clarification to that effect was sought for, the Court before whom the question about confirmation of sale was pending, had adjourned the proceedings and not passed any order on the Court Receiver's Report to that effect itself is not indicative of the fact that the Court was willing to accept the bid of the appellant at the rate on which such a bid was given.
Considering the said aspect, we do not find any fault with the order passed by the learned single Judge by which the highest bidder is permitted to withdraw his amount. It is required to be noted that on 5th May, 2008, the Court has already taken a decision not to accept the bid of the highest bidder. It is not possible for us to believe that it was only a tentative decision simply because the proceedings were adjourned to next date in connection with the acceptance of Court Receiver's report. As pointed out earlier, since the highest bidder and others who were interested in the auction wanted to get clarification from the ::: Downloaded on - 09/06/2013 15:16:30 ::: -36- concerned Judge who had fixed the reserve price that the proceedings were adjourned by the learned Judge. The confirmation of sale was before another Judge than the one who has fixed the reserve price and at the time of deciding the speaking to the minutes note, the learned single Judge clearly found that there was no error in fixing the reserve price and it was consciously fixed. Even otherwise, by subsequent order, which is impugned in this appeal, the learned Judge thereafter permitted the highest bidder to withdraw from the bid. It can, therefore, be assumed that the learned single Judge was not willing to confirm the same as per the amount of bid offered by the highest bidder.
27. By participating in the bid, the highest bidder has not committed any crime for which the highest bidder is required to be penalised. Looking to the facts of the case, in our view, the learned Judge was perfectly justified in allowing the highest bidder to withdraw the amount while disposing of the Court Receiver's report. It is required to be noted that in case the concerned Judge who had fixed the reserve price had allowed the speaking to the minutes of the order by holding that it was a typographical error and really the reserve price was fixed at Rs. 650 crores, naturally the highest bidder could not have been permitted to withdraw from the proceedings and in such eventuality the amount which is deposited was required to be forfeited. But that is not the factual aspect of the matter. In fact, the Court reaffirmed the fact that purchase ::: Downloaded on - 09/06/2013 15:16:30 ::: -37- price at Rs. 1650 was consciously fixed and in view of the said order of the learned single Judge, the highest bidder was entitled to withdraw as the highest bidder cannot be compelled to increase its bid against its will.
28. Simply because on 5th May, 2008, the highest bidder might have shown inclination to continue with the auction proceedings, in view of subsequent developments i.e. rejection of the speaking to the minutes note and disinclination on the part of the highest bidder to increase the bid, the highest bidder cannot be prevented from withdrawing from the bid as its bid was not ultimately found to be successful before the concerned court and the Court was not inclined to confirm the sale in its favour. Considering the said fact, we do not find any infirmity in the order of the learned single Judge allowing the highest bidder to take back its amount as its bid was not found to be successful before the Court. Since the appeals are also filed against the order of the learned single Judge fixing the reserve price at Rs. 1650 crores, we have to examine the said aspect also. At this stage, reference is required to be made to the affidavit filed on behalf of the State Government wherein it is averred as under.
"3. I say that the learned Judge was conscious of the potential value which would be fetched on sale of the said property. I further say and submit that the valuation reports submitted by the valuers did not and rather have not taken into consideration the fact that if the said property is developed by taking the benefit of the existing ::: Downloaded on - 09/06/2013 15:16:30 ::: -38- policy of the State and Central Government the developer would make heavy profits. I further say and submit that as the said property is now falling in MMRDA zone and if the said property is developed by putting up and/or constructing a SEZ as per the existing policy of the State and Central Government then the developer would be entitled to double FSI by way of incentive FSI and therefore the total area that can be developed would be around 11,00,000 sq.metres.
4. I further say that the bid received from Citra Developers who were declared as the highest bidder is much lower than the reserved price as fixed by the learned Judge. I say that as the said bid submitted by Citra Developers is substantially lower than the reserved price the same has rightly been rejected by Her Ladyship by her Order dated 5th May, 2008. I say that as Citra Developers did not agree to increase their bid to come near the reserve price fixed by the learned Judge vide his order dated 12th March, 2008 the learned Judge Her Ladyship the Hon'ble Mrs. Justice R.S. Dalvi passed the said order dated 27 th June, 2008. I say that the Applicant had appeared at the time of hearing on 27th June, 2008 before Her Ladyship the Hon'ble Mrs. Justice R.S. Dalvi and submitted that the bid submitted by the Citra Developers ought not to be accepted as same was substantially lower than the reserve bid fixed by the learned Judge and if the potential of the property is fully and properly exploited than the said property would generate much higher value. However, the aforesaid submission of the applicant has not been recorded by the learned Judge while passing the said order dated 27 th June, 2008."
