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TMI Blog2006 (8) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... her clarified on 13-1-2005, confirming the sale is restored. Vide order dated 28-1-2005, the Official Liquidator was restrained from taking any further action with regard to the sale, he may now proceed in completing all the requisite formalities in favour of the auction purchaser. A sum of Rs. 2 crores which was ordered to be deposited by respondent No. 10 with the Official Liquidator shall now be returned to it on an application to be moved in this regard. Any interest if accrued thereupon, shall also be paid to respondent No. 10 along with the aforesaid amount. X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 19 and Rs. 15.5 lakhs for Item No. 20. At its meeting held on 27-7-2004, the Sale Committee decided to retain the offer of WINSOME in regard to Item No. 17 until the machinery, furniture and fittings (Item Nos. 18, 19, 20) kept in the premises were disposed of. At its further meeting held on 28-7-2004, the Sale Committee resolved to invite WINSOME to buy Item Nos. 17, 18, 19 and 20, (that is, the three items for which it had made offers as also Item No. 18 (- machineries installed in Item No. 17) at a total price of Rs. 5 crores, the price being subject to negotiations, if WINSOME so desired. WINSOME did not agree. On 10-12-2004 there was an inter se bidding among WINSOME and two other tenderers, namely, M/s. Star Point Financial Services Ltd. and M/s. S.K. Khaitan Pvt. Ltd., WINSOME increased the offer in respect of Item No. 17 to Rs. 3.16 crores. There was no increase in its offer for ItemNos. 19 and 20. The learned Company Judge, by his order dated 10-12-2004, accepted the offer of WINSOME at Rs. 3.36 crores for Item Nos. 17, 19 and 20 and confirmed the sale of these items in favour of WINSOME. The order dated 10-12-2004 was clarified on 13-1-2005. 5. WINSOME deposited the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by it to its bankers on the loans taken by it, on submission of a bill for interest based on actuals. The court directed that SUNGROUP should bear and pay the said interest as also the expenses relating to re-auction of Item Nos. 17, 19 and 20. 8. The said order was challenged by WINSOME, in Company Appeal No. 11/2005. A Division Bench of the Punjab & Haryana High Court by order dated 6-10-2005 allowed the said appeal, set aside the order dated 30-3-2005 of the learned Company Judge and restored the order dated 10-12-2004 (as clarified on 13-1-2005) confirming the sale in favour of WINSOME. The Division Bench directed the Official Liquidator to complete all formalities in regard to the sale in favour of WINSOME and further directed the return of Rs. 2 crores to SUNGROUP. The order of the Division Bench is challenged by the Employees Union in the first batch of appeals and by SUNGROUP in the second batch of appeals. 9. SUNGROUP contends that the sale price at which Item Nos. 17, 19 and 20 were sold to WINSOME was very low. It relied on the minutes of the meeting dated 28-7-2004 of the Sale Committee to get a fair indication of the market value. It pointed out that the Sale Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Committee had merely suggested that WINSOME should be requested to purchase Item Nos. 17 to 20, which included the machinery for which it had not made any offer, for Rs. 5 crores making it clear that it was only an asking price, open to negotiations. It is contended that the sum of Rs. 5 crores referred to by the Sale Committee was not an indication of the market price of Item No. 17 as Rs. 4.5 crores but only an attempt by the creditor banks to maximize the sale price receivable for Item Nos. 18 to 20. Strong reliance was also placed on the fact that SUNGROUP itself had offered only Rs. 3.53 crores for Item No. 17 in February, 2005, when it sought the setting aside of the sale in favour of WINSOME which showed that the price was only around Rs. 3 crores when it made its offer in July, 2004. It is contended that as there were no irregularities in the sale, the sale could not be set aside even if for any reason, the price paid by it is held to be marginally lower than the then prevailing market price. Insofar as the purchase of the adjoining plot by SUNGROUP on 20-4-2006 for Rs. 11.6 crores, it was contended that the said sale was nearly 21 months after the sale of item No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement. In view of the above we consider it a fit case to exercise our power under article 142 of the Constitution, and accept the settlement as proposed in the larger interest of parties and to benefit the workmen. We make it clear that the sale which has already been confirmed in favour of WINSOME, is set aside, not on merits, but in pursuance of the negotiated settlement arrived at among SUNGROUP, the