Madras High Court
Kasturi Commodities Pvt Ltd vs K.Shajahan on 26 July, 2013
Author: R.Sudhakar
Bench: R.Sudhakar
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 26/07/2013 CORAM THE HON'BLE MR.JUSTICE R.SUDHAKAR Application Nos.3150 to 3152 of 2013 in C.S.No.222 of 2013 Application No.3150 of 2013 --------------------------- KASTURI COMMODITIES PVT LTD 1 PRITHVI VALLABAH PLOT NO.2299 HILL DRIVE BHAVNAGAR vs 1 K.SHAJAHAN PROPRIETOR OF M/S. SABAH SHIP SUPPLIERS, HAVING OFFICE AT OLD NO.5/2 NEW NO.13, KUTTY MAISTRY ST, SEVEN WELLS, CHENNAI 2 THE OWNERS AND PERSON INTERESED IN THE VESSEL MT CHEMICAL ARROW Application No.3151 of 2013 --------------------------- KASTURI COMMODITIES PVT LTD 1 PRITHVI VALLABAH PLOT NO.2299 HILL DRIVE BHAVNAGAR vs 1 K.SHAJAHAN PROPRIETOR OF M/S. SABAH SHIP SUPPLIERS, HAVING OFFICE AT OLD NO.5/2 NEW NO.13, KUTTY MAISTRY ST, SEVEN WELLS, CHENNAI 2 THE OWNERS AND PERSON INTERESED IN THE VESSEL MT CHEMICAL ARROW Application No.3152 of 2013 --------------------------- KASTURI COMMODITIES PVT LTD 1 PRITHVI VALLABAH PLOT NO.2299 HILL DRIVE BHAVNAGAR VS 1 K.SHAJAHAN PROPRIETOR OF M/S. SABAH SHIP SUPPLIERS, HAVING OFFICE AT OLD NO.5/2 NEW NO.13, KUTTY MAISTRY ST, SEVEN WELLS, CHENNAI 2 THE OWNERS AND PERSON INTERESED IN THE VESSEL MT CHEMICAL ARROW ORDER
Application No.3150 of 2013 is filed under Order XIV Rule 8 of the Original Side Rules and Order XLII Rule 11 of the Original Side Rules to permit the applicant to intervene in the suit C.S.No.222 of 2013 as person interested in the defendant Vessel M.T.Chemical Arrow (for brevity, "the Vessel") , which is now lying at the Port of Kakinada, India.
2. Application No.3151 of 2013 is filed under Order XIV Rule 8 of the Original Side Rules and Order XLII Rule 11 of the Original Side Rules to recall the order dated 19.7.2013 in Application No.2170 of 2013 in C.S.No.222 of 2013 and accept the bid of the applicant.
3. Application No.3152 of 2013 is filed under Order XIV Rule 8 of the Original Side Rules and Order XLII Rule 50 of the Original Side Rules read with Section 151 of the Code of Civil Procedure to stay the operation of the order dated 19.7.2013 declaring Maritime Ventures Fund Ltd. as the successful bidder in terms of the Auction Notice dated 11.7.2013.
4. The Admiralty Suit is filed by the Ship Chandler for recovery of money amounting to Rs.54,65,190.50. Along with the suit, Application No.1597 of 2013 was filed for arrest of the Vessel and that was ordered on 4.4.2013. Another application in A.No.1813 of 2013 was filed by crew members, who also filed a claim against the defendant, and an order was passed on 15.4.2013 extending the order of arrest to the said application as well.
5. The Vessel was carrying some cargo, which is perishable in nature and at the behest of M/s.Dharangadhara Chemical Works Limited (DCW Limited), discharge of the cargo was ordered on 22.4.2013 in Application No.1873 of 2013. The said DCW Limited have made further claim together with a plea for arrest in A.No.2437 of 2013, which was ordered on 18.6.2013.
6. On 30.4.2013, the crew filed a memo seeking a direction to maintain the ship and the crew, which was permitted, by order dated 30.4.2013.
7. At the behest of M/s.Sembmarine Kakinada Limited, Kakinada, who claims to be the repairer of the engines and other spares removed from the Vessel, arrest of the Vessel was ordered on 28.6.2013 in A.No.2200 of 2013.
8. A.No.2883 of 2013 filed by the Agents of the Vessel seeking intervention was ordered on 10.7.2013 and their claim is in relation to the agency services rendered by them amounting to Rs.10,81,856/-.
9. The crew of the Vessel filed A.No.2170 of 2013 for sale of the Vessel and since the defendant/Owners of the Vessel did not object to the same, the Court, on 9.5.2013, ordered the sale of the Vessel by inviting sealed tenders. The Advocate Commissioner was directed to file a report along with sealed tenders before this Court on 10.6.2013. In order to ensure wide publication of the sale, the Court ordered publishing the sale of the Vessel in "The Times of India", All India Edition and also on the website of the Kakinada Port Trust.
10. On 30.5.2013, further order was passed in the very same application permitting the prospective purchasers to inspect the Vessel between 3.6.2013 and 21.6.2013, namely for 19 days. As per the order dated 30.5.2013, the last date for receipt of sealed tenders by Advocate Commissioner was fixed on 27.6.2013 and the opening of the sealed tenders was fixed on 28.6.2013.
11. On 28.6.2013, the Advocate Commissioner presented two sealed covers and the valuation report of the Valuer M/s.Admiralty Marine Services, Chennai, before the Court. On 28.6.2013, the sealed tenders were opened, but the value quoted by the two bidders was not disclosed to anyone. The report of the valuer was verified and on comparison of the valuer's report and the price quoted by the two persons, the Court felt that the margin was wide. It was pointed out by the learned counsel for the two bidders, who have given their offers, that many parts of the Vessel like engine and other spare parts necessary for running the Vessel were taken for repair and had not been repaired and replaced and, therefore, the Vessel is immobile and not conducive for sailing and at best it can be considered only for demolition.
12. The Court, in order to doubly ensure that the value fixed by the Valuer M/s.Admiralty Marine Services is the correct price, thought it fit not to declare the sale in favour of one or the other party and the Valuer was asked to give a fresh report and be present before this Court on 1.7.2013. On 1.7.2013, the matter was adjourned to 4.7.2013, on which date the Valuer M/s.Admiralty Marine Services gave a further report reiterating the value, except for a marginal difference on the lower side for demolition of the Vessel, citing dollar fluctuation. Thereafter, the matter was taken up on 10.7.2013 and a detailed order was passed as under:
"2. This Court ordered paper publication for sale of the Vessel M.T.Chemical Arrow. Consequent to the same, a report has been filed by the Advocate Commissioner setting out the details of intending purchasers. Their details are as follows:
<~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> Sl. No. Name <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 1 Mr.Miltiadis, Hydrus Engineering Ltd., 52, Pindou St, Chalandri, 15233, Greece <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 2 Sunoffshore Enterprise, [email protected] <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 3 Mr.Dinesh Phuse, Kinesis Power and Infra Services, B-12 Bhushan Apartment, Karve Nagar, Pune.
