Shri Narendrakumar
Nakhat Vs. M/S Nandi Hasbi Textile Mills & Ors [1998] INSC 136 (27 February 1998)
G.T.
Nanavati, Syed Shah Mohammed Quadri Nanavati, J.
ACT:
HEAD NOTE:
Leave
granted.
Heard
learned counsel for both the parties.
The
appellant is challenging in these appeals the order dated 8.10.96 passed by the
High Court in Company Application No, 542/96 made in Company Petition No, 25/85
and also the order dated 21.2.97 passed in Company Application No.826/96. The
appellant in Company Application No.542/96 had prayed for refund of Rs.5 lakhs
(being the earnest money deposit) and Rs.59 lakhs (being 25% of the bid amount/
sale consideration) along with accrued interest on the ground that his bid
having been cancelled by the High Court, he was entitled to get back those
amounts. The High court directed the official Liquidator to refund Rs.50 lakhs
and with respect to the remaining amount rejected that application on 8.10.96.
The Syndicate Bank had filed Company Application No, 743/96 with a prayer to
award compensation to it and not to refund the said amounts till then. It was
also rejected on the same day. The bank has not challenged that order probably
because the whole amount was not ordered to be refunded. The appellant then
filed a review petition (Company Application No.826/96) but it was rejected on
21.2.97.
The
High Court rejected the claim for refund of the earnest money on the ground
that at that stage it was not proper to grant it was not proper to grant it as
that might affect the right of the official Liquidator to forfeit that amount
in case it is held that he has suffered some loss as a result of the conduct of
the appellant. As regards the claim of the Syndicate Bank for damages the High
Court merely stated that "in view of the order made in Company Application
No. 542 of 1996, this application stand r ejected." In the order passed on
Company Application No.542 of 1996 there is no discussion regarding the Bank's
claim for damages or regarding the claim of damages by the General Body of Liquidators
on account of the dilatory tactics adopted by the appellant in the proceedings
for confirmation of sale. The only observation made in that order is "the
question whether the amounts due by the applicant by reason of non-performance
of his part of the contract in any manner arises and the damages payable by him
could be appropriately adjudicated at a later stage." Mr. R.F.Nariman,
learned senior counsel appearing for the appellant submitted that the bid of
the appellant having been cancelled, he became entitled to refund of the whole
amount and the High Court committed a grave error in not passing an order for
refunding the same. He drew our attention to the following observations made by
the High Court itself in this behalf :
"As
long as the transaction is inchoate or incomplete for any reason and the
acceptance of the bid is cancelled, the parties are relegated tot he original
position even though the cancellation of the acceptance of the bid may be on
account of the conduct of the bidder himself. By virtue of the cancellation of
the acceptance of the bid, the offer made by the bidder is not accepted. It is
only on acceptance of the offer made by the bidder, other clauses would stand
attracted. This is a case wh ere the sale proceedings were cancelled on account
of the conduct of the parties in not doing one or the other acts provided under
the terms of sale. The act attributed to the applicant is that he had adopted
the stance of filibusters by indulging in dilatory tactics in postponing the
proceedings for confirmation of sale. If the Court had confirmed the sale,
other terms and conditions in the offer of sale would have arisen. In the
absence of such an event of confirmation of the sale, the only conclusion we
have to draw is that the applicant is entitled to the entire refund of the
money." He also submitted that the Division Bench of the High Court while
disposing of the said application proceeded on a wrong assumption that the
order dated 12.4.96 passed by the learned Single Judge of that High Court was
the final order as can be seen from the following observations made by it:
"The
learned Company Judge made an order on 12.4.1996 and that order has not been
challenged in an appeal. Therefore, the applicant cannot now seek for refund of
the entire amount, but only to the extent indicated by the learned Company
Judge." Having gone through the order dated 12.4.96 we find that it was an
interim order and the application was ordered to be listed again on 15.4.96. On
that day the learned Single Judge had passed an order for keeping that order in
abeyance and directing the secured creditors to file their objections.
Thereafter for certain reasons the same application was placed before a
Division Bench for passing a final order thereon. Therefore, there was no question
of the appellant challenging that order by way of an appeal. The High Court
was, therefore, obviously wrong in observing that the appellant "cannot
now seek for refund of the entire amount but only to the extent indicated by
the learned Company Judge." We also find that the final order passed by
the High Court is not quite consistent with its own observations quoted above.
As observed by us earlier the High Court has not stated why the balance amount
minus the earnest money deposit should not be refunded to the appellant. The
bank's application for awarding compensation was rejected. Probably it was
premature in view of the fact that the appellant's application for refund of
the balance amount was already rejected. Even if we proceed on the basis that
the appellant had indulged in dilatory tactics during the proceedings for
confirmation of sale and had thereby wasted almost one year it cannot be said
with certainly at this stage that he will be liable to pay compensation for the
alleged loss caused to the General Body of Creditors.
The
bank is a secured creditor and there is nothing to show that it had made the
application for and on behalf of the General Body of Creditors. Their
entitlement to damages and the extent of loss suffered by them, even if they
are held entitled to claim damages on that count, is yet to be decided. In such
circumstances, the court having not confirmed the sale and cancelled the bid of
the appellant, ought not to have rejected the claim of the appellant except in
respect of the earnest money deposit of Rs.5 lakhs. The High Court was,
therefore, not right in holding the refund of the remaining amount of Rs.9 lakhs
along with the interest accrued thereon at the instance of the Syndicate Bank.
If the bank is of the view that it has suffered any loss as a result of
wrongful act of the appellant it will be open to it to adopt an appropriate
remedy for claiming damages. Keeping that right of the bank open we allow this
appeal partly. That part of the order of the High Court whereby the appellant's
application for refund of Rs.9 lakhs being the balance amount out of the total
deposit of Rs.9 lakhs was rejected is set aside and we allow Company
Application No.542 of 1996 to that extent. There shall be no order as to costs.
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