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TMI Blog2000 (4) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... construction Regulations, 1987 ("B.I.F.R.") and thereafter application under the said Act was rejected by the Board. Appeal filed before the A.I.F.R. was also dismissed. It is the contention of the Bank that on 30-3-1981, the borrowings by the company increased to about Rs. 3 crores and company executed four balance confirmations in respect of the dues in various accounts. The bank also filed a title mortgage suit No. 103 of 1992 before the Assistant District Judge, Sealdah against the company and five guarantors for recovering Rs. 4,11,21,411 alongwith interest after obtaining leave by the company Judge under section 446 of the Companies Act, 1956 ('the Act'). By order dated 19-8-1991, the Company Judge issued directions for winding up of the company and appointing Official Liquidator to take over assets. On 16-2-1996, the Company Judge appointed Mr. Pranoj Roy Chowdhary of Chowdhary Associates as a valuer with a direction to submit a report within six weeks from the date. Official Liquidator has stated that he informed the appellant Bank about the said order by letter dated 29-2-1998. Thereafter the matter was placed before the Company Judge on 21-6-1996 and on the same date Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears that on behalf of Syndicate & Promising Exports Ltd., one advocate appeared and submitted that it was ready and willing to purchase the company as a going concern by paying Rs. 70 lakhs on the same terms and conditions as stated above. His offer was considered by the Court by giving a direction that offeror would deposit 20 per cent of the amount either by Bank draft or pay order, with the Official Liquidator on or before 23-9-1996. The Court further directed that in the event of failure to deposit the said sum, the offer of Indrani Soft Drinks will stand accepted without there being any further bid. The matter was kept for further orders on 27-9-1996. On that date it was found that Promising Exports had neither sent any offer to the official liquidator nor had deposited any amount. The Court observed that the sale in favour of auction purchaser - Indrani Soft Drinks remains accepted and directed them to pay the balance amount within 60 days. It also directed - "Official Liquidator will supply a copy of the valuation report to the secured creditor at their cost". The Official Liquidator was directed not to part with possession of the company till the entire purchase price w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory expert bodies failed to restart the company and thereafter the learned Judge without verifying any of these facts and the valuation report and without giving the copy of valuation report to the secured creditors for whose benefit properties were sold, directed the property to be sold and confirmed the sale. It is also submitted that in the notice for sale issued by the liquidator the upset price is not stated and that at initial stage offer of respondent No. 2 Messrs Indrani Soft Drinks Ltd. was only Rs. 40 lakhs but in the Court after seeing the so called valuation report it was raised to Rs. 67 lakhs which clearly indicates that there was something wrong with the offers. He also relied on the decisions of this Court in Allahabad Bank v. Bengal Paper Mills Co. Ltd. [1999] 4 SCC 383/ 20 SCL 309 and submitted that facts of the said case are similar and the law laid down in the said case would be applicable in the present case. 9. As against this, the learned senior counsel Mr. A.K. Ganguli for the respondents vehemently submitted that the Bank has not raised any objection before the company Judge with regard to the inadequacy of the price or non-supply of the valuation r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Company Judge ought to have also considered the fact that an attempt made by the BIFR and AIFR which are expert bodies under the SICA to revive the sick unit had failed. In any set of circumstances, there was no material on record before the learned Judge for holding that company could be revived and the employees would be reinstated in service by giving them re-employment. Without indulging in any such exercise straightaway to state that property would be sold as a going concern was totally without any basis and, therefore, unjustified. At the time of hearing of this matter it is admitted that after purchase of the company, it was restarted only for one day i.e. on the day of inauguration. 12. It also appears that the Division Bench was persuaded by the so-called sympathy for the workers, without verification of the fact that Company was closed before 17 years of sale. Court has noted in the beginning while narrating the submission of the learned Counsel who appeared for the benefit of the employees that more than 100 employees were starving to death and in the later para stated that Court was informed by the learned advocate appearing for the employees union that more than 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reasonable value at Rs. 2 lakhs per katta is found reasonable but as a mater of fact the land is lease hold. So the value of land will be lease because of lease hold land. As per lease beginning of the year of 1963 for the term of 99 years @ Rs. 300 per month. So, the rent for 99 years @ Rs. 300 = Rs. 3,56,400. 