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TMI Blog2010 (1) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant. Mrs. Latha Parimalavandana for the Official Liquidator , Jayes Dolio, K.S. Viswanathan, R. Krishnamurthy, C. Kathiravan, K. Srinivasamurthy and G.R. Lokshmanan for the Respondent. ORDER M. Chockalingam, J. - These three intra court appeals have arisen from the orders of the learned Single Judge of this Court made in Company Application No. 2107 of 2008 and Company Application Nos. 1238 and 1239 of 2009 respectively. 2. The Court heard the learned Counsel on either side. 3. C. A. No. 1238 of 2009 was filed to stay all further proceedings in the auction, while C. A. No. 1239 of 2009 was to set aside the auction proceedings under the following facts and circumstances : ( a )Seeking winding up of the company, the first respondent therein made CP No. 78 of 2008 on the ground that a sum of Rs. 8,79,035 was due as on 21-12-2007, and the company was unable to pay the same. The applicant could not pay the amount immediately on receipt of the summons; but the applicant has made part payments to the first respondent on various dates and has settled the entire amount due to the first respondent in full quit, and a sum of Rs. 45,000 was paid to the Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bringing the properties into auction. The description of properties with survey numbers and boundaries, the amount due for which sale was ordered and the encumbrance to the properties have not been specifically mentioned. ( f )As far as the banks were concerned, they were holding a decree made by the Debt Recovery Tribunal, and appeals have been preferred before the Appellate Tribunal. Hence the debts due to the banks stood under dispute, and they could not participate in the proceed-ings before the Company Court. As far as the movables were con- cerned, their claim was a disputed debt, and no finality was reached in respect of their claim. Hence these applications. ( g )The applications were strongly opposed by the Official Liquidator and also by the creditor banks. ( h )After hearing the Counsel, the learned Single Judge took the view that there was no reason either to set aside the sale or to stay the same. Accordingly, both the applications were dismissed. Hence, O. S. A. Nos. 371 and 372 of 2009 have arisen. 4. As far as C. A. No. 2107 of 2008 was concerned, it was filed by the Official Liquidator under the following circumstances: ( a )Subsequent to the publicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue Home India Pvt. Ltd., who offered Rs. 45 crores and submitted a demand draft for Rs. 12.11 crores on 15-9-2009 towards EMD. One Seetharaman also offered Rs. 46 crores and submitted a demand draft for Rs. 12.11 crores towards EMD. M/s. True Value Home India Pvt. Ltd., raised their bid to Rs. 49 crores. Thus it was the highest offer. Hence the demand draft was accepted and handed over to the Official Liquidator. The successful bidder was directed to make the balance payment of Rs. 36,89,00,000 in two consecutive instalments. The first instalment of 50 per cent of the balance amount i.e., Rs. 18,11,50,000, should be paid within a period of two months, and the remaining amount should be paid within a period of three months thereafter. If there is any default, the EMD amount paid by him should be forfeited. Thus the sale in respect of the above bidders was confirmed. Aggrieved over the same, OSA No. 370 of 2009 has been brought forth by the appellant. 5. Advancing arguments on behalf of the appellant, the learned Senior Counsel Mr. T. R. Rajagopalan would submit that it is pertinent to note that the Official Liquidator has not yet adjudicated upon the claims called for; that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quidation. An order came to be passed on 3-12-2008, directing the Official Liquidator to take steps to sell the properties fixing the upset price of the immovable assets at Rs. 48,44,00,000. Some part payments made by the company in liquidation were recorded by the company Court. On the first day of auction namely 23-1-2009, since there was only one offer and the same was also below the upset price, the auction was postponed. Though the Company Court directed the company in liquidation to pay Rs. 25,08,395 to the Official Liquidator on or before 4-3-2009, the same was not done. At this juncture, it becomes necessary to state that once the Official Liquidator has been appointed and the properties are vested on him, such a direction to the company in liquidation to pay the said sum to the Official Liquidator would not arise. The Company Court directed the Official Liquidator to proceed with the sale as per the order dated 3-12-2008, since the company in liquidation did not make the payment of Rs. 25,08,395 as stated above. On the next date of auction namely 30-7-2009, there was only one offer, which was below the upset price. The publication was also made only in two newspapers, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 25 lakhs and odd. Then, at that juncture, there was no justification in bringing the entire properties of the company in liquidation for sale. It is settled proposition of law that the Official Liquidator has to act only for the benefit of the creditors but also to the contributories like the appellant, and a duty is cast upon him to realise the sale proceeds by making sale of only such of the properties required to discharge the liabilities crystallized and return the surplus assets to give back to the contributories. In the instant case, he has not acted so at that juncture. 