TaxTMI 
TaxTMI 
2020 (6) TMI 18
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....rice 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 Om Gurudev Enterprises, a sole proprietorship concern, ....
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....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/- 2,79,00,000/- The aforesaid chart makes it very clear that the difference between the price offered by the ....
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....he 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 of the highest bidder M/s Seabright Landmark Projects LLP, Indore (M.P.). IA No.7202/19 has been filed by the highest bidder M/s Seabrig....
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....ed 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/s Om Gurudev Enterprises, Indore. Counsel for the Bank of India, secured creditor has also submitted that the offer made by the highest bidder be accepted and the ....
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....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 act of confirmation of the sale would not be a proper exercise of judicial discretion. In Gordhan Das Chuni Lal Dakuwala v. T. Sriman Kanthimathinatha Pillai, it was observed that where the property is authori....
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....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 judicial discretion within a shortest time." 39. We cannot help pointing out that their Lordships came to such a conclusion placing reliance on para 6 of Navalkha case. Their Lordships failed to take note of the last sentence....
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....ion 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 Seabright Landmark Projects LLP, Indore (M.P.) has been considered by the assets sale committee and has been accepted. Before this Court also counsel for the Bank of India has supported the confirmation of sale in favour of the highest bidder M/s Seabright Landmark Projects LLP, Indore and has opposed t....
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....e 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 now the prayer for extension of time cannot be considered. He further submits that the offer of the applicant was objected by another party by offering higher amount and that applicant has not shown the bonafides by depositing any amount in pursuance to the order of this Court. He further submits that value of the assets are going up. Shr....
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....old), 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 above, if this Hon'ble Court deem fit and proper, necessary directions may kindly be issued to Highest bidder of e-auction M/s Seabright Landmark Projects LLP to raise their offer more or equal to Rs. 30.69 crores, in order to meet the highest offer for subject assets / properties of the company (In-Liqn.), if M/s Seabright Landmark Projects LLP raised the offer, sale may be confirmed in their favour ....
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....n'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 in favour of respondent No.2 / M/s Seabright Landmark Projects LLP. 25. The Hon'ble Supreme Court in the case of LICA (P) Limited v/s Official Liquidator & Another reported in (2000) 6 SCC 79 in paragraph - 5 has held as under:- "5. The purpose of an open auction is to get the most remunerative price and it is the duty of the court to keep openness of the auction so that the intending bidders would be free to participate and offer higher value. If that path is cut d....
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....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 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 act of confirmation of the sale would not be a proper exercise of judicial discretion. In Gordhan Das Chuni Lal v. T. Sriman Kanthimathinatha Pillai(1) it was observed that where the property is authorised to be sold by private contract or otherwise it is the duty of the Court to satisfy itself that the....
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....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 sale, the offered reserve price was Rs. 31,00,00,000/-, which was certainly much more than the reserved price offered by respondent No.2 i.e. Rs. 28,15,00,000/-. The price offered by respondent No.2 is again much lower than the price offered by the appellant. 28. Keeping in view the judgments delivered by the Hon'ble Supreme Court, it is the bounden duty of the Court to see that the price fetched at the auction is an adequate price, even though, there is no suggestion of irregularity or fraud. In the case....
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.... 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 unsecured creditors, overweighed such equities, if any, as might have been considered to be in favour of the second respondent. It was, in our view, the obligation of the Division Bench to have struck down the order of sale having regard to what it found wrong with it. 25......The second respondent knew that the appeals were pending. It should have appreciated that the order of sale was very vulnerable, given what the Division Bench of the High Court had to say about it. It consciously took the risk of incurring the expenditure and obligations and it....
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....mmission 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 appellant has offered Rs. 2,80,00,000/- more in the matter, and therefore, fresh auction is inevitable. 29. Another important aspect of the case is that the sale was confirmed on 02.03.2020 in presence of advocate of respondent No.2 with a direction to deposit entire sale consideration within a period of 60 days from the date of the order i.e. by 01.05.2020, however, respondent did not deposit any amount by 03.05.2020 and taking shelter of pandemic COVID - 19, a prayer was made for extension of time. 30. In the considered opinion of this Court, as the amount offered by respon....