Hon'ble Shyam Shankar Tiwari,J.
1. Heard Shri U.N. Sharma, learned Senior Advocate, and Shri B.C. Rai, learned counsel for the appellant. Shri Ashok Bhalla has appeared for respondent No. 2 and Shri Anurag Khanna appearing for newly impleaded respondent Nos.4.
2. This special appeal has been filed against the judgment and order of the learned Single Judge dated 6.5.2008 passed by the Company Judge in Misc. Company Application No. 2 of 1998 M/s. Mahendra Steel Tubes Ltd rejecting the application No. 53878 of 2008, by which application was filed for recalling the earlier order of learned Company Judge dated 20.12.2006..
3. Brief facts of the case necessary to be noted for deciding the issue raised in the appeal are :-
4. M/s. Mahendra Steel Tubes Ltd., the Company in liquidation was wound up by order dated 21.7.2001. The plant and machinery of the company was sold. Earlier, the reserved price of land and building of the Company was fixed at Rs.26.87 lakhs. Advertisement was issued in response to which bids of not more than 20 lakhs were received, by an order dated 8.11.2006 of the Company Judge, the Official Liquidator was required to re-advertise the properties at reserve price of Rs.20 lakhs. The properties were again re-advertised in 'Dainik Jagran' a Hindi daily published from Delhi 'Amar Ujala', a Hindi published from Meerut 'Shah Times,' Hindi daily newspaper published from Muzzafarnagar, Economic Times and Hindustan Times published from New Delhi. 16 offers were received by the Official Liquidators, two more were received in chambers. The respondent No. 2 gave highest bid of Rs. 51 lakhs after competitive bidding. The Learned Company Judge by order dated 20.12.2006 accepted highest bid of respondent No. 2, being the highest bidder. An application was moved by the appellant on 14.2.2008 before the learned Company Judge praying for recall of the order dated 20.12.2006. In an affidavit filed by the appellant it was stated that applicant was ready and willing to offer a sum of Rs.65 lakhs. It was submitted that the property in question has been under valued and the price is inadequate. It was further stated that amount was not deposited within the time allowed by this Court. The said application was heard by learned Company Judge and was rejected by an order dated 6.5.2008. The learned Company Judge took the view that properties were put to auction after due advertisement in newspapers and if the applicant was sleeping over, he cannot be permitted to come forward and get the matter re-opened only on the ground that he is prepared to give a higher bid .
5. This special appeal has been filed by the appellant challenging the order of the learned Company Judge dated 6.5.2008.
6. Shri B.C. Rai, as well as Shri U.N. Sharma, learned Senior Advocate appearing for the appellant in support of the appeal contended that there was no adequate publication of the advertisement. It is submitted that the local daily hindi newspaper Shah Times in which the advertisement was published has no adequate circulation in district Muzzafarnagar. It is submitted that other newspapers in which auction was advertised were the papers published from New Delhi. It is further submitted that bid of respondent No. 2 was not adequate bid and the property was under valued.
7. Learned counsel for the appellant submitted that the learned Company Judge committed error in rejecting the application dated 6.5.2008 when the appellant had offered a higher amount of bid for Rs.65 lakhs, the same ought to have been accepted and order dated 20.12.2006 set aside.
8. Shri B.C. Rai, in support of his submissions has placed reliance on several judgments of this Court as well as of the Apex Court which are as hereunder :-
(i) Divya Manufacturing Company (P) Limited, and Tirupati Woollen Mills Shramik Sangharsha Samity and another Vs. Union Bank of India & others; reported in (2000) 6 SCC 69 ;
(ii) Lakshmanasami Gounder Vs. C.I.T., Selvamani & others reported in (1992) 1 SCC 91;
(iii) Desh Bandhu Gupta Vs. N.L. Anand & Rajinder Singh reported in (1994) 1 SCC 131
(iv) FCS Software Solutions Ltd Vs. LA Medical Devices Limited & others reported in (2008) 10SCC 440 ;
(v) Valji Khimji & Company Vs. Official Liquidator of Hindustan Nitro Product (Gujrat) Ltd., & ors reported in 2008 (11) SCALE 287;
(vi) S.J.S. Business Enterprises (P.) Ltd Vs. State of Bihar & others ;
(vii) Union Bank of India Vs. Official Liquidator H.C. Of Calcutta & others reported in (2000) 5 SCC 274 Brihan Mumbai Electric Supply & Transport Undertaking & another Vs. Laqshya Media Private Limited & others reported in (2010) 1SCC 620
(viii) Allahabad Bank & others Vs. Bengal Paper Mills Co. Ltd. & others reported in (1999) 4 SCC 383 ;
He further submits that a corrigendum to the advertisement was issued in Hindustan Times published from Delhi Edition and no corrigendum was issued in the Shah Times which was published from Muzzafar Nagar.