29. Even otherwise, as per the material on record, it is not possible for us to come to the conclusion that the reserve price fixed by the Court at the relevant time was unworkable or that it was on a higher side. It is impossible for us to come to the conclusion that the reserve price is required to be reduced upto Rs. 650 crores so that it can match the offer given by the highest bidder.
::: Downloaded on - 09/06/2013 15:16:30 ::: -39-There is also a contrary submission on behalf of the rival trade-union to the effect that the offer by the highest bidder is too inadequate as compared to the actual price of the disputed land. Under the circumstances, it is not possible for us to accept the say of the appellant that the order of the learned single Judge fixing the reserve price is required to be modified and/or reduced suitably. Even on that ground also the sale in favour of the highest bidder cannot be confirmed as it is far below the reserve price fixed by the Court and we do not find that the reserve price fixed by the Court is unreasonable.
30. At this stage, the submission of Mr. Chinoy is required to be considered. He has submitted that during the process of confirmation of sale, the other bidders were entitled to ask the Court to reduce the reserve price and that is why the appellant - Metropolitan Infrahousing Pvt. Ltd. - has also locus standi in this behalf. Even if that be so, we do not find any justification in reducing the reserve price fixed by the Court vide order dated 12th March, 2008.
It is also required to be noted that no grievance was made by any of the appellants before the learned single Judge when the Court passed an order refunding the amount of the highest bidder. It seems that no objection was taken by the appellants in this behalf as nothing in this behalf is even reflected in the order. It cannot be said that the highest bidder was a defaulter in any manner or that because of the default on the part of the highest bidder that re-auction is ::: Downloaded on - 09/06/2013 15:16:30 ::: -40- required to be ordered. It is not possible for us to accept the submission of the appellants that the reserve price should be reduced upto the amount of highest bid given by the highest bidder and the bid of the highest bidder must be confirmed by this Court. At the cost of repetition, we may reiterate that the highest bidder cannot be said to be a defaulting purchaser in any manner and as stated above the sale in favour of the highest bidder cannot be confirmed. In future as and when question about re-auction arises, the Court will have to fix the reserve price de novo and we have no doubt in our mind that at that time the Court will consider the appropriate market price and may fix the reserve price accordingly. It is for the concerned Court at that time to consider whether the same may be workable or not and whether it is realistic or not.
31. We are not in a position to accept the submission of Mr.Cama in connection with the promissory estoppel. The bid had taken place before the court concerned. Bidders had taken part in the auction. If ultimately the bid of the highest bidder is not found favour with the Court and when the sale is not confirmed by the Court, the submission regarding promissory estoppel pressed into service is not at all sustainable as ultimately the auction had taken place at the instance of the Court and the Court is required to confirm the sale. If the Court ultimately rejects the bid of the highest bidder, doctrine of promissory estoppel has no application and such argument therefore, cannot be taken into consideration.
::: Downloaded on - 09/06/2013 15:16:31 ::: -41-We also cannot compel the highest bidder to continue with the bid and confirm the sale at a price offered by the highest bidder only with a view to see that the appellants may get their dues realised from such auction.
32. At this stage, reference is required to be made to the judgments cited at the Bar by Mr. Dwarkadas, learned Senior Counsel. He has relied upon the decision of the Supreme Court in the case of Riya Travel & Tours (India) Pvt.
