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TMI Blog2009 (1) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 crores and of ₹ 80.25 crores are without merits and cannot be appreciated nor the sale in favour of purchaser who had deposit the sale consideration almost three years back and whose sale had been confirmed about two years back cannot be set aside. The applications of the applicants are therefore, liable to be dismissed. - CA NOS. 491 & 710 OF 2007 C.P. NO. 539 OF 1998 - - - Dated:- 6-1-2009 - ANIL KUMAR, J. V.K. Jhanji, Ravi Kant Chadha, Deepak Dhingra, Ms. Monica Sharma, Anil Nauriya, Jos Chiramel, B.L. Wali, R.C. Chawla, Harinder Singh, Ms. Rajdipa Behura and A.K. Chaturvedi for the Petitioner. Harish Sharma, Ashutosh Dubey, Arvind Nigam and Gaurav Chauhan for the Respondent. JUDGMENT 1. The applicants Sh. Raj Kishan Goel (CA No. 491/2007) and M/s. Siddharth Clutches Pvt. Ltd. (CA No. 710/2007) seek quashing of entire process of bidding and sale whereby unit Nos. 2 to 6 of M/s. Jhalani Tools (India) Ltd. were sold in favour of M/s. Morgan Ventures Ltd. nominee of M/s. P.N. Marwah Co. and seek acceptance of their bids of Rs. 80,25,00,000 and Rs. 70,00,00,000 respectively. 2. The applicant/Raj Kishan Goel contended that units 2 to 6 have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qr.Ft.) II 4, New Industrial Area, Faridabad 4.91 98,448 III 1 and 2, New Industrial Area, Faridabad 8.70 1,57,317 IV Narela Road, Village Kundali, Distt. Sonepat 8.29 1,19,200 V E-29 E-30, Chikalthana Industrial Area, Aurangabad, Maharashtra 11.1 97,579 Open Land E-18 E-19, Chikalthana Industrial Area, Aurangabad, Maharashtra 7.8 VI C-1, Additional Industrial Area, Jalna, Maharashtra 18.16 97,338 5. It is stated that inter se bid took place and in the bidding the highest bid was by M/s. Balaji Associates of Rs. 59.05 crores and the second highest bid was of M/s. R.N. Marwah and Co. for Rs. 59 crores. It is contended that though the difference was only Rs. 5 lakhs yet M/s. R.N. Marwah and Co. meekly withdrew and that was on account of formation of a coterie between the bidders. M/s. Balaji Associates, the highest bidder also chose not to deposit the balance amount of the bid and, therefore, by order dated 20-10-2005 the next highest bid of M/s. R.N. Marwah and Co at Rs. 59 crores was accepted. After the secon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 18-3-2003 In the winding up petition under section 434 of the Companies Act filed by Tata Iron and Steel Company Ltd., it was held that the company is indebted to Tata Iron and Steel Company Ltd. and is unable to pay its debts and, therefore, company was directed to be wound up and the Official Liqui- dator was appointed as provisional liquidator of the company who was directed to take into possession all the assets and books of account and the citation was ordered to be published in Statesman (English) and Veer Arjun (Hindi). 2-2-2005 The company had six units and since the intention was shown for reviving only unit 1 at Faridabad, the Court ordered for issuance of sale proclamation by the Official Liquidator in respect of other units 2 to 6. In the said order it is recorded, it is agreed by all concerned that whether the said scheme is approved or not, insofar as following properties of the company are concerned, they may be put to sale. The sale proclamation was ordered to be published in Times of India , Delhi as well as Financial Express for 24-3-2005. Bids were invited in two categories. In the first category bids for units 2 to 6 were to be with a reserv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BIFR in 2001. It was valued at Rs. 1,166 lakhs against the valuer valuing it at Rs. 435 lakhs. The challenge to valuation by the workers union was, however, opposed by the consortium of the banks. The leading bank had contended that in the year 2000 the secured creditors were to recover a sum of Rs. 58 crores from the company in liquidation and under the OTS it had agreed to accept much lesser amount of Rs. 21.38 crores thereby waiving Rs. 36.62 crores which concession was given with the object to get the amount immediately after the sale of units and the realization of the money. The objections of the workers to the valuation report were rejected after consideration and it was held that considering the substantial expenses for publication of sale proclamation and valuation of the properties the bidding process could not be stayed. Mr. U.N. Marwah of M/s. R.N. Marwah and Co. had given a bid of Rs. 46 crores at that time along with the EMD. The matter on that date was adjourned for inter se bidding to 28-7-2005. 