Employees' Union and WINSOME. Accordingly, we allow these appeals in part accepting the settlement on the following items : (i)SUNGROUP shall pay a sum of Rs. 6.36 crores to WINSOME towards the refund of the sale price and as compensation for depriving WINSOME from the enduring benefit of its capital asset, in the following manner : (a)Rs. 1.64 crores by demand draft drawn in favour of Canara Bank, Sector 35B, Chandigarh, to the account of WINSOME, in repayment of the loan taken for purchasing item 17. (b)Rs. 1.38 crores by demand draft drawn in favour of State Bank of Patiala, Commercial Branch, SCO 103-107, Sector 8C, Chandigarh, to the account of WINSOME, in repayment of the loan taken for purchasing item 17. (c)Rs. 3.34 crores by two demand drafts for Rs. 3 crores and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to SUNGROUP. (vii)SUNGROUP shall make all the payments within one week from today. The Official Liquidator and WINSOME shall issue necessary NOCs./request letters within one week thereafter. (viii)SUNGROUP shall pay ex gratia a sum of Rs. 50 lakhs to the Employees' Union, by a demand draft made out in the name of the Union, for equal distribution to the employees who were in the employment of PUNWIRE during June, 1999 (when employees were last paid salaries by the company). In respect of any employees who died subsequently, their LRs. shall be paid the employee's share. The entire distribution shall be done by the Employees' Union independent of these proceedings. (ix)SUNGROUP will have the option to purchase Item Nos. 19 and 20 separately by paying the price of Rs. 4.50 lakhs and Rs. 15.50 lakhs respectively to the Official Liquidator to the account of PUNWIRE. (x)On the sale of Item No. 17 being set aside and leasehold in respect of Plot No. B-77, being transferred in favour of SUNGROUP, it is open to WINSOME to seek refund of the transfer fee in regard to lease in its favour from PSIEC or stamp duty from the State Government, if permissible, as per law. The order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the office of the Official Liquidator by creating separate lots as prepared by the sale committee. A valuation report is also prepared. A tender notice was consequently floated on June 15, 2004, which was published on June 25, 2004, in various leading newspapers, viz., the Economic Times (All India Edition), Times of India (All India Edition), The Tribune (All India Edition), Punjab Kesri (Hindi) Ambala, Delhi and Jalandhar editions and Jagbani (Punjabi) Jalandhar edition. According to the tender notice, the properties and assets of Punwire were divided into 25 lots. The reserve price of each lot along with earnest money in respect thereof was also specified. The date of opening the tenders was also fixed. The requirement as per the tender notice was that the tenderers were required to submit separate tenders for each lot along with earnest money through bank draft in favour of the Official Liquidator. The Official Liquidator and the Committee were given the power to reject any offer without assigning any reason and also allow inter se bidding amongst participating bidders, if necessary. The sale was, however, to be subject to confirmation by the company judge. As per the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies (Court) Rules, 1959 (for short "the Rules"), requesting the court to call the prospective bidders namely the appellant, M/s. Star Point Financial Services Pvt. Ltd., Panchkula and M/s. S.K. Khaitan and Company for inter se bidding with regard to land and building comprised in lot No. 17. In respect of lot No. 19, a recommendation was made to consider the offer received by the Official Liquidator by the appellant. With regard to lot No. 20, the Official Liquidator stated in the aforesaid application that the appellant had offered Rs. 15.50 lakhs but with certain conditions. It was also mentioned in the said application that the offer of the appellant was sent back with a counter-offer of the Committee to give a bid of lot Nos. 17, 19 and 20 collectively at least for Rs. 5 crores. The secured creditors also stepped in before the learned company judge before the confirmation of the sale. These are Indian Overseas Bank-respondent No. 2, Canara Bank--respondent No. 3, State Bank of Patiala--respondent No. 5, State Bank of India--respondent No. 6 and IDBI Bank--respondent No. 7. A joint reply was filed before the learned company judge by the said secured creditors asserting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage as the sale has already been confirmed. The learned company judge vide order dated January 28, 2005, directed the Sun Group to deposit a sum of Rs. 2 crores with the Official Liquidator within a stipulated period and restrained the Official Liquidator from executing the sale deed in the meanwhile in favour of the appellant. Thereafter, on