Gujarat High Court
Khandwala Finstock Pvt Ltd vs Ol Of Kanoria Dye-Chem Ltd (In ... on 15 July, 2025
Author: A.Y. Kogje
Bench: A.Y. Kogje
NEUTRAL CITATION
C/OJA/3/2023 ORDER DATED: 15/07/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/O.J.APPEAL NO. 3 of 2023
In R/OFFICIAL LIQUDATOR REPORT NO. 103 of 2021
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KHANDWALA FINSTOCK PVT LTD
Versus
OL OF KANORIA DYE-CHEM LTD (IN LIQUIDATION) & ORS.
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Appearance:
MR. MANISH BHATT, SENIOR COUNSEL WITH JAIMIN A GANDHI(8065)
for the Appellant(s) No. 1
MR AS ASTHAVADI(3698) for the Opponent(s) No. 2
MR K T KHATRI(11337) for the Opponent(s) No. 3
MR. MR BUKHARI(6919) for the Opponent(s) No. 7
MS MOHINI J BHAVSAR(3071) for the Opponent(s) No. 3
NOTICE SERVED for the Opponent(s) No. 10,9
NOTICE SERVED BY DS for the Opponent(s) No. 4,5,8
RAJVI PATEL(9620) for the Opponent(s) No. 6
SHIVANG A THACKER(7424) for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE A.Y. KOGJE
and
HONOURABLE MR.JUSTICE N.S.SANJAY GOWDA
Date : 15/07/2025
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE N.S.SANJAY GOWDA) [1] The prayers in this appeal are as follow:-
"11. (i) The Hon'ble court may admit and allow this appeal.
(ii) The Honorable Court may set aside the judgment dated 25/03/2022 passed in OLR No.103 of 2021.
(iii) The Honorable Court may confirm the auction conducted by the Official Liquidator, wherein the appellant was declared as the successful bidder.
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NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined
(iv) The Honorable Court may award appropriate compensation to the appellant.
(v) The Honorable Court may stay the operations of the judgment dated 25/03/2022 in OLR No.103 of 2021.
(vi) The Honorable Court may grant such other and further relief(s) as deemed just and proper by this Hon'ble Court in the interest of justice."
[2] The facts which are essential for deciding this appeal are as follows:-
[2.1] On 09.08.2002, an order of winding-up was passed in respect of M/s. Kanoria Dyechem Limited.
[2.2] On 25.02.2021, this Court directed the Official Liquidator to sell the assets of the company, including the land situated at Plot Nos.6101/1, 6101/A and 6101/2 at Ankleshwar GIDC (which is the subject matter of the dispute herein). On 02.03.2021, the said notice was published in the newspapers. The said sale notice indicated that the properties of the company under liquidation were to be sold by way of e-auction on 05.04.2021 at 3.30 p.m. and upset price of Rs.6,02,00,000/- was fixed under the said notice. An Earnest Money Deposit of Rs.60,20,000/- was required to be submitted by the Page 2 of 17 Uploaded by DHARMENDRA KUMAR(HC01071) on Tue Aug 05 2025 Downloaded on : Fri Aug 08 22:28:48 IST 2025 NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined intending bidders. Inspection of the property was permitted to be done on 18.03.2021. The said notice ultimately stated that the last date of availability of the tender form would be 30.03.2021 upto 1:00 p.m. and the last date for submission of the online offers along with EMD would be 30.03.2021 at 4:00 p.m. [2.3] M/s. Survival Technologies Private Limited, however, deposited the EMD amount of Rs.60,20,000/- at 7:00 p.m., i.e., after the deadline on 30.03.2021. The Official Liquidator consequently refused to accept the EMD and as a consequence, M/s. Survival Technologies Private Limited made an application for a direction to the Official Liquidator to permit it to participate in the e-auction. This Court accepted the said application and permitted M/s. Survival Technologies Private Limited to participate in the e-auction and ordered a revised schedule / programme for sale of assets. This Court directed the conduct of e-auction on 08.04.2021. The e- auction was to be carried out by M/s. Railtel Corporation of India Limited. On 08.04.2021, the e-auction was conducted, in which M/s. Khandwala Finestock Limited, i.e., the appellant herein, offered the highest bid of Rs.6,95,00,000/-.