28-7-2005 Three bidders M/s. Chaudhary and Sons (Forging) Pvt. Ltd. M/s. Balaji Associates and M/s. R.N. Marwah and Co. were present, however, inter se bidding did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs. 43 lakhs by three drafts was handed over by Sh.Sat Prakash, partner of Balaji Associates. Since the draft of Rs. 25 lakhs as EMD was not revalidated the same was returned and the partner Sh. Sat Prakash also agreed to give an undertaking to make the payments in accordance with the schedule. He made a statement that 50 per cent of the bid amount shall be deposited by 5-10-2005 and the balance amount shall be paid by 11-10-2005 the last date for making the payment. 20-10-2005 M/s. Balaji and Associates did not deposit the amount in terms of the undertaking given by its partner Sh. Sat Prakash. More time was sought which was, however, not allowed and the acceptance of bid of M/s. Balaji and Associates was cancelled and amount of Rs. 43 lakhs was forfeited. The counsel for the second highest bidder R.N. Marwah and Company was present though the bid was ordered to be returned earlier and, therefore, the second highest bid of M/s. R.N. Marwah and Co. for Rs. 59 crores was accepted. The counsel contended that the second highest bidder had redeposited the earnest money of Rs. 43 lakhs and the draft was given in the name of Official Liquidator and a cheque of Rs. 15 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer was revised to Rs. 75,25,00,000 on 29-8-2007 and again revised to Rs. 80,25,00,000 on 25-9-2007. 10. The learned counsel for the applicants have relied on Bakemans Industries (P.) Ltd. v. New Cawnpore Flour Mills [2008] 84 SCL 489 (SC); T. Vijenderdas v. M. Subramanium [2007] 8 SCC 751; Trilochan Rice and Alloys Mills Ltd. v. State of U.P. [Civil Misc. Writ Petition No. 18085/2006]; Elsor Cotton Mills Ltd. (In Liquidation) [2005] 122 DLT 669; Divya Mfg. Co. (P.) Ltd. v. Union Bank of India [2000] 26 SCL 280 (SC); Allahabad Bank v. Bengal Paper Mills Co. Ltd. [1999] 20 SCL 309 (SC) and Lica (P.) Ltd. v. Official Liquidator [1996] 85 Comp. Cas. 788 (SC) to contend that even after confirmation of sale, in the interest of secured and unsecured creditors and workers, the sale can be set aside if the assets of the company can be sold at higher price. It is also contended that before passing the winding up order of the company, the assets of the company could not be sold and therefore the sale by the Court in favour of M/s. Morgan Ventures Ltd. is liable to be set aside. 11. The applications are opposed by the purchaser, M/s. Morgan Ventures Ltd. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resence of Official Liquidator who was present. The purchaser also emphatically contended that despite the order passed by the Court directing the Official Liquidator to execute the sale deeds, non-execution of the same will not negate the rights of the purchaser to get the sale deeds executed. It was rather contended that the sale deeds in respect of some units have already been executed. 12. On behalf of the purchaser it was also contended that since the Court had conducted the sale, there was no requirement for confirmation. Regarding the offer of the applicant/Sh. Raj Kishan Goel it was contended that he got a draft for Rs. 7 crores, however, he also got it cancelled within three days after it was purchased. It is asserted by the purchaser that the applicant/Sh. Raj Kishan Goel has misled the Court by not disclosing this fact and the averment by the purchaser regarding this fact has not been denied by the said applicant. Mr. Nigam, learned counsel also contended that the power of confirmation could not be delegated and consequently the order dated 25-7-2006 is of the confirmation of the sale which fact was also re-asserted by the Court in its order dated 22-11-2006 specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properties of the company could not be sold. The learned counsel Mr. Anil Nauriya has relied on Rajathan Financial Corpn. v. Official Liquidator [2005] 63 SCL 468 (SC), Bakemans Industries (P.) Ltd. s case ( supra ) to contend that even before the winding up order, the assets of the company could be sold. The learned counsel also contended that the sale of five units of the company was on the basis of agreement recorded in order dated 2-2-2005 wherein it was specified that the sale will be de hors the scheme and it is for the purpose of early distribution of money to the workers and other creditors. 