<~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 4 Mr.Davinder Kumar, [email protected] <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 5 Mr.Deepak Mehra, Dehradun, U.K. <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 6 Mr.Seethy Kabeer, sithara_traders @ yahoo.com <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 7 Mr.S.S.Pandey, [email protected] <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 8 Mr.Manoj Jain, [email protected] <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 9 Mr.Mohamed Ismail, [email protected] <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 10 Mr.Shashank Agarwal, Advocate, [email protected] <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 11 Mr.Rukun, Manager, Sales & Purchase, CTI Shipbrokers Pvt Ltd.
<~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 12 Mr.Ravi Shankar, Universal Marine Surveying & Consultancy (S) Pte. Ltd., Singapore.
<~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 13 Mr.Haroon Basha, M/s.Royal Trading Co., Mysore.
<~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 14 Mr.Panagiotis Papagiannis, Moss Marine Management, for Attica Bank, Greece.
<~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 15 Mr.CHakrapani Bodapati, BSRM LAW, Hyderabad <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 16 Mr.Mayank Kumar, ACE EXIM Pte Ltd., Singapore <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 17 Mr.Rahul Kothak, KCPL International Ltd.
<~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 18 Mr.Kunhi Mohamed, Kerala <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 19 A.Khan, [email protected] <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 20 Prabhakar Rao, Nag Steels Castings <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> 21 Transpower India, Bhasmang - OZA <~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~><~> However, only two parties volunteered to bid for the purchase of the Vessel and they are:
1.Maritime Ventures Fund Ltd., Cayman Islands, and
2.Nadella Corporation, Chalrlestown, Nevis.
3. M/s.Admiralty Marine Services has given a valuation report both for demolition as well as trading of the Vessel. The value has been taken into consideration. On opening the two bids, the Court found that the difference in the value offered by the two intending purchasers and the valuation given by M/s.Admiralty Marine Services is too wide. Therefore, the Court feels that it may not be justifiable to confirm the sale in favour of one or other party, who have offered their bids.
4. The Court also takes note of the further report dated 4.7.2013 filed by M/s.Admiralty Marine Services wherein the valuation already given is reiterated, except for a small reduction in the value for the purpose of demolition, which reduction is based on the foreign exchange rate fluctuation in relation to the price of Scrap Steel.
5. This Court, taking note of the fact that there are large number of claims as against the owners of the Vessel and the two bids offered are far less than the Surveyor's value, and in order to ensure that the best possible price is obtained by the sale of the Vessel, is inclined to consider public auction of the Vessel. Accordingly, the Vessel M.T.Chemical Arrow shall be sold by public auction before this Court on 19.7.2013 at 3.00 P.M. To this course of action, the learned counsel for both the intending purchasers are also agreeable subject to the condition that they should be allowed to partake in the auction to be conducted by this Court based on the earnest money deposit already made and it is permitted.
6. The Advocate Commissioner is directed to intimate all the parties who have evinced interest in purchasing the Vessel, as set out above, immediately as under:
(i)that the auction will be held in the Court on 19.7.2013 at 3.00 P.M;
(ii)that the upset price will be indicated at the time of auction;
(iii)that any higher offer by the intending bidder shall be in the multiples of Rs.5 Lakhs;
(iv)that whoever intends to participate in the auction, as a condition precedent, should deposit a sum of Rs.20,00,000/- (Rupees Twenty Lakhs only) towards earnest money deposit by way of demand draft drawn in favour of the Advocate Commissioner on or before 1.30 P.M. on 19.7.2013.
7. The Advocate Commissioner is directed to host the direction of this Court for public auction of the Vessel M.T.Chemical Arrow in the official websites of the Chennai Port Trust and Kakinada Port Trust.
8. The Master of the Vessel is directed to place his request for essential ship stores for maintenance of the ship crew, including diesel oil, with the Advocate Commissioner and the Advocate Commissioner shall place appropriate order with the Ship Chandler M/s.Seatraffic, if they are willing to supply, and the said claim will be taken on priority basis at the appropriate time."
13. Pursuant to the said order, the Advocate Commissioner has filed a report stating that all the 21 persons, who have evinced interest in the purchase of the Vessel, were intimated by her and that the order of the Court has been hosted in the websites of the Kakinada Port Trust and the Chennai Port Trust. The said notice reads as under:
"SHIP FOR SALE It is hereby informed that "Vessel M.T.CHEMICAL ARROW" Call sign: V7JW3, IMO:9017678, MMSI: 538002578, Ship type: Oil/Chemical tanker registered at Marshall Islands, Marshall Island (MH) Flag, built in 1992 Length x Breadth: 108 M x 18.2 M, Gross tonnage 4526, Dead weight" 7877 MT, Speed recorded (Max/Average): 13 knots, now lying at "Kakinada Port", Andhra Pradesh, India. Owner of ship: M/s. Gila Maritime S.A., Majuro Marshall Island and Omafina Enterprises, Kapsali, No.6, Kolonki 10674, Atens, Greece is being sold in "As is where is condition" free of all LIENS/ENCUMBRANCES AND LIABILITIES pursuant to orders of the Honourable High Court, Madras, India dated 09.05.2013 in Application No.2170/2013 in C.S.No.222/2013 by public auction in the Hon'ble High Court of Madras on 19.07.2013 at 3.00 p.m. It is also informed that following directions have been given by the Hon'ble High Court of Madras dated 10.07.2013, in the above application as follows:-
(i)that the auction will be held in the Court on 19.7.2013 at 3.00 P.M.;
(ii)that the upset price will be indicated at the time of auction;
(iii)that any higher offer by the intending bidder shall be in the multiples of Rs.5 Lakhs;
(iv)that whoever intends to participate in the auction, as a condition precedent, should deposit a sum of Rs.20,00,000/- (Rupees Twenty Lakhs only) towards earnest money deposit by way of demand draft drawn in favour of "Ms.S.Buvaneswari, Advocate Commissioner" on or before 1.30 P.M. on 19.7.2013.