February 11, 2005, the Punwire Employees Union (for short the union) through its President and General Secretary also filed objections praying for modification/recalling/setting aside the order or confirmation of sale on the ground that under section 529A of the Act, the dues of the employees are at par with the dues of the secured creditors and thus, they are to be treated pari passu along with them. The grouse shown by the union was that the Official Liquidator had not associated it as no communication was ever received by the union in connection with the sale of assets of Punwire. The stand of the union was also repudiated by the appellant. The learned company judge vide impugned order dated March 30, 2005, set aside his earlier order of confirmation of sale dated December 10, 2004, in favour of the appellant and directed it to hand ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint Financial Services Pvt. Ltd. We have heard Mr. L.M. Suri, learned senior advocate assisted by Mr. Deepak Suri and Mr. Neeraj Khanna, advocates for the appellant--auction purchaser, Mr. Alok Jain, advocate for the Official Liquidator--respondent No. 1, Mr. Manish Jain, advocate for IFCI, the main secured creditor--respondent No. 9, Mr. Vivek Bhandari, advocate for M/s. Sun Group Enterprises Pvt. Ltd.--respondent No. 10 and Mr. S.C. Nagpal, advocate for Punwire Employees' Union--respondent No. 11. With their assistance, we have gone through the entire record available to us. Mr. Suri vehemently contends that the order passed by the learned company judge is without jurisdiction as after confirmation of sale by the court the company court has no jurisdiction to entertain further higher bids for the already auctioned property as it becomes functus officio and does not have the power to review or recall the order of confirmation of sale. In other words, it is claimed that the company judge can recall or review his earlier order only at a stage prior to the confirmation of sale and not thereafter. Mr. Suri dwelling upon his arguments then contends that in the case in hand even the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of price with regard to lot Nos. 17, 19 and 20, Mr. Suri contends that the learned company judge has failed to appreciate that even as per the revised offer giving lot-wise bifurcations, the offer of the Sun Group for these three lots was higher by Rs. 20.65 lakhs only and this difference, not being substantial, should not have influenced the mind of the learned company judge to review his order confirming the sale especially when the prices of the immovable properties are known to rise on day-to-day basis and therefore, a higher offer of just negligible margin after three months is of no consequence. Thus, learned counsel contends that even the revised bid ought to have been rejected at the very outset. He points out that it was at a much later stage that the petitioner's oral bid of Rs. 3.75 crores for lot Nos. 17, 19 and 20 had been entertained. Mr. Suri highlighted another material aspect submitting that before the sale was confirmed in favour of the appellant, no one had ever alleged any irregularity, fraud or inadequacy of price. It is only after the issuance of the "no objection certificate" by the Official Liquidator to PSIEC for transfer of the property, the present app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of workmen is not only contrary to the provisions of company law but also runs counter to the facts. Mr. Suri then submits that the miscellaneous application moved by the union to create an impression that a fraud has been played upon the Court by the appellant by introducing M/s. Star Point Financial Services Pvt. Ltd. as one of the bidders to show competitive bidding whereas aforesaid Star Point is the sister concern of the appellant, has in fact no substance in it as the bidding was conducted by the company court itself in which no one else except the appellant, M/s. Star Point Financial Services Pvt. Ltd. and one M/s. S.K. Khaitan and company had participated. There is neither any allegation nor any finding by the Court that the appellant or M/s. Star Point had entered into any arrangement to prevent any other person from participating in the open bidding. Even otherwise a company is a legal person having its separate distinct entity and can act as such. Mr. Suri then submits that the learned company judge has not correctly appreciated the judgment of Hon'ble Apex Court reported in Divya Manufacturing Co. Ltd. v. Union Bank of India [2000] 102 Comp. Cas. 66 ; [2000] 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of inadequacy of price relying upon Divya's case [2000] 102 Comp. Cas. 66 ; [2000] 6 SCC 69. He has also referred to the relevant observations made therein to strengthen his submissions. According to Mr. Bhandari, the company judge, never becomes