Shradhha Aromatics
Private Limited Vs. O.L. of Global Arya Industries Limited and others
J U D G M E N T
G.S. Singhvi, J.
1.
Leave
granted.
2.
The
appellant is aggrieved by judgment dated 12.9.2008 of the Division Bench of the
Gujarat High Court whereby the appeal preferred by respondent No.2 - Bipin B.
Lathia against order dated 12.11.2007 passed by the learned Company Judge in
Company Application No. 504 of 2007 was allowed and the Official Liquidator was
directed to complete the formalities 2 for execution of the sale deeds in
respect of the property belonging to M/s. Global Arya Industries Limited
(hereinafter referred to as, "the Company") in his favour.
3.
By
an order dated 27.4.2006 passed in Company Petition No. 106 of 2002, the
learned Company Judge ordered winding up of the Company and appointed the
Official Liquidator attached to the High Court as Liquidator of the Company.
The proposal submitted
by the Liquidator in the form of Report No.162 of 2006 for sale of the assets
of the Company including land, building, plant and machinery, furniture, fixtures
and all other movables (except records) at L.S. No.202/3P, SIDC Main Road, village
Veraval, District Rajkot was approved by the Company Judge and a committee was appointed
for conducting the sale. After due deliberations, the committee decided to
advertise sale of the assets of the Company.
In furtherance of
that decision, advertisements were issued in vernacular and English newspapers showing
reserve price of the land etc. as Rs.64 lakhs. After considering the bids and
further offers made before the Court, the learned Company Judge passed an order
dated 30.8.2007 and approved the highest offer of Rs.127 lakhs given by respondent
No.2. Soon thereafter, the appellant filed Company Application No. 450 of 2007
for recall of order dated 30.8.2007 by stating that it was interested in making
an offer of Rs.141 lakhs. The learned Company Judge dismissed the application by
observing that the revised offer made by the appellant was an afterthought and
there was no tangible reason to review the earlier order.
4.
Undeterred
by rejection of one application, the appellant filed another application, which
came to be registered as Company Application No.504 of 2007, for recall of order
dated 30.8.2007. After considering the rival submissions, learned Company Judge
vide his order dated 27.11.2007 allowed the second application. The relevant portions
of that order are extracted below: "13. If the above conduct of the
applicant is to be viewed in light of the latest judgment of the Hon'ble
Supreme Court in the case of Divya Manufacturing Company (P) Limited (Supra), it
is clear that though the sale was confirmed in favour of respondent No.2, neither
the possession of the movable properties was handed over nor the sale deed was
executed in favour of respondent No.2.
Unless and until these
formalities are over, it cannot be said that the transaction is complete and before
that, if higher offer is made, the Court would certainly consider and at that
point of time, it is to be seen as to whether the earlier transaction is by
virtue of fraud. The real criteria is that the property of the Company in liquidation
should fetch maximum price and whether the properties can be adjudged on the
basis of the offers which are received. Here in the present case, the applicant
has offered Rs.1.51 Crores.
If that is to be considered
as market value then in that case, certainly the offer of Rs. 1.27 Crores made
by respondent No.2 and accepted by the Court earlier cannot be said to be an adequate
price and hence, the Court is well within its power to reconsider the case. The
authorities cited by the learned advocate appearing for the respondent No.2 are
confining to the facts of those cases. Even in the case of Divya Manufacturing Company
(P) Limited, a distinction was sought to be drawn by submitting that there was condition
laid down in the tender document empowering the Court to set aside the sale.
Irrespective of the fact whether any such condition is there or not, the Court
is well within its power to reconsider its decision especially when higher amount
is offered and ultimately, it is in the advantage and benefit of the Secured
Creditors and workers.
Even the Division
Bench of this Court has taken the view in O.J. Appeal No. 80 of 2007 decided on
28.06.2007 where the Learned Single Judge has rejected the application for de- confirmation
of sale and while considering the higher offer made by that appellant, since
the original successful bidder had increased its offer to match with the offer
made by the appellant in the appeal, the matter was accordingly decided. 15. Considering
the over all view of the matter and looking to the facts and circumstances of
the present case, the Court is of the view that since the present applicant is
offering Rs. 1.51 Crores and it is already deposited with the Official
Liquidator, there is no reason not to accept the said offer.
