9911796707
TMI Blog1990 (3) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... nted. The valuer submitted his report on April 12, 1989, in which the assets were valued at a little above rupees one crore. On April 21,1989, the court issued directions for the sale of the assets of the company (in liquidation), including the factory premises, as per inventory, by public auction and by inviting sealed tenders upon advertisement, one each in an English newspaper (the Statesman) and in a Bengali and a Hindi newspaper (Jugantar and Viswamitra) as per usual terms and conditions of sale. The advertisement was directed to be published at least two weeks prior to June 2, 1989, which was fixed as the date of sale. The reserve price was fixed at rupees one crore. The official liquidator was directed to give notice to the secured creditors directing them to be present in the court on the date of sale at 2 p.m. Advertisement inviting offers for purchase of the entire movable and immovable assets of the company (in liquidation) lying at the factory was published as directed in the Bengali and Hindi newspapers on May 10, 1989, and in the English newspaper on May 11, 1989. The reserve price fixed by the court was mentioned in the advertisement and the intending purchasers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the court in the presence of the offerors on the date and at the time specified in the advertisement, (3) the offerors would be given a chance to raise their offers and the person whose offer is accepted would be required to deposit a further sum which would, along with the 10% of earnest money, amount to 25% of the accepted bid, (4) any person other than the offeror would also be entitled to be present and give an offer higher than the highest bid submitted; in case of acceptance of such offer, he would be required to deposit 25% of the offered amount by bank draft or pay order,(5) the court would have the right to accept or reject any offer without assigning any reason and the decision of the High Court would be final,(6)the successful bidder would have to pay the balance of the purchase price within a week from the date of sale either by bank draft or pay order, if the sale price is less than Rs. 1,00,00,000, and if such price is more than the said amount, then within a fortnight, (7) in case of failure to pay the balance amount accordingly, the earnest money would stand forfeited and the assets might be sold at the risk and cost of the defaulting offeror with out prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a view to securing the running of the manufacturing unit and getting the co-operation and assistance of the appellant in proposing a scheme for working the mill and for obtaining necessary orders/directions from the court in that behalf. The agreement provided, inter alia , that the mill would be reopened and the workmen (other than those superannuated and unfit) would be employed in a phased manner within six months of the restoration of electric supply and that they would be paid wages equivalent to the last drawn salary plus Rs. 100 per month on an ad hoc basis and also dearness allowance in accordance with law and that the past liability on account of provident fund dues, E. S. I. contributions, gratuity and other dues, if any, would be realised by them from the official liquidator in accordance with law. The appellant, however, agreed to pay a sum of Rs. 3,00,000 (rupees three lakhs) on installment basis to the superannuated workmen in six half-yearly installments. The agreement was to remain in force for three years. By a subsequent agreement executed by and between the parties on or about September 22, 1989, the aforesaid agreement was modified to some extent. It was pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e ., September 27, 1989. On September 27, 1989, the Chief Manager, Indian Bank, stated to the court that he had no authority to take any unilateral decision and that the final decision in the matter would have to be taken or confirmed by the corporate office at Madras. His counsel also raised an objection that there was no jurisdiction to sell the assets as a going concern. Having recorded these facts in the course of its order, the court proceeded to observe that it was not possible to settle any terms with the appellant as regards the payment of money or to direct him to reopen the mill in view of the stand of the Indian Bank. The order passed on the previous day confirming the sale in favour of the appellant subject to further orders was, therefore, kept in abeyance and the pay order in the sum of Rs. 10,01,000 received by way of earnest money was directed to be returned to the advocate on record of the appellant. The case was ordered to be listed on November 3, 1989. The course of subsequent events would show that the order of confirmation of sale passed on the previous day in favour of the appellant subject to further orders, which was kept in abeyance by the order afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their offers through their counsel and the highest offer of the first respondent for the purchase of the assets was in the sum of Rs. 1,85,00,000 (rupees one crore eighty-five lakhs). The appellant escalated his offer up to Rs. 1,80,00,000 (rupees one crore eighty lakhs) and was disinclined to go further. An order was passed accepting the first, respondent's offer and the sale in its favour was confirmed. The first respondent handed over to the official liquidator in court five pay orders for a total sum of Rs. 16,25,000. The balance amount to make up ten per cent. of the purchase price ( i.e. , Rs. 2,25,000) was directed to be made over to the official liquidator by way of pay order in the course of the day. The official liquidator was directed to make over possession of the mill premises to the first respondent forthwith upon receipt of such balance amount. The case was ordered to stand over till the next day. This is one of the orders under challenge in the present appeal. Pursuant to the impugned order aforesaid, the first respondent paid the balance amount of Rs. 2,25,000 to the official liquidator as directed and obtained possession of the mill premises from the official