TaxTMI 
TaxTMI 
2011 (9) TMI 771
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....Ltd., filed Company Application No. 52 of 2008, seeking sale of the assets of the property so that these could be distributed amongst the secured creditors and if anything was left over, be paid to the unsecured creditors. On 4th January, 2010, the learned Company Judge in the presence of the counsel appearing for the promoter and guarantor of the company passed an order directing that the secured creditors should hold a meeting alongwith the Official Liquidator in the office of the Official Liquidator on 27th January, 2010, to chalk out the manner in which the sale of the assets of the company was to be carried out. It appears that prior to this meeting, M/s. Prashar & Company, which is an empanelled valuer, carried out the valuation of the assets of the company and submitted their valuation report on 13th October, 2008. In this valuation report, the land of the company was shown to be 25 kanals and 6 marlas and valuation was done accordingly. The secured creditors did not have any objection to the report of the valuer. Thereafter, the secured creditors in their minutes proposed that the property be sold in four lots as follows: 1. Land & building Rs. 22.00 lacs ....
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....ot listed in the court till 7th December,2010, when sale was carried out in which appellant in Company Appeal No. 3 of 2011 was the highest bidder. 7. The Auction Purchaser filed an application for confirmation of the sale and for permission to deposit the balance sale consideration. On 6th January, 2011, the learned Company Judge permitted the Auction Purchaser to deposit the balance sale consideration within a period of one month. Various applications were filed and on 29th March, 2011, it was brought to the notice of the Hon'ble Company Judge that the entire land owned by the Company situated at Kandrori actually measured 51 kanals and only a part of it, i.e. 25 kanals and 6 marlas, were sold and, therefore, it was essential to sell the balance land. The learned Company Judge passed the following order: "..................... In view of the order passed by this Court on October 19, 2010 in Company Application No. 52 of 2008, publication was made for sale of the property. Whole property was not sold, but only part of it measuring 25 kanals 6 marlas was sold and the sale proceeds, as per the submission of the learned counsel for the Official Liquidator, have been deposite....
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.... earnest money of the remaining bidders. This in no manner means that the bid of the highest bidder will be necessarily accepted nor will he have any right to claim that the property must be given to him. As observed the confirmation of the bid will abide by the orders passed in the main appeal. The application is accordingly disposed of." ....................... 9. This order was passed basically on account of the fact that the learned counsel for IFCI had informed the Court that he had spent Rs. 30 lacs for issuance of advertisement and in case bids were not opened then in all probability, persons would not come forward because their earnest money would remain blocked for a long time. The bids were actually opened on 24th May, 2011 and bids of five bidders, namely M/s Bohra Exports Pvt. Ltd., M/s Pramaki Finvest Pvt. Ltd., M/s Mahabali Balaji Traders Pvt. Ltd., M/s Valley Iron Steels Pvt Ltd. And M/s Stelco Ltd., were opened. The Auction Purchaser had only bid for the remaining about 26 kanals of land and his bid was for Rs. 81 lacs which meant that for the entire assets of the company, i.e. the composite property purchased earlier by it and 26 kanals of land later put to a....
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....was clearly mentioned that all the bids should be submitted latest by 4 p.m. on 23rd May, 2011. Now, if a party takes a chance of trying to reach the office of the Official Liquidator on the last date, he does so at his own risk and in case he could not reach the Official Liquidator's office in time, his bid could not be considered and was rightly rejected. Therefore, this application is rejected. Company Application No. 33 of 2011 14. This application has been filed by M/s. Symcom Impex Private Limited. According to the averments made in the application, the company was willing to make an offer of Rs. 13.50 crores. In this application, there is no explanation as to why the bid was not submitted by the last date. Therefore, this application is also rejected. Company Application No. 34 of 2011 15. This application has been filed by M/s. Pramaki Finvest Private Limited. As observed above, the bid submitted by it was actually the highest, i.e., Rs. 14,51,00,000/-. A draft of Rs. 3,00,00,000/-, required in terms of the advertisement, was not submitted by it, though a photo copy of a draft was submitted. The Official Liquidator rejected the bid on the ground that the photoco....