functus officio, as contended by Mr. Suri and is fully competent to reverse/set aside his earlier order of confirmation of sale on this ground. Mr. Bhandari then contends that once the company judge is of the view that the earlier sale which was confirmed was not proper the same can be set aside even after handing over of possession. In support of his contentions, Mr. Bhandari relies on two judgments of the Apex Court rendered in Allahabad Bank v. Bengal Paper Mills Co. Ltd. [1999] 96 Comp. Cas. 804 ; [1999] 4 SCC 383 and Union Bank of India v. Official Liquidator High Court of Calcutta [2000] 101 Comp. Cas. 317 ; [2000] 5 SCC 274. Dwelling upon his arguments, Mr. Bhandari further submits that in Divya's case [2000] 102 Comp. Cas. 66; [2000] 6 SCC 69, the observation of the hon'ble Apex Court with regard to handing over of possession is just a obiter dicta whereas in the aforesaid judgments, the Hon'ble Supreme Court has dealt with this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as higher than the accepted bid of the appellant, still the learned company judge has not confirmed the sale in its favour. He has merely ordered the reauction of three lot Nos. 17, 19 and 20 at the expense of the Sun Group and even interest on loans raised by the appellant is to be borne by it. Therefore, the appellant possibly should not have any grouse to it as the chapter is still open and the appellant can enter into re-auction by putting its claim along with other bidders. Mr. Nagpal representing the union (respondent No. 11) also joins issue and vehemently submits that the order of the learned company judge deserves to be upheld as the interest of the workmen, being in no way different from the interest of the secured creditors, has not been taken care of by the Official Liquidator as he has failed to associate the workmen in the process of sale of the assets of the company in liquidation. Mr. Nagpal submits that by virtue of section 529A of the Act, the status of the workman is at par pari passu with secured creditors and thus, the workmen, like the secured creditors were required to be associated with the sale of the assets of the company in liquidation as well as at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agpal adopts the offer made by the Sun Group and fairly states that the union was not able to bring a better buyer. On the question of possession, Mr. Nagpal submits that only symbolic possession was given to the appellant and not physical possession and therefore, there is no flaw in the impugned order. Mr. Munish Jain appearing for the secured creditors, on the other hand, has supported the case of the appellant and submits that earlier also when the sale was confirmed by the company judge, the secured creditors had preferred no objection to its confirmation. The order setting aside the confirmed sale, according to Mr. Jain, is not sustainable as the same is adverse to the interest of the secured creditors. Mr. Jain then submits that a workman is not a secured creditor for all purposes by virtue of section 529A of the Act. He steps in only at the time of disbursement of dues and at that stage, he indeed has a preferential right over the secured creditors. Prior to that the Official Liquidator for all intents and purposes represents the workman before the company judge and safeguards his interest. In support of his contentions, Mr. Jain has relied upon the following judgments: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lots as prepared by the sale Committee. The tenders were opened on June 20, 2003, July 27, 2003 and July 28, 2003, in the presence of all the members of the Sale Committee and the representatives of the prospective buyers and in that regard details have been furnished in the application. All those proceedings have been placed on record and exhibited as Annexure A2. In respect of land and building situated at B-77, Phase VII, Industrial Area, Mohali, highest bid of Rs. 3.14 crores was received from M/s. Winsome Yarns Limited. The sale committee has recommended that the offer of the auction purchaser may be retained and same decision may be taken in respect of furniture and fixtures and other miscellaneous items as those items have to be disposed of for handing over the vacant possession of the property to the auction purchaser. It is appropriate to mention that during the course of hearing M/s. Star Points Financial Services Pvt. Ltd. from Calcutta, made an offer of Rs. 3.15 crores which has further been toppled by a higher bid of Rs. 3.16 crores. It is further appropriate to mention that the intervener has deposited a sum of Rs. 25 lakhs as an earnest amount to seek eligibility t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der was ultimately clarified with regard to lot Nos. 19 and 20 on January 13, 2005, as there was some ambiguity with regard to confirmation of