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TMI Blog2007 (8) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale in favour, of the second respondent on the ground that the second respondent has come forward with the highest offer raising his offer from ₹ 124.5 lakhs to ₹ 165.13 lakhs, without noticing the material irregularities, can not be sustained. Case remanded to direct the official liquidator to tender the property for sale afresh. - O.S.A. NO. 74 OF 2003 - - - Dated:- 28-8-2007 - V. GOPALA GOWDA AND N. ANANDA, JJ. M. Narayana Bhat for the Appellant. Deepak and G. Balakrishna Shastry for the Respondent. JUDGMENT V. Gopala Gowda, J. The appellant has called in question the order made by the company court in C.A. No. 830 of 2003 in Co. P. No. 62 of 1987 dated November 13, 2003. By the impugned order the learned single judge has confirmed the sale of certain assets of the company under liquidation in favour of the second respondent/auction purchaser and directed the official liquidator to hand over possession of certain assets of the company and take consequential steps to confer title in favour of the second respondent/auction purchaser. Consequently, the applications filed by the applicant as also the representatives of the employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises. On May 30, 2003, at the request of learned counsel appearing for the ex-director-the applicant, one week time was granted by the learned single judge to inspect the property to get better offer, if possible. The said request was renewed twice. On July 3, 2003, the application was heard as the applicant ex-director could not bring better offer. After hearing the parties by a separated order dated July 3, 2003, the company court called upon the second respondent, to raise the price offered by him to the reserve price. The second respondent accepted to raise the price from Rs. 12,45,400 to Rs. 165.13 lakhs (reserve price) provided he was given sixty days time to deposit the amount] Accordingly, the company court granted sixty days time to the second respondent to deposit remaining sum and also made it clear to the applicant, that before confirmation of sale in favour of the second respondent if a better offer is secured by the applicant the same would be considered at the time of confirmation of sale. The second respondent, deposited balance amount within sixty days and moved the court for confirmation of the sale. On October 10, 2003, when the matter came up for confirmati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idator and Sri G. Balakrishna Shastry, learned counsel appearing for the second respondent. The submissions made by learned counsel for the appellant and grounds and additional grounds urged in this appeal may be summarised as follows: ( i )The learned single judge ought not to have confirmed the sale in favour of the second respondent in the absence of application filed by the second respondent for confirmation of sale. The learned single judge has failed to notice that the assets of the company under liquidation are worth more than Rs. 750 lakhs. Thus, the valuation furnished by the official liquidator appears to have been done without bringing the same to the notice of the company court. In this view of the matter, also the sale ought not to have been confirmed in favour of the second respondent. The representation dated September 8, 2003, given by the appellant to the official liquidator to furnish the valuation report was not considered. The learned single judge did not consider this fact though it was brought to the notice of the court. ( ii )The learned single judge has failed to notice that operating agency of the company had valued the fixed assets of the company bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 50 of 1995, dated August 30, 1999, on the file of the Second Additional Labour Court, Bangalore. The submission made by learned counsel for the second respondent may be summarised as follows : ( i )The second respondent has filed objections contending that the offer made by the second respondent is the best offer. The proceedings before the learned single judge would demonstrate that neither the ex-director of the company nor the appellant herein was interested in getting better offer than what was offered by the second respondent. It would also demonstrate that the ex-director of the company and the appellant herein are interested in protracting the proceedings without there being any genuine intention to act in the interest of the company under liquidation. ( ii )Neither the ex-director nor the appellant made genuine efforts to bring better offer or to take intending purchasers to the inspection. On the other hand, they went on pleading for time before the learned single judge on one pretext or the other. ( iii )The learned single judge was justified in confirming the sale in favour of the second respondent who offered the highest price of Rs. 165.13 lakhs and which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company under liquidation, the court acts as a custodian for the interest of the company and the creditors. Therefore, before sanctioning the sale of its assets, the court is required to exercise judicial discretion to see that properties are sold at a reasonable price. For deciding what would be a reasonable price, valuation report of an expert is a must. Not only that, it is the duty of the court to disclose the said valuation report to the secured creditors and other interested persons including the offerors. Further, it is the duty of the court to apply its mind to the valuation report for verifying whether the report indicates reasonable market value of the property to be auctioned, even if objections are not raised." (emphasis laid by us) In a decision reported in Navalkha and Sons v. Ramanuja Das [1970] 40 Comp. Cas. 936 (SC) ; AIR 1970 SC 2037, ft is held (page 941) : "Where the acceptance of the offer by the Commissioners is subject to confirmation of the court the offerer does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The condition of confirmation by the court operates as a safeguard ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was fixed as February 14, 2003, and the date of opening the tenders was fixed on March 6, 2003. At the outset it is necessary to state that sale advertisement does not contain proper and complete description of the properties ; there is no proper description of the land ; the survey number and the boundaries of the land are given. This was essential in view of the fact that the prospective purchasers cannot inspect or identify the land in the absence of proper description and also to ensure warranty of title in favour of the prospective purchasers. The description of plant and machinery under lot II is also vague. The nature of machinery, type of machinery and the purpose for which they can be used are not mentioned ; the description of inventories under lot III is vague and incomplete. The reserve price has not been mentioned. The time fixed for the last date for receipt of tenders was also inadequate. These facts would loom large in view of the controversial material available on record regarding valuation of the assets. As could be seen from the proceedings before the BIFR, in case No. 284 of 1988 dated September 21, 1995, the DGM of IFCI has stated, as per independent valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auctioned even if the objections are not raised". From the impugned order we find not that the learned single judge apart from stating that non-mention of the reserve price in the paper publication did not result in any loss to the company has not adverted to the valuation report and the valuation made before the BIFR and the details contained in the valuation report. Therefore, we are of the opinion that the learned single judge ought to have adverted to these facts before confirming the sale. From the impugned order we and that by order dated September 25, 2002, the official liquidator was permitted to sell the assets of the company. The second respondent herein was the highest bidder and he had offered the highest price of Rs. 80.45 lakhs. The said offer was rejected by the court with a direction to the official liquidator to advertise the sale afresh. That in the subsequent sale held pursuant to the notification, the second respondent offered the highest bid of Rs. 1,24,50,000 which was accepted by the learned single judge on April 10, 2003. During the pendency of the applications filed by the appellant and the ex-director before the learned single judge, on July 3, 2003, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat having regard to the market value of property the price offered is reasonable. Unless the court is satisfied about the adequacy of the price the act of confirmation of sale would not be a proper exercise of a judicial discretion". From the impugned order we find and the learned single judge had not satisfied himself that the price offered by the second respondent is reasonable. The reasonableness or the best price could have been ascertained by directing the official liquidator to advertise the sale afresh with complete details of the property in the sale publication, We also find from the records made available by learned counsel for the official liquidator that the official liquidator had not secured the details of the landed properties to be sold in public auction. Except a copy of the survey sketch other details are not forthcoming. From this document, the boundaries of the property cannot be ascertained. During the pendency of the appeal it is brought to our notice that in respect of the very property confirmed in favour of the second purchasers the proceedings were pending before the Debts Recovery Tribunal in Case No. DCP. 3118. The proceedings were initiated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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