17. During the course of arguments, the learned counsel for the applicants had also contended that their clients want to raise their offer to Rs. 100 crores. The learned counsel for the workers union regarding the alleged offer of Rs. 100 crores has contended that there is no offer in writing of Rs. 100 crores and the price of about Rs. 70 crores offered by the applicant (Shri Raj Kishan Goel) is only on account of interest factors. It was also contended that both the applicants have not given any EMD with their offers. Similar pleas have been raised in respect of the alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erties have also been executed. The applications for setting aside the sale has also not been filed within a short time after the confirmation of the sale but after considerable delay of more than a year. 19. The other judgment relied on by the applicants is also distinguishable. In Lica (P.) Ltd. s case ( supra ) the terms and conditions published before the sale included that the sale would be subject to such modification/alteration of the terms and conditions of the sale as may deem fit and proper and the decision of the High Court was to be final and the High Court could set aside the sale in favour of the purchaser/purchasers even after the confirmation of the sale. The Company Judge in this case had rejected the offers made in the tenderers and in open auction, the price fetched was Rs. 45 lakhs. The Supreme Court had directed the open auction of the same plot in an appeal. In the second open auction the appellant had become the highest offeror with an offer of Rs. 1.10 crores. In an appeal filed against the second auction, the Division Bench directed the Single Judge to reconsider the matter and to conduct the auction sale again. In the appeal filed against the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is always a peril in treating the words of a speech or judgment as though they are words in a legislative enactment and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case. . . . Circumstantial flexibility, one additional or different fact may make a word of difference between conclusion in two cases. (p. 153) In Rafiq v. State 1980 SCC (Crl.) 946 it was observed as under : "The ratio of one case cannot be mechanically applied to another case without having regard to the fact situation and circumstances obtaining in two cases." 22. The sale notice categorically stipulated that the five units of the company were to be sold. The bids were invited in two categories. In the first category consolidated bids in respect of all the five units were invited with the reserve price of Rs. 43 crores and in the second category individual bids in respect of the five units were invited although no reserve prices for individual units were given. The sale notice also categorically stipulated that the tenderers had to satisfy themselves from appropriate authority about the duty and dues payable in respect of properties in question. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted to hearing and the worker unions were also impleaded pursuant to the order of the Division Bench dated 22-4-2005. 25. This is no more res integra that accepted offer and the confirmed sale is not to be set aside lightly merely on account of higher offer received later on, as the same would result in no auction sale ever been completed because someone would be offering a higher amount after the auction. While considering whether the auction sale should be set aside or not, the higher offer offered should also be seen not to be marginal. The five units of the company have already been sold and in respect of some of them the conveyance deeds have already been executed. Though the sale deed stipulates that the conveyance is subject to the orders of this Court, however, this cannot be a ground for revoking the sale deeds already executed in favour of the purchaser, unless there is fraud or the sale price is extremely inadequate or it is not in the interest of secured creditors, workers and others to sell the properties of the company. For this reliance can be placed on Valji Khimji Co. s case ( supra ) where the Supreme Court had set aside the order of the Single Judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not make the bid when they were invited for 21-4-2005 after wide publicity of sale proclamation. The other applicant M/s. Sidharth Clutches (P.) Ltd. had revised his offer to Rs. 80.25 crores, however, no EMD was deposited nor any prayer was made to deposit the EMD. From the valuation of the properties which have been auctioned it cannot be inferred that the properties were sold at inadequate price. The offer of Rs. 80.25 crores almost after two years could also be on account of various factors. Yet another affidavit during the arguments was filed on 7-11-2008 of Shri Satyaprakash son of Shri Lakhu Singh alleging him to be an authorized signatory of the applicant company by an alleged resolution dated 30-10-2008. However, neither any copy of the alleged resolution has been filed nor any other documents has been filed to show that the said applicant company has taken a decision to offer a price of Rs. 100 crores and the alleged person is the authorized representative for the purpose. Mere filing of an affidavit without any EMD or prayer to deposit the amount of EMD cannot be construed to be a proper offer requiring consideration. The applicant Sh.Raj Kishan Goel has also not dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant has suffered substantial injury by reason of the sale, this would not be