Gujarat High Court
Mehul Dilipbhai Pandya vs Sicom Limited on 5 July, 2021
Equivalent citations: AIR 2021 GUJARAT 139, AIRONLINE 2021 GUJ 1093
Author: N.V.Anjaria
Bench: N.V.Anjaria
C/COMA/16/2021 ORDER DATED: 05/07/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/COMPANY APPLICATION NO. 16 of 2021
In R/COMPANY APPLICATION NO. 314 of 2015
==========================================================
MEHUL DILIPBHAI PANDYA
Versus
SICOM LIMITED
==========================================================
Appearance:
MR TIRTHRAJ PANDYA FOR MR PARTHIV B SHAH(2678) for the
Applicant(s) No. 1
MR JAY KANSARA FOR M/S WADIAGHANDY AND CO(5679) for the
Respondent(s) No. 1
MR SAURABH M PATEL(5019) for the Respondent(s) No. 4
NOTICE NOT RECD BACK(3) for the Respondent(s) No. 3
NOTICE UNSERVED(8) for the Respondent(s) No. 2
==========================================================
CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
Date : 05/07/2021
ORAL ORDER
Heard learned advocate Mr.Tirthraj Pandya for learned advocate Mr.Parthiv Shah for the applicant, learned advocate Mr.Jay Kansara for respondent No.1 - SICOM Limited and learned advocate Mr.Saurabh Patel for respondent NO.4 - Official Liquidator.
2. By bringing out the Judges Summons, following prayers are made by the applicant in the present Company Application.
(i) To quash and set aside impugned order dated 14.05.2021 passed by Respondent No. 1 rejecting the bid of the applicant.
(ii) To stay the process of issuance of fresh public notice for auction of the scheduled properties to be held by Respondent No. 1 as intimated in impugned order dated 14.05.2021, Page 1 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021 C/COMA/16/2021 ORDER DATED: 05/07/2021
(iii) To direct Respondent No. to file an appropriate report before this Hon'ble Court for the confirmation of sale of the scheduled properties in favour of the applicant herein.
3. The facts in the background stated in brief are inter alia that respondent No.2 herein - Kemrock Agritech Pvt. Ltd. was under liquidation. In respect of certain properties of the company in liquidation, respondent No.1 - SICOM Limited claimed its exclusive charge. It was the case that the properties were mortgaged with the said respondent No.1 company. Respondent No.1 therefore approached this Court seeking permission to sell them off.
3.1 In the Company Application No.314 of 2015 in Company Petition No.338 of 2013 being SICOM Limited Vs. Kemrock Agritech Pvt. Ltd., following was the prayer.
"to grant leave to the Applicant under Section 446 r/w. Section 537 of the Companies Act, 1956 to auction and sell the immovable property described at Annexure "B" hereto and appropriate the proceeds towards discharge of the Respondent Company's liability owned to the Applicant under the Deed of Further Mortgage dated 13th December, 2012 and Indenture of Mortgage dated 10th June, 201o."
3.2 The respondent No.2 company was wound up on 01st July, 2014. As the properties of the company in liquidation was mortgaged with respondent No.1 - SICOM Limited, it sought to exercise powers under Section 29 of the State Financial Corporations Act, 1951. In the aforesaid Company Application No.314 of 2015, the Court considered the submissions of the parties, mentioned the decision of the Supreme Court Page 2 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021 C/COMA/16/2021 ORDER DATED: 05/07/2021 in Rajasthan State Finance Corporation v. Official Liquidator [(2005) 8 SCC 190] in which the legal position regarding the powers of the State Financial Corporation under the Act vis-a-vis powers of the Company Court were considered. Another decision of the Apex Court in A.P. State Financial Corporation v. Official Liquidator [(2000) 7 SCC 291] was also referred to, whereafter this Court stated thus, "11. Thus, as held by the Hon'ble Supreme Court, the control of the Company Judge and the Official Liquidator, if authorized, can be only to ensure that the purpose of Section 529A is effectively achieved i.e. only to a limited extent and for the limited purpose of securing the right of the workers for distribution of their wages as pari passu charge. Learned advocate for the applicant has fairly stated before the Court that the Official Liquidator could be associated with the applicant in sale of the properties and that the applicant has no objection or reluctance in depositing the sale proceeds on completion of the sale of the mortgaged properties with the official liquidator reserving its right to claim that except the pari passu charge of the works for recovery of their dues from the sale proceeds, the applicant shall have the exclusive right to the sale proceeds. The Court, therefore, finds that the applicant being Financial Corporation and entitled to exercise the power under Section 29 of the Act could be granted permission to auction and sale the properties mentioned in schedule at Annexure A, however, with certain directions to safeguard the interest of the workers of the company, if any."