9. Shri Ashok Bhalla, appearing for respondent No. 2 refuting the submissions of learned counsel for the appellant contends that the property was sold in an open auction after proper advertisement in newspaper having wide circulation. It is submitted that 18 persons participated in the bid and there has been competitive bidding. He submits that reserve price was for Rs. 20 lakhs and bid of respondent No. 2 was of Rs. 51 lakhs which was not inadequate and he further submits that the advertisement was published in the newspaper Economic Times, New Delhi (Edition) which has wide circulation and is well-known newspaper with regard to such transactions. He submits that advertisement was also published in two Hindi daily newspapers i.e. 'Dainik Jagran' and 'Amar Ujala' published from Delhi and Meerut respectively. He also submits that 18 persons participated in the auction and gave bids which clearly proves that there was wide circulation of the advertisement. He submits that prior to the advertisement in question there were earlier advertisements also in which bids were received up to 20 lakhs.
10.Learned counsel for the respondents No. 2 submits that publication of the corrigendum in Hindustan Times, New Delhi Edition cannot give any benefit to the appellant since the corrigendum which put certain conditions on the sale can prejudice the highest purchaser but not a person who has not participated in the bid. It is submitted that in fact the appellant has no locus to challenge the auction. It is further submitted that secured creditors did not raised any objection when the highest bid was confirmed. The appellant who had not participated in the auction in any stage cannot be said to be an aggrieved person. It is further submitted that merely on the ground of higher price being offered that too after more than one year of the confirmation of the auction cannot give any benefit to the appellant. It is further submitted that the amount which is now sought to be offered by the appellant if discounted value is taken at the relevant time, the price offered by respondent No. 2 is higher than discounted value.
11. Learned counsel for the respondent No. 2 has placed reliance on the judgment of the Apex Court in Valji Khimji & Company Vs. Official Liquidator of Hindustan Nitro Product & others 2008 (11) SCALE 287.
12. Learned counsel for respondent No. 4 who has been newly impleaded in the appeal submits that if fresh bids are called, higher offer may be received which shall be beneficials to the secured creditors. He submits that respondent No. 4 thus support the claim of the appellant.
13. Shri B.C. Rai, learned counsel for the appellant lastly submitted that forfeiture clause was not incorporated in the advertisement which permitted forfeiture in case highest bidder failed to deposit within time.
14. We have considered the submissions of learned counsel for the parties and perused the record.
15. The principal submission on which the appellant had relied upon is that there was no publication of the advertisement in widely circulated newspapers hence the appellant could not know about the proceeding as such he could not participate.
16. The order dated 20.12.2006 of the learned Company Judge by which the highest bid was accepted itself has noted in para 3, the details of publication of the advertisement. Para 3 of the order is as follows:-
Para 3. "The Official Liquidator reports vide its report No. 367 of 2006 that advertisements were carried out in 'Dainik Jagran' Hindi published from Delhi, 'Amar Ujala' Hindi published from Meerut, 'Shah Times' Hindi published from Muzzafarnagar; 'Economic Times' English and 'Hindustan Times' English from New Delhi."
17. The submissions of learned counsel is that 'Shah Times', Hindi newspaper published from Muzzafarnagar has no adequate circulation. From para 3 of the order as quoted above, it is clear that the publication was also made in Hindi daily 'Dainik Jagran' and 'Amar Ujala' published from Delhi and Meerut. It is not even suggested that daily newspapers "Dainik Jagran", "Amar Ujala", "Economic Times" and "Hindustan Times" are not the newspapers having wide circulation. It is to be noted that the Company was wound up on 21.7.2001 and after that land and building was put to auction after advertisement. In pursuance of earlier advertisements, bids of not more than 20 lakhs were received. The highest bid which has been given by respondent No. 2 is a second exercise after the order of the Company Judge dated 8.11.2006. In para 4 of the order dated 20.12.2006, the details of the competitive bidding has been noted of all the 18 bidders who participated after depositing earnest money of Rs.2 lakhs and gave their bids. The detail chart of the competitive bidding as noted in para 4 indicates that Shri Vinod Kumar Gupta mentioned at Serial No. 17 had initially given the bid of 16 lakhs which was increased by him up to 49 lakhs. There are other bidders who also increased their bids up to 40 lakhs. The bidders who participated came from Muzzafar Nagar, New Delhi, Azamgarh, Ghaziabad etc.
