2014 (3) TMI 1234 - HC - Companies Law

Validity of the court s decision to order the sale of the property for the fourth time - Consideration of an offer made after the third auction by a party who did not participate in earlier auctions - Application of principles governing court sales and confirmation of sales by the court - HELD THAT - The amount quoted by the appellant in the first sale was Rs. 35, 11, 111/-. The upset price fixed by the court after cancelling that sale was Rs. 45, 55, 555/-. But in the next auction there was no one to purchase the property for this amount. In the third auction the appellant alone submitted tender and the amount quoted by him was Rs. 36, 66, 885/-. On 1.8.2012 he deposited Rs. 15, 00, 000/- as earnest money. The third respondent approached the court with an offer to purchase the property for Rs. 50, 00, 000/- and to pay Rs. 1, 00, 000/- as compensation to the appellant. The learned Single Judge has directed him to pay Rs. 1, 00, 000/- as compensation to the appellant and to furnish bank guarantee for Rs. 20, 00, 000/-; if he happens to be the successful bidder this amount will be adjusted towards the purchase price. In the course of the argument it was submitted on behalf of the 3rd respondent that if he does not bid the property for Rs. 50, 00, 000/- he is ready to forfeit to the second respondent-creditor the amount of Rs. 20, 00, 000/- for which he has been ordered to furnish bank guarantee in the impugned order. This is a procedure unknown to law. The court can act only within the framework of law. How can it order forfeiture of the amount to the second respondent who has no right to it. The facts and circumstances only justify the conclusion that if the sale is set aside at the request of the third respondent and the property is put up for sale again court auction sale will become a mockery. The third respondent who did not participate in the earlier three court auctions appears to be a fortune seeker. The court cannot give a platform to such fortune seekers. Though every attempt should be made by the court to ensure sale of property for an adequate price it shall not be at the expense of the credibility of court auction sale. Frequent setting aside of sale will have a scare value . It will only scare prospective bidders. Before fixing the upset price at Rs. 45, 55, 555/- the court had ascertained the value of the land and the building at Rs. 50, 60, 300/-. It is well known that court sale may not fetch the market value because of the risks involved in it and that large plots will not be sold easily since only very few people can afford to siphon out a huge sum - These facts are relevant in deciding whether the price offered by the appellant is reasonable. Even though the third respondent has quoted Rs. 50, 00, 000/- he would call it a fancy price (vide the affidavit filed by him on 30.6.2013). If that is true the valuation of the property at Rs. 50, 60, 300/- is no where near the real price. Having regard to these facts we are of the opinion that the price offered by the appellant is adequate. The order passed by the Company Judge is liable to be set aside and the sale should be confirmed. The impugned order is set aside - Appeal allowed.

Summary

Issues:
1. Validity of the court's decision to order the sale of the property for the fourth time.
2. Consideration of an offer made after the third auction by a party who did not participate in earlier auctions.
3. Assessment of the court's authority to set aside a sale without allegations of fraud or vitiating circumstances.
4. Application of principles governing court sales and confirmation of sales by the court.
5. Evaluation of the adequacy of the price offered by the appellant in the auction process.
6. Analysis of the impact of setting aside sales on the credibility of court auction sales.

Issue 1:
The court ordered the sale of the property for the fourth time, which the appellant challenges, arguing that without allegations of fraud or vitiating circumstances, such a decision was unwarranted.

Issue 2:
An offer made by a third respondent after the third auction, who did not participate in earlier auctions, raised concerns regarding the fairness of considering such an offer and its impact on the auction process.

Issue 3:
The absence of fraud or vitiating circumstances raised the question of the court's authority to set aside a sale, prompting a review of the legal framework governing such actions.

Issue 4:
The judgment highlighted the principles governing court sales and the confirmation process, emphasizing the court's duty to ensure reasonable prices and protect the interests of all parties involved.

Issue 5:
The adequacy of the price offered by the appellant in the auction process was a crucial factor in determining the validity of the sale, considering the market value, property specifics, and bidding history.

Issue 6:
The potential impact of frequent sale cancellations on the credibility of court auction sales was discussed, emphasizing the need to balance achieving adequate prices with maintaining the integrity of the auction process.

In conclusion, the judgment analyzed the auction process, the role of the court in confirming sales, and the importance of assessing prices offered in court sales. It emphasized the need to balance ensuring fair prices with maintaining the credibility of court auction sales. The decision ultimately set aside the impugned order and confirmed the sale in favor of the appellant based on the adequacy of the price offered.