3.3 Finally, the following operative portion was passed in the aforesaid order dated 14th June, 2018 while disposing of the Company Application.
"12. In view of the above, the application stands disposed of with the following orders.
(a) The applicant is permitted to auction and sell the properties mentioned in the schedule at Annexure A in exercise of the power under Section 29 of the Act.Page 3 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021
C/COMA/16/2021 ORDER DATED: 05/07/2021
(b) For such purpose, the applicant shall get the properties valued by the approved valuer and keep the Official Liquidator informed about the valuation done.
(c) The applicant shall associate the official liquidator while fixing the upset price, conducting auction and sale of the properties and shall seek the approval of this court for acceptance of the bid and confirmation of the sale in favour of the highest bidder.
(e) As agreed by the learned advocate for the applicant, the applicant shall deposit the entire amount of sale proceeds with the Official Liquidator within a period of two weeks after receipt thereof.
(f) On depositing the sale proceeds by the applicant with the Official Liquidator, the Official Liquidator shall immediately invite the claims of the workmen, and if the Official Liquidator receives any claim from any worker, the same shall be intimated to the applicant. The sale proceeds shall be then applied for payments on final adjudication of the claims received against the sale proceeds.
(g) It is clarified that the applicant`s agreeing to deposit the sale proceeds with the Official Liquidator shall not be construed as if the applicant has participated in the winding up proceedings but rather it has made it clear that it while remaining outside the winding up proceedings is enforcing its security to recover its dues outstanding against the company in liquidation."
3.4 Accordingly, SICOM Limited was permitted to auction and sale the properties mentioned in the schedule in exercise of powers under Section 29 of the State Financial Corporations Act. In the entire process of valuation of the properties leading to the auction sale, it was directed that the Official Liquidator shall be associated in fixing the upset price and conducting the auction. It was further stated that approval of the Court would be sought for, for acceptance of the bid and confirmation of Page 4 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021 C/COMA/16/2021 ORDER DATED: 05/07/2021 the sale in favour of the highest bidder. The sale proceeds were required to be deposited with the Official Liquidator. It was, at the same time, clarified that depositing of sale proceeds with the Official Liquidator would not mean that SICOM Limited had participated in the winding up proceedings.
3.5 It appears that in the auction so held, the present applicant was the only bidder who had submitted his bid at Rs.09,61,00,000/-. The necessary demand draft towards earnest money was also furnished as per condition No.12 of the general terms and conditions. On the ground that only one offer was received, management of SICOM Limited decided to issue fresh advertisement for auction.
3.6 The applicant was accordingly intimated by letter dated 14th May, 2021 that his bid was not accepted and fresh auction would be held. As was stated in the said communication itself, the applicant was also asked to again participate in the ensuing public auction.
3.7 The aforementioned letter dated 14th May, 2021 by respondent No.1 addressed to the applicant, is reproduced hereinbelow.
"WITHOUT PREJUDICE Ref No: NPAD/SICOM/KAPL/MP/2021-22 May 14, 2021 To Shri Mehul Pandya/Shri Vineet Jain 414, Corner Point, B/h. Express Hotel, Jetalpur Road, Alkapuri Vadodara, Gujarat-390007 Page 5 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021 C/COMA/16/2021 ORDER DATED: 05/07/2021 Sub:- Sale of property being Industrial non- agricultural land bearing Revenue Survey Nos 133, 150, 186, 178/1, 18001, 249, 250, 252, 253, 254, 255, 256, 257, 258, 261, 262, 263 and 303 and building located at Vadodara-Halol State Highway SH-87, Village Asoj. Taluka-Waghodia, District Vadodara, Gujarat-391510 alongwith the installed Plant and Machinery.
Re:-Offer in Public Auction held on November 25, 2020 at 3.00 pm. at SICOM's Mumbai Dear Sir, This is with reference to the Public Auction held on November 25, 2020 at 3.00p.m. at SICOM's registered office at Mumbai for sale of captioned mortgaged property.
At the outset, we thank you for giving your offer for the purchase of the captioned property for Rs. 9.61 crores in the said public auction. However, we regret to inform you that since SICOM has received only one offer/single bid in the said public auction, the management has decided to reject your offer and issue fresh advertisement for public auction.