18. Learned counsel for the respondents has relied on the judgment of Valji Khimji & Company (Supra) wherein the newspaper 'The Economic Times' has been treated to be as a newspaper of having wide circulation. Following observations were made by the Apex Court in the aforesaid case :
"4. The property was then put up for auction on 25.3.2003 after advertising it in various well known newspapers having wide circulation, including 'The Economic Times' which is a well known newspaper having wide circulation in the business commodity."
19. In view of the facts of the present case which has been brought on record, we are satisfied that there was wide circulation of the advertisement and submissions of the appellant cannot be accepted that there was no wide circulation and the sale is vitiated on that ground. It is also relevant to note that highest bid was confirmed on 20.12.2006 and the application which was submitted by appellant was filed on 14.2.2008 i.e. more than 14 months after highest bid was confirmed. In the application filed along with an affidavit which has been brought on record as Annexure 3 to the appeal, there is not even a whisper as to how the applicant came to know about the advertisement, bidding and confirmation of the highest bid. The application of the applicant was based only on the averment that applicant is willing to offer a sum of Rs. 65 lakhs. Nothing has been said as to how and in what manner the applicant came to know, and it has not even averred in the application that the applicant was not aware of the winding up of the Company or earlier advertisement. In fact there is no averment in the affidavit that advertisement published in other newspapers have not been looked into by the applicant and he was not aware of the same.
20. In view of the aforesaid, we are not persuaded to accept the submission of the appellant that there was no wide circulation of the advertisement and the sale is vitiated on the said ground. The submission which has been further pressed by the appellant is that appellant having offered a higher bid, the said higher offer is in interest of the secured creditors and the Court has to consider that the sale on inadequate price be not confirmed and the property should not be allowed to be sold on inadequate price.
21. Submission has been pressed by Shri Rai that Court is to protect the interest of secured creditors and other creditors and the maximum price of the property has to be fetched. He submits that Court has every jurisdiction to set aside even the confirmed sale if the price is found to be inadequate. He submits that value of the property is more than one crore. Reliance has been placed by Shri B.C. Rai on the judgments as cited above. In Lakshmanasami Gounder Vs. C.I.T., Selvamani & others reported in (1992) 1 SCC 91; para 4 has been relied which is to the following effect Para 4. "The publication is an invitation to the intending bidders to prepare and participate at the bid. Unless there is a due publication of the date and place of sale, the intending purchasers cannot be expected to run after the Sale Officer to find out the date and place of sale and to participate thereat. The Sale Officer has a statutory duty and a responsibility to have the date and place of sale mentioned in the notice and given due publication in terms of the Act and the Rules. Public auction is one of the modes of sale intending to et highest competitive price for the property. Public auction also ensures fairness in actions of the public authorities or the sale officers who should act fairly, objectively and kindly. Their action should be legitimate. Their dealing should be free from suspicion. Nothing should be suggestive of bias, favoritism, nepotism or beset with suspicious features of underbidding detrimental to the legitimate interest of the debtor. The fair and objective public auction would relieve the public authorities or sale officers from above features and accountability. Any infraction in this regard would render the sale invalid."
The proposition which has been laid down in the aforesaid case that there has to be publication of date and place. There cannot be dispute to the said proposition.
22. In the case of Desh Bandhu Gupta Vs. N.L. Anand & Rajinder Singh reported in (1994) 1 SCC 131, learned counsel for the appellant has relied on following observation in para 9 :-
9."The estimate of the value of the property is a material fact to enable the purchaser to know its value. It must be verified as accurately and fairly as possible so that the intending bidders are not misled or to prevent them from offering inadequate price or to enable them to make a decision in offering adequate price."
23. There cannot be dispute to the proposition as laid down in the above case that estimate of the value of the property is a material fact to enable the purchaser to know its value.