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[2.4] At 8.32 p.m. on the same day, i.e., on 08.04.2021, M/s. Survival Technologies Private Limited addressed an e-mail to the Official Liquidator alleging that a technical snag prevented them from placing a higher bid. It was stated that the online bidding site had been interrupted 10 minutes before the close of the bid and as a result, they could not punch the bid in time. He therefore requested another opportunity to participate in the auction. The Official Liquidator forwarded the e-mail to M/s. Railtel Corporation of India Limited and sought for the response. The M/s. Railtel Corporation of India Limited responded to the said e-mail stating that no technical issues had occurred and there was nothing wrong in the conduct of the e-auction. It is also stated that they had not received any complaint from other bidders in this regard.
[2.5] On 05.07.2021, the Official Liquidator placed on record the details of the e-auction proceedings conducted on 08.04.2021 and also placed on record the request of M/s. Survival Technologies Private Limited to raise or revise the offer, in which it placed on record the further details of both the e-auction proceedings. The Official Liquidator also stated in its report that he had requested M/s. Railtel Corporation of India Limited to extend the time to raise or revise the offer by intending purchasers so as to ensure the Page 4 of 17 Uploaded by DHARMENDRA KUMAR(HC01071) on Tue Aug 05 2025 Downloaded on : Fri Aug 08 22:28:48 IST 2025 NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined probability of fetching the maximum price. It was also stated that again M/s. Railtel Corporation of India Limited had extended the time twice, but no one raised or revised the bid over and above Rs.6,95,00,000/- submitted by the appellant herein. [2.6] The Official Liquidator also received requests from two other bidders for refund of the EMD. The Official Liquidator also received e-mails from three bidders, i.e., M/s. Prudence Lifecare Private Limited, M/s. Shree Ganesh Remedies Limited and M/s. Survival Technologies Private Limited, whereby they stated that they were prepared to raise / increase their bids. The Official Liquidator ultimately submitted a report requesting for permission to refund the EMD of the two companies and also for permission to carry out e- auction amongst the intending purchasers afresh. This Court permitted the Official Liquidator to refund the EMD to the two of the companies which had requested for refund and also to offer the refund of EMD to M/s Prudence Lifecare Pricate Limited, who had initially indicated their willingness to increase their bids. [2.7] M/s. Survival Technologies Private Limited thereafter filed Company Application No.35 of 2021 requesting the company court to hold an auction in the physical form and thereby permit them to Page 5 of 17 Uploaded by DHARMENDRA KUMAR(HC01071) on Tue Aug 05 2025 Downloaded on : Fri Aug 08 22:28:48 IST 2025 NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined make a higher bid. They also filed affidavits dated 16.12.2021 and 05.02.2022, whereby they stated that they intended to raise the offer by more than 10% to 15%.
[2.8] The appellant, who was the higher bidder, also preferred an application being Civil Application No.1 of 2021 with a prayer to join as a necessary party in the OJCA No.1 of 2021 in Official Liquidator Report No.103 of 2021 and since the appellant was the highest bidder, it was permitted to be made a party respondent in Official Liquidator Report No.103 of 2021 by the company Court. [2.9] The Company Application No.22 of 2021 was also filed by another bidder stating that it was prepared to raise its offer from Rs.6,97,00,000/-, i.e., Rs.2,00,000/- more than the offers by the appellant.
