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TMI Blog2003 (7) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... mited (in liquidation) praying to recall and set aside the order dated 3-4-2003 made in C.A. No. 273/2000 in R.C.C. No. 6/93 and pass such other suitable orders. By an order dated 2-9-1998 in R.C.C. No. 6/93 the Company Court had directed the winding up of M/s. Lakshmi Porcelains Limited and appointed Official Liquidator as Liquidator under section 459 of the Act. The 7th respondent offered Rs. 1,75,00,000 and an order was passed by the Court in C.A. No. 273/2000 accepting the offer of the 7th respondent and the appellant made an offer of Rs. 7 lakhs more than the offer made by the 7th respondent. The dismissal of C.A. No. 379/2003 is assailed in this Original Suit Appeal by the appellant. 4. In O.S.A. No. 15/2003, the appellant filed C.A. No. 364/2003 in R.C.C. No. 4/97 in the matter of M/s. Sri Ambuja Petrochemicals Limited (in liquidation) praying to recall and set aside the order dated 20-3-2003 passed by the Court in C.A. No. 44/2003 in R.C.C. No. 4/97 by confirming the sale in favour of the applicant and for other suitable orders. By an order dated 10-4-1998 in R.C.C. No. 4/97, the Company Court had directed winding up of M/s. Sri Ambuja Petrochemicals Limited and appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant that in the event of fresh auction being ordered, he would start his offer with Rs. 1,93,50,000. It was further contended that at any rate, this offer was made before confirmation and before deposit and keeping in view the principle that in a company Court sale, every endeavour should be made to get the best price out of such sale, in the light of the bona fide offer made, the learned single Judge had totally erred in dismissing the applications instead of allowing them. The learned Counsel also had placed reliance on Navalkha Sons v. Ramanya Das AIR 1970 SC 2037, Divya Mfg. Co. (P.) Ltd. v. Union of India AIR 2000 SC 2346. 6. Sri S. Ravi, Counsel representing the contesting respondents in both these appeals had drawn our attention to the counter affidavits filed by respondents 7 and 12 in these Appeals respectively and had pointed out that absolutely there are no grounds since no regularities had been pointed out in the conduct of these sales. The learned Counsel also would maintain that the applications of this nature would definitely undermine the confidence of tender participants/auction purchases and having gone through the ordeal of submitting seal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me by virtue of which the interest of the secured creditors will be definitely jeopardized. 9. Heard the counsel on record and perused the material available on record. 10. In O.S.A. No. 14/2003, the appellant M/s. Haryana and Steel Centre filed C.A. No. 379/2003 with a prayer to recall and set aside the order dated 3-4-2003 made in C.A. No. 273/2000 in R.C.C. No. 6/93 on the file of the Company Court and pass such other suitable orders. It is stated that the appellant is a partnership firm. The Official Liquidator filed a report and filed C.A. No. 273/2000 on the file of the Company Court praying for sale of the properties of the Company in liquidation M/s. Lakshmi Porcelains Limited which was ordered to be wound up by an order dated 2-9-1998. Pursuant to the order dated 7-2-2002, a public notice was issued by the Official Liquidator on 24-3-2002 in the newspaper for sale of properties of the Company in liquidation dividing the properties of the said Company into three lots and by fixing the upset price for each of those and by fixing up the date of sale to be 9-4-2002. But since there was poor response to the abovesaid publication and in view of the fact that the bids rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sking them to be present in the chamber of the Official Liqui- dator on 6-1-2003 and in the said auction M/s. Soma Enterprises Limited had given a higher offer for Rs. 95,00,000 for lot No. 1 and for lot No. 2, M/s. Haryana and Steel i.e., the appellant herein, emerged as the highest bidder for Rs. 25,20,000 and for lot No. 3 M/s. K.K. Associates emerged as the highest bidder being Rs. 2,05,000. On a representation made by the counsel for M/s. Soma Enterprises, the Company Court by the order dated 20-3-2003 was pleased to sell the property afresh by following the procedure. The appellant herein submitted its offer to the Official Liquidator on 20-2-2003 for Rs. 1,10,00,000, Rs. 40,00,000 and Rs. 3,00,000 for the lots 1, 2 and 3 respectively. The Official Liquidator filed his report on 3-4-2003 stating that one M.S. Prasad Rao and others had given their highest offer, being Rs. 1,25,00,000, Rs. 45,00,000 and Rs. 5,00,000 for the lots 1, 2 and 3 respectively and placed his offer before the General Manager, Industrial Development Bank of India and subsequently the officials of I.D.B.I. vide their letter dated 31-2-2003 intimated the Official Liquidator that a joint meeting was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000. It is further stated that M.S. Prasad Rao had the benefit of knowing the offer of the appellant herein and the same had facilitated him to quote higher offer than the appellant herein. Now that the offer made by M.S. Prasad Rao is being confirmed by the Company Court by the order dated 3-4-2003, the appellant herein is deprived of an opportunity to increase his offer than what had been offered by the prized bidder M.S. Prasad Rao. Thus, it was specifically stated that the appellant herein is ready and willing to make a higher offer for lots 1, 2 and 3, which would be Rs. 7,00,000 more than the offer made by the 7th respondent and it was specifically stated that the appellant herein is ready to increase the offer, if opportunity is offered to him to participate in the negotiations with M.S. Prasad Rao. Thus, a specific stand had been taken making a clear offer of Rs. 7,00,000 more by the appellant herein. 