24. As noted above, in pursuance of the earlier advertisement bids of not more than 20 lakhs were received hence, the reserve price was fixed at Rs.20 lakhs, thus it cannot be said that no value was estimated.
25. In Union Bank of India (Supra) reliance has been placed on para 13 of the judgment which is to the following effect :-
Para 13. "Further, in the present case, it is admitted that valuation report was called for by order dated 16.2.1996; once the report was called for, it was the duty of the Court to see that copy of the said report is given to the secured creditors and other affected persons. It was known to the Court that the appellant secured creditor was claiming more than Rs.4 crores from the Company. It appears that valuation report was kept as a secret, confidential document. After winding-up order, the properties of the Company are in the custody of the Court for the benefit of the secured creditors and if any thing remains, thereafter for other creditors and its share-holders. In the present case, without disclosing the valuation report to the creditors and without fixing its reserve price, the properties were auctioned and the sale was confirmed. This approach is unjustifiable by any judicial standard and is against the normal procedure for auctioning the immovable property of the Company which is to be wound up."
26. In the present case, reserve price was Rs.20 lakhs, earlier the reserve price was fixed at Rs.26.87 lakhs when the earlier advertisement was issued. When bids were not received for more than 20 lakhs, the auction was re-advertised and reserve price was fixed as 20 lakhs. Thus present is not a case where it can be said that fixing a reserve price was without any basis.
27. In Union Bank of India's (Supra) case, valuation report was kept secret and confidential document which approach was held to be unjustified and was held to be against the normal procedure. The said case has no application in the present case.
28. In S.J.S. Business Enterprises (P.) Ltd Vs. State of Bihar & others ; the Court took the view that period of notice given in the second advertisement i.e. only three days were inadequate. No such facts have either been pleaded or placed in the present case that period of notice was inadequate. The judgments which have been relied by learned counsel for the appellant in Divya Manufacturing Company, (Supra) in para 16 the Apex Court laid down that the Court in the interest of creditors can set aside even the confirmed sale. There was specific condition in condition No.11 which empowered the Court to set aside the same, there cannot be any dispute to the propositions that Court for valid reasons and circumstances can set aside even a confirmed sale. Following observations were made in para 16 of the judgment :-
" Para 16. Further, there is a specific Condition 11 in the terms and conditions of sale as quoted above which empowers the Court to set aside the sale even though it is confirmed for the interests of creditors, contributories and all concerned and/or public interest. In this view of the matter, it cannot be said that the Court became functus officio after the sale was confirmed. 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 crores 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 be a business house well versed in the market forces and prices. 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 the shortest time."
29. The next judgment relied by learned counsel for the petitioner in FCS Software Solutions Ltd Vs. LA Medical Devices Limited & others reported in (2008) 10SCC 440 ; where the Apex Court in paras 34 and 35 laid down :-
"Para 34. In Divya Manufacturing Co. (P.) Ltd. v. Union Bank of India this Court held that even a confirmed sale can be set aside. IN that case, the highest bid by a party was accepted by the Court and the sale was confirmed, but before possession was delivered to the auction-purchaser and the execution of the sale deed, other parties offered much higher price. The High Court required the subsequent bidders to deposit an amount of 25% which was done. Considering the facts in their entirety, the High Court set aside the confirmation of past highest bid. The said action was challenged in this Court. This Court held that in an appropriate case, even confirmed sale can be set aside. The Court in this connection, relied upon earlier two decisions in LICA (P) Ltd. (1) vs. Official Liquidator and LICA (P) Ltd (2) v. Official Liquidator.
"Para 35. The learned counsel for the appellant is no doubt right in submitting that in Divya there was a specific condition (Clause 11) which empowered the Court to set aside confirmed sale "in the interest of creditors, contributors and all concerned and/or in public interests". But the Court put the matter on principle and stated: (SCC p.78, para 13) "13. ........it is the 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."
"16. ........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."
30. The said judgments lays down the proposition that even a confirmed sale can be set aside by the Court. There is neither any dispute to the proposition nor there can be any dispute that apart from specific condition in the auction, the Court has inherent powers to set aside even a confirmed sale when sufficient grounds are made out for such setting aside.