Therefore, the order
dated 30.08.2007 passed by this Court in OLR No. 143 of 2007 is hereby recalled
and the sale of Lot No. A of the Company in liquidation confirmed in favour of
respondent No.2 is hereby cancelled. The Court hereby confirms the sale of Lot No.
A of the Company in liquidation in favour of the present applicant for Rs. 1.51
Crores. Since the entire sale consideration has already been deposited by the
applicant with the Official Liquidator, the Official Liquidator is hereby directed
to hand over the possession of the movables within one week from today and the
sale deed be executed in favour of the present applicant within one week from
the date of receipt of the draft of sale deed from the present applicant.
Since the respondent
No.2 has already paid an amount of Rs. 1.27 Crores, now the said amount is
required to be refunded 5 to the respondent No.2. The equity, however, demands
that the respondent No. 2 should be adequately compensated by way of interest
on the said amount. The present applicant is, therefore, directed to pay
interest @ 12% p.a. on the actual amount of the respondent No.2 lying with the Official
Liquidator. The calculation be made accordingly and the applicant shall deposit
the said amount of interest with Official Liquidator and on deposit of the said
amount of interest, the possession of the property would be handed over as well
as the sale deed would be executed in his favour. The amount of interest so
deposited by the applicant would be refunded to the respondent No.2 along with
the amount of Rs. 1.27 Lacs."
5.
Respondent
No.2 challenged the aforesaid order in O.J. Appeal No.248 of 2007. During the
pendency of the appeal, the Division Bench of the High Court gave opportunity
to the parties to give higher offers. This is evident from order sheets dated
28.2.2008, 3.3.2008 and 27.3.2008, which read as under: "DATE: 28.02.2008 It
is stated that when the property was auctioned, offer of Rs. 1.51 crore was
given by respondent No.4, and option was given to the appellant if he is
prepared to pay Rs. 1.51 crores. Counsel for the appellant prays for time to seek
instruction from his client, whether appellant is prepared to pay Rs. 1.51
crores. List on 3.3.2008. DATE: 03.03.2008
On 28.02.2008, when some
other party offered Rs.1.50 Crores, we gave the option to the appellant to offer
similar 6 amount, as the Court felt that preference should be given to the appellant,
if similar amount is offered by the appellant. Today, respondent No.1 Shradhha Aromatics
Pvt. Ltd. offered Rs.1.61 Crores. Counsel for the appellant prays time to consult
his client, whether he can offer the amount similar to which is offered by the
respondent No.1 . List it on 05.03.2008. DATE: 27.03.2008 On 05.03.2008,
respondent no.1 was prepared to deposit Rs.1.51 crores.
The parties were
directed to appear in person in Court and submit their bids. However, today,
the appellant has backed out and submits that he does not want to participate
in the bidding. Respondent no.1 Shradhha Aromatics Pvt. Ltd. has already deposited
an amount of Rs.1.51 crores. Respondent No.1 is, therefore, directed to deposit
a demand draft for the balance amount of Rs.10 lakhs within three weeks and thereafter
the matter will be taken up for hearing.
However, it is made
clear that as the appellant does not want to pay higher amount as has been
offered by respondent no.1, he will not be permitted to submit any bid by
offering a higher amount hereafter. The appellant submits that he shall only
make his submissions on the next date. List it on 22.04.2008."
6.
After
undertaking the aforesaid exercise, the Division Bench of the High Court considered
the question whether the learned Company Judge was justified in
reviewing/recalling order dated 30.8.2007 on the ground that the appellant herein
had offered better price and answered the same in negative. The Division Bench
opined that the confirmed auction sale cannot be set aside merely because
subsequently a higher price is offered by one of the bidders.
7.
In
the special leave petition filed by the appellant, this Court ordered notice on
24.9.2008. After about two years, learned senior counsel appearing for the appellant
gave out that his client is ready to deposit an additional amount of Rs.39
lakhs and that will make its bid as Rs.2 crores. After taking note of his
statement, the Court passed order dated 4.10.2010 and gave an opportunity to
the contesting parties to give fresh bids in sealed envelopes. On the next date
of hearing i.e. 10.12.2010, learned counsel for the parties produced sealed envelopes
containing the revised bids of their respective clients.