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....cannot be permitted to bid when it had not deposited the earnest money at all. Company Applications No. 43 and 46 of 2011 19. These applications have been filed by M/s. Deepak Goyal & Company, praying that they may be permitted to take part in bidding, if it takes place again. The applicant had not submitted any bid and, therefore, application filed by it is rejected. Demand draft, if any, furnished by M/s. Deepak Goyal & Company be returned to it. 20. This leaves us with the main issue as to whether the sale made in favour of the Auction Purchaser has become final and whether the learned Company Judge could have passed the order permitting not only the sale of the balance land measuring 26 kanals but also permitting the bidders to bid for the entire composite lot, i.e, the assets purchased by the Auction Purchaser and the remaining extra land discovered later on. 21. From the facts narrated above and the various orders which we have quoted, it is apparent that the intention of the Court, the Official Liquidator as well as the secured creditors was that the entire property of the company should be sold in one lot. Unfortunately the promoter and guarantor, who was repres....
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....n held but also the interest of the secured creditors and the employees whose claims rank pari passu with the secured creditors. We are also not unaware that most of the secured creditors are public sector banks and the money actually belongs to the public. When there is conflict between individual interest and public interest, then public interest must take precedence over individual interest. 24. A number of decisions have been cited before us and we also draw support from the observations made by the Apex Court. The first judgment cited before us is Navalkha & Sons v. Sri Ramanya Das [1969] 3 SCC 537, which dealt with a similar situation where the assets of the company were sold. The Apex Court held that where the terms of the order of the Court/the advertisement/the auction commissioner provided that the auction/sale would be subject to the confirmation by the court, then no right is vested in the Auction Purchaser till the sale is confirmed. This is in contradistinction to the auction/sales carried out in terms of Order 21 of the Code of Civil Procedure. The following observations of the Apex Court are apposite for the purpose of decision of this case: "6. The principles....
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....to be an end to sale proceedings and sale proceedings cannot continue infinitely because if Courts permit this to happen, then it would be impossible to recover the real value of the property. It would be appropriate to refer to the following observations of the Apex Court in Valji's case supra: "28. If it is held that every confirmed sale can be set aside the result would be that no auction-sale will ever be complete because always somebody can come after the auction or its confirmation offering a higher amount. It could have been a different matter if the auction had been held without adequate publicity in well-known newspapers having wide circulation, but where the auction-sale was done after wide publicity, then setting aside the sale after its confirmation will create huge problems. When an auction-sale is advertised in well-known newspapers having wide circulation, all eligible persons can come and bid for the same, and they are themselves to be blamed if they do not come forward to bid at the time of auction. They cannot ordinarily later on be allowed after the bidding (or confirmation) is over to offer a higher price. Of course, the situation may be different if an aucti....
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.... 108 SCL 1/11 taxmann.com 144 (SC), was dealing with a case where sale of the assets of a company (which had been wound up) was made by way of auction. The highest bid was accepted by the Company Judge and on an intervention made before the Apex Court, it set aside the sale because the intervener offered a price which was seven times higher than the offer made by the highest bidder. The Apex Court also devised a formula of compensating the original Auction Purchaser and the Auction Purchaser was awarded five lacs as compensation. 31. The overview of the entire law laid down by the Apex Court indicates that the Apex Court has clearly held that before confirmation, the High Court has powers to review the sale and decide whether the sale has to be confirmed or not on many grounds. After confirmation, normally no intervention would be called for unless it is shown that fraud has taken place or as in the Shradhha Aromatics case, the offer made in Court shows that the difference of amount is substantial. 32. Mr. R.L. Sood, learned Senior Counsel, has made a submission before us that in light of what has been stated in Shradhha Aromatics case, his clients are willing to match the of....
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....crores, the bid of M/s. Mahabali Balaji Tradex Private Limited shall only be considered, if it alongwith its bid, submits a demand draft in favour of the Official Liquidator for a sum of Rs. 8.76 crores. In case, the bid of the Auction Purchaser is the highest, then obviously no further action will be required. However, in case the bid of M/s. Mahabali Balaji Tradex Private Limited is higher than that of the Auction Purchaser, then the Auction Purchaser will have to be compensated. 36. In an auction conducted under the provisions of Order 21 of the Code of Civil Procedure, if within fifteen days of the auction, the owner of the property/judgment debtor offers to pay the auction amount plus 5%, then the sale is automatically set aside. Keeping in view the fact that there is no judgment debtor in the present case, we feel that compensation of approximately 2.5% would be adequate compensation payable in such a case, which works out to approximately Rs. 30 lacs. We are also fixing this amount as the compensation, because if re-advertisement takes place, it will entail expenditure of approximately Rs. 30 lacs. 37. We are making it clear that the opening of the bids on 28th Septemb....