2011 (7) TMI 1010 - HC - Companies Law

Winding up reopening of auction application filed by Ex-Promoter Director of the company in liquidation - Company was auctioned for Rs. 3,90,00,000 which is far below the market value. he found that the second applicant is ready to purchase the assets of the first respondent-Company for Rs. 4,10,00,000 Held that - highest bid offered for Rs. 3,90,00,000/- is very close to the market value accordingly it was accepted by the Court. If the applicant has any other buyers, he would have tendered his offer when the notification was issued or he could have been present before the Court on 4-3-2011 with his bid for Rs. 4.10 crores. Having kept quite all these days after depositing the bid amount the applicants cannot come before the Court and say that they were ready to pay the higher amount. There is no bona fide in the claim made by the applicants. application is dismissed

Issues Involved:
1. Reopening of the auction conducted by the Court.
2. Validity of the auction process and the highest bid.
3. Compliance with the payment terms by the successful bidder.
4. Allegations of undervaluation and subsequent higher offers.
5. Previous attempts to stall the auction confirmation.

Issue-wise Detailed Analysis:

1. Reopening of the Auction Conducted by the Court:
The application was filed under Rule 9 of the Companies (Court) Rules, 1959 by the Ex-Promoter Director of the first respondent company, seeking to reopen the auction conducted on 4-3-2011. The applicant contended that he was out of station during the auction and that the property was auctioned below market value. He proposed a new offer of Rs. 4.10 Crores before the sale confirmation.

2. Validity of the Auction Process and the Highest Bid:
The court reviewed the auction process, noting that multiple attempts were made to secure the best price for the assets of the company in liquidation. The first respondent company was wound up due to non-payment of dues, and the Official Liquidator was tasked with selling the assets. The highest bid received during the auction on 4-3-2011 was Rs. 3.90 Crores by K.N. Shivaswamy, which was close to the latest market valuation of Rs. 3.99 Crores.

3. Compliance with the Payment Terms by the Successful Bidder:
The successful bidder, K.N. Shivaswamy, was required to deposit the full amount within 30 days. The cheque was drawn on 2-4-2011, but due to 3-4-2011 being a Sunday and 4-4-2011 a government holiday, the cheque was handed over to the Official Liquidator on 5-4-2011 and collected on 8-4-2011. The court found no violation of the payment terms.

4. Allegations of Undervaluation and Subsequent Higher Offers:
The applicant argued that the market value was initially assessed at Rs. 5.14 Crores, and the highest bid of Rs. 3.90 Crores was below this valuation. However, the court noted that the value of the assets had decreased over time, and the latest valuation was Rs. 3.99 Crores. The court rejected the argument that the auction should be reopened for a higher bid of Rs. 4.10 Crores, as the applicant had the opportunity to bid during the auction but did not.

5. Previous Attempts to Stall the Auction Confirmation:
The court referenced a previous attempt by MGM Pooja Infra (Pvt) Limited to stall the auction confirmation by offering Rs. 5 Lakhs more than the accepted bid. This attempt was dismissed with costs, as the court found no merit in the application. The current application was seen as another attempt to delay the process without bona fide reasons.

Conclusion:
The court concluded that there was no justifiable reason to reopen the auction or reject the highest bid. The application was dismissed with costs of Rs. 5,000/-. The court emphasized that the auction process was conducted fairly, and the bid of Rs. 3.90 Crores was close to the latest market valuation, thereby warranting acceptance.

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