[2.10]Applications were also made by Kotak Mahindra Bank Limited as well as by the Gujarat Industrial Development Corporation for certain other reliefs which would not be relevant for the purpose of this appeal. The company court, after hearing the claims of the appellant, the Official Liquidator and M/s. Survival Technologies Private Limited came to the conclusion that the appellant herein had Page 6 of 17 Uploaded by DHARMENDRA KUMAR(HC01071) on Tue Aug 05 2025 Downloaded on : Fri Aug 08 22:28:48 IST 2025 NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined submitted the highest bid but on the same day, M/s. Survival Technologies Private Limited had raised objections and had contended that there was a technical snag during the auction proceedings which prevented from making of higher bid. The company court came to the conclusion that the auction proceedings conducted by M/s. Railtel Corporation of India Limited were not without any objections and though the Official Liquidator sought to justify its report and contending that there was no technical snag, there were no details available on record as to why the time was extended on two occasions by auction agency on 08.04.2021. It also came to the conclusion that in April, 2021, the second wave of Covid-19 was peaking and e-auction had been conducted during such time. The company court, therefore, came to the conclusion that since the dispute had been raised by one of the bidders who was permitted to participate in the auction, it could not be said that the auction had been conducted without any objection. The company court placed reliance on the decision of the Hon'ble Apex Court rendered in Shradhha Aeromatics Private Limited Versus Official Liquidator for Global Arya Industries Limited 5 (1968) 38 COMP CASE No.5 (Kerala) and came to be conclusion that it would be inappropriate to confirm the sale in favour of the appellant and directed the auction of the properties of the company to be conducted afresh by obtaining a fresh valuation report.
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[2.11]Being aggrieved by the refusal of the company court to confirm the auction sale and by the direction to obtain a fresh valuation report and to conduct a fresh auction in the physical mode, the appellant, who was the highest bidder, is in appeal. [3] Shri Manish Bhatt, learned senior counsel assisted by Shri Jaimin A. Gandhi, learned counsel appearing on behalf of the appellant contended that the company court was not justified in refusing to confirm the auction sale. He contended that the plea of a technical snag could not have been accepted, firstly, in the light of the fact that the auctioning agency, i.e., M/s. Railtel Corporation of India Limited had clearly stated that there was no technical snag and secondly, the Clause - 45 of the sale notice had clearly indicated that the Official Liquidator would not be held responsible for problem of internet connectivity, network problem, system crash down, power failure and any such reason. Consequently, the company court could not have upheld the plea of a technical snag impeding the auction and could not have ordered for re-auction. Leaned senior counsel also pointed out that it is settled law that an auction conducted by the court should not be interfered with on vague allegations and that attempts being made to upset the highest bid by spurious entities ought not to be entertained. He highlighted the fact that M/s.
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Survival Technologies Private Limited, who had challenged the e- auction had only stated their intention to increase the bid by merely 10% to 15%, which indicated that there was no intention to increase the bid substantially which would have affected the interest of the company in liquidation. He submitted that any attempt made by the unsuccessful bidders to dislodge the highest bidder and that too after the stipulated time and date fixed for conducting the auction ought not to have been entertained by the Tribunal. He placed reliance on the following cases in support of his arguments:-
(i) In the case of IFCI Ltd. versus Vishnu Kant Gupta reported in [2008] 145 COMP 1 (SC).
(ii) In the case of Santhosh Kumar versus Official Liquidator reported in [2011] 105 SCL 46 (Kerala).
(iii) In the case of Sithara Associates versus Oshon Treads Ltd.
(In Liquidation) reported in [2015] 55 taxmann.com 239 (Kerala).
(iv) In the case of Dr. K. S. Thangal versus State of Kerala reported in [1968] 38 COMP CASE 5 (Kerala).
(v) In the case of Vedica Procon Private Limited versus Balleshwar Greens Private Limited reported in 2015 (0) AIJEL-SC 56918.
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Official Liquidator submitted that having regard to the passage of time, it would be appropriate to permit re-auction. He submitted that pursuant to the impugned order, a fresh valuation report had been secured and there is also a revision in the guideline values and if a fresh auction were to be conducted, there would be a substantive increase in the sale price, which would ultimately benefit the creditors. He submitted that though the Official Liquidator had supported the highest bidder, given the possibility of securing a higher amount, it would be just and proper to permit the re-auction. [5] Shri Manish Bhatt, learned senior counsel assisted by Shri Jaimin A. Gandhi, learned counsel appearing on behalf of the appellant, in response, submitted that even subsequent events after the auction ought to be disregarded and this was also a settled position of law. Learned senior counsel contended that the passage of time and the resultant consequences could not be attributed to the appellant and the appellant could not be penalized for the acts of a unsuccessful bidder such as M/s. Survival Technologies Private Limited. [6] In light of the above arguments, the only point that would arise for consideration of this appeal as to whether the company court was justified in refusing to confirm the auction sale in favour of the Page 10 of 17 Uploaded by DHARMENDRA KUMAR(HC01071) on Tue Aug 05 2025 Downloaded on : Fri Aug 08 22:28:48 IST 2025 NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined appellant and in ordering re-auction after obtaining a fresh valuation. As already narrated above, the sale notice dated 02.03.2021 indicated that the property would be sold by way of e-auction on 05.04.2021 and an upset price of Rs.6,02,00,000/- had also been fixed for sale of the properties. The sale notice stipulated that the last date for submission of online offers along with the EMD was 30.03.2021 at 4:00 p.m. [7] Clause-45 of the said sale notice read as follow:-
"45. The Official Liquidator shall not be held responsible for the problem of internet connectivity, network problem, system crash down, power failure and any such reason."
