TaxTMI 
TaxTMI 
2020 (6) TMI 18
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. Lot No.1 through e-auction and the reserve price was fixed at Rs. 31,00,00,000/-. 04. In the first round of auction against the reserve price of Rs. 31,00,00,000/-, no buyer came forward and the learned Company Judge vide order dated 17.12.2018 permitted the Official Liquidator to take appropriate steps for fresh e-auction of the assets under Lot No.1 consisting of freehold land, buildings, office machineries, stocks etc. situated at 39-A, Devguaradia Road, 5/2, Milestone on Nemawar Road, next to Flyover, Indore at a reduced reserve price of Rs. 27,90,00,000/-. 05. In light of the direction issued by the learned Company Judge in the Company Petition on 09.03.2019, the Official Liquidator published a fresh advertisement of sale notice inviting tenders in respect of Lot No.1 in the Economic Times, Dainik Bhaskar and the e-auction sale notice was also uploaded on the MCA Portal. 06. Pursuant to the sale notice, four parties participated in the e-auction and on 16.04.2019, a meeting of the Asset Sale Committee was held and the respondent No.2 in the present appeal / Seabright Landmark Projects LLP was declared to have made the highest offer. 07. The appellant No.2 / M/s ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellants has placed heavy reliance upon a judgment delivered in the case of Navlkha & Sons v/s Shri Ramanya Das & Others reported in (1969) 3 SCC 537 and a prayer has been made to set aside both the orders passed by the learned Company Judge and to direct a fresh e-auction in the matter. 14. Shri Atre, learend counsel under insturction of the appellant has also submitted an undertaking of the appellant, wherein he has given an undertaking that in case a fresh auction is held, he will not quote the price less than the price already quoted before this Court as well as quoted before the Official Liquidator i.e. less than Rs. 30,69,00,000/- 15. The offers made by the persons, who have participated in the auction as well as other competitors in a tabular form, are as under:- Sr. No. Name of the Head Amount (Rs.) Difference (Rs.) 1 Reserve price in first round 31,00,00,000/- 2 Reserve price in second round (10% Reduction) 27,90,00,000/- 3,10,00,000/- 3 Offer of the highest bidder 28,15,00,000/- 25,00,000/- 4 Offer of Aviral Buildcon Pvt. Ltd. 29,00,00,000/- 1,10,00,000/- 5 Offer of the Appellant 30,69,00,000....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ildings, office machineries, stocks etc. The reserve price was fixed at Rs. 31,00,00,000/-, however, no buyer came forward and the learned Company Judge vide order dated 17.12.2018 permitted the Official Liquidator to take appropriate steps for e-auction, however, this time the reserve price was reduced to Rs. 27,90,00,000/-. No cogent reason is reflected from the orders passed by the learned Company Judge in respect of grant of permission relating to reduction in the reserve price and re-auction was held. A meeting took place on 16.04.2019 of the Asset Sale Committee and respondent No.2 / M/s Seabright Landmark Projects LLP was declared to have made the highest offer. 21. The appellant before this Court has submitted a cheque to the official liquidator giving an offer of Rs. 30,69,00,000/-, meaning thereby, offered Rs. 27,90,00,000/- more than the amount offered by the respondent No.2. The learned Company Judge has confirmed the sale by an order dated 02.03.2020 and the order passed by the learned Company Judge reads as under:- "OLR No.31/19 has been field by the OL with a prayer to confirm the sale of the properties of the Company-in- Liquidation in Lot No.1 in favour....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 30.69 Crores was received and on 18.6.2019 one offer of Shri Girish Panchal without disclosing any amount was received. Hence the OL has filed the report OLR No.31/19 mentioning the details of all these offers and making alternate prayers of confirming the sale in favour of highest bidder or in favour of the subsequent offeree M/s Om Gurudev Enterprises, Indore. The submission of learned counsel for the highest bidder is that the bid of the highest bidder M/s Seabright Landmark Projects LLP, Indore (M.P.) was already found to be highest and accepted by the assets sale committee and it had deposited the EMD at that time and thereafter almost an year was passed, therefore, subsequent offers may not be considered at this stage. As against this, the submission of counsel for M/s Om Gurudev Enterprises, Indore (M.P.) is that he is offering the amount higher than the amount offered by the highest bidder and the object of the auction by this Court is to fetch the maximum possible price, therefore, its bid should be accepted. The submission of counsel for the OL is that no proper explanation for submitting the bid at the time of e-auction has been given by M/....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Division Bench successfully. Hence the appeal before this Court by the original offeror. This Court dismissed the appeal approving the view of the Division Bench that the procedure adopted by the learned single Judge was not legally sustainable. 