11.07.2013 S.Buvaneswari Chennai Advocate Commissioner"
14. Thereafter, on 19.7.2013, the sale of the Vessel was taken up in the Court. On that date, Ms.Shubharanjini Ananth, learned counsel representing M/s.Nadella Corporation, Chalrlestown, Nevis, withdrew her offer and that was recorded and the earnest money deposit made by the said party was directed to be handed over to the party. Amongst the 21 persons who were intimated, none turned up. Besides, there was no other person available pursuant to the hosting of the sale notice in the websites. The Court avoided further newspaper publication taking note of the fact that the cost of the paper publication already effect at Rs.6,99,440/- was on credit basis and there is no provision for expending further amount for the purpose of sale, which would entail further cost, and there was nobody to foot the bill. Taking note of all these factors, the Court passed the following order:
"2. This Court, by order dated 10.7.2013, fixed open auction of the Vessel today (19.7.2013) at 3 P.M. and directed the Advocate Commissioner to host the direction of this Court regarding public auction of the Vessel in the official websites of the Chennai Port Trust and the Kakinada Port Trust and to intimate all persons who have evinced interest in the purchase of the Vessel.
3. When the matter was listed today, the Advocate Commissioner reported to this Court that all steps as directed by this Court have been taken.
4. The matter was listed today to find out whether are any other persons interested in the purchase of the Vessel, apart from the two bidders, who submitted their bids. However, no new buyer is present before the Court, except the earlier bidders.
5. M/s.Nadella Corporation, Charlestown, Nevis, which is represented by Mr.Benny Williams, appeared before the Court and stated that they are withdrawing the offer and this is confirmed by their counsel, Ms.Subharanjini Ananth, who states that the offer already made is withdrawn by letter. The said statement and letter are recorded.
6. There is therefore only one offer before this Court and that is by M/s.Maritime Ventures Fund Ltd., Cayman Islands. The offer is for a sum of Rs.3,87,00,000/- (Rupees Three Crores and Eighty Seven Lakhs only).
7. The Court after considering the revised valuation report of M/s.Admiralty Marine Services both for demolition as well as trading of the Vessel at 9,50,000 USD and 12,00,000 USD respectively is of the view that, despite such valuation by M/s.Admiralty Marine Services, the best offer given by M/s.Maritime Ventures Fund Ltd., Cayman Islands is justified for the following reasons:
(i)the Vessel if allowed to be sold at a later date will not fetch better price than what is available before the Court this day and it will not serve the interest of anyone of the parties before this Court;
(ii)the Vessel has been abandoned and it is subject to vagaries of nature and if further time is lost by taking steps for sale of the Vessel once again, it will entail further cost, while the deterioration in the price of the Vessel would mount;
(iii)the cost of the ship stores has already mounted to approximately a sum of Rs.35.85 Lakhs and this will increase further;
(iv)there are no better offers in spite of diligent efforts by the Court;
(v)the Vessel it appears is sought for demolition only; and
(vi)the parts like engines, etc. have been removed for repair long back and are not fitted back. The Vessel therefore is immobile. It has become disfunctional by efflux of time.
8. Considering all these aspects of the case, the Court is inclined to accept the offer made by M/s.Maritime Ventures Fund Ltd., Cayman Islands for a sum of Rs.3,87,00,000/- (Rupees Three Crores and Eighty Seven Lakhs). Accordingly, M/s.Maritime Ventures Fund Ltd., Cayman Islands is declared as the highest bidder and the earnest money deposit made by highest bidder shall be deposited by Advocate Commissioner in a separate account in the Indian Bank, High Court Branch, Madras 600 104 to the credit of C.S.No.222 of 2013.
9. The earnest money deposit tendered by M/s.Nadella Corporation, Charlestown, Nevis has been returned to Ms.Subaranjini Ananth, learned counsel representing the said party, on proper acknowledgment by the Advocate Commissioner.
10. It was mentioned by the highest bidder that some parts of the engine and other parts taken for repair are to be put back on the Vessel. M/s.Sembmarine Kakinada Limited, Kakinada, who is the applicant in Application No.2199 of 2013 and the repairer, has undertaken to put back the engine parts and other parts immediately. The said statement made by Mr.A.K.Mylsamy, learned counsel representing M/s.Sembmarine Kakina Limited, Kakinada is recorded and the repairer is directed to put back the engine parts and other parts on board the Vessel immediately.
11. The highest bidder shall pay the balance amount as per the terms and conditions of the sale without default. Post on 25.7.2013 for reporting compliance of payment of the first part of the condition of sale. The amount shall be deposited directly in the name of the Advocate Commissioner, in the account directed to be opened in the Indian Bank, High Court Branch, Madras 600 104 to the credit of C.S.No.222 of 2013.
12. The Advocate Commissioner has filed two memos one dated 28.6.2013 and another dated 19.7.2013 seeking additional remuneration. In her memo dated 19.7.2013, the Advocate Commissioner requests to grant additional remuneration of Rs.85,000/-. It is stated that the initial remuneration fixed at Rs.25,000/- as per the direction dated 9.5.2013 has also not yet been paid to the Advocate Commissioner. The same will be considered on the next hearing date.
Post the matter on 25.7.2013."
15. Thereafter, on 22.7.2013, the present three applications have been filed by M/s.Kasturi Commodities Private Limited, Shop No.1, Prithvi Vallabh, Plot No.2299, Hill Drive, Bhavnagar 364 002, rep. by its Director, for the reliefs stated supra. These applications are moved by Ms.Shubharanjini Ananth, who had earlier appeared for one of the parties, namely M/s.Nadella Corporation, Chalrlestown, Nevis, who subsequently withdrew the offer. Notice was ordered to the respondents and the Advocate Commissioner has filed a counter affidavit to these applications along with typed set of papers refuting the plea made in these applications.
16. Insofar as the application for intervention is concerned, the learned counsel for the applicant contended that one Sunil Kumar, having email ID: [email protected] and mobile No.09566003702 spoke to the Advocate Commissioner on 15.7.2013 and sent an email on 15.7.2013 to the Advocate Commissioner and wanted the details of the sale. It is her plea that the Advocate Commissioner did not furnish the details in time, however after the sale has been ordered, he came to know of the inaction on the part of the Advocate Commissioner in non furnishing the details of the sale, which precluded him from participating in the sale. The said Sunil Kumar contacted the Advocate Commissioner on 19.7.2013 and it was confirmed that sale got completed. Therefore, it is alleged that the applicant was prejudiced and unable to participate in the sale. It is pleaded that as an intending purchaser, the applicant is an interested person in terms of Order 42 Rule 11 of the Original Side Rules. On this premise, the application for intervention is filed.