sufficient to set the sale aside unless substantial injury has been occasioned by a material irregularity or fraud in publishing or conducting the sale. [ See Dhirendra Nath Gorai v. Sudhir Chandra Ghosh AIR 1964 SC 1300; Jaswantlal Natvarlal Thakkar v. Sushilaben Manilal Dangarwala 1991 Suppl. (2) SCC 691 and Kadiyala Rama Rao v. Gutala Kahna Rao [2000] 3 SCC 87]. A charge of fraud or material irregularity under Order 21 Rule 90 must be specifically made with sufficient particulars. Bald allegations would not do. The facts must be established which could reasonably sustain such a charge. In the case before us, no such particulars have been given by the respondent of the alleged collusion between the other respondents and the auction-purchaser. There is also no material irregularity in publishing or conducting the sale. There was sufficient compliance with Order 21 Rule 67(1) read with Order 21 Rule 54(2). No doubt, the trial court has said that the sale should be given wide publicity but that does not necessarily mean by publication in the newspapers. The provisions of Order 21 Rule 67 clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had also taken a plea that he has entered into various agreements in respect of the properties purchased by him. In reply dated 12-11-2007 by the Dena Bank to an application being CA No. 1092 of 2007 of the applicants seeking restrain against the purchaser, it has been admitted in para 2 that the purchaser has entered in to various agreements in respect of various movable properties of the units purchased by him. 30. The applicants in order to get the sale set aside not only has to plead the material irregularity or fraud but also has to establish the same. The applicants also have to establish substantial injury to them on account of material irregularity and fraud. Except making the bald allegation that a coterie was formed between the unsuccessful and successful bidders, there are no material averments regarding material irregularity or fraud nor they have been established on record. The applicants have also failed to show any substantial injury caused to them. The workers unions have not supported the plea of the applicants. During the arguments, the learned counsel for the Bank has also not supported the plea of the applicants. Nothing has been argued in support of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dator or someone else. In Yogesh Mehta s case ( supra ) the confirmation of the sale by a special Court was a provisional one subject to the orders of the Supreme Court. It was held that where the sanctioning authority is Court itself and the confirmation of sale was not subject to approval from some other authority, acceptance of the sale itself would amount to sanction thereof. 32. The applicants have also sought setting aside of the sale in favour of purchaser on the ground that on the date the assets of the company were sold, the company had not been wound up and, therefore, its assets (five units) could not be sold. In a case where a company is unable to pay its debt or liabilities, the Company Court can orders sale of assets of the company prior to winding up order. In Altos India Ltd. s case ( supra ), the Division Bench of Punjab and Haryana High Court had held that in order to protect the interest of its creditors, even prior to winding up, the assets of the company can be sold. The contention on behalf of respondent company in that case that it would be appropriate to sell the unit only after the company had been actually wound up was not accepted. The Division Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licants are offering marginal higher price for the five units of the company taking into consider all the facts and circumstances. The secured creditors and worker union are also not supporting the plea of the applicants to set aside the sale and acceptance of their bids. For the foregoing reasons, therefore, it cannot be held that the Court was not competent to sell the five units of the company in the facts and circumstances of the present case. For the foregoing reasons it will be not in the interest of the company to set aside the sale in favour of the purchaser, M/s. Morgan Venture Limited. 34. Therefore, considering all the facts and circumstances and for the foregoing reasons, the applications by Shri Raj Kishan Goel (CA No. 491 of 2007) and M/s. Siddhartha Clutches Pvt. Ltd. (CA No. 710 of 2007) seeking setting aside of sale and acceptance of their offer of Rs. 70 crores and of Rs. 80.25 crores are without merits and cannot be appreciated nor the sale in favour of purchaser who had deposit the sale consideration almost three years back and whose sale had been confirmed about two years back cannot be set aside. The applications of the applicants are therefore, liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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