Ltd. vs. C.U. Chengapa and others1 wherein it has been held that when bid is made subject to acceptance within limited time and when the amount of deposit of Rs. 15 lakhs as earnest money has been made by the bidder on condition that if the offer was accepted but sale was not confirmed within three months, interest at the rate of 18 per cent would be payable. The Supreme Court held that the offer of the appellant was a qualified one and the bid was not open for acceptance for an indefinite period and in the offer made by the appellant therein it was clearly stated that the acceptance should be conveyed within three months which was subsequently extended upto July, 1999. When admittedly there was delay in the acceptance of the bid, the appellant was at liberty to ask for the refund of money already paid and to withdraw from the bid at least after 9th July, 1999. In the instant case, the question of conditional offer is not involved and the Court is required to consider as to whether the bid of the highest bidder can be said to have been accepted by the learned Judge 1 (2001) 9 SCC 512 ::: Downloaded on - 09/06/2013 15:16:31 ::: -42- and if not whether they are entitled to get back the money which they have deposited.
33. Mr. Dwarkadas also relied upon the decision of the Supreme Court in the case of Union of India and others vs. M/s. Bhim Sen Walaiti Ram 1. In the aforesaid case, the Supreme Court has considered clause 22 of Rule 5.34 of the Excise Rules and has observed as under in paragraph 4 of the judgment which reads thus:
"On behalf of the appellants it was contended by Dr. Syid Muhammad that the respondent was under a legal obligation to pay one-sixth of the annual fee within seven days of the auction under Clause 21 of Rule 5.34 and it was due to his default that a re-sale of the excise shop was ordered. Under clause 22 of Rule 5.34 the respondent was liable for the deficiency in price and all expenses of such re-
sale which was caused by his default. We are unable to accept this argument. The first portion of Clause 21 requires the "person to whom the shop has been sold" to deposit one-sixth of the total annual fee within seven days. But the sale is deemed to have been made in favour of the highest bidder only on the completion of the formalities before the conclusion of the sale. Clause 16 of Rule 5.34 states that "all sales are open to revision by the Chief Commissioner". Under Clause 18, the Collector has to make a report to the Chief Commissioner where in his discretion he is accepting a lower bid. Clause 33 of the conditions, Ex. D-28, states that " all final bids will be made subject to the confirmation by the Chief Commissioner who may reject any bid without assigning any reasons". It is, therefore, clear that the contract of sale was not complete till the bid was confirmed by the Chief Commissioner and 1 1969 (3) SCC 146 ::: Downloaded on - 09/06/2013 15:16:31 ::: -43- till such confirmation the person whose bid has been provisionally accepted is entitled to withdraw his bid. When the bid is so withdrawn before the confirmation of the Chief Commissioner the bidder will not be liable for damages on account of any breach of contract or for the shortfall on the re-sale. An acceptance of an offer may be either absolute or conditional. If the acceptance is conditional the offer can be withdrawn at any moment until absolute acceptance has taken place. This view is borne out by the decision of the Court of Appeal in Hussey v. Hornepayne (1878) (8) Ch D 670 at 676. In that case V offered land to P and P accepted 'subject to the title being approved by my solicitors'. V later refused to go on with the contract and the Court of Appeal held that the acceptance was conditional and there was no binding contract and that V could withdraw at any time until P's solicitors had approved the title. Jossel M.R., observed at p. 626 of the report as follows:
"The offer made to the plaintiff of the estate at that price was a simple offer containing no reference whatever to title. The alleged acceptance was an acceptance of the offer, so far as price was concerned, ' subject to title being approved by our solicitors'. There was no acceptance of that additional term, and the only question which we are called upon to decide is, whether that additional term so expressed amounts in law to an additional terms or whether it amounts, as was very fairly admitted by the counsel for the respondents, to nothing at all, that is, whether it merely expresses what the law would otherwise have implied. The expression 'subject to the title being approved by our solicitors appears to me to be plainly an additional term. The law does not give a right to the purchaser to say that the title shall be approved by any one, either by his solicitor or his conveyancing counsel, or any one else. All that he is entitled to require is what is called a marketable title, or, as it is sometimes called, a ::: Downloaded on - 09/06/2013 15:16:31 ::: -44- good title. Therefore, when he puts in 'subject to the title being approved by our solicitors', he must be taken to mean what he says, that is, to make a condition that solicitors of his own selection shall approve of the title."