17. In the affidavit filed in support of this application, it is stated by the applicant that he is offering a sum of Rs.4,10,00,000/- for purchase of the Vessel and to show his bona fides, the applicant has produced demand drafts for a sum of Rs.20,00,000/- (towards EMD) and Rs.1,03,00,000/- (being 25% of the bid). According to the applicant, the price offered at Rs.4,10,00,000/- is Rs.23,00,000/- over and above the sale price offered by the highest bidder, namely Maritime Ventures Fund Ltd., Cayman Islands. It will, therefore, establish a case of inadequate sale and the higher offer now made by the applicant will enure to the benefit of all parties concerned. The learned counsel further submitted that if the applicant is allowed to participate in open auction, he is likely to improve the offer. Similarly, the highest bidder declared by this Court, in whose favour the sale has been ordered, could also improve his offer and that will go to the benefit of the suit claim. To counter the plea that the litigation will get protracted and defeat the object of sale, it is stated that the applicant is willing to pay the full amount in seven working days. If the entire sale amount, as undertaken is deposited in seven days, the question of incurring additional expenses for the maintenance of the Vessel and crew also will not arise.
18. Though fraud is not alleged, it is the plea of the learned counsel for the applicant that wide publicity has not been ordered for the second time, except publication on the websites of Kakinada Port Trust and the Chennai Port Trust. In support of the plea that no wide publicity was made, she relied upon a decision in Navalkha and Sons v. Ramanuja Das and Others, AIR 1970 SC 2037. Insofar as plea regarding inadequacy in the sale price is concerned, the learned counsel for the applicant relied on a decision of a Division Bench of this Court comprising Shivaraj Patil,J. And M.Karpagavinayagam,J. in Bancorex S.A. v. Ocean Marine Services Co. Ltd. and others, AIR 1998 Mad 225, wherein it was held as under:
"31. The principles which govern the confirmation of sale are well established. It is settled law that at the time of confirmation of the sale of the vessel, adequacy of price is a vital and essential aspect to be considered by the Court. Admittedly, there is no finding in the impugned order with reference to the adequacy of price, having regard to the claims made against the vessel, more particularly as stated earlier, when the value of the vessel as per the Valuation Report is very much higher than the sale price. While considering the adequacy of price, the Court has to necessarily consider various circumstances, as referred to above, including the market value of the vessel.
32. In this context, the observation of the Apex Court made in the decision in Navalkha and Sons v. Ramanya Das MANU/SC/0614/1969 : AIR 1970 SC 2037 is quite relevant which is as follows (at page. 2039):
'In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion.'
33. When the similar question has been raised before this Court earlier on various occasions, this Court would hold as reported in MANU/TN/0314/1920 : AIR 1921 Mad 286 (Gordhan Das Chuni Lal v. Kathimathinatha Pillai), MANU/TN/0419/1924 : AIR 1925 Mad 318 (Rathnasami Pillai v. Sabapathi Pillai), MANU/TN/0367/1939 : AIR 1940 Mad 42 (Soundararajan v. Mohamed Ismail) and MANU/TN/0321/1951 : AIR 1951 Mad 986 (A. Subbaraya Mudaliar v. K. Sundararajan), that it is the duty of the Court to satisfy itself that the price fixed is the best that could be expected to be offered and that the condition of confirmation by the Court being a safeguard against the property being sold at an inadequate price, it will be not only proper but necessary that the Court in exercising the discretion should see that the price fetched at the auction is an adequate price.
34. So, if the principles enunciated in the decisions referred to above are applied to this case, there is no difficulty for us to come to the conclusion that the aspect of adequacy of sale price has not been given due consideration by the learned single Judge, more so when the price offered by the third respondent was less than the minimum price fixed by the Court. As already discussed above, if others also had known that they could offer price for purchase of the vessel less than the minimum price fixed by the Court, perhaps there would have been more offers. We have reason to think so, as during the pendency of hearing before the learned single Judge, and as well as before us, some persons, have come forward offering more price, and assuring that in case sale is confirmed they will pay or deposit money as ordered by the Court. Under the circumstances, and having regard to the position of law stated in the decisions referred in paragraphs 32 and 33 of this judgment, we are unable to sustain the order of the learned single Judge confirming the sale in favour of the third respondent."
19. In support of the plea of inadequate price as a parameter for ordering resale, she relied on a decision of the Supreme Court in Navalkha and Sons v. Ramanuja Das and Others, AIR 1970 SC 2037, wherein it was held as under:
"5. Rule 273 of Companies (Court) Rules, 1959 is to the following effect:
'Procedure at sale. Every sale shall be held by the Official Liquidator, or, if the Judge shall so direct, by an agent or an auctioneer approved by the Court, and subject to such terms and conditions, if any, as may be approved by the Court. All sales shall be made by public auction or by inviting sealed tenders or in such manner as the Judge may direct.'
6. The principles which should govern confirmation of sales are well-established. Where the acceptance of the offer by the Commissioners is subject to confirmation of the Court the offerer does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion. In Gordhan Das Chuni Lal v. S. Sriman Kanthimathinatha Pillai, AIR 1971 Mad. 286 it was observed that where the property is authorised to be sold by private contract or otherwise it is the duty of the Court to satisfy itself that the price fixed is the best that could be expected to be offered. That is because the Court is the custodian of the interests of the Company and its creditors and the sanction of the Court required under the Companies Act has to be exercised with judicial discretion regard being had to the interests of the Company and its creditors as well. This principle was followed in Rathnaswami Pillai v. Sadapathi Pillai, AIR 1925 Mad. 318 and S. Soundarajan v. Roshan & Co, AIR 1940 Mad. 42. In A. Subbaraya Mudaliar v. K. Sundarajan, AIR 1951 Mad 986 it was pointed out that the condition of confirmation by the Court being a safeguard against the property being said at an inadequate price, it will be not only proper but necessary that the Court in exercising the discretion which it undoubtedly has of accepting or refusing the highest bid at the auction held in pursuance of its orders, should see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularity or fraud. It is well to bear in mind the other principle which is equally well-settled namely that once the Court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already received. (See the decision of the Madras High Court in Roshan & Co.'s case, AIR 1940 Mad 42)."
