2007 (11) TMI 419 - HC - Companies Law

Winding up - Custody of company s properties - Held that - Since the present applicant is offering 1.51 crores and it is already deposited with the Official Liquidator there is no reason not to accept the said offer. Therefore the order dated 30-8-2007 passed by this Court in O.L.R. No. 143 of 2007 is hereby recalled and the sale of lot No. A of the company in liquidation confirmed in favour of respondent No. 2 is hereby cancelled. The Court hereby confirms the sale of lot No. A of the company in liquidation in favour of the present applicant for 1.51 crores. Since the entire sale consideration has already been deposited by the applicant with the Official Liquidator the Official Liquidator is hereby directed to hand over the possession of the movables within one week from today and the sale deed be executed in favour of the present applicant within one week from the date of receipt of the draft of sale deed from the present applicant. Since respondent No. 2 has already paid an amount of 1.27 crores now the said amount is required to be refunded to respondent No. 2. The present applicant is therefore directed to pay interest at 12 per cent per annum on the actual amount of respondent No. 2 lying with the Official Liquidator. As soon as this transaction is over and sale deed is executed and possession is handed over the Official Liquidator shall file compliance report before the Court.

Summary

Issues Involved:
1. Recalling of the order confirming the sale of property.
2. Acceptance and confirmation of the higher offer by the applicant.
3. Re-auction of the property.
4. Legal contentions raised by respondent No. 2.
5. Consideration of higher bids in the interest of secured creditors and workers.

Detailed Analysis:

1. Recalling of the Order Confirming the Sale of Property:
The applicant sought to recall the order dated 30-8-2007, which confirmed the sale of lot No. A to respondent No. 2 for Rs. 1.27 crores. The applicant argued that since the full consideration had not been paid and the sale deed had not been executed, no rights or title had vested with the successful bidder. The applicant offered a higher price of Rs. 1.51 crores, which would benefit the secured creditors and workers of the company. The Court, after considering the submissions and the judgment in Divya Manufacturing Co. (P.) Ltd. v. Union Bank of India, decided to recall the order and cancel the sale confirmed in favor of respondent No. 2.

2. Acceptance and Confirmation of the Higher Offer by the Applicant:
The Court noted that the applicant had previously participated in the auction but could not deposit the required amount, leading to the rejection of Company Application No. 450 of 2007. However, the applicant later offered Rs. 1.51 crores and deposited the amount with the Official Liquidator, demonstrating bona fides. The Court, emphasizing the duty to fetch the maximum price for the property, accepted the higher offer and confirmed the sale in favor of the applicant.

3. Re-auction of the Property:
The applicant alternatively prayed for a re-auction of the property. However, the Court did not find it necessary to order a re-auction since the applicant's higher offer was accepted, ensuring the property fetched a better price than the previous bid.

4. Legal Contentions Raised by Respondent No. 2:
Respondent No. 2 opposed the application, arguing that the applicant's earlier application for similar relief was rejected and not challenged, making the present application barred by principles of estoppel. Respondent No. 2 also contended that the sale was confirmed, and the entire sale consideration had been paid. The Court, however, found that the transaction was not complete as the possession and sale deed formalities were pending. The Court also considered various judgments cited by respondent No. 2 but concluded that the higher offer from the applicant warranted reconsideration.

5. Consideration of Higher Bids in the Interest of Secured Creditors and Workers:
The Court emphasized that the primary criterion was to ensure the property fetched the maximum price for the benefit of secured creditors and workers. The Court cited the Division Bench's view in O.J. Appeal No. 80 of 2007, where higher offers were considered. The Court thus accepted the applicant's higher offer of Rs. 1.51 crores, directing the Official Liquidator to hand over possession and execute the sale deed in favor of the applicant.

Conclusion:
The Court allowed the application, recalling the order dated 30-8-2007, and confirmed the sale of lot No. A in favor of the applicant for Rs. 1.51 crores. The Official Liquidator was directed to refund Rs. 1.27 crores to respondent No. 2 with 12% interest per annum on the amount lying with the Official Liquidator. The implementation of the order was stayed until 5-12-2007 to allow respondent No. 2 to approach a higher forum.