2015 (8) TMI 933 - SC - Companies Law

Supreme Court Upholds Sale Confirmation, Rejects Recall Appeal

Vedica Procon Private Limited Versus Balleshwar Greens Private Limited & Others

The Supreme Court allowed the appeals of the appellant, Vedica Procon Private Limited, with costs, holding that the High Court was not justified in ... Revocation of order accepting highest bid – auction of property of company under liquidation - High Court vide impugned order recorded that Company Judge’s order accepting bid of appellant was vitiated as Judge failed to take note of potential value of land and bid of appellant was inadequate price to property in question – Held that:- It was well settled principle as opined in case of Navalkha & Sons Versus Sri Ramanya Das & Ors. [1969 (10) TMI 41 - SUPREME COURT OF INDIA] that company court had discretion to either accept or refuse highest bid at auction, it also emphasizes obligation of Court to see that price fixed at auction is adequate price even though there is no irregularity or fraud in conduct of sale – Equally well-settled principle that once Company Court recorded its conclusion that price is adequate, subsequent higher offer cannot be ground for refusing confirmation – Highest bid of appellant was accepted by Company Court and all stake-holders of company in liquidation were heard before such acceptance – Nobody ever objected including first respondent at that stage on any ground whatsoever – No doubt, property in question became more valuable in view of subsequent development – None of stake-holders of Company in liquidation ever objected to offer of appellant on ground that it is inadequate consideration for property –Value of property in question must have escalated substantially in view of developments subsequent but allowing such attempt, would rob sales conducted by Courts of all sanctity – Thus, he High Court was not justified in recalling order accepting highest bid – Decided in favour of Appellant. Issues Involved:1. Confirmation of the highest bid in a company liquidation sale.2. Legality of recalling the confirmed sale order due to subsequent higher offers.3. Impact of changes in property regulations on the auction process.4. Adequacy of the bid price and its effect on stakeholders.5. Procedural fairness and the role of the Company Court in ensuring the best price.Detailed Analysis:1. Confirmation of the Highest Bid in a Company Liquidation Sale:The Supreme Court analyzed whether the High Court's order dated 17.12.2013, which accepted the highest bid of Rs. 148 crores by the appellant, constituted a confirmation of the sale. The Court concluded that although the order did not explicitly use the term 'confirmation,' the totality of circumstances, including the lack of objections from stakeholders and the actions of the official liquidator, indicated that the sale was indeed confirmed.2. Legality of Recalling the Confirmed Sale Order Due to Subsequent Higher Offers:The Court emphasized that a subsequent higher offer cannot be a valid ground for recalling a confirmed sale. The principle established in Navalkha & Sons v. Sri Ramanya Das & Others, (1969) 3 SCC 537, was reiterated, stating that once the court concludes the price offered is adequate, subsequent higher offers cannot justify refusing confirmation of the sale. The Court criticized the High Court's reliance on Divya Manufacturing Company (P) Ltd. v. Union Bank of India & Others, (2000) 6 SCC 69, which deviated from this principle.3. Impact of Changes in Property Regulations on the Auction Process:The Court addressed the argument that the increase in the Floor Space Index (FSI) after the auction date, which made the property more valuable, could not be a relevant factor in determining the legality of the sale order dated 17.12.2013. The Court reasoned that the legality and adequacy of the bid should be assessed based on the circumstances existing at the time of the auction, not subsequent developments.4. Adequacy of the Bid Price and Its Effect on Stakeholders:The Court underscored the obligation of the Company Court to ensure that the property of a company in liquidation fetches the best possible price. However, it held that the bid of Rs. 148 crores was adequate on the date of the auction, and no objections were raised by stakeholders at that time. The subsequent increase in property value due to regulatory changes did not justify recalling the confirmed sale.5. Procedural Fairness and the Role of the Company Court in Ensuring the Best Price:The Court criticized the High Court's approach of reopening the sale process based on subsequent higher offers, as it undermines the certainty and finality of judicial sales. The Court highlighted that such a practice would deter genuine bidders and adversely affect the public interest by creating uncertainty in court-conducted sales.Conclusion:The Supreme Court allowed the appeals of the appellant, Vedica Procon Private Limited, with costs. The Court held that the High Court was not justified in recalling the order dated 17.12.2013, which confirmed the sale. The judgment reaffirmed the principle that subsequent higher offers cannot invalidate a confirmed sale and emphasized the importance of procedural fairness and finality in judicial sales.