1997 (9) TMI 432 - HC - Companies Law

Summary

Issues Involved:
1. Setting aside the offer of Chauri Chaura Steels Ltd.
2. Acceptance of Jalan Iron and Steel Co.'s higher offer.
3. Compliance with terms and conditions of sale.
4. Adequacy of the sale price.
5. Confirmation of sale and handing over of possession.

Issue-wise Detailed Analysis:

1. Setting aside the offer of Chauri Chaura Steels Ltd.:
The applicant-objector, Jalan Iron and Steel Co., filed Company Application No. A-31 to set aside the offer of Chauri Chaura Steels Ltd. and to accept their higher offer. The court noted that Chauri Chaura Steels Ltd. had the highest initial offer of Rs. 94 lakhs and subsequently increased it to Rs. 1 crore 5 lakhs upon negotiation, which was accepted by the court. The applicant contended that there was no clause in the advertisement or the conditions of sale allowing for bid negotiations post-tender opening, and thus they were not given an opportunity to increase their bid initially. The court found no merit in this argument, noting that the applicant had only offered Rs. 64.91 lakhs for lots Nos. 2 to 10 and not for the entire unit, unlike Chauri Chaura Steels Ltd. who intended to run the factory, benefiting the company and its creditors.

2. Acceptance of Jalan Iron and Steel Co.'s higher offer:
The applicant offered Rs. 1 crore 10 lakhs after the initial acceptance of Chauri Chaura Steels Ltd.'s offer. The court referenced several precedents, including Brindaban Agarwala v. Official Liquidator of Saraswati Soap and Oil Mills Ltd., which emphasized that subsequent higher offers should not be grounds for refusing confirmation of a sale if the initial price is adequate. The court concluded that the highest offer accepted by the court cannot be set aside merely because a subsequent higher offer was made, especially when the initial offer was deemed adequate and there was no evidence of irregularity or fraud.

3. Compliance with terms and conditions of sale:
The applicant argued that Chauri Chaura Steels Ltd. did not comply with the sale terms as they paid the earnest money via cheque instead of a bank draft and delayed the first instalment payment. The court acknowledged these minor defaults but emphasized its inherent powers to modify terms if it serves the interest of the company, creditors, and contributories. The court cited T. Velusamy v. Official Liquidator, stating that modification of terms is permissible if justice demands. The cheque was encashed, and the delay in instalment payment was mitigated by an additional deposit of Rs. 5 lakhs. The court decided that these minor defaults did not warrant cancellation of the sale.

4. Adequacy of the sale price:
The applicant contended that the price offered by Chauri Chaura Steels Ltd. was inadequate and offered Rs. 5 lakhs more. The court reviewed the history of the sale process, noting that despite wide publicity and multiple advertisements, the highest offer received was Rs. 1 crore 5 lakhs. The court referred to the Supreme Court's principles in Navalkha and Sons v. Ramanuja Das, which state that once the court deems the price reasonable, subsequent higher offers do not justify setting aside the sale. The court found no independent evidence suggesting the price was inadequate and concluded that the offer of Rs. 1 crore 5 lakhs was adequate.

5. Confirmation of sale and handing over of possession:
Chauri Chaura Steels Ltd. filed Application No. A-33, requesting directions to the official liquidator to hand over possession after the balance payment. The official liquidator confirmed that the entire sale consideration was deposited within time. The court decided to confirm the sale under rule 272 of the Companies (Court) Rules, 1959, but directed Chauri Chaura Steels Ltd. to pay 15% interest on the overdue amount of the first instalment. The confirmation of sale and orders for handing over possession would be finalized upon the deposit of the interest amount.

Conclusion:
Application No. A-31 filed by Jalan Iron and Steel Co. was rejected. Application No. A-33 filed by Chauri Chaura Steels Ltd. was disposed of with the court's observations, pending the deposit of the interest amount for final confirmation and possession orders.