2011 (5) TMI 845 - SC - Companies Law

Supreme Court Accepts Highest Offer of Rs.7.60 Crores, Directs Sale Deed Execution

Shradhha Aromatics (P.) Ltd. Versus Official Liquidator of Global Arya Industries Ltd.

The Supreme Court set aside the Division Bench's decision and accepted the highest offer of Rs.7.60 crores from the intervenor-cum-promoter, M/s. Chiripal ... Winding up - Custody of company's properties - Company was ordered to be wound up and advertisements were issued for sale of its properties Issues Involved:1. Validity of the Division Bench's decision to set aside the Company Judge's order.2. Legitimacy of recalling the auction sale confirmation.3. Consideration of higher offers post-auction confirmation.4. Compensation for the bidders affected by the litigation.Issue-wise Detailed Analysis:1. Validity of the Division Bench's Decision to Set Aside the Company Judge's Order:The appellant contested the Division Bench's decision dated 12-9-2008, which reversed the Company Judge's order dated 27-11-2007. The Company Judge had accepted a higher offer from the appellant after the initial confirmation of sale to respondent No.2. The Division Bench directed the Official Liquidator to finalize the sale in favor of respondent No.2, which the appellant challenged, arguing that the higher offer should be considered to maximize the value for the creditors.2. Legitimacy of Recalling the Auction Sale Confirmation:The Company Judge initially confirmed the sale to respondent No.2 for Rs.127 lakhs. Subsequently, the appellant offered Rs.141 lakhs and later Rs.151 lakhs. The Company Judge, referencing the Supreme Court's decision in Divya Manufacturing Company (P) Limited, ruled that until possession and execution of the sale deed, the transaction was not complete, and a higher offer could be considered to ensure the property fetched the maximum price. Thus, the Company Judge recalled the earlier order and confirmed the sale to the appellant for Rs.151 lakhs.3. Consideration of Higher Offers Post-Auction Confirmation:The Division Bench, during the appeal, allowed parties to submit higher offers. Despite this, they ultimately ruled that a confirmed auction sale should not be set aside merely due to a subsequent higher offer. This decision was challenged in the Supreme Court, which, after multiple hearings and considering subsequent higher offers, indicated a preference for re-auction to ensure maximum benefit to the creditors.4. Compensation for the Bidders Affected by the Litigation:The Supreme Court noted that the prolonged litigation prevented the bidders from utilizing the amounts deposited with the Official Liquidator. Therefore, it directed the intervenor-cum-promoter to compensate the appellant and respondent No.2 with Rs.6 lakhs and Rs.5 lakhs, respectively. This compensation was deemed necessary due to the delays and financial implications caused by the ongoing legal proceedings.Conclusion:The Supreme Court, considering the substantial development in the property's value and the interest of creditors, decided to accept the highest offer of Rs.7.60 crores from the intervenor-cum-promoter, M/s. Chiripal Textile Mills Private Limited. The previous orders of the Division Bench were set aside, and specific directions were issued for the execution of the sale deed and compensation to the affected bidders. This decision aimed to maximize the returns for the creditors and ensure a fair resolution of the matter.