sale qua these two lots. We have perused the impugned order dated March 30, 2005, also. The learned company judge has referred to rule 272 of the Rules vis-a-vis section 447 of the Act with regard to effect of a winding up order and then relying upon Navalkha & Sons v. Ramanuja Das [1969] 3 SCC 537; [1970] 40 Comp. Cas. 936 , Union Bank's case [2000] 101 Comp. Cas. 317 ; [2000] 5 SCC 274, Allahabad Bank's case [1999] 96 Comp. Cas. 804 ; [1999] 4 SCC 383 and Divya's case [2000] 102 Comp. Cas. 66 ; [2000] 6 SCC 69 ultimately set aside the confirmed sale. The relevant observations anent to the controversy involved in this case for reference are reproduced as under : The following circumstances may persuade the court to lean in favour of the auction purchaser : (a)participation in the tender proceedings in accordance with the time table notified by the Official Liquidator ; (b)on time payment of earnest money and on confirmation, vide order dated December 10, 2004, payment of whole amount on December 13, 2004; (c )approval to disburse loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toppled by the auction purchaser by offering higher bid of Rs. 3.16 crores. According to the advertisement, reserve price for lot No. 17, was Rs. 3 crores. Similarly, in respect of lot Nos. 19 and 20, a reserved price of Rs. 4 lakhs and Rs. 15 lakhs, respectively, was kept. The auction purchaser in their tender for lot No. 20, which comprises of air-conditioners, had offered Rs. 15.50 lakhs on the condition that lot No. 17 be sold to it at the price offered by it. It has also made an offer in respect of lot No. 19 for which it had offered Rs. 4.50 lakhs. It is evident that lot No. 17, which comprises of land and building is the prime lot. The official liquidator received only three offers and in the inter se bidding, only two bidders, namely, "auction purchaser" and M/s. Star Point Financial Services Limited partici-pated. This fact further shows that the auction purchaser succeeded in confirmation of sale at an inadequate price. It is true that wide publicity had been given and there might be delay on the part of the intervener namely, Sun Group Enterprises (P.) Limited, in making the offer, hiking the bid much higher. During the course of arguments, Mr. Bhandari has offered Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h more as the difference is huge. The other argument based on the judgment of the Supreme Court in the case of State of Punjab v. Yoginder Sharma Onkar Rai & Co. [1996] 6 SCC 173, cannot also be accepted because in that case the controversy related to the auction of liquor vend in the State of Punjab. There is no provision equivalent to rule 272 of the Rules requiring that the sale by the official liquidator or the agent appointed by the court is subject to confirmation by the court. There cannot be a parallel situation between the sale of liquor vend and the present case. Therefore, I regret my inability to read the aforesaid judgment for the purpose of applying the same to the facts of the present case. I am unable to persuade myself to the argument that there are any mala fides on the part of interveners to come up with the higher price in respect of lot Nos. 17, 19 and 20. There is no nexus between the interveners and those who are placed in the core group, as is sought to be projected during the course of arguments. After the arguments were heard and orders reserved another application being C.A. No. 228 of 2005 has been filed for enhancing the bid in respect of lot No. 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cas.) : "11. The Hon'ble High Court may set aside 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 benefit of creditors, contributories and all concerned and/or public interests." In Oswal Agro Furnace Ltd., In re (In Liquidation) [2004] 2 PLR 1, this court while relying upon Divya's case [2000] 102 Comp. Cas. 66 ; [2000] 6 SCC 69 had set aside the confirmed sale observing that the price offered by another company (M/s. KRBL Ltd.) was higher by Rs. One crore. It is also pertinent to mention here that in Oswal's case [2004] 2 PLR 1 (P&H), possession was not handed over to the auction purchaser. What emerges from the reading of the aforesaid judgments is that inadequacy of the price alone can be a ground for setting aside the confirmed sale but this factor is to be examined by the company judge on the basis of the facts of each case. We will be appreciating this aspect while discussing the merits of the present case at the appropriate stage. Let us now advert to the second part with regard to setting aside of the confirmed sale a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. However, the gross irregularity observed in the aforesaid case by the Hon'ble Supreme Court was that the valuation report was kept as a secret and confidential document and without disclosing the