11. The Official Liquidator filed a report in detail explaining the circumstances under which the offer made by the 7th respondent has to be accepted. The Official Liquidator also had explained the difficulties in conducting the resales. The details are well narrated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03, the Company Court was pleased to permit the Official Liquidator for sale of the Company s assets. Consequent to the above orders passed by the Company Court, advertisements were published in the newspapers informing the date of sale as 26-2-2003. On 12-3-2003, the Official Liquidator filed a report stating that the 12th respondent herein gave the highest offer for lot No. 2 i.e. Rs. 1,76,00,000. The report of the Official liquidator was received by the Company Court and an order was passed on 20-3-2003 accepting the same with an observation that the sale would be confirmed after payment of the total amount and the total amount was directed to be paid within one month from the date of the order. It is further stated that the appellant is interested in purchasing the plant and machinery for a much higher amount i.e., Rs. 1,93,50,000, which would be Rs. 17,00,000 more than what had been offered by the 12th respondent and to show the bona fides , the appellant also had expressed his readiness and willingness and had undertaken to deposit 20 per cent of the total amount immediately within the time as may be pleased by the company Court. The appellant also had stated that he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l have power, with the sanction of the Court to sell the immovable property and movable property and actionable claims of the Company by public auction or private contract with power to transfer the whole thereof to any person or body corporate or to sell the same in parcels. It is significant to note that the words employed in section 457(1)( c ) of the Act are "... by public auction or private contract...". Conferring power to do something is something different from exercising the said power. It is no doubt true that sale by private contract also is permitted, but however, in view of the principle that in a Company Court sale endeavour should be made to get the best possible price, sale by public auction should be the normal rule and sale by private contract should be an exception, only under inevitable circumstances. It is no doubt true that the report of the Official Liquidator explains the details under what circumstances the sale was confirmed, but definitely, this sale was not by public auction and now an offer is made to a tune of Rs. 7,00,000 more. Likewise in O.S.A. No. 15/2003, a specific offer enhancing Rs. 17,00,000 was made. As can be seen from the record itself, of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion. In Gordhan Das Chunni Lal v. Kanthimathinatha Pillai AIR 1921 Mad. 286, it was observed that where the property is authorized to be sold by private contract or otherwise it is the duty of the Court to satisfy itself that the price fixed is the best that could be expected to be offered. That is because the Court is the custodian of the interests of the Company and its creditors 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 Rathnasami Pillai v. Sabapathi Pillai AIR 1925 Mad. 318 and S. Soundararajan v. Mahomed Ismail, 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 Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p. Petition No. 1 of 1964 - a petition for winding up Kundara Enamel Industries . He was directed by the Court to sell among other properties a building for which the upset price was fixed at Rs. 50,000. The appellant had filed a petition on 14-11-1966 stating he was prepared to purchase the said building for a reasonable sum. There were no bidders at the sale and the sale was adjourned. The upset price was reduced by Court to Rs. 20,000. The building was sold for Rs. 20,600 on 10-2-1967, to the third respondent the highest bidder. One Ismail, it seems, had filed a petition after the said sale offering Rs. 25,000 and making certain allegations against the Liquidator. On 14-2-1967, the appellant filed I.A. No. 164 of 1967 in the District Court stating that he was prepared to purchase the building for Rs. 30,000, that there would have been no occasion for the sale if his offer had been accepted and that the sale was vitiated by irregularities; no particulars of irregularities were set forth therein. The application was dismissed stating that the sale had already been confirmed. In the appeal against the dismissal the appellant contended that the Court should have considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19,569.00 Total 17,90,041.00 Advertisement cost break up 28-03-2001 For sale of car9,300.00 17-06-2002 For claims28,158.00 15-01-2003 For sale1,60,960.00 14-05-2003 For sale3,36,135.00 Valuation fees of Sambasiva Rao Valuation fee payable as per court order 6,00,000.00 Less: already paid 3,00,000.00 Balance of valuation fee payable 3,00,000.00 19. It is no doubt true that ordering resales too often also may be detrimental to the interest of the general body of creditors and the secured creditors as well. But, at the same time, when higher offers are made, which are not just marginal or negligible, the Court is expected to bestow its thought in considering whether such sales are to be confirmed or resales are to be ordered depending upon the fact, and circumstances of the case, even in the absence of any allegation of irregularity or fraud in the conduct of sales. A few of the guidelines in the case of conduct of Company Court sales may be specified as hereunder: (1) It is the duty of the Court in the conduct of sale to see that the price offered is reasonable when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able decision may have to be arrived at in this regard. 21. In the light of the principles enumerated above, we are satisfied that a bona fide offer of Rs. 7,00,000 in the case of sale not by public auction and yet a bona fide offer of Rs. 17,00,000 in the case of sale by public auction, at any stretch of imagination, cannot be said to be only marginal or narrow offers and these offers were made before the confirmation and especially a specific undertaking also was made to begin the bid from such an offer, in case the Court directs resales. In the light of the ratio laid down by the Apex Court in the decision referred in Divya Mfg. Co. (P.) Ltd. s case ( supra ), and in the light of the facts and circumstances narrated in detail supra , we are satisfied that the impugned Common Order made by the Company Court cannot be sustained and accordingly the same is set aside. It is made clear that the appellant in O.S.A. No. 15/2003, in the application, prayed for confirmation of sale in his favour, which definitely cannot be granted and at the best, resale alone can be ordered since others also must be given an opportunity to participate in the auction. 22. For the reasons r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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