36. In the process, this Court indicated the principles governing the confirmation of sales conducted by the Company Courts by the official liquidators. (Navlakha case, SCC pp. 540-41, para 6) "6. The principles which should govern confirmation of sales are well- established. Where the acceptance of the offer by the Commissioners is subject to confirmation of the Court the offeror does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the Court is satisfied about the adequacy of the price the ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rating the principles laid down in Navalkha case, declined to interfere with the order of the court and held as follows: (Divya Mfg. Co. case, SCC p. 79, Para 16) "16. ....As stated above, neither the possession of the property nor the sale deed was executed in favour of the appellant. The offer of Rs. 1.30 crore is totally inadequate in comparison to the offer of Rs. 2 crores and in case where such higher price is offered, it would be in the interest of the Company and its creditors to set aside the sale. This may cause some inconvenience or loss to the highest bidder but that cannot be helped in view of the fact that such sales are conducted in Court precincts and not by a business house well versed with the market forces and price. Confirmation of the sale by a Court at a grossly inadequate price, whether or not it is a consequence of any irregularity or fraud in the conduct of sale, could be set aside on the ground that it was not just and proper exercise of judicial discretion. In such cases, a meaningful intervention by the Court may prevent, to some extent, underbidding at the time of auction through Court. In the present case, the Court has reviewed its exercise of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d from the principle laid down in Navalkha & Sons. We have already explained what exactly is the departure and how such a departure was not justified." In the present case the record reflects that in the earlier round the attempt to sale the properties of Lot No.1 had failed, therefore, a decision was taken by the assets sale committee to fix the reserved price of Rs. 27.90 Crores and considering the circumstances of the case, this Court had approved it by order dated 17.12.2018. After wide publicity the e-auction was held on 4.4.2019, in which as against the reserved price of Rs. 27.90 Crores, the highest bid of Rs. 28.15 Crores has been received from M/s Seabright Landmark Projects LLP, Indore (M.P.). The explanation furnished by the subsequent applicant M/s Om Gurudev Enterprises for not submitting the bid in e-auction on the ground that the marriage of his daughter was to be performed at a subsequent date on 17.4.2019, does not inspire confidence. No other subsequent offerer has approached this Court pressing his claim for its alleged highest bid, therefore, their claim before the OL are not found to be bonafide. The record further reflects that the highest bid of M/s ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt of Rs. 25,35,000,00/- after adjustment of EMD amount of Rs. 2.80 crore within a period of 60 days from the date of that order. Learned counsel for applicant submits that applicant had received the communication from OL dated 24th March 2020 on 7th April 2020 for depositing the balance consideration amount but by that time the lockdown was already declared on account of spread of COVID 19, therefore, the applicant could not deposit the balance consideration amount. He submits that on account of restriction of movement and restriction on business operations there is liquidity crunch in the market and banks are also functioning with 10%-15% staff at the minimal level therefore, the applicant has difficulty in depositing the balance consideration amount within the period granted by this Court. He further submits that EMD amount of Rs. 2.80 crore has already been deposited by the applicant and the applicant is ready to deposit the balance consideration amount but at- east 3 month's time be granted to applicant to deposit the same. Shri H.Y. Mehta learned counsel for OL submits that the IA has been filed after expiry of the time granted by this court to deposit and n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e facts before the learned Company Judge. The prayer made by the Official Liquidator in OLR No.31/2019 reads as under:- "(i) The report of the Official Liquidator may kindly be taken on record. (ii) In view of Para 7 (a) of this report, if this Hon'ble Court would pleased to accept highest offer of Rs. 28,15,00,000/- received in e-auction, in respect of Lot No.1 (Land (Freehold), Buidings, Office Machineries, Stocks and Trees) of M/s Seabright Landmark Projects LLP, 295, Shree Krishna Paradise, Rau, Indore-453331, as recommended by Asset Sale Committee in the meeting held on 16.04.2019, sale may be confirmed in their favour with necessary directions to them, to deposit the balance sale consideration amount of Rs. 25,35,00,000/- in respect of Lot No.1, after adjustment of EMD amount of Rs. 2.80 Crores, within a period of 60 days as per terms & Conditions of sale of within such time as decided by this Hon'ble Court. OR (iii) In view of Para 7 (b) of this report, in view of aforesaid highest offer of Rs. 30.69 Crores, along with cheque Bi,325994 of Rs. 3,06,90,000/- EMD (10% of Rs. 30.69 Crores), received after e-auction, as detailed at Para No.6 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Economic Times (English Daily)- -All India Edition 2) Dainik Bhaskar (Hindi)- -M.P. Edition (viii) In view of Para 11 of this report, necessary permission may also be granted to release the advertisement expenses to the advertising agency and fes for online auction to M/s e-Procurement Technoligies Ltd, Ahmedabad in respect of Re-Auction, out of the fund