valuation report to the creditors and without fixing the reserve price, the properties were auctioned and the sale was confirmed. In this eventuality, the approach of the company judge was considered to be unjustifiable holding that it is against the judicial standard and the normal procedure for auctioning the immovable property of the company which is to be wound up. Another observation made by the Apex Court was that there was non-application of mind to the valuation report. The essence of the aforesaid observations made by the highest court of the land, lead us to draw a conclusion that in a given set of circumstances the entire proceedings leading to the confirmation of sale can be reversed or set aside but it does not lay down the proposition that the sale can be set aside on mere asking. In other words, there cannot be any hard and fast rule to say that a confirmed sale cannot be set aside after the possession has been delivered and sale deed executed. There is no strait-jacket ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not it is a consequence of any irregularity or fraud 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 Chuni Lal v. T. Sriman Kanthimathinatha Pillai, AIR 1921 Mad. 286, it was observed that where the property is authorised 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 interest 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 Ratnasami Pillai v. Sabapathy Pillai, AIR 1925 Mad. 318 and S. Soundararajan v. Khaka Mahomed Ismail Saheb of Roshan & Co., AIR 1940 Mad. 42. In A. Subbaraya Mudaliar v. K. Sundararajan, AIR 1951 Mad. 986, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There was no publication in The Times of India. Further, out of the four newspapers in which publication was made, only in two there were two insertions and in the remaining two there was only one insertion. This was contrary to what the Commissioners have promised in their affidavit, dated July 8, 1964. No doubt, other efforts were made for giving publicity but these efforts were not sufficient to attract more than one offer. When the case came for confirmation on December 24, 1964, there was an application by Babu Khan that the property was of much higher value and that fresh offers must be invited again with wider publicity. There is also the affidavit of the State Government, dated August 29, 1963, in which the value of the property was shown as Rs. 13,40,000. Besides, on that very day, one Gopaldas Darak had come before the court with a higher offer showing his bona fides and earnestness by depositing more than one lakh of rupees. He came with the complaint that there was not sufficient publicity as to attract people from the north and that as soon as he came to know he gave his offer. In these circumstances, the learned Single Judge was right in expressing his reluctance to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterfered with the discretion exercised by the company judge. It is true that the discretion exercised by the judge ought not to be interfered with unless the judge has gone wrong on principle. 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 Agarwal also suggested 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. We are accordingly of opinion that the Division Bench was right in holding that the order of the company judge, dated February 19, 1965, should be set aside and there should be fresh sale of the property either by calling sealed tenders or by auction in accordance with law. The tender will be called or the auction will take place with the minimum offer or with the starting bid of ten lakhs of rupees." In the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have also re-examined the entire aspects and are of the view that the confirmation of sale was in fact in conformity with the well established guidelines/principles governing the confirmation of sale as enumerated in Navalkha's case [1969] 3 SCC 537; [1970] 40 Comp. Cas. 936 . We shall now deal with the second aspect with regard to subsequent events when on 28-1-2005, the Sun group intervened by moving an application before the company judge bearing C.A. No. 775 of 2004 making an offer of Rs. 12 crores for buying the entire assets of Punwire as a going concern which include land and building situate at B-77, Phase 7, Industrial Area, Mohali. The relevant para. No. 14 of the said application is reproduced as under for reference : "That as the case was coming up for hearing on 28-1-2005, the applicant was not in a position to submit the bid before the liquidator due to paucity of time and was advised to approach this Hon'ble court directly. Therefore, now the applicant hereby makes an offer of Rs. 12 crores for the entire assets of M/s. Punwire as a going concern, this includes the land and building situated at B-77, Phase VII, Industrial Area, Mohali. Since the sale