The sealed envelopes
were opened in the Court and the offers made by the parties were perused. At that
stage, Shri Pallav Shishodia, learned senior counsel appearing for the intervenor-cum-
promoter - M/s. Chiripal Textile Mills Private Limited submitted that his client
is willing to give a better offer. Thereupon, the case was adjourned to 15.12.2010,
on which date the following order was passed: "At the commencement of hearing,
Shri Pallav Shishodia, learned senior counsel appearing for the promoter produced
before the Court an envelope containing the offer of his client. The envelope was
opened in the Court. We have perused the contents thereof.
The two envelopes produced
by the learned senior counsel appearing for the petitioner and respondent No.2,
which were sealed on the last date of hearing were opened in the Court. After perusing
the offers, we are prima facie of the view that the property should be put to re-auction.
However, before recording any conclusion on the issue, we deem it proper to give
an opportunity to the learned counsel for the parties to make their
submissions. As requested and agreed by all the learned counsel, the case is adjourned
to January 5, 2011. The Court Masters shall reseal all the envelopes and keep
the same in safe custody." On 5.1.2011, the case was adjourned because
learned counsel for the parties made a request that their clients may be given an
opportunity to submit fresh revised offers.
While adjourning the
case, the intervenor-cum- promoter was directed to deposit a Demand Draft of Rs.2
crores with the Registrar (Judicial). On 25.1.2011, learned counsel for respondent
No.2 made a statement that his client is not willing to give a bid higher than
what was offered before the Division Bench of the High Court. Thereafter, the appellant
and the intervenor-cum-promoter gave their respective bids. However, the matter
could not be finalised because counsel for the intervene or-cum-promoter sought
time for two days to give a bid higher than 9 the bid of Rs.7.5 crores given by
the appellant.
On 10.2.2011, learned
counsel for the intervenor-cum-promoter submitted a note suggesting that his
client is willing to offer Rs.7.55 crores. After considering the same, the Court
indicated the parties that an order may be passed for public auction of the property.
On 11.2.2011, learned counsel for the appellant and intervenor-cum-promoter
stated that if the property is to be auctioned afresh, then their clients are not
willing to deposit the amount in terms of their revised offer.
8.
On
18.2.2011, the Court, after hearing learned counsel for the parties, intervenor-cum-promoter
and Gujarat State Industrial Investment Corporation (GSIIC), passed the
following order: "At the commencement of further hearing, Shri S. Ganesh, learned
senior counsel appearing for Gujarat Industrial Investment Corporation, submitted
that as on date a sum of about Rs.12 crores are due to his client being a
secured creditor and it will be in public interest if the Court, instead of
remitted the matter to the High Court, may accept the offer made by the intervenor
on behalf of M/s. Chiripal Textile Mills Pvt. Ltd. in case it agrees to pay
Rs.7.58 crores. Shri Pallav Shisodia, learned senior counsel appearing for the intervenor-cum-promoter,
submitted that his client is prepared to offer Rs.7.58 crores but would require
three months' time for making payment.
In our view, it is not
possible to give a long rope to the intervenor-cum-promoter for producing evidence
of its 10 willingness to pay Rs.7.58 crores. Therefore, we deem it proper to
grant four weeks' time for the purpose. List the case on 1.4.2011 after the category
"Adjourned Matters". On the next date of hearing, the Court will decide
the issue relating to compensation, if any, which may be awarded to the petitioner,
who had deposited Rs.1.61 crores and respondent no.1, who had deposited Rs.1.27
crores. The Registry is directed to keep the amount deposited on behalf of intervenor
in a short term fixed deposit of six weeks in a nationalized Bank." On 9.5.2011,
the Court noted that counsel appearing for the intervenor-cum-promoter has
produced two bank drafts for a sum of Rs.5.58 crores and Rs.2 lakhs
respectively. The same were ordered to be deposited with the Registrar
(Judicial).
9.
Shri
Amar Dave, learned counsel for the appellant submitted that if the Court is
inclined to accept the offer made by intervenor-cum-promoter, then the Official
Liquidator may be directed to return the amount deposited by his client with interest.
