(Per : HONOURABLE MR.JUSTICE MOHINDER PAL) 1. This appeal is directed against the judgment and order dated 24.1.2008 passed in Company Application No.4 of 2008. By the impugned judgment and order, the learned Company Judge reviewed the earlier order passed by it, by which sale in favour of present appellant was confirmed and thereafter, another order was passed in company application by which the bid of respondent No.4 herein was accepted.
2. Brief facts of this case are that the property of the company in liquidation was to be auctioned and an advertisement in this regard was published on 2.3.2007. In response to the said advertisement, 26 persons participated and submitted their bid before the Liquidator. The bid of the appellant for a sum of Rs.1.95 crores being highest was duly recommended by the Official Liquidator (OL) for acceptance by the learned Company Judge. On 26.11.2007, the learned Company Judge asked the concerned bidders to remain present in the Court for further bidding which was to take place on 20.12.2007. The present appellant ultimately increased his bid to Rs.2.05 crores and the said bid was finally accepted. The appellant was directed to make payment of 25% of bid amount within a period of one month and remaining 75% within next three months. However, before the expiry of period of one month, the respondent No.4 - Manu Tiling Co. Pvt. Ltd. submitted an application for reviewing the earlier order. In his application, it was stated that he was willing to offer Rs.2.10 i.e. Rs.5 lacs more than what was offered by the present appellant. The present appellant did not participate in further bidding before the learned Company Judge. However, in order to see bonafide of respondent No.4, the petitioner requested the Court to direct the respondent No.4 to deposit some amount and on the direction of the Court, respondent No.4 deposited Rs.50 lacs. The learned Company Judge carried out inter-se bidding between the respondent No.4 and few other bidders, who were present in the Court and ultimately, the bid of the respondent No.4 was accepted at Rs.2.70 crores. Being aggrieved by the aforesaid order of the learned Company Judge, the appellant, whose bid was originally accepted by the learned company Judge, has filed this original side appeal before this Court.
3. Learned Senior Counsel, Mr.S.N.Soparkar appearing with learned counsel, Mr.Amar Bhatt on behalf of appellant submitted that when sale in favour of appellant was already confirmed by the learned Company Judge, there is no reason to review the earlier order and undertaking fresh bid, especially when in his application, the respondent No.4 has only shown willingness to pay Rs.5 lacs more. It is further submitted that if such proceeding is undertaken, then there is no end to the auction proceedings and no bidder would know where he stands even after his bid is accepted. It is submitted that even the Liquidator in his report suggested to the Court to accept the bid of appellant which was highest. The appellant even increased his bid to Rs.2.5 crores on asking of the Court. It is submitted that respondent No.4 had never participated in the original bidding and having came to know about the rates offered by the present appellant. It is submitted that in view of the marginal increase of Rs.5 lacs in a property consisting of more than Rs.2 crores, the auction in favour of the appellant cannot be said to be bad. As there was neither any fraud, misrepresentation or lack of advertisement on the basis of which auction has been set aside, the order of the learned Company Judge was liable to be set aside. In support of his submissions, Mr.Soparkar has relied upon a decision of the Supreme Court in the case of Valji Khimji & Company v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. & Ors., reported in 2008 (1) Scale 287.
4. Learned counsel, Mr.M.B.Gandhi, appearing on behalf of respondent No.4, on the other hand, has argued that present appeal is not maintainable as the appellant was permitted to take part in the fresh bidding and the appellant having refused to do so, cannot challenge the order of the learned Company Judge, by which the bid of respondent No.4 was accepted. It is argued by Mr.Gandhi that even otherwise the appellant is estopped from challenging the order of the learned Company Judge, as, in fact, he had asked the learned Company Judge to direct the respondent No.4 to deposit Rs.50 lacs which the respondent No.4 did and in view of this conduct, he cannot prefer this appeal before this Court. It is submitted by him that he has already deposited the amount with the Official Liquidator. It is further submitted that even advertisement for auction was not properly published and there is no adequate publicity. According to him, the notice given in the Economic Times is not read by people at large and as such, all interested persons have not come to know about the auction. It is submitted that the advertisement given in two other newspapers 'Dainik Bhaskar' of Udaipur edition and “Divya Bhaskar' Gujarat edition was not having wide circulation, and as such, the people who were interested in the have not come to know regarding this auction. Relying upon a decision of the Supreme Court in the case of Allahabad Bank etc. v. Bengal Paper Mills Co. Ltd. & Ors., reported in AIR 1999 SC 1715, learned counsel, Mr.Gandhi submitted that the property has been rightly released in favour of respondent No.4 and as such, the order passed by the company Judge is liable to be upheld.