20. The learned counsel for the applicant relied upon a decision of the Supreme Court in Allahabad Bank and others v. Bengal Paper Mills Co. Ltd. and others, (1999) 4 SCC 383, which case relates to sale of immovable property of a company, wherein reliance has been placed on the earlier decision of the Supreme Court in Navalkha and Sons, referred supra. On the plea that the Court has to take into consideration the interest of the small trade creditors so as to protect their rights, she placed reliance on paragraph (23) of the decision, which reads as under:
"23. It is also well to remember that, for the most part, the creditors of a company in liquidation are small trade creditors whose dues are not so large as would make it economical for them to resort to proceedings in court. It is these small creditors that the High Court is expected to protect when confirming a sale by the Liquidator."
21. The learned counsel for the applicant stated that when there are no set of rules prescribed in the High Court for sale of the Vessel, it should fall in line with the decision of the Supreme Court in Kerala Financial Corporation v. Vincent Paul and another, 2011 (6) CTC 554, wherein on the conduct of sale, it was held as under:
"12. We have already concluded that the decree for specific performance granted by the High Court cannot be sustained. We also observed in the earlier part of our judgment that though KFC has initiated proceedings under Section 29 of the Act, admittedly, the State has not framed rules or guidelines in the form of executive instructions for sale of properties owned by them. Till such formation of rules or guidelines or orders as mentioned above, we direct KFC to adhere to the following directions for sale of properties owned by it:
(i)The decision/intention to bring the property for sale shall be published by way of advertisement in two leading newspapers, one in vernacular language having sufficient circulation in that locality.
(ii)Before conducting sale of immovable property, the authority concerned shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:
(a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying such assets; or
(b) by inviting tenders from the public; or
(c) by holding public auction; or
(d) by private treaty.
Among the above modes, inviting tenders from the public or holding public auction is the best method for disposal of the properties belonging to the State.
(iii)The authority concerned shall serve to the borrower a notice of 30 days for sale of immovable secured assets.
(iv)A highest bidder in public auction cannot have a right to get the property or any privilege, unless the authority confirms the auction-sale, being fully satisfied that the property has fetched the appropriate price and there has been no collusion between the bidders.
(v)In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. It becomes a legal obligation on the part of the authority that property be sold in such a manner that it may fetch the best price.
(vi)The essential ingredients of sale are correct valuation report and fixing the reserve price. In case proper valuation has not been made and the reserve price is fixed taking into consideration the inaccurate valuation report, the intending buyers may not come forward treating the property as not worth purchase by them.
(vii)Reserve price means the price with which the public auction starts and the auction-bidders are not permitted to give bids below the said price i.e. the minimum bid at auction.
(viii)The debtor should be given a reasonable opportunity in regard to the valuation of the property sought to be sold, in absence thereof the sale would suffer from material irregularity where the debtor suffers substantial injury by the sale."
22.1. Mr.Giridhar, learned counsel for one of the intervenors contended that the application seeking to intervene is not maintainable in view of the clear mandate of Order 42 Rule 11 of the Original Side Rules. The applicant had not participated in the auction and, therefore, he does not fall within the parameters of Order 42 Rule 11 of the Original Side Rules, which states that any person seeking intervention should show that he is interested in the property under arrest or in the fund in the Registry. Order 42 Rule 11 of the Original Side Rules reads as under:
"Order XLII Rule 11: Appearance by intervenor: In a suit in rem, any person not named in the writ may intervene and appear on filing an affidavit showing that he is interested in the property under arrest or in the fund in the Registry."
22.2. He further contended that the sale of the Vessel is covered under the provisions of Order 42 Rules 13 and 34 of the Original Side Rules, which read as follows:
"Order XLII Rule 13. Order for sale of the property: If when the suit comes before the Court, the judge is satisfied that the plaintiffs claim is well founded, he may pronounce for the claim and may order the property to be sold with or without previous notice and the proceeds paid into the Registry or make such order in the premises as he shall think just."
Order XLII Rule 34. Sale by Sheriff to be in like manner as sale of movable property: Every sale under decree of the Court, shall, unless the Judge shall otherwise order, be made by the Registrar in like manner as a sale of movable property in execution of a decree in an ordinary civil suit."
and the provisions of the Code of Civil Procedure are made applicable insofar as the sale is concerned under Order 42 Rule 50 of the Original Side Rules, which reads as under:
"Order XLII Rule 50. Rules and practice relating to Civil Suits to apply: Where no other provision is made by these rules, proceedings in suits brought in the Court in the exercise of its Admiralty Jurisdiction shall be regulated by the Rules and practice of the Court in suits brought in it in the exercise of its Ordinary Original Civil Jurisdiction."
22.3. Insofar as Code of Civil Procedure is concerned, it was pointed out that Order 21 Rule 77 of the CPC relates to sale of movable property by public auction and the same reads as follows:
"Order XXI Rule 77. Sale by public auction (1) Where movable property is sold by public auction the price of each lot shall be paid at the time of sale or as soon after as the officer or other person holding the sale directs, and in default of payment the property shall forthwith be re-sold.
(2) On payment of the purchase-money, the officer or other person holding the sale shall grant a receipt for the same, and the sale shall become absolute.
(3) Where the movable property to be sold is a share in goods belonging to the judgment-debtor and a co-owner, and two or more persons, of whom one is such co-owner, respectively bid the same sum for such property or for any lot, the bidding shall be deemed to be the bidding of the co-owner.
22.4. Placing reliance on the said provisions, he contended that the Court was justified in confirming the sale to the highest bidder when one of the two bidders withdrew their offer and there was no other bidder. The reasons given in the order dated 19.7.2013 made in A.No.2170 of 2013 are self-explanatory to justify the sale at that point of time and the higher offer now made by the present applicant post the sale is of no consequence and cannot be the basis for recall of the order and for resale. The applicant by no stretch of imagination can call himself an intervenor, there being no interest on the property or funds in the Registry as on the date of sale of the movable property.
