2009 (1) TMI 473 - HC - Companies Law

Winding up - Custody of company s property - entire process of bidding and sale whereby unit Nos. 2 to 6 were sold seeked to be quashed - Held that - The applicants are offering marginal higher price for the five units of the company taking into consider all the facts and circumstances. The secured creditors and worker union are also not supporting the plea of the applicants to set aside the sale and acceptance of their bids. For the foregoing reasons, therefore, it cannot be held that the Court was not competent to sell the five units of the company in the facts and circumstances of the present case. For the foregoing reasons it will be not in the interest of the company to set aside the sale in favour of the purchaser, M/s. Morgan Venture Limited. Considering all the facts and circumstances and for the foregoing reasons, the applications by Shri Raj Kishan Goel (CA No. 491 of 2007) and M/s. Siddhartha Clutches Pvt. Ltd. (CA No. 710 of 2007) seeking setting aside of sale and acceptance of their offer of ₹ 70 crores and of ₹ 80.25 crores are without merits and cannot be appreciated nor the sale in favour of purchaser who had deposit the sale consideration almost three years back and whose sale had been confirmed about two years back cannot be set aside. The applications of the applicants are therefore, liable to be dismissed.

Issues Involved:
1. Quashing of the bidding process and sale of units.
2. Alleged fraud and improper conduct in the bidding process.
3. Valuation and reserve price of the properties.
4. Confirmation and execution of the sale.
5. Timeliness and adequacy of the applicants' bids.
6. Legal grounds for setting aside the sale.

Detailed Analysis:

1. Quashing of the Bidding Process and Sale of Units:
The applicants sought the quashing of the entire bidding process and the sale of units 2 to 6 of M/s. Jhalani Tools (India) Ltd., which were sold to M/s. Morgan Ventures Ltd., a nominee of M/s. R.N. Marwah & Co. They contended that their bids of Rs. 80.25 crores and Rs. 70 crores respectively should be accepted instead.

2. Alleged Fraud and Improper Conduct in the Bidding Process:
The applicant, Sh. Raj Kishan Goel, alleged that the bidding process was vitiated by fraud, claiming that the successful and unsuccessful bidders conspired to manipulate the process. He argued that M/s. R.N. Marwah & Co., being a Chartered Accountancy firm, could not be involved in manufacturing activities and that the properties were sold at a throwaway price. He also sought an enquiry into the bidding process and the recalling of the orders by which the bids were held.

3. Valuation and Reserve Price of the Properties:
The applicant contended that the reserve price of Rs. 43 crores for the five units was far below the actual value. The highest bid of Rs. 59.05 crores by M/s. Balaji Associates was not honored, and the second highest bid of Rs. 59 crores by M/s. R.N. Marwah & Co. was accepted. The applicant argued that rebidding should have been ordered when the highest bidder failed to deposit the amounts.

4. Confirmation and Execution of the Sale:
The sale was confirmed in favor of M/s. Morgan Ventures Ltd. by an ex parte order dated 25-7-2006. The applicant argued that the sale had not been confirmed by the official liquidator or the Court and that the units were still intact and had not been dismantled. The purchaser contended that the sale was confirmed on 25-7-2006, and this was reiterated by the Court on 22-11-2006.

5. Timeliness and Adequacy of the Applicants' Bids:
The applicants filed their applications for setting aside the sale and offering higher bids after significant delays. Sh. Raj Kishan Goel offered Rs. 70 crores on 3-5-2007, and M/s. Siddharth Clutches Pvt. Ltd. offered Rs. 70.25 crores on 17-7-2007, later increasing their offer to Rs. 80.25 crores. The purchaser argued that these offers were speculative and made after considerable delay, and that the properties had already been sold and conveyance deeds executed.

6. Legal Grounds for Setting Aside the Sale:
The purchaser contended that the applications were barred by time and that no case was made out under rule 272 or 273 of the Companies Court Rules or under Order 21 rules 90 and 92 of the Code of Civil Procedure for recalling/setting aside the sale. The allegations of fraud were deemed bald and baseless. The Court held that the sale should not be set aside lightly merely on account of higher offers received later, as it would result in no auction sale ever being completed. The applicants failed to show any material irregularity or fraud in conducting the sale, and the higher offers were marginal and speculative.

Conclusion:
The Court dismissed the applications of Sh. Raj Kishan Goel and M/s. Siddharth Clutches Pvt. Ltd. seeking to set aside the sale and accept their higher bids. The Court found no substantial injury or material irregularity in the sale process and emphasized that the sale was conducted with wide publicity and proper valuation. The applications were also dismissed with costs of Rs. 20,000 each.

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