l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeded Rs. 4,00,00,000 (rupees four crores), the offer given by the appellant should be accepted. On behalf of the first respondent the plea with regard to the reopening of the sale was stoutly opposed on the ground, inter alia , that he had altered his position in that he had parted with a substantial amount of money, possession of the unit was also delivered to him, and guards were employed and posted after delivery of possession and that if the sale was reopened after confirmation there would be loss of faith and confidence in the orders of the court. After hearing the parties the court passed an order rejecting the prayer made on behalf of the appellant. In the course of its order the court observed that despite repeated opportunities given to the appellant on the previous day he had shown his disinclination to give an offer in a sum higher than Rs. 1,80,00,000 (rupees one crore eighty lakhs) and that, therefore, the highest offer made by the first respondent for Rs. 1,85,00,000 (rupees one crore eighty-five lakhs) was accepted and confirmed. The delivery of possession and consequential steps stated to have been taken by the first respondent thereafter were relevant factors w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the unions of workmen and employees, has also been filed. Under the orders of the court, the official liquidator has filed three separate affidavits affirmed on February 15, 23, and 28, 1990, placing on record all the facts culminating in the passing of the orders under appeal and annexing copies of various documents and orders passed by the court from time to time. The matter was, thereafter, listed and heard on different dates, that is, February 22, 23 and 28, 1990. With the consent of the parties, the appeal and the application were both heard together. After the hearing concluded on February 28, 1990, the judgment was kept reserved and the case was ordered to be listed for pronouncement of judgment today, that is, March 6, 1990. The parties have agreed that the filing of the paper book be dispensed with and the case be disposed of on the basis of the record of the trial court as well as of the materials placed on the record of the application for interim relief by means of the affidavits aforementioned. The undertaking given on behalf of the appellant with regard to the filing of the paper book is, therefore, discharged and the filing of the paper book is dispensed with. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case law on the subject also provides adequate guidance. The decision in Navalkha and Sons v. Ramanuja Das [1970] 40 Comp. Cas. 936 (SC) being directly in point may be first referred to. In that case, the official liquidator as well as a shareholder of the company (in liquidation) sought directions of the court for the sale of immovable and movable properties and actionable claims of the company. The court appointed joint commissioners for effecting the sale subject to certain terms and conditions. Accordingly, a sale proclamation was drawn up and issued by the commissioners inviting sealed tenders for the purchase of movable and immovable properties and actionable claims of the company (in liquidation) as a single unit. The proclamation was published in four leading English dailies only instead of five. Besides, the advertisement was made only in two out of those four newspapers twice; in the remaining two, there was only one insertion. This was contrary to the conditions of sale approved by the court. Not even a single offer was received on or before September 8, 1964, which was the last date fixed for the purpose. The time for receipt of offers was extended by the court to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that was not done, the object of getting adequate price was defeated. The appeals were allowed by the Letters Patent Bench and the order dated February 19, 1965, confirming the sale read with the order dated December 24, 1964, by which an open bid was arranged between the appellant and Gopal Das was set aside. The company court was directed to take fresh steps for the sale of the property either by calling for sealed tenders or by auction in accordance with law, with the reserve price fixed at Rs. 10,00,000. The matter was thereupon carried to the Supreme Court by way of appeal and the submission of the appellant was that the company court had not erroneously exercised the discretion to accept the bid of the appellant in the auction held on December 24, 1964, and consequently there was no justification for the Letters Patent Bench to interfere with the order of the learned single judge. The submission was not found acceptable and the appeal was allowed. It was held that there was no adequate publicity since publication of advertisement was made, contrary to the conditions of sale, in four dailies only and in two out of them only one insertion was given. The fact that the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enial of opportunity to purchase the property by persons who would have taken part in the auction bid but for want of notice is a serious matter. In our opinion, the learned judge having decided on December 24, 1964, that the property should be put to auction should have directed auction by public sale instead of confining it to two persons alone. Since there was want of publicity and there was lack of opportunity to the public to take part in the auction, the acceptance of the highest bid by the learned judge was not a sound exercise of discretion ... As already pointed out, the learned company judge having decided to put the property to auction, went wrong in not holding the auction as a public auction after due publicity and this has resulted in prejudice to the company and the creditors in that the auction did not fetch adequate price. The prejudice was inherent in the method adopted. The petition of Padam Chand Agrawal also suggests that want of publicity had resulted in prejudice. In these circumstances, the company judge ought not to have confirmed the bid of the appellant in the auction held on December 24, 1964." In the course of the judgment, the principles which should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. In