It was submitted on behalf of the appellant that the phrase "person to whom a shop has been sold" in clause 21 of Rule 5.34 means a "person whose bid has been provisionally accepted". It is not possible to accept this argument. As we have already shown the first part of clause 21 deals with a completed sale and the second part deals with a situation where the auction is conducted by an officer lower in rank than the Collector. In the latter case the rule makes it clear that if any person whose bid has been accepted by the officer presiding at the auction fails to make the deposit of one-sixth of the annual fee, or if he refuses to accept the license, the Collector may re-sell the license, either by public auction or by private contract and any deficiency in price and all expenses of such re-sale shall be recoverable from the defaulting bidder. In the present case the first part of Clause 21 applies. It is not disputed that the Chief Commissioner has disapproved the bid offered by the respondent. If the Chief Commissioner had granted sanction under clause 33 of Ex. D-23 the auction sale in favour of the respondent would have been a completed transaction and he would have been liable for any shortfall on the re-sale. As the essential pre-requisites of a completed sale are missing in this case there is no liability imposed on the respondent for payment of the deficiency in the price."
34. So far as the present case is concerned, as we have already indicated above, considering the conditions of sale, it cannot be said that the highest bidder was a defaulter in any manner and, therefore, since the sale has not been confirmed and even otherwise it could not have been confirmed in view of the ::: Downloaded on - 09/06/2013 15:16:31 ::: -45- huge variance between the reserve price and the amount of highest bid, the highest bidder was entitled to withdraw the amount. Mr. Dwarkadas also relied upon several judgments of the Supreme Court in order to substantiate his say that before confirmation of sale, the auction purchaser can always withdraw from the offer and he is entitled to get back his deposited amount. However, in our view, the said aspect depends upon the conditions of sale. If the highest bidder withdraws from the bid unilaterally contrary to the terms and conditions of the sale, naturally the highest bidder can do the same at its own cost and peril. So far as the factual aspect of this case is concerned, as we have already indicated above, the highest bidder could not get its sale confirmed and in fact the bid was rejected and under these circumstances even as per the conditions prescribed in the sale, the highest bidder is entitled to withdraw the amount.
35. Mr. Cama has also relied upon the decision of the Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. vs. The State of U.P. and others, 1. The aforesaid decision is in connection with the promissory estoppel wherein it is held that even the State is bound by the said doctrine. However, in the instant case, the question of promissory estoppel does not apply as pointed out by us in the earlier part of this judgment.
36. Considering the aforesaid aspect of the matter, we do not find any 1 AIR 1979 SC 627 ::: Downloaded on - 09/06/2013 15:16:31 ::: -46- substance in any of these appeals. We may once again reiterate that simply because proceedings were adjourned by the Court regarding acceptance of the Receiver's report and simply because a praecipe was given by the auction purchaser showing its willingness to get the sale confirmed is not a conclusive fact by which it can be held that the auction purchaser is a defaulting purchaser and the deposit amount is required to be forfeited. We have elaborately discussed this aspect in the earlier part of our order as to why on 5 th May, 2008 the proceedings were adjourned. Even otherwise, the sale in favour of the highest bidder is not required to be confirmed as, in our view, the reserve price fixed by the learned single Judge is not required to be reduced in any manner.
37. Considering the facts and circumstances of the case, we direct the Court Receiver to expedite the procedure for re-auction at the earliest and the said procedure should be commenced at the earliest, preferably within a period of four months from today. Subject to what is stated above, all these appeals are dismissed. In view of the dismissal of the Appeals, all the Petitions, Chamber Summonses and the Notices of Motion are also disposed of. The plaintiff in the suit to co-operate and bear the expenses of the Court Receiver with regard to the re-auction as ordered above so that auction proceedings are held without any further delay.
::: Downloaded on - 09/06/2013 15:16:31 ::: -47-38. At this stage, learned counsel for the appellant requests that the undertaking given by Citra Developers Limited may be continued for a period of two months to enable them to carry the matter to Supreme Court against this order. Learned counsel for Citra Developers, however, objected the said prayer on the ground that the undertaking was in force only till the decision of the appeals. However, in order to enable the appellants to approach the Hon'ble Supreme Court, it is directed that the undertaking given by Citra Developers be continued for a period of six weeks from today.
39. We may also observe that in future as and when any question about the acceptance of the report of the Receiver comes up for consideration before the concerned Court, till such report is decided and disposed of by the Court, withdrawal of the bid may not be permitted and such condition may also be incorporated in the terms and conditions of sale.
P. B. MAJMUDAR, J.
R.C. CHAVAN, J.
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