15% Municipal Tax & Repairing of structure etc. = Rs. 53,460 Total rent, tax etc. for 99 years = Rs. 4,09,860. So, the value of land for 99 years = Rs. 4,09,860 (Rupees four lakhs nine thousand eight hundred and sixty only)." 15. In our view valuer stating that for the purpose of valuation of the land he has inquired from local people and that he understood that the land price in this particular area varies between Rs. 2 lakhs to 2.5 lakhs per katta cannot be said to be an opinion of an expert valuer. He has not relied upon any sale instance for arriving at the conclusion that the valuation varies from Rs. 2 to 2.5 lakhs per katta. He has also not stated from whom he has verified the value of the land. Further, he has stated that after considering all aspects, he felt that fair and reasonable value would be Rs. 2 lakhs per katta. Presuming that valuation of land is Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the sanction of the Court required under the Companies Act has to be exercised with judicial discretion regard being had to the interests of the company and its creditors as well. This principle was followed in Rathnaswami Pillai v. Sadapathy Pillai (AIR 1925 Mad. 318) and S. Soundararajan v. Roshan & Co. (AIR 1940 Mad. 42). In A. Subbaraya Mudaliar v. K. Sundararajan (AIR 1951 Mad. 986) it was pointed out that the condition of confirmation by the court being a safeguard against the property being sold at an inadequate price, it will be not only proper but necessary that the Court in exercising the discretion which it undoubtedly has of accepting or refusing the highest bid at the auction held in pursuance of its orders, should see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularity or fraud." 17. The learned senior counsel Mr. Ganguli relied upon the decision of this Court in Kayjay Industries (P.) Ltd. v. Asnew Drums (P.) Ltd. 1974 (2) SCC 213 and contended that Court should not go on adjourning the sale till a good price is received, as it being a notorious fact that Court sales and market prices are distant neighbo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the basis of auction sale under Order 21 rule 90 of the Code of Civil Procedure, 1908 and the court has observed that judgment debtor did not furnish adequate materials to substantiate the allegation of fraud and material irregularity. 19. Further, the learned counsel relied on the decision in Motors & Invests Ltd. v. Union Bank of India 1997 (11) SCC 271 and contended that the Court in the alternative may direct refund of the amount deposited and invested by the bona fide auction purchaser with 18 per cent interest. In that case, the Court has set aside the sale of 44 acres of land by holding that it was sold at too inadequate price. In the said case also the Court has observed:- "Equally, though court sale is compulsive sale, equal endeavour should be made to fetch adequate price for the property sold so that the decree debt would get satisfied and surplus, if any, could be paid over to the judgment-debtor." 20. The Court further ordered that in case the official assignee has kept the sale amount in any interest-earning security, the principal amount together with interest is directed to be refunded to the appellant. And, in case the amount was not kept in any deposit an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side the sale in favour of Purchaser/Purchasers even after the sale is confirmed and/or purchase consideration is paid on such terms and conditions as the Court may deem fit and proper for the interest and benefits of creditors, contributories and all concerned and/or for public interest." 24. Hence, if the sale is set aside in appeal, it cannot be stated that purchaser is entitled to have refund of the amount with interest. 25. We also make it clear that we have not dealt with the contention of the learned counsel for the Bank that what was sold in auction was equity of redemption and not the rights of the mortgagee. 26. In the result, the appeal is allowed. The impugned order passed by the Company Judge in Company Petition No. 316 of 1981 confirmed in appeal GA No. 708 of 1996 is quashed and set aside with costs. Official Liquidator is directed to recover the possession of the property sold as per the inventory and thereafter to refund the amount deposited by the respondent No. 2 - auction purchaser. It would be open to respondent No. 2 to file proper application for recovering any other expenditure incurred by it after purchase of the said property if it is entitled to recove ..... X X X X Extracts X X X X X X X X Extracts X X X X
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