[8] Notwithstanding the above condition, since a complaint was made by M/s. Survival Technologies Private Limited that it was unable to submit its online offer within the stipulated time, this Court, by an order dated 05.04.2021 had passed an order deferring the auction by a period of three days to 08.04.2021 and M/s. Survival Technologies Private Limited was permitted to participate in the e- auction. A revised schedule was also fixed by this Court for sale of the assets. It may be pertinent to notice here that the claim of M/s. Survival Technologies Private Limited was to the effect that there was a technical snag which had prevented them. It was the case of Page 11 of 17 Uploaded by DHARMENDRA KUMAR(HC01071) on Tue Aug 05 2025 Downloaded on : Fri Aug 08 22:28:48 IST 2025 NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined the M/s. Survival Technologies Private Limited that they had deposited the EMD amount of Rs.60,20,000/- in the account of the Official Liquidator through NEFT and yet a mail has been received stating that the amount had been credited into the account of the Official Liquidator after the cut-off time for deposit, i.e., after 4:00 p.m. and therefore they were dis-entitled to participate in the auction. This Court taking into consideration that the amount had been credited at 4.06 p.m., i.e., during the banking hours, came to the conclusion that the auction could not have raised such an objection and proceeded to pass an order permitting M/s. Survival Technologies Private Limited to participate in the e-auction. It is, therefore, clear that M/s. Survival Technologies Private Limited had been permitted to participate in the e-auction and they were thus aware of the consequences of any lapse on their part in the matter of submitting their bids.
[9] At this stage, it may also be pertinent to notice the terms relating to the conduct of the e-auction and submission of the bid. The Clause - 45 of the sale notice had clearly indicated that the Official Liquidator shall not be held responsible for the problem of internet connectivity, network problem, system crash down, power failure and any such reason.
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[10] As could be seen from the above, in the matter of submitting bids during the e-auction, it was made clear to the bidders that the Official Liquidator would not be held responsible for technical problem such as internet connectivity, network problem, system crash down, power failure or any such similar reason. It is, therefore, clear that any technical reason given for non-submission of bids would not be a valid ground to annul the auction or to direct a re-auction of the properties. It is forthcoming from the record that at the request of the Official Liquidator, the time for submission of bids was extended on two occasions by the M/s. Railtel Corporation of India Limited and yet M/s. Survival Technologies Private Limited did not offer their bid. It may be pertinent to state here that M/s. Railtel Corporation of India Limited had responded to the complaint of M/s. Survival Technologies Private Limited stating that there were no technical issues while the e-auction has been conducted and that it had received various bids. In the light of clause 45 and also the specific stand of the auction conducting agency, i.e., M/s. Railtel Corporation of India Limited, the plea of M/s. Survival Technologies Private Limited that they were prevented from submitting their bid cannot be accepted. As already observed above, it was categorically made clear that technical reasons for non-submission of bid would Page 13 of 17 Uploaded by DHARMENDRA KUMAR(HC01071) on Tue Aug 05 2025 Downloaded on : Fri Aug 08 22:28:48 IST 2025 NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined not be accepted. The consequence of this clause is that, even if there was a technical issue, it would not enable a non-successful bidder to challenge the auction. In the light of this particular fact, the direction of the company judge for holding re-auction of the property cannot be sustained. The reasoning of the company court that there was no reason forthcoming as to why the time was required to be extended and that the Covid-19 pandemic was peaking cannot also be a ground to disturb an auction which was conducted in accordance with the terms of the sale notice. If the auction conducting agency had extended the time at the request of the Official Liquidator, it would only