23. A similar plea was made by Mr.Yashod Vardhan, learned Senior Counsel appearing for the highest bidder M/s.Maritime Ventures Fund Ltd., Cayman Islands, who however has not been impleaded as a party respondent by the present applicant. He relies on the decision of the Supreme Court in Valji Khimji and Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and others, (2008) 9 SCC 299, wherein it was held as under:
"28. If it is held that every confirmed sale can be set aside the result would be that no auction-sale will ever be complete because always somebody can come after the auction or its confirmation offering a higher amount. It could have been a different matter if the auction had been held without adequate publicity in well-known newspapers having wide circulation, but where the auction-sale was done after wide publicity, then setting aside the sale after its confirmation will create huge problems. When an auction-sale is advertised in well-known newspapers having wide circulation, all eligible persons can come and bid for the same, and they are themselves to be blamed if they do not come forward to bid at the time of the auction. They cannot ordinarily later on be allowed after the bidding (or confirmation) is over to offer a higher price. Of course, the situation may be different if an auction-sale is finalised, say for Rs 1 crore, and subsequently somebody turns up offering Rs 10 crores. In this situation it is possible to infer that there was some fraud because if somebody subsequently offers Rs 10 crores, then an inference can be drawn that an attempt had been made to acquire that property/asset at a grossly inadequate price. This situation itself may indicate fraud or some collusion. However, if the price offered after the auction is over which is only a little over the auction price, that cannot by itself suggest that any fraud has been done."
He pointed out that the applicant has not shown any material to show glaring irregularity in the sale or fraud or that misrepresentation has been committed. Besides, the higher offer is also of not such magnitude that will shock the conscience of the Court to order resale.
24. Mr.S.Vasudevan, learned counsel appearing for the plaintiff in the suit pleaded that the Court in exercise of the power under Order 39 Rule 6 of the Code of Civil Procedure is entitled to order interim sale to secure the property which will otherwise deteriorate in value. The exercise of power under Order 42 Rule 50 of the Original Side Rules read with Order 39 Rule 6 of the Code of Civil Procedure justifies the present sale. For better clarity, Order XXXIX Rule 6 of the Code of Civil Procedure is extracted hereunder:
"Order XXXIX Rule 6 . Power to order interim sale The Court may, on the application of any party to a suit, order the sale, by any person named in such order, and in such manner and on such terms as it thinks fit, of any movable property being the subject-matter of such suit or attached before judgment in such suit, which is subject to speedy and natural decay, or which for any other just and sufficient cause it may be desirable to have sold at once.
25. The learned Advocate Commissioner pointed out that she has taken all effective steps to inform all the parties who had evinced interest at the first instance after wide paper publication and as directed by this Court, steps have been taken to publish the sale notice in the websites. The said Sunil Kumar has not chosen to follow up the email, when it is alleged by him that he did not receive the response. She also explained to this Court that a reply was sent to the email of Sunil Kumar immediately thereafter and that email did not get delivered to Sunil Kumar. It was beyond her control. This stand of the learned Advocate Commissioner is not disputed by Ms.Shubharanjini Ananth, learned counsel for the applicant, who stated that the email sent through email Id under Gmail to Sunil Kumar by her also did not get delivered and there was some technical problem therein. This only fortifies the view that Advocate Commissioner has not committed any error.
26. Under such circumstances, the point to be considered is whether the offer made by the applicant to enhance the bid amount by Rs.23 Lakhs at this juncture could be accepted and a resale could be ordered.
27. At the outset, Mr.Yashod Vardhan, learned Senior Counsel appearing for the highest bidder rejected the plea for re-auction of the Vessel stating that they have deposited Rs.20 Lakhs towards EMD and also deposited first part of the sale amount of Rs.1,00,00,000/- as per the conditions of sale. The Advocate Commissioner confirms the encashment of Rs.20 Lakhs towards EMD and deposit of Rs.1,00,00,000/- towards first part of the sale amount. He, therefore, pleaded that there is no question of going back on the sale and the applicant cannot be allowed to bid at this point out time, as there will be no end to the sale if such a procedure is adopted at the behest of one or the other party and to expatiate the said plea, he relied on the decision in Valji Khimji and Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and others, (2008) 9 SCC 299, referred supra.
28. The whole case of the applicant revolves around the so-called email of Sunil Kumar to the Advocate Commissioner; the non receipt of the particulars and the consequential prejudice caused. The present application is filed by M/s.Kasturi Commodities Private Limited, Shop No.1, Prithvi Vallabh, Plot No.2299, Hill Drive, Bhavnagar 364 002, rep. by its Director Amit Agarwal. An objection was raised by the plaintiff and other respondents that among the 21 persons who evinced interest earlier, one KPCL International Limited, represented by Rahul Kothak, has a common website and mobile number as that of the present applicant and, therefore, they were in the know of things. It is, therefore, improper on the part of the applicant to plead that he did not know about the same. This objection of the respondents appears to be justified. However, one other factor on which the Court is inclined to consider against the applicant is that there is nothing in the affidavit filed by Amit Agarwal, Director of Kasturi Commodities Private Limited, to show that there is any connection between him and the said Sunil Kumar and how he is authorised by the applicant to represent his company. What is the nature of employment of Sunil Kumar with the applicant is also not established by documents or otherwise. From records there is nothing to show that there is any causal connection between Sunil Kumar and the present applicant. Therefore, on the basis of the so-called email request by Sunil Kumar, the present application by Amit Agarwal is totally unjustified. The present applicant is a rank outsider and attempts to enter the fray as an afterthought. The present applicant cannot take refuge on an email sent by so-called Sunil Kumar by merely stating that he is his authorised Agent, when admittedly no document showing their business connection has been filed. Therefore, the present applicant apparently, as an afterthought, has come before this Court taking shelter under the so-called email sent by Sunil Kumar. For the aforesaid reasons, the Court is not inclined to accept the present application, as it lacks bona fides and has to be rejected at the threshold.
29. In any event, the intervention application filed by the present applicant is not maintainable as Order 42 Rule 11 of the Original Side Rules states that any person seeking intervention should show that he is interested in the property under arrest or in the fund in the Registry. As an intending purchaser, the applicant cannot have any claim in respect of the Vessel or in the funds of the Registry. The applicant is a rank outsider insofar as the suit is concerned. No right has enured to the benefit of the applicant in any of the proceedings. He remains outside the entire suit proceedings. Merely on the basis of email enquiry, he cannot claim right to intervene in the suit. Therefore, the said application deserves to be rejected.
30. The question of stay or bringing the Vessel for re-auction cannot be justified, as the sale in this case is in relation to a Vessel on which engines and spare parts were removed and it has been abandoned by the owners of the Vessel. In other words, it is as dead as a dodo and everyday's delay would cause further damage and consequent loss in value. The Court in a case of this nature is only interested in getting the best possible price in the given circumstances and that is what is provided under Order 39 Rule 6 of the Code of Civil Procedure. No doubt, while considering the valuation of the Admiralty Marine Services and the offers made by the two persons, the Court found that there was a gap, nevertheless thought it fit to ask the Valuer to re-value the ship and they have reiterated the value, except for a partial reduction of the value for demolition on account of dollar fluctuation. The Court was, therefore, constrained to go for public auction by intimating all the persons who evinced interest at the first stage when publication was made through "The Times of India", All India Edition, coupled with hosting of the sale of the Vessel on the website of Kakinada Port Trust, and once again hosting the sale notice in the websites of Kakinada Port Trust and Chennai Port Trust. It is not as if the persons in this trade are total strangers to Court proceedings. The purchasers of the Vessel were put on notice by paper publication as well as by hosting the sale notice on Port Trust websites and they have been responding in appropriate cases where it is convenient for them to purchase the Vessel offered for sale. This procedure is going on for many years in the past. There appears to be no reason to depart from the established procedure.