31. The judgments of the Apex Court in Valji Khimji & Company (Supra) fully support the submissions of learned counsel for the respondents. In this case, the properties were put to auction for valuation of Rs.2.55 crores, the highest bid was Rs.3.51 crores given by the appellant which was accepted and sale was confirmed on 30.7.2003. Then a letter dated 22.10.2003 as sent to the Official Liquidator by one M/s. Manibhadra Sales Corporation offering to buy the assests in question for Rs.3.75 crores. Subsequently, another offer was made in August, 2004 by M/s. Castwell Alloys Ltd., who offered of Rs.5 crores. Applications were filed by the subsequent applicant for recall of the order dated 30.7.2003 on which application the order was recalled, the appeal filed before the Division Bench was dismissed. Aggrieved against which the highest bidder filed an appeal before the Apex Court.
Following was observed in the case of Valji Khimji & Company (Supra) in Paras 11, 26, 27, 31 and 32 :-
Para 11. "It may be noted that the auction sale was done after adequate publicity in well known newspapers. Hence, if any one wanted to make a bid in the auction he should have participated in the said auction and made his bid. Moreover, even after the auction the sale was confirmed by the High Court only on 30.7.2003, and any objection to the sale could have been filed prior to that date. However, in our opinion, entertaining objections after the sale is confirmed should ot ordinarily be allowed, except on very limited grounds like fraud, otherwise no auction sale will ever by complete."
Para 26. "Learned counsel for the appellant Mr. Sundaram has relied upon the decision of this Court in M/s. Kayjay Industries (P) Ltd. vs. M/s. Asnew Drums (P) Ltd & ors (1974) SCC 213 in which it was observed that mere inadequcy of price cannot demolish every court sale. The Court also observed in para 7 as under:
"If Court sales are too frequently adjourned with a view to obtaining a still higher price it may prove a self-defeating exercise, for industrialists will lose faith in the actual sale taking place and may not care to travel up to the place of auction being uncertain that the sale would at all go through."
Para 27 " On the other hand, learned counsel for the respondents relief upon a decision of this Court in Divya Manufacturing Company (P) Ltd. Etc Vs. Union Bank of India & Ors etc (2000) 6 SCC 69. We have carefully perused the above decision and we find that it is clearly distinguishable."
Para 30 "In our opinion, the decision of this Court in Divya Manufacturing Company (P) Ltd (supra) cannot be treated as laying down any absolute rule that a confirmed sale can be set aside in all circumstances. As observed by one of us (Hon.Katju,J.) in his judgment in Civil Appeal No. 4908/2008 (Dr. Rajbir Singh Dalal vs. Chaudhary Devi Lal University), Sirsa & Anr pronounced on 6.8.2008), a decision of a Court cannot be treated as Euclid's formula and read and understood mechanically. A decision must be considered on the facts of that particular case."
Para 31. " If it is held that every confirmed sale can be set aside the result would be that no auction sale will ever be complete because always somebody can come after the auction or its confirmation offering a higher amount."
Para 32. " It could have been a different matter if the auction had been held without adequate publicity in well known newspapers having wide circulation, but where the auction sale was done after wide publicity, then setting aside the sale after its confirmation will create huge problems. When an auction sale is advertised in well-known newspapers having wide circulation, 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. They cannot ordinarily later on be allowed after the bidding (or confirmation) is over to offer a higher price."
32. The present is not a case where any kind of fraud has been alleged. The basis of the application is highest offer of Rs.65 lakhs that too after more than 14 months from the confirmation of the sale.
33. There is substance in the submission of learned counsel for the respondents that discounted value of 65 lakhs even if taken on the date of sale, the same shall be not more than the value which was offered by the highest bidder on the date of bid and mere fact that a subsequent applicant makes a higher offer cannot be a ground for setting aside the sale which was conducted after participation of 18 bidders and after publication in the widely circulated newspapers. If such course is accepted there will be an unending applications and there shall be never finality of any sale conducted. The judgment of Valji Khimji & Company (Supra) as noted in paras 11, 26, 27, 31 and 32 as quoted above, fully support the submissions of learned counsel for the respondents. The application filed by the applicants for setting aside the order dated 30.12.2006 was rightly rejected. The appeal has no merit and is dismissed. The amount which has been deposited by the appellant in pursuance of the order of this Court dated 30.7.2008 be returned to the appellant along with accrued interest within two weeks from the date a copy of this order is produced before the authority concerned.
34. Subject to above observations, the appeal is dismissed.
Dt./-7.12.2010 Pk./Sp.App. No.782 of 2008