a partition suit the estate properties were sold at a public auction on September 13, 1937. The defendant in the suit (a member of the family) offered a bid for the property but when the reserve price was reached, he refused to bid further. The sale was eventually knocked down in favour of the respondent at a higher price (Rs. 1,12,500). The sale came up for confirmation before the court on April 7, 1938. The appellant informed the court that he would like to have the property for himself since it had been in the family for long. The case stood adjourned to April 11, 1938, when the appellant informed that he would offer Rs. 1,15,000. The respondent objected to the matter being reopened on the ground that he was the highest bidder at the public auction and that he had complied with all the conditions of sale. The trial court accepted the respondent's contention and confirmed the sale. On appeal, the Division Bench held as follows (at page 43): "The fact that the sale is subject to the confirmation of the court does not mean that the court shall refuse to accept the highest bid because at a later stage someone on second thoughts says that he is willing to pay more. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collect further information by procuring a copy of the terms and conditions of sale. There was virtually no purchaser on the first notified date of sale. A fresh sale was, therefore, ordered and all the formalities previously undergone in that regard were followed once again. In fact, wider publicity was given to the proposed sale on an all India basis and the reserve price was simultaneously raised to Rs. 1,15,00,000 (rupees one crore fifteen lakhs). The fact that the publicity was adequate can be judged not only from the circumstance of the advertisement having been inserted in four daily English newspapers and one Hindi newspaper published at different metropolitan cities but also from the fact that as many as 21 parties had collected copies of the terms and conditions of sale from the official liquidator. The record discloses that when the proceedings for sale took place on various occasions in the court, different parties had made offers and that these offers had escalated from time to time. True, somewhere midstream, the basis of the sale was changed from "as is where is and whatever there is" basis and the assets were decided to be sold as a going concern. However, there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t none of them has come up in appeal nor has any creditor of other class complained or now complains about the inadequacy of price also leads to the view that the price offered by the first respondent was rightly found by the court to be adequate. There is also no other independent evidence to show that the price fetched was inadequate. It is significant to note further that on the day on which the sale was confirmed even the appellant himself was not prepared to go beyond his offer of Rs. 1,80,00,000 as against Rs. 1,85,00,000 offered by the first respondent. The question then is whether the sale in favour of the first respondent should have been deconfirmed and the assets ought to have been offered for resale merely on the basis of a higher offer (Rs. 2,10,00,000) made by the appellant on the day next after he was outbidden by the first respondent. In answering this question due weight must be given to the fact, firstly, that no irregularity or fraud is alleged and, secondly, that in this case the question is not whether the sale should be confirmed after the acceptance of a bid by the auctioneer or agent but whether a fresh sale should be ordered by setting at naught the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All possible care was exercised right from the inception to ensure that having regard to the market value of the property and other circumstances, the price fetched is adequate. The record is replete with materials showing that at all relevant stages requisite steps were taken in that direction. A valuation report was obtained, the reserve price was fixed and revised upwards, wide publicity to the intended sale was given to invite most competitive offers, the co-operation of workmen and secured creditors was secured so that the buyer may not have to face subsequent obstacles and the assets were sold as a going concern with the end in view of starting the manufacturing unit in the larger public interest and also in the interests of workmen, creditors and contributories. There is no suggestion of any irregularity or fraud. There is no independent evidence of the sale having taken place at an inadequate price. Between the two parties who were offering bids, the sale was ultimately confirmed in favour of the one who offered a better price. Ample opportunities were given to the appellant to outbid the first respondent but he did not avail of them on the date of sale. The price ultimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded on February 28, 1990, an affidavit was sought to be tendered in court on March 2, 1990, on behalf of the appellant, when the court was about to rise for the day, and it was submitted that it was thereby intended to place on record materials with regard to the financial capability of the appellant to make good his offer and to run the manufacturing unit. We declined to take the affidavit on record for the obvious reason that there was no room for it at that late stage. For the foregoing reasons, the appeal fails and it is dismissed. The appellant shall pay the costs of the appeal to the first respondent and to the workers' union( s ) quantified at 100 Gms each and to the official liquidator quantified at 50 Gms. Pursuant to the interim directions passed on February 9, 1990, the appellant deposited a sum of Rs. 1,00,000 with the official liquidator. The said amount will be returned to him forthwith. Similarly, the like amount deposited by the first respondent will also be returned to it by the official liquidator after deducting therefrom payments, if any, made by him to the workmen under the orders of the court. Interim stay stands vacated. In case the parties want a co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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