31. The further plea taken by the applicant's counsel is that there is inadequacy of price and, therefore, the order of sale should be withdrawn and fresh sale should be ordered based on the decision of Bancorex S.A. v. Ocean Marine Services Co. Ltd. and others, AIR 1998 Mad 225. In that case, the price difference was enormous. No doubt, there was a single buyer. In that case, one of the parties to the litigation before the learned Single Judge went on appeal on a plea that the price is inadequate. It is not by an outsider as in the present case. In any event, since the price difference was very huge, the Division Bench on the plea of inadequacy of price remitted the matter to the Single Judge for fresh auction. It is to be pointed out that the Vessel in that case was subsequently sold by the Single Judge at a price of USD 4,70,000/- as against USD 7,90,000/- sold earlier and which was challenged in appeal as inadequate price. For better clarity the relevant portions of the Division Bench decision and the order of the Single Judge in the sale on remand are extracted hereunder:
Division Bench order in Bancorex S.A. v. Ocean Marine Services Co. Ltd. and others, AIR 1998 Mad 225:
"10. After hearing all the parties concerned, the order was reserved on 17-10-1997 by the learned single Judge in Application No. 1217 of 1997. However, by the order dated 24-1-1998, the learned single Judge confirmed the sale in favour of the third respondent herein who had bid US $ 7,90,000/-. This order is challenged in this appeal."
Order dated 1.9.1998 in A.No.1217 of 1997 in C.S.No.97 of 1997:
"6. It is brought to my notice that during earlier occasion, the highest bid was for US Dollar 7,90,000/-. But the bidder had refused to pay the excise duty and sales tax on this amount then. That had to be borne out of the sale proceeds. It is also submitted that at the relevant time one US Dollar was equivalent to Rs.35.60 on the exchange rate. Thus, it would appear that US$ 7,90,000/- work out approximately to Rs.3,20,00,000. The excise duty payable at 30% works out to Rs.93 Lakhs and the sales tax at 4% works out to Rs.12 Lakhs. A sum of Rs.1,05,000/- had to come out of the sale consideration for payment of tax and duty. The balance available would have been Rs.2,15,00,000. Now, the bidder is willing to pay the excise duty and sales tax. He is prepared to pay Rs.2 Crores for the ship, free of such burdens. The excise duty would works out to Rs.62 lakhs at the prevailing rate of 31% and sales tax at Rs.8,000/- i.e. total sum of Rs.70 Lakhs which the bidder is willing to bear. At present, the sale falls short of Rs.15 Lakhs only i.e. at the price of 7,90,000 US Dollars, deducting exchange duty and sales tax, the sale consideration that would remain would be Rs.2,15,00,000. Now, straightaway the bidder will pay Rs.2,00,00,000/-. Considering the earlier value of the ship and the present valuation, this price appears to be acceptable.
7. I am constrained to accept the bid by M/s.Jansee Steel Industries Pvt. Ltd. for 4,70,000 US Dollars. The bidder M/s.Jansee Steel Industries Pvt. Ltd., 8, Second Street, Perambur High Road, Chennai 600 012 is directed to pay the balance of consideration within three weeks from today, failing which the earnest money deposited by them shall stand forfeited. The Commissioner will deposit the entire amount to the credit of the suit."
It is a case where the appeal succeeded, but the result failed to serve the purpose. All that the Court has to see is whether under the given circumstances it is worthwhile to go for fresh sale or the sale could be confirmed at the best possible price (i.e.) to say is the price justified. In the present case, the reasons for going ahead to confirm the sale have already been extracted above in the order dated 19.7.2013. Nothing more needs to be added, as there is no need to explain any further. All that this Court will have to state is the sale price is what the willing purchaser offers to buy the goods offered for sale at arms length. It has to be noted that we are dealing with movable goods and perishable too.
32. In the case of Navalkha and Sons v. Ramanuja Das and Others, AIR 1970 SC 2037, the sale is of immovable property by the Official Liquidator, which sale is subject to confirmation by the Court and in that case the Supreme Court was of the view that the condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. It only emphasises the fact that the Court should satisfy, having regard to the market value of the property, that the price offered is reasonable. In the same decision, it has been clearly said that after conclusion of the sale, no subsequent higher offer can constitute a valid reason for refusing confirmation of sale or offer already made.
33. Likewise, the case of Allahabad Bank and others v. Bengal Paper Mills Co. Ltd. and others, (1999) 4 SCC 383 also relates to sale of immovable property. On the plea that the Court has to take the interest of small trade creditors so as to protect their rights, in the case on hand, this Court has taken into consideration the overall situation and postponed the auction at the first instance to ensure that one another opportunity is to be given to allow the persons to participate in the open auction bid and that has not come to fruition. Given the fact that the Vessel is not in a fit condition, as the engine and other parts have been removed, there is no need for the Court to wait any longer and confirm the sale. In fact, none of the respondent creditors are seriously objecting to the sale made by this Court, as they state that everyday's delay will cause further loss in value. It is more so at this moment of time when the Rupee is falling drastically against the Dollar.
34. All these parameters go to show that the Court has to ensure that at the time when the sale is made the price offered for the Vessel is adequate considering all parameters relevant to sale. The price of the goods sold cannot be equated to the suit claim, however best price will be relevant for ordering sale. The valuation of the property sought to be sold will have to be considered on the basis of the market price that it would fetch in public sale (i.e.) sale at arms length where the buyer and seller have no interest in each other and that the price is the sole consideration for sale. In the present case, there was wide publicity in the Times of India, All India Edition and in the official websites of the Port Trusts. Subsequent opportunity was given to all parties who evinced interest and the sale proclamation which has been extracted above clearly gives the details of the Vessel and the date of auction in the Court and the terms which are required to be complied with. Nothing prevented the present applicant to come forward to participate in the sale on that date and the intimation of sale was given at the first instance bringing to the knowledge of the applicant at his website and email ID. The Court after considering the two offers, withdrawal of one of the offers, and the condition of the Vessel, for the reasons stated therein, ordered the sale of the Vessel to secure the price and to avoid further loss of value. There was no manner of doubt that the price was inadequate, because the price at which it was sold in open market in public auction was the best available price in the market at that point of time. The Court is constrained to hold that a new offer cannot be a ground to recall the sale and order fresh auction, as was held in Valji Khimji and Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and others, (2008) 9 SCC 299.