Shri Dhruv Mehta, learned senior counsel appearing for respondent No.2 also made
a similar submission and relied upon the judgments of this Court in Punjab
Wirelsess Systems Employees' Union v. Winsome Yarns Ltd. and others (2006) 7 SCC
233 and FCS Software Solutions Ltd. v. La Medical Devices Limited and others (2008)
10 SCC 440. Shri S. Ganesh,
learned senior
counsel appearing for GSIIC submitted that the Court may accept the offer made on
behalf of intervenor-cum-promoter but may not award interest on the amount deposited
by the appellant and respondent No.2 because both the parties had given higher
offers after receipt of the initial bids and so far as the appellant is
concerned, it had offered to pay higher amount only after finalisation of the
bid of respondent No.2.
He submitted that
GSIIC has first charge on the assets of the Company and there is no reason why
it should be deprived of its legitimate dues by directing payment of interest
on the amount deposited by the bidders. Learned senior counsel emphasized that
the offer given in the first instance was extremely low and, therefore, the offer
of Rs.7.60 crores made by the intervenor-cum-promoter should be accepted.
10.
We
have considered the respective submissions and carefully perused the record. Ordinarily,
the Court is loathe to accept the offer made by any bidder or a third party after
acceptance of the highest bid/offer given pursuant to an advertisement issued
or an auction held by a public authority. However, in the peculiar facts of this
case, we are inclined to make a departure from this rule. Admittedly, total
area of the land advertised by the committee is 12,500 square meters and the
same is situated in an important district of Gujarat. It is also not in dispute
that the area has been substantially developed in last four years.
The initial offer made
by M/s. Patel Agro Diesel Ltd. was of Rs.83 lakhs and the highest revised offer
given before the learned Company Judge was of Rs.127 lakhs. After acceptance of
the revised offer by the learned Company Judge, the appellant stepped in and
made an offer to pay Rs.141 lakhs. The first application filed by it was dismissed
but the second application was allowed and the increased offer of Rs.151 lakhs
was accepted by the learned Company Judge vide order dated 27.11.2007. That order
did not find favour with the Division Bench, which restored the first order passed
by the learned Company Judge.
If the order of the Division
Bench is sustained, the creditors of the Company are bound to suffer because
the amount available for repayment of the dues of the creditors would be a
paltry sum of Rs.127 lakhs. As against this, if the offer made by the
intervenor-cum-promoter is accepted, the Official Liquidator will get an
additional amount of more than Rs.4.25 crores. The availability of such huge
amount will certainly be in the interest of the creditors including GSIIC. Therefore,
it is not possible to approve the order passed by the Division Bench of the
High Court. In a somewhat similar case - FCS Software Solutions Ltd. v. La Medical
Devices Limited and others (supra), this Court approved the acceptance of revised
bid of Rs.3.5 Crores given by the appellant with a direction to compensate the
earlier highest bidder by payment of the specified amount.
11.
In
the result, the appeal is disposed of in the following terms:
i.
The
impugned order is set aside.
ii.
The
offer of Rs.7.60 crores including additional amount of Rs.2 lakhs made by the intervenor-cum-promoter-M/s.
Chiripal Textile Mills Private Limited is accepted.
iii.
The
Registry is directed to encash the fixed deposits of Rs.7.60 crores and get prepared
a demand draft of the total amount including the interest in the name of the
Official Liquidator attached to the Gujarat High Court. The latter shall depute
an authorised officer to collect the demand draft from the Registry of this
Court.
iv.
Within
four weeks from today, the intervenor-cum-promoter shall pay Rs.6 lakhs to the
appellant and Rs.5 lakhs to respondent No.2 by way of compensation because on
account of pending litigation, they were prevented from utilising the amount deposited
with the Official Liquidator.
v.
Within
four weeks from the date of receipt of demand draft by the Official Liquidator
attached to the Gujarat High Court and production of receipt showing payment of
money by the intervenor-cum-promoter to the appellant and respondent No.2 in terms
of sub- paragraph
vi.
(iv)
above, GSIIC shall execute sale deed(s) in favour of the nominee of the intervenor-cum-promoter,
namely, M/s Chiripal Energy Ltd. and handover possession of the land etc. to the
purchaser.
vii.
The
tax etc., if any, payable to the State Government and/or agencies/instrumentalities
of the State in respect of the assets of the Company shall be paid by the
purchaser. The Registry is directed to send by fax a copy of this judgment to
the Official Liquidator attached to the Gujarat High Court, Ahmedabad.
.............................J.
[G.S. Singhvi]
..............................J.
[Asok Kumar Ganguly]
New
Delhi
May
24, 2011.
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