available in the amount of the company (In-Liqn.). And Such other order(s) as this Hon'ble Court deem fit and proper may kindly be passed in the circumstances of the case." 24. The Official Liquidator, after bringing all facts, has certainly made a prayer for grant of permission of reauction of assets / properties to fetch maximum sale price in the interest of stakeholder of the Company in liquidation and even a prayer was made for issuance of appropriate direction to respondent No.2 / M/s Seabright Landmark Projects LLP to raise their offer to Rs. 30,69,00,000/- in order to meet the highest offer and even a prayer was made to sell of the property to appellant / M/s Om Gurudev Enterprises, however, the learned Company Judge has disposed of the OLR by an order dated 02.03.2020 confirming sale i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aken thereof as per law. The appeal is accordingly allowed but in the circumstances parties are directed to bear their own costs." In light of the aforesaid judgment, once the reserve price was fixed to Rs. 31,00,00,000/-, all the more there was no reason to reject the offer made by the present appellants on a technical ground that the appellant was not a participant. If the present appellant was not a participant, the prayer made by the Official Liquidator for re-auctioning the entire properties should have been allowed. 26. The Hon'ble Supreme Court in the case of Navlkha & Sons (supra) in paragraph - 6 has held as under:- "6. The principles which should govern confirmation of sales are well-established. Where the acceptance of the offer by the Commissioners is subject to confirmation of the Court the offeror does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of. his offer. The condition of confirmation by the Court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ppellant herein was accepted by the Company Court and all the stakeholders of the company in liquidation were heard before such an acceptance. Nobody ever objected including the first respondent herein at that stage on any ground whatsoever, such as, that there was any fraud or irregularity in the sale nor was there any objection from any one of them that the price offered by the appellant herein was inadequate. No doubt, the property in question became more valuable in view of the subsequent development. In our opinion, it is not a relevant consideration in determining the legality of the order dated 17.12.2013. Imagine, if instead of increasing the floor space index for construction from 1.0 to 1.8 the State of Gujarat had decided to reduce it below 1.0 subsequent to 17.12.2013, could the appellant be heard to argue that it would be legally justified in resiling from its earlier offer which was accepted by the Court and not bound by the contractual obligation flowing from such an offer and acceptance? " In the aforesaid case, the property in question became more valuable in view of subsequent development (i.e. increased FSR), however, in the present case, in the first round of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....laims of the creditors of the Company, the Supreme Court in the case of Allahabad Bank v. Bengal Paper Mills Co. Ltd. (1999)4 S.C.C. 383 (supra) has held that it is duty of the Courts to ensure that the best possible price is realised by sale of the assets and the properties of the Company in liquidation as it is obliged to the creditors for undertaking such a course. It was noticed that the learned Company Judge had ordered possession to be delivered to the Official Liquidator hastily and concluded that the auction purchasers should have realised that the order of sale could be set aside when any expenditure incurred by the auction purchaser was at his own risk. It was also observed that the interest of the creditors of the Company, particularly those of the unsecured creditors over weighed such equities. The observations of their Lordships in this regard read as under:- "The second respondent knew that the appeals were pending and that they could end in the order of sale being set aside. Such expenditure as it incurred withthis knowledge was at its risk. In the third place, and most important, the interests of the creditors of the Company, particularly the unsec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....In such cases, a meaningful intervention by the Court may prevent, to some extent, underbidding at the time of auction through Court. In the present case, the Court has reviewed its exercise of judicial discretion within the shortest time." 25. The aforementioned survey of case law clearly lays down that this Court is clothed with the powers to set aside even a confirm sale provided its comes to the conclusion that the price offered by the auction purchaser in fact was inadequate. Such powers is not dependent on any finding that there was material irregularity or commission of fraud in the process of sale, adopted by the Official Liquidator. It is also significant to notice that Dr. Singhvi appearing for the auction purchaser has also conceded such a power of the Court. The question which arises is whether in the facts and circumstances of the case, the sale confirmed in favour of the auction purchaser should be set aside or the plea raised by the interveners should be rejected." Thus, in short, if the Court feels that the price offered in the auction is not the adequate price, the Court can certainly order for re-auction and in the present case, a person i.e. present a....