deed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference with regard to the aforesaid three lots comes to Rs. 29 lakhs only which is hardly 8/9 per cent of the earlier bid confirmed in favour of the appellant. This in any manner cannot be termed to be a jump in the bid which would warrant the setting aside of the confirmed sale. Another fact which is worth consideration is that the offer is made after two months of the confirmed sale and during this period, the market price of the property may well have gone up to that extent. This is a very common phenomenon as far as immovable property is concerned. Let us now examine the present case in the light of observations made in Divya's case [2000] 102, Comp. Cas. 66 [2000] 6 SCC 69 on which reliance was made by the Sun Group even in its initial application dated 28-1-2005. The following are the main distinguishable factors : Divya's casePresent case (i)The possession was not handed over.(i)The possession was handed over. (ii)There was a (clause No. 11) in the sale(ii)There is no such clause. agreement. (iii)The jump of the bid was 50 per cent.(iii)It is hardly 9 per cent. Even if we ignore the first two situations, viz., the condition in the terms of sale or handing over of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case, that is not the situation at all. The valuation report was very much before the learned company judge. It was not kept as a secret document at any stage. The sale committee which represented the secured creditors had also perused the same and thereafter, the open auction was held. It is nobody's case that the valuation as per this report was not proper. It is also not in dispute that the accepted bid of the appellant auction purchaser was higher than the value determined in the valuation report. We are, therefore, of the considered view that the aforesaid two judgments relied upon by Mr. Bhandari and referred to by the company judge in his impugned order are distinguishable on facts. We may also observe here that the learned company judge has also referred to the aforesaid two judgments Union Bank's case [2000] 101 Comp. Cas. 317; [2000] 5 SCC 274 and Allahabad Bank's case [1999] 96 Comp. Cas. 804 ; [1999] 4 SCC 383 with regard to the border principles regarding confirmation of sale without considering their applicability to the facts of the present case. The impugned order shows that the learned company judge has taken into account the following four factors leaning i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the appellant. The intention of the Sun Group does not seem to be fair from the very beginning. We see this aspect from another angle also. Time and again reference has been made to the suggestion of the sales committee that the auction purchaser be asked to enhance his bid to Rs. 5 crores for three lots in question. It is significant to note that even the offer made by the Sun Group for three lots was to the tune of Rs. 3.56 crores which was only marginally higher than the amount offered by the auction purchaser and much below the amount of Rs. 5 crores suggested by the sales committee. Nowhere in its initial application for setting aside the confirmed sale or in the affidavit an offer of Rs. 5 crores is made. It is, therefore, clear that even as per the respondents, Rs. 5 crores was not the realistic price of three lots in question. This crucial aspect knocks the bottom out of the case to conclude that the offer given by the Sun Group is not substantially higher. There should be no haggling like public marts before the company court otherwise all confirmed sales will be set aside even on marginally higher offer. A realistic and pragmatic approach is expected. In Kayja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... What is expected of the judge is not to be a prophet but a pragmatist and merely to make a realistic appraisal of the factors, and, if satisfied that, in the given circumstances, the bid is acceptable, conclude the sale. The court may consider the fair value of the property, the general economic trends, the large sum required to be produced by the bidder, the formation of a syndicate, the futility of postponements and the possibility of litigation, and several other factors dependent on the facts of each case. One that is done, the matter ends there. No speaking order is called for and no meticulous post mortem is proper. If the court has fairly, even if silently, applied its mind to the relevant considerations before it while accepting the final bid, no probe in retrospect is permissible. Otherwise, a new threat to certainty of court sales will be introduced." It was also observed in the aforesaid judgment that mere inadequacy of price cannot demolish every court sale. The relevant para for reference is reproduced as under (page 220) : "So viewed, we are satisfied that the district court had exercised a conscientious and lively discretion in concluding the sale at Rs. 11.5 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignificant than the interest of the secured creditors in the company under liquidation. For that reason also, the order dated 10-12-2004, requires to be recalled." Before adverting to the question we may notice the relevant provisions of sections 529 and 529A of the Act which read as under : "529. Application of insolvency rules in winding up of insolvent companies.