10. As far as the valuation of the properties is concerned, it is contended by the appellant that the market value of the property was much more than the value found in the report which, according to them, was very low. When such a contention was raised that the value fixed was low and unreasonable, there arose a necessity for making proper publication in order to fetch best and adequate price for the properties. It is not in controversy that for the auction sale in respect of the three items of properties mentioned above, a publication was made by the Official Liquidator stating that the sealed ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditor banks that the appellant was unable to show any irregularity or fraud in the conduct of the sale, and hence it should not be set aside. It should not be forgotten that the Court can set aside the sale even though the same was confirmed, if the interest of the creditors at large, contributories and all concerned is affected. Merely because of the confirmation of the sale, the Court will not become functus officio. In the instant case, no doubt this would cause inconvenience or even a loss to the highest bidder, but the same cannot be helped since in the instant case, the sale was conducted in the Court premises, but not in a business house. Though the sale is not attacked on any ground of irregularity or fraud in the conduct of the sale, when the Court is able to notice that there was neither just nor proper exercise of the judicial discretion, the sale has to be set aside on that ground. In the instant case, there was no proper publication. Two bidders were present in Court who did not have the EMD amount. Then the sale was adjourned, and even on that day, two bidders were present. Both of them were not present in Court pursuant to the publication made. Hence, it would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such manner as the Judge may direct. It appears that on April 17, 1964 at the instance of the Official Liquidator and at the instance of a contributory the Court had approved of the terms and conditions of sale which provide calling of the sealed tenders. On December 24,1964 the learned Judge realised the inefficacy of this Course and decided to abandon the original procedure and put the properties to auction. But having made up his mind to resort to auction the learned Judge confined the auction to only two persons namely the previous tender and the fresh tenderer. The auction in question no doubt was conducted in a public place but it was not a public auction because it was not open to the general public but was confined to two named persons. Secondly it was not held after due publicity. It was held immediately after it was decided upon. It is, therefore, obvious that the sale in question was not a public sale which implies sale after giving notice to the public wherein every member of the public is at liberty to participate. No doubt, the device resorted to considerably raised the previous bid yet it was not an adequate price having regard to the market value of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore striking a bargain and that circumstance must enter the judicial verdict before deciding whether a better price could be had by a postponement of the sale. In Radhey Shyam v. Shyam Behari Singh AIR 1971 SC 2337 this Court considering the scope of Order 21, Rule 90 of the Civil Procedure Code, 1908, held that in order to set aside an auction sale what has to be established is that there was not only inadequacy of the price but that inadequacy was caused by reason of the material irregularity or fraud. The purpose of an open auction is to get the most remunerative price and it is the duty of the Court to keep openness of the auction so that the intending bidders would be free to participate and offer higher value. If that path is cut down or closed the possibility of fraud or to secure inadequate price or underbidding would loom large. The Court would, therefore, have to exercise its discretion wisely and with circumspection and keeping in view the facts and circumstances in each case." 13. In the instant case, for the reasons stated above, it can be well stated that there was no proper publication at all calling for sufficient number of bidders and only two bidders were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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