mean that an opportunity was extended to all prospective purchasers to submit their bids. This extension of an opportunity, which enured to the benefit of all the bidders, cannot be a ground to annul the auction. Any interference in the auction process, which is to be determined as a fair auction, can only be made on valid ground. The reasoning that the Covid-19 pandemic was peaking cannot also be a ground to order for a re- auction, more so when M/s. Survival Technologies Private Limited during this very period had approached this Court for acceptance of its EMD and also for objecting to the confirmation of the sale. We are, therefore, of the view that the company court was not justified in refusing to confirm the auction in which the appellant had submitted Page 14 of 17 Uploaded by DHARMENDRA KUMAR(HC01071) on Tue Aug 05 2025 Downloaded on : Fri Aug 08 22:28:48 IST 2025 NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined the highest officer of Rs.6,95,00,000/-. The auction conducted in favour of the appellant would, therefore, have to be confirmed. [11] Shri Bhatt, learned senior counsel is justified in placing reliance on the judgment of the Hon'ble Apex Court in the case of Vedica Procon Private Limited (supra) to contend that there is no principle that whenever a higher offer is received in respect of the sale of the property of a company in liquidation, the Court should reopen the concluded proceedings. The learned senior counsel is right in the submission that the plea of M/s. Survival Technologies Private Limited to permit them to make a higher offer after the auction had been conducted could not have been entertained, more so when an incorrect plea was advanced that there is a technical snag and which prevented them from submitting their bids. It may also noticed that the neither did the company court find that the purchase price offered by the appellant was inadequate, nor that the property would have fetched a much higher rate if re-auction. Unless financial prejudice had been clearly established, the company judge ought not to have refused the confirmation of the auction. [12] However, it also has to be been noticed that the auction was conducted on 08.04.2021 and a period of more than 4 years have Page 15 of 17 Uploaded by DHARMENDRA KUMAR(HC01071) on Tue Aug 05 2025 Downloaded on : Fri Aug 08 22:28:48 IST 2025 NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined lapsed since then. The terms of the sale required the highest bidder, i.e., the appellate to deposit 25% of the amount within a period of one month from the date of intimation of the acceptance of his bid and the balance was required to be deposited within a period of 3 months or within such time as may be re-fixed by the Court. The appellant is a corporate entity engaged in a commercial activity. The appellant had the benefit of retaining the entire sum of Rs.6,95,00,000/- for the past 4 years, it would have utilized this financial advantage for gaining a profit and would not have kept the amount idle.
[13] Having regard to the fact that the appellant company would have benefited from the retention of Rs.6,95,00,000/- for the past more than 4 years, which would neither detrimentally affect or prejudice the interest of the official liquidator, in our view, the interest of justice would be subserved if the appellant company is directed to get interest at the rate of 12% per annum from 08.07.2021 (i.e. after the expiry of three months from the date of the auction) till the date of repayment to the Official Liquidator. The appeal is accordingly allowed in the following terms:-
(1) The impugned order of the Company Court is set aside. Page 16 of 17 Uploaded by DHARMENDRA KUMAR(HC01071) on Tue Aug 05 2025 Downloaded on : Fri Aug 08 22:28:48 IST 2025
NEUTRAL CITATION C/OJA/3/2023 ORDER DATED: 15/07/2025 undefined (2) The auction conducted on 08.04.2021, in which M/s. Survival Technologies Pvt. Ltd. submitted the highest bid of Rs.6,95,00,000/- is accepted and the sale is confirmed in their favour.
(3) M/s. Survival Technologies Pvt. Ltd. shall, however, pay interest @ 12% per annum from 08.07.2021 on the sum of Rs.6,95,00,000/- to the Official Liquidator within a period of THREE MONTHS from the date of receipt of the copy of this order.
(4) On such payment being made, the Official Liquidator shall take necessary steps to convey the property to M/s. Survival Technologies Pvt. Ltd.
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