35. Furthermore, the sale cannot be set aside on account of a higher bid amount being offered by persons who did not participate in auction sale, as held by a Division Bench of this Court in Mettur Textiles Mill Quarters Residents' Welfare Society v. The Official Liquidator, High Court, 2012 (6) CTC 147. It is relevant to refer to paragraph (9) of the said decision, which reads as under:
"9. It is true that the Company Court while approving the sales takes note of the interest of the creditors and the workers who are the persons having right to have the value of the property ascertained in a proper manner, but it does not mean that anybody who is not participating in the auction can suddenly come to the Court and raise the bid amount for the purpose of setting aside the sale. If this practice is allowed, the proceedings before the Company Court will never attain finality. In the absence of any illegality, we are of the view that there is nothing to be interfered with the order of the learned Single Judge. Simply because there has been a typo in the order of the learned Judge that will not vitiate, in our considered opinion, the steps taken by the Company Court for the purpose of confirmation of sale."
In this case, the non receipt of reply to Sunil Kumar email is the reason for seeking re-auction. That reason has been found to be untenable and unsustainable.
36. That apart, Section 64(2) of the Sale of Goods Act provides for confirmation of sale. There was no irregularity and the sale was by open auction and the sale has been ordered and the highest bidder has paid the earnest money deposit and complied with the condition of first part payment. Therefore, it is deemed to be a sale in terms of Section 64(2) of the Sale of Goods Act.
37. With regard to the applicability of the decision in Kerala Financial Corporation v. Vincent Paul and another, 2011 (6) CTC 554, I have gone through the Rules laid down in the said decision by the Supreme Court. I find no reason to hold that the auction conducted by this Court is in any way in violation of the prescription by the Supreme Court, as the sale in this case was by way of an all India paper publication inviting tenders from public and public auction was conducted on 19.7.2013. All methods possible were explored before the sale was confirmed.
38. One other plea which has to be considered is that the sale in case of movable properties stands on a different footing altogether when compared to sale of immovable properties. The sale of immovable properties falls under Order 21 Rule 66 of the CPC, whereas the sale of movables falls under Order 21 Rule 77 of the CPC. The conditions that are required to set aside the sale in respect of immovable properties cannot be imported to seek setting aside sale of movables. Order 21 Rule 66 of the CPC is not applicable in the case of sale of movables and therefore the plea of the applicant's counsel on this score has to be rejected.
39. The learned counsel for the respondents made a plea that even if there is irregularity in the sale, it will not vitiate the sale, as it is saved by Order 21 Rules 78 and 90 of the CPC. While accepting the plea in relation to Order 21 Rule 78 of the CPC, I am afraid that Order 21 Rule 90 of the CPC will not apply to the facts of the present case. In any event, even assuming without admitting that there is an allegation of minor irregularity in intimating prospective buyers, the sale cannot be faulted. Order 21 Rules 78 and 90 of the CPC read as under:
"Order XXI Rule 78 . Irregularity not to vitiate sale, but any person injured may sue No irregularity in publishing or conducting the sale of movable property shall vitiate the sale; but any person sustaining any injury by reason of such irregularity at the hand of any other person may institute a suit against him for compensation or (if such other person is the purchaser) for the recovery of the specific property and for compensation in default of such recovery.
Order XXI Rule 90. Application to set aside sale on ground of irregularity or fraud (1) Where any immovable property has been sold in execution of a decree, the decree-holder, or the purchaser, or any other person entitled to share in a rateable distribution of assets, whose interests are affected by the sale, may apply to the Court to set aside the sale on the ground of a material irregularity or fraud in publishing or conducting it.
(2) No sale shall be set aside on the ground of irregularity or fraud in publishing or conducting it unless, upon the facts proved, the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud.
(3) No application to set aside a sale under this rule shall be entertained upon any ground which the applicant could have taken on or before the date on which the proclamation of sale was drawn up.
Explanation.There mere absence of, or defect in, attachment of the property sold shall not, by itself, be a ground for setting aside a sale under this rule.
The present case falls squarely under Order XXI Rule 78 of the CPC and applicant can have no remedy as prayed for by him.
40. Furthermore, it has to be emphasised that a third party to an auction sale held by the Court cannot attack the sale on the ground that he did not have proper opportunity to participate in the said auction sale either on the ground that there was irregularity in publishing the sale proclamation or conducting the sale of the movable property.
41. In any event, in the present case, the offer of Rs.23 Lakhs over and above the price made by the highest bidder cannot be considered as a valid reason to recall the order of sale, because if such a plea is considered, the entire sale has to be conducted afresh and it cannot be undertaken only for these two persons. Once again publication has to be effected and the entire rigmarole has to be gone through as ordered by the Division Bench in Bancorex S.A.'s case, referred supra. It will also entail further cost by way of paper publication. It will lead to further litigation as the successful bidder has already opposed the recall of the order stating that he has already paid the first part payment as per the order of the Court. The time loss in litigation will not be of benefit to any of the party. I am only envisaging a situation as in the case of Bancorex S.A. v. Ocean Marine Services Co. Ltd. and others, AIR 1998 Mad 225, where as per the direction of the Division Bench the Vessel was ordered to be sold by the Single Judge and it was indeed sold at a lower price than the higher price which was objected to. In fact, the Division Bench found fault with the appellant, a party to the suit, for his conduct which lacked bona fides. It did not serve anybody's cause. A similar situation has to be avoided and I do not intend to show any indulgence to this applicant on any score. The offer made by the present applicant does not inspire this Court to even consider recalling the order of sale, taking cue from the Supreme Court decision in Valji Khimji and Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and others, (2008) 9 SCC 299,.
42. For the foregoing reasons, I am of the firm view that there is no ground made out for this Court to exercise its extraordinary jurisdiction under the Letters Patent or Section 151 of the CPC to do complete justice. The trivial offer by the applicant to trifle proper adjudication of the suit has to suffer its consequential fate of dismissal. The applicant has also not made out a case either under equity or good conscience for this Court to show indulgence.
In the result, all the applications are dismissed.
sasi