2013 (10) TMI 1147 - HC - Companies Law

Court dismisses plaintiff's objections on auction sale fraud; allows higher bids and grants extension.

Kusum Kumria & Others Versus M/s Pharma Venture (India) Pvt. Ltd.

The court dismissed the plaintiff's objections regarding the auction sale, finding no substantial evidence of fraud or irregularities. Both parties were ... Auction sale under order 21 Rule 90 CPC – Fraud During Auction - Plaintiff contended that a fraud has been played on the Court by the Court Auctioneer and his associates – Held that:- There is also nothing to substantiate the contention of the plaintiff that the three bidders are nothing but an extension of the defendants - even otherwise, provisions of Order 21 Rule 72 CPC would have no application - None of the arguments raised by the plaintiffs in any way would materially prejudice the plaintiffs - It cannot be said that the auction process suffers from any fraud or material irregularity so as to vitiate the auction process. Application under Order 151 CPC - Extension of Time for Depositing Pre-deposit – Held that:- In view of the injunction orders passed by the Division Bench of this Court on 26.07.2013, the Court Auctioneer rightly did not accept the balance 15% of the bid amount from the applicant - The stay now stands vacated - the time for depositing the balance 15% of the bid amount is extended till today - The applicant may deposit the said amount by cheque in favour of Registrar General of this Court today itself - the balance sale price may also be deposited within 15 days from today as provided in the conditions of sale and subject to other terms and conditions of the proclamation of sale – Decided against Petitioner. Issues Involved:1. Objections to the auction sale conducted by the Court Auctioneer.2. Allegations of fraud and irregularities in the auction process.3. Financial capability of the successful bidder.4. Alleged connections between bidders and defendants.5. Compliance with auction terms and conditions.6. Extension of time for depositing the balance bid amount.Detailed Analysis:1. Objections to the Auction Sale Conducted by the Court Auctioneer:The plaintiff filed objections under Order 21 Rule 90 CPC against the auction sale conducted on 26.07.2013, where DKG Buildwell Pvt. Ltd. emerged as the highest bidder at Rs. 10.45 crores. The auction was ordered by the court on 08.05.2013 with a reserve price of Rs. 10 crore. Despite an interim stay order by the Division Bench on 26.07.2013, the auction proceeded. The Division Bench later allowed the plaintiff to withdraw the appeal and file objections to the auction.2. Allegations of Fraud and Irregularities in the Auction Process:The plaintiff alleged that the Court Auctioneer and his associates committed fraud by continuing the auction despite the stay order. It was argued that the three bidders (M/s Green Valley Hospitality Pvt. Ltd., M/s DKG Buildwell Pvt. Ltd., and M/s Chase Avian Communication Pvt. Ltd.) were interconnected, having common directors, and essentially represented the defendants. The plaintiff claimed that the earnest money drafts of Rs. 1 crore each were made from the same bank branch at the same time, indicating collusion.3. Financial Capability of the Successful Bidder:The plaintiff contended that DKG Buildwell Pvt. Ltd., with an authorized capital of only Rs. 25 lacs, lacked the financial capacity to purchase the property and was merely a speculator intending to profit from reselling the property. The plaintiff argued that this constituted fraud under Order 21 Rule 90 CPC.4. Alleged Connections Between Bidders and Defendants:The plaintiff argued that the bidders were essentially the same entity due to common directors and connections with the defendants. The court, however, rejected this argument, stating that the companies were distinct legal entities under The Companies Act, and mere commonality of directors in another company did not vitiate the bid process.5. Compliance with Auction Terms and Conditions:The plaintiff claimed irregularities in the bidding process, arguing that DKG Buildwell Pvt. Ltd. should not have been allowed to continue bidding after initially placing the lowest bid. The court found no merit in this argument, noting that the bid sheet did not support the plaintiff's claim and that no prejudice was caused to the plaintiff by the bidding process.6. Extension of Time for Depositing the Balance Bid Amount:DKG Buildwell Pvt. Ltd. sought an extension for depositing the balance 15% of the bid amount, arguing that the Division Bench's stay order prevented them from doing so. The court found merit in this contention and extended the time for depositing the balance amount, allowing the bidder to deposit the amount by cheque on the same day and the remaining balance within 15 days.Conclusion:The court dismissed the plaintiff's objections, finding no substantial evidence of fraud or material irregularity in the auction process. The court allowed both parties to seek higher bids before the next hearing. The application for extension of time to deposit the balance bid amount was granted, and other related applications were disposed of accordingly.