Therefore, we are hereby returning your EMD of Rs.1 crore submitted in the form of DD No. "925547"
drawn on Yes Bank dated November 25, 2020, (Original DD is enclosed for your record).
This is to further inform you that we are in process of issuing fresh advertisement for e- auction and shall communicate to you regarding the same. You may again participate in the ensuing public auction."
3.8 The applicant moved the present Company Application making prayers as above to set aside the aforesaid decision reflected in communication dated 14th May, 2021 and to stay the process of fresh public notice for auction. As reproduced above, one of the prayers is also to direct respondent No.1 to file appropriate report before this Court for confirmation of sale of the scheduled properties in favour of the applicant.
Page 6 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021C/COMA/16/2021 ORDER DATED: 05/07/2021
4. What was vehemently contended by learned advocate Mr.Tirthraj Pandya for learned advocate Mr.Parthiv Shah for the applicant that in condition No.12(c) of the aforesaid order dated 14th June, 2018 passed in Company Application, a clear stipulation was imposed on the respondents that respondent No.1 shall associate the Official Liquidator while fixing the upset price and further that it shall seek approval of the Court for acceptance of the bid and confirmation of sale. It was submitted that the aforesaid condition No.12(c) of the order was defied and while taking the impugned decision reflected in communication dated 14th May, 2021, approval of the Company Court was not asked for. It was submitted that neither the respondent No.1 - SICOM Limited nor the Official Liquidator who was also responsible for compliance, approached the Court. It was submitted that non-compliance of the said condition was contemptuous and further that it seriously prejudiced the rights of the applicant as the Company Court could have confirmed the sale in its discretion in applicant's favour.
4.1 Learned advocate for the applicant relied on decision of the Supreme Court in M.V. Janardhan Reddy v. Vijaya Bank [(2008) 7 SCC 738]. In that case, auction sale of the property of the company under liquidation was permitted by the Company Court to be conducted through Recovery Officer, Debts Recovery Tribunal, subject to confirmation thereof by the Company Court. The orders of the Company Court provided that Bank was permitted to go ahead with the Page 7 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021 C/COMA/16/2021 ORDER DATED: 05/07/2021 proposed sale of the assets of the company under liquidation and such sale was subject to confirmation by the Company Court. The Recovery Officer accepted the highest bid among the bids received and on his own, confirmed the sale. The Supreme Court held that it would not open for the Recovery Officer to confirm the sale. On the basis of the said decision, it was submitted that neither the applicant had an opportunity to show that his offer was reasonable representing the market price nor the Company Court was allowed to exercise its discretion as approval was not sought for before deciding to proceed anew with advertisement.
4.2 Learned advocate also relied on the observations of the Supreme Court in Navlakha & Sons v. Ramanya Das [(1996) 3 SCC 537] to highlight the principles which should govern the confirmation of sale. It was observed that condition of confirmation of Court operates as safeguard against the properties being sold at inadequate price. Mere acceptance of offer does not give any vested right to the bidder in the property for confirmation of offer, it was stated by the Supreme Court.
4.3 While learned advocate Mr.Saurabh Patel for the Official Liquidator submitted that the entire sale was conducted by respondent No.1 and only time- to-time respondent No.1 informed the Official Liquidator about various decisions, learned advocate Mr.Jay Kansara for M/s. Wadia Ghandy & Co., defending the impugned decision, at the outset, submitted that Page 8 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021 C/COMA/16/2021 ORDER DATED: 05/07/2021 respondent No.1 was exercising its powers under Section 29 of the State Financial Corporations Act. It was submitted that bid of the applicant was not accepted and there was no stage of confirmation reached, therefore respondent No.1 was justified in cancelling the bid and not seeking any approval for the same from the Court as it was to be in the event of acceptance of the bid only, as per condition No.12(c) in the order.
4.4 It was tried to submit by learned advocate for respondent No.1 that the Company Court had minimal role and that in conducting the auction, respondent No.1 company was not a participatory in the liquidation proceedings which is clarified by the Company Court in order dated 14th June, 2018. It was submitted further that respondent No.1 was justified in conducting auction and take decision in that regard within the domain of its rights under Section 29 of the State Financial Corporations Act. He placed reliance on the decision of the Supreme Court in Haryana Financial Corporation v. Jagdamba Oil Mills [(2002) 3 SCC 501]. Therein the Supreme Court held in the context of Section 29 of the Act, inter alia that dominant consideration in the sale by Corporation of defaulter's properties mortgaged etc. is to secure best possible price for the property. It was also held that where the bid price in the public auction are depressed, tender should be invited after proper publicity.