--(1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to-- (a )debts provable ; (b )the valuation of annuities and future and contingent liabilities ; and (c )the respective rights of secured and unsecured creditors ; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent : Provided that the security of every secured creditor shall be deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realize his security,-- (a )the liquidator shall be entitled to represent the workmen and enforce such charge ; (b )any amount realized by the liquidator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. If there is no secured creditor then the workmen of the company become unsecured preferential creditors under section 529A to the extent of the workmen dues. It is further observed that the purpose of section 529A is to ensure that the workmen should not be deprived of their legitimate claims in the event of liquidation of the company and the assets of the company would remain charged for the payment of the worker's dues and such charge will be pari passu with the charge of the secured creditors. It is further observed in the aforesaid judgment that under section 529A the dues of the workers and debts due to the secured creditors are to be treated pari passu and rather have priority over all other dues. In International Coach Builders Ltd. v. Karnataka State Financial Corporation [2003] 114 Comp. Cas. 614 ; [2003] 10 SCC 482, the Apex Court, while dealing with sections 528 and 529A, has held that the liquidator is the representative of the workmen so far as their preferential right over the secured creditors with regard to the dues are concerned. The relevant observation in para. No. 17 is reproduced as under (page 623) : "As a result of the proviso added in section 529, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n have to be treated pari passu with the secured creditors so far as their dues are concerned. They have even the preferential right. But at the same time, there is no provision in the Act or the Rules requiring the Official Liquidator to associate the workmen in the process of sale of the company. In other words, the interest of the workmen is to be watched by the Official Liquidator only when the sale is confirmed and even thereafter until the stage for distribution of dues to the secured creditors and the workmen is reached. We are, therefore, of the view that the observation made by the learned company judge as referred to above, in favour of the workmen considering as one of the grounds for setting aside the sale is contrary to the law. We, accordingly, reverse the said view. Although we have answered the main two core questions arising in this appeal for our consideration yet to be fair to Mr. Nagpal we deal with his other objections as well. It is borne out from the record that the union had moved an application before the company judge raising certain objections. The same was dismissed on 23-8-2004. From this it can be safely inferred that the workmen were already in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pate in a public auction for sale of evacuee property on behalf of both of them. It was agreed that the property would be shared equally by both of them. The person participating in the public auction gave highest bid and acquired the property and sale in his favour was confirmed. He, however, did not transfer one-half of the property to the other person as per the agreement and, therefore, a suit for specific performance of contract was instituted. The suit was resisted by the successful bidder stating that the contract was void ab initio being contrary to the public policy. However, the suit was decreed and the appeals against the same were dismissed by the District Court and the High Court. The Supreme Court also dismissed the appeal by observing that an agreement between A and B to purchase property at an auction sale jointly and not to bid against each other at the auction is perfectly lawful, though the object may be to avoid competition between the two. But if there is an agreement between all the competing bidders at the auction sale forming a ring to peg down the price and to purchase the property at knock out price, the purpose or design of the agreement is to defraud the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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