2017 (1) TMI 637 - SC - Companies Law

Key Points from Recent Judgment on Property Auction Process

S.E.B.I. Versus SAHARA INDIA REAL ESTATE CORPN. LTD. AND ORS.

The judgment addressed various issues including acceptance of notice and filing of objections, cancellation of a sale property, sale of properties ... Re-auction - higher amount offered for the same in the previous auction shall be taken as the reserve price for the said properties except in the case of property at Ajmer where the reserve price shall be treated to be ₹ 41,00,00,000/- offered by Shri Rajinder Daga - Held that:- Keeping in view the status report received from Justice Agrawal and the fact that the Income-Tax Department does not oppose the sale of the properties in question provided their rights were suitably protected, we direct that the five properties referred to above shall be offered by SEBI for sale afresh on the following conditions: 1) The price offered by the highest bidder for the five properties except for the property situate at Ajmer shall be the reserve price for the fresh auction to be conducted by SEBI. For the property situate at Ajmer the reserve price shall be taken at ₹ 41,00,00,000/-. We say so because Mr. Vikas Singh, learned senior counsel appearing for the successful bidder for the property at Ajmer submits that he has instruction to match the offer made by Shri Rajinder Daga at ₹ 41,00,00,000/-. 2) In the case of property at Ajmer and so also the four other properties mentioned above, the prospective bidders shall deposit with SEBI forfeitable security equivalent to 25% of the reserve price for the properties mentioned above. The deposit shall be made in the manner stipulated in the notice to be issued by SEBI. 3) Needless to say that in case after deposit of the forfeitable security amount the highest bidder does not make good his offer or does not participate in the auction. The amount so deposited shall be liable to be forfeited. 4) In case any one of the properties, does not attract any bid higher than the one received by SEBI in the first auction, the SEBI shall be free to finalise the sale and to issue the requisite sale Certificate in favour of highest successful bidder in the previous auction. A report on the progress made in the fresh auction shall be filed in this Court within six weeks. Issues:1. Acceptance of notice and filing of objections to I.As.2. Cancellation of sale property and withdrawal of I.As.3. Sale of properties attached by Income-Tax authorities.4. Re-auction of properties under SEBI supervision.5. Conditions for re-auction process and reserve prices.6. Deposits and forfeitable security requirements for bidders.7. Progress report submission and compliance with court orders.Issue 1:The judgment addresses the acceptance of notice and filing of objections to I.As. Mr. Pratap Venugopal, Adv., accepted notice and was directed to file objections within four weeks. Additionally, an additional affidavit was to be filed by Ms. Sharmila Upadhayay, Adv., detailing the salary drawn by the applicant and explaining the source of funds in the bank.Issue 2:Regarding the cancellation of a sale property and withdrawal of I.As., Mr. Arvind Datar informed the court that the property had been cancelled, making it available for sale by the concerned party. Consequently, Mr. Nidesh Gupta sought to withdraw the I.As., which was granted, and a bank draft was handed over as part of the sale consideration, with the balance to be deposited in the SEBI Sahara Account within thirty days.Issue 3:The judgment discussed the sale of properties attached by Income-Tax authorities. SEBI had offered seven properties for sale, but five were attached by the Income-Tax department. It was recommended that these properties be auctioned under court orders, as the Income-Tax Department did not oppose the auction but claimed rights to the sale proceeds.Issue 4:The court deliberated on the re-auction of properties under SEBI supervision. Mr. Kapil Sibal proposed re-auctioning the properties, citing higher offers received post-attachment. The court directed SEBI to conduct a fresh auction for the attached properties, with specific conditions and reserve prices based on previous bids, ensuring serious bidders participated.Issue 5:Conditions for the re-auction process and reserve prices were outlined in the judgment. The reserve prices were set based on previous bids, with forfeitable security required from prospective bidders to ensure commitment. The court mandated progress reports on the fresh auction to be submitted within six weeks.Issue 6:Deposits and forfeitable security requirements for bidders were established, with 25% of the reserve price to be deposited as forfeitable security. If the highest bidder failed to fulfill their offer, the deposited amount would be forfeited. Specific conditions were set to maintain the integrity of the auction process.Issue 7:The judgment emphasized the submission of progress reports and compliance with court orders. Mr. Kapil Sibal complied with the court order by providing the necessary funds and outlined a roadmap for further compliance. The interim arrangement was to continue until the next hearing date, with specific deadlines for depositing additional amounts. Compliance with court orders and ongoing communication between parties were crucial aspects of the judgment.