5. We have heard learned counsel appearing for the respective parties and have also gone through the file.
6. The last date for bidding was 16.3.2007. By 16.3.2007, 26 offers were received and as per the report filed by the Official Liquidator, they were called and inter-se bidding took place and the bid of the petitioner for Rs.1.95 crores was found to be the highest. Thereupon, the Official Liquidator filed the report seeking confirmation of sale in favour of the petitioner from the Company Court. The Official Liquidator has also mentioned in his report that the value of the property was Rs.50 lacs. Thereafter, in order to ascertain correctness of the bid, the Company Court directed all the bidders to remain personally present in the Court on 20.12.2007 for further inter-se bidding. On 20.12.2007, before the Company Court the proceedings were conducted. The petitioner was directed to increase his bid which he agreed and he gave his bid of Rs.2.05 crores. This increase was done in view of the letter given by the third party that he was ready to purchase this property for the abovesaid amount. It will be relevant to mention here that the third party i.e. respondent No.4 was not even personally present at the time of bidding before the Official Liquidator or inter-se bidding which has taken place before the learned Company Judge. On this basis, on 26.12.2007, the Company Court passed the order accepting the bid of the petitioner for a sum of Rs.2.05 crores. The petitioner was further directed to deposit 25% of the bid amount within a period of one month and remaining 75% in the next four months thereafter. After finalization of the bid in favour of the petitioner, respondent No.4 moved the application before the Liquidator stating therein that the order dated 26.12.2007 passed in favour of the petitioner was liable to recalled in view of his decision to buy the property for a sum of Rs.2.10 crores. It is further pleaded that the office of respondent No.4 was situated in Delhi and as there was no publication in the newspaper circulated in Delhi, the auction was liable to set aside by recalling the order. The learned Company Judge seems to have reviewed his own order by setting aside the sale in favour of the petitioner before expiry of the period of one month in which the appellant was to deposit 25% of the bid amount. In view of this background, this Court is required to determine whether the order passed by the Company Judge reviewing his earlier order dated 26.12.2007 was valid and legal. It is not the case of the respondent No.4 that auction in favour of the petitioner was as a result of fraud. As per the offer made by respondent No.4, he has increased the bid amount from Rs.2.05 crores to Rs.2.10 crores i.e. Rs.5 lacs. The parameters of review are contained in Order 47, Rule 1. The judgment of the Honourable Supreme Court in the case of Valji Khimji & Company (supra) relied upon by learned counsel for the petitioner directly deals on this point. In this judgment, it has been held that the objection after the sale should not be entertained except limited ground like fraud otherwise no auction can ever be completed. Once the sale is confirmed by the authority creating right in favour of the auction purchaser, certain rights accrued in favour of the auction purchaser cannot be extinguished. As in the present case, auction has been set aside for the simple reason that respondent No.4 has offered a sum of Rs.2.10 crores against confirmation of sale in favour of the petitioner for a sum of Rs.2.05 crores. We are of the considered opinion that the Company Court has not followed the correct principles of law. If it is held that every confirmed sale is set aside, the result would be that no auction sale would ever be completed because always somebody can come after the auction or its confirmation offering the highest amount. The situation could have been different if the auction had been held without adequate publicity in the well known newspaper having wide circulation, but in a case where the auction sale was done after publicity in the important newspaper like Economic Times and other vernacular having wide publicity in the area where the property is situated, then setting aside the sale after its confirmation will create huge problem. When an auction sale is advertised, all eligible persons can come and bid for the same and they will be themselves be to blame if they do not come forward to bid at the time of the auction. Later on, they cannot be allowed after bidding or confirmation is over to offer the highest price. It could have been different case if the auction is finalized for a sum of Rs.1 crore and subsequently somebody comes with the offer of Rs.10 crores. However, where the sale has been confirmed for a sum of Rs.2.5 crores and somebody has come forward with the offer of Rs.2.10 crores, in our considered opinion, in such situation a sale can never be set aside. In the present case, we are fully satisfied that there was no fraud in the auction and in absence of any allegation regarding fraud, sale cannot be set aside. Another important thing has come to our notice that auction in this case was subject to confirmation by the Company Judge. Once inter se bidding has taken place in the court premises and in the presence of the Company Judge himself the same cannot be set aside on an application moved by the third party who has not at all participated in the bid and was not present at the time of proceedings before the Official Liquidator and before the Company Judge. Once the sale is confirmed by the authority, certain rights accrued in favour of the auction purchaser cannot be extinguished except in exceptional cases such as fraud.