4.5 After relying on the observations in Page 9 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021 C/COMA/16/2021 ORDER DATED: 05/07/2021 paragraph No.13 of the Haryana Financial Corporation (supra0, learned advocate for respondent No.1 relied on another decision in Kerala State Financial Corporation v. Vincent Paul [(2011) 4 SCC 171]. Therein the following principles laid down by the Supreme Court were highlighted - "(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.".
4.6 Respondent No.1 - SICOM Limited as well as respondent No.4 - Official Liquidator also filed their affidavits-in-reply. Respective learned advocates relied on the contents and the contentions raised in those affidavits to submit that no prejudice has been caused to the applicant whose offer was solitary offer and therefore respondent No.1 decided to go for fresh auction. Learned advocate for respondent No.1 also further submitted that a fresh auction has been announced and the schedule thereof is underway.
Page 10 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021C/COMA/16/2021 ORDER DATED: 05/07/2021
5. Having considered the controversy and the attendant aspects, submission of learned advocate for respondent No.1 that bid of the applicant was not accepted and the stage of negotiating with him did not arise to validly make the complaint that approval of the Court was necessary, could not be brushed aside lightly. Even if the said aspect is left aside, the scenario offered was that there was only one bid from the applicant. The comparative price was not available except quoted by the applicant. Respondent No.1 appears to have been guided by the said factum and only one offer having been received in the auction, it decided not to accept it and opt for fresh auction by publishing new advertisement.
5.1 The paramount principle is always that the properties should fetch maximum price in the larger interests of revenue and in the cases like on hand, in public interest. It may be noted that the applicant, when was communicated about the decision of not acceptance of his bid, was conveyed that it will be open for him to participate in the fresh auction.
5.2 As per the new advertisement which is produced and also screen shared, fresh auction has to be conducted in terms of the order dated 14 th June, 2018 of the Company Court in Company Application No.314 of 2015, aforesaid. Under various terms and conditions of the auction and as per the schedule of auction, the inspection of property was undertaken on 23rd June, 2021 from 11:00 a.m. to 4:00 p.m. The last Page 11 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021 C/COMA/16/2021 ORDER DATED: 05/07/2021 date for receiving the bids and uploading of the documents including proof of payment is 06th July, 2021. The e-auction date is fixed to be 07th July, 2021 between 1:00 p.m. to 5:00 p.m. with auto extension clause of five minutes.
6. In the circumstances, when further developments have taken place including that fresh auction has been announced by issuing public advertisement on 10th June, 2021 and fresh bids will be received, for which as stated above, last date is 06th July, 2021 upto 06.00 p.m., this Court does not consider it apposite, in the context of facts of the present case, to upset the schedule to stay the entire auction.
6.1 In view of the above aspects mentioned and the discussion supplied, this Court is not inclined to set aside the on going auction. However, this Company Application is disposed of with following directions.
(i) The current auction shall be held, conducted and concluded strictly in accordance with the order dated 14th June, 2018 passed in Company Application No.314 of 2015 and the conditions mentioned therein shall govern to the present auction as well;
(ii) The auction shall be conducted in association with the Official Liquidator in its all stages and steps;
(iii) The applicant herein shall be entitled to Page 12 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021 C/COMA/16/2021 ORDER DATED: 05/07/2021 participate in the auction. It will be permissible for the applicant to submit his bid, for which the last date is 06th July, 2021 upto 06.00 p.m.;
(iv) If the applicant chooses to participate in the auction and submits his bid, in the event he is unable to procure the demand draft towards earnest money for want of sufficient time, upon a written request made by the applicant to the Official Liquidator, such time to submit the Earnest Money Deposit draft shall be extended for the applicant till 01.00 p.m. on 07th July, 2021;
(v) In other words, in the event the applicant is not able to submit the demand draft towards Earnest Money Deposit by 06th July, 2021 upto 06.00 p.m., he may be allowed to submit the same, upon his written request to Official Liquidator, till 01.00 p.m. on 07th July, 2021.
7. This Company Application stands disposed of in the aforesaid terms and directions.
(N.V.ANJARIA, J) ANUP Page 13 of 13 Downloaded on : Tue Jul 06 21:45:17 IST 2021