7. Learned counsel for respondent no.4 has laid much emphasis on the point that principle of estoppel has come in the way of the petitioner in view of his refusal to participate in further bid after respondent no.4 has deposited a sum of Rs.50 lacs to show his bonafide. As stated earlier, the principle of estoppel will not come into play in this case as the order setting aside the sale in favour of the petitioner is per se illegal and against the law. Any subsequent proceedings after this order are meaningless and have no bearing in the facts of this case. Learned counsel for respondent no.4 has also laid emphasis on the point of advertisement in the Economic Times and the local vernacular. This argument is once again meaningless in view of the fact that respondent no.4 himself being stationed at Delhi has come to know about the auction and now he cannot come and say that wide publicity has not taken place regarding the auction. Otherwise also, 26 participants have taken part in the auction. This itself shows that there was wide publicity before the auction and interested persons have come forward to take part in the auction.
The proposition of law contained in the case of Allahabad Bank (supra) as relied upon by learned counsel for respondent no.4 is not disputed but the facts of that case are totally different. In that case, the Court has come to the conclusion that the auction in favour of the auction purchaser was as a result of fraud and number of workers were likely to render jobless if the property was allowed to be sold. However, in the present case, the situation is entirely different. There is wide publicity and the auction has taken place in the presence of the Official Liquidator. The case of the appellant has been duly recommended and thereafter further auction has taken place in the court and finally the Company Judge has accepted the bid of the appellant, while respondent no.4 was not at all present either at the time of bid before the Liquidator or before the Company Court. In this view of the situation, the impugned order is liable to be set aside.
8. During the course of argument, learned Senior Counsel, Mr.Soparkar submitted that even though his earlier bid was rightly accepted by the learned Company Judge at the rate of Rs.2.5 crores. However, the appellant in order to meet with the bid of present respondent No.4, he has shown willingness to increase his bid upto Rs.2.70. Considering the fact that the bid in favour of present appellant was rightly confirmed earlier, in our view, the learned Company Judge could not have reviewed his earlier order. Therefore, while setting aside the order of the learned Company Judge, we hold that amount offered by the appellant at Rs.2.70 crores is just and reasonable and the sale in favour of appellant is required to accepted and confirmed.
9. In this view of the situation, present appeal is bound to succeed. The same is allowed with a direction that sale certificate be issued in favour of appellant. The appellant will pay 25% of Rs.2.70 crores within a period of one month from today, while the remaining 75% will be paid within next period of one month.
10. Learned counsel for respondent No.4 was fair enough to offer that his money be kept intact till the appellant makes the complete payment. In case, the appellant fails to make the payment within the stipulated period, the amount of respondent No.4 be accepted. However, in case full amount is paid by the appellant within the above mentioned period, the amount of respondent No.4 lying invested in long term fixed deposit be returned back to respondent No.4 with full interest.
(P.B.MAJMUDAR,J.)
(vipul)
(MOHINDER PAL, J.)