Lica Private Limited v. Official Liquidator And Another

Leave granted

In winding-up proceedings of India Electric Works Ltd., the learned Company Judge, Calcutta High Court brought one of its assets, Plot No. 13-A, Block 4, Asaf Ali Road, New Delhi to sale. The learned Company Judge rejected the offers made in the tenders and in the open auction it fetched Rs. 45 lakhs. Ultimately when the matter was brought to this Court, by our order dated 4-4-1993 we allowed the appeal and directed to sell the plot by open auction between the appellant and Satpal Malik, the second respondent and we fixed the upset price at Rs. 45 lakhs. In the second auction the appellant became the highest bidder for Rs. 1.10 crores. On appeal by the respondent, the Division Bench, while upholding the auction, directed the learned Company Judge to reconsider the matter and to conduct auction afresh. Against the order dated 26-5-1993 this appeal by special leave has been filed

Shri G. Ramaswamy, learned Senior Counsel for the appellant contended that as per the directions of this Court and the conditions imposed by the learned Company Judge, the appellant had deposited Rs. 1.10 crores on the same day and in terms thereof the appellant had already obtained a registered deed of conveyance. Therefore, the Division Bench was not justified in law to reopen the concluded sale validly made. He further contended that if the auctions are unsettled by repeated court orders and reauction is conducted, prospective bidders would not come forward to participate in the competitive bid and it creates an impression among the genuine bidders that the court sale will be uncertain and litigious, would not be attractive and would fetch low price. Inherently there would be much difference between free sale and court sale prices. So the court should be slow to interfere with court sale unless it is vitiated by fraud or material irregularity in conducting the sale. That is not the case of the respondentShri Soli Sorabji, the learned Senior Counsel for Mr. Malik refuted the contentions

The respondent has filed a counter-affidavit in this Court in which he offered to pay a sum of Rs. 1.25 crores and demand drafts are also produced today in the Court in this behalf to make up the deficiency. This Court while disposing of the matter on 4-1-1993 has inter alia stated thus

"The purpose of 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 down or closed the possibility of fraud or to secure inadequate price or underbidding would loom large. The court would, therefore, have to exercise its discretion wisely and with circumspection and keeping in view the facts and circumstances in each case the steps for conducting the sale would be moulded." *

Proper control of the proceedings and meaningful intervention by the court would prevent the formation of syndicate, underbidding and the resultant sale of property for inadequate price. The order passed by this Court yielded the result that the property which would have been finalised at Rs. 45 lakhs, fetched Rs. 1.10 crores and in this Court a further offer of Rs. 1.25 crores is made. In other words, the property under sale is capable of fetching a higher market price. Under these circumstances, though there is some force in the contention of Shri Ramaswamy that the court auction may not normally be repeatedly disturbed, since this Court, on the earlier occasion, had limited the auction between the two bidders, the impediment will not stand in the way of directing sale afresh. Even today the parties are prepared to participate in the bid. Accordingly we fix the upset price at Rs. 1.50 crores. It is stated that Mr. S. L. Malik had already deposited a sum of Rs. 45 lakhs. Bank drafts for a sum of Rs. 80 lakhs are produced before us today. Therefore, we direct that the bank drafts should be deposited in the office of the learned Company Judge on or before 27-9-1993 and the balance amount of Rs. 25 lakhs shall be deposited on or before 11-10-1993 making up the total sum of Rs. 1.50 crores. Learned Single Judge is requested to conduct the auction afresh between the parties immediately after the reopening of pooja holidays fixing the upset price at Rs. 1.50 crores. The highest bidder should deposit the balance amount on the same day before the working hours are closed. On deposit so made the Court would confirm the sale. No appeal thereon shall be entertained on any ground whatsoeverThe terms and conditions set out by the learned Company Judge, were published before the sale was conducted. Conditions 9 and 11 read thus

"9. The sale would be subject to such modification/alteration of terms and conditions of sale as the Honble Court may deem fit and proper and the decision of the High Court shall be final

11. The High Court may set aside the sale in favour of purchaser/purchasers even after the sale is confirmed and the purchase consideration is paid on such terms and conditions as the Court may deem fit and proper for the interest and benefit of creditors, contributories and all concerned and/or for public interest." *

When the matter was carried in appeal, the Division Bench passed the order on 5-5-1993 to the following effect

"... If any conveyance is executed, that will also abide by the result of the appeal."

It is stated that the appellant got the sale deed executed and registered on 25-5-1993. The Division Bench upset the order of the learned Single Judge with the above direction on 26-5-1993. Therefore, the execution and registration of sale deed are subject to the result in the appeal. Keeping the facts and circumstances of this case in view, we set aside the sale with the aforestated directions. The deposit of Rupees 1.10 crores made by the appellant would remain in deposit. He need not make any further deposit to make up the upset price. In the event of his becoming the highest bidder, he shall deposit the balance amount on the same day as directed above

Shri Ramaswamy stated that Rs. 1.10 crores is lying idle without earning interest. If the amount was not already deposited in any interest-earning deposit or securities, the learned Company Judge or the Official Liquidator is free to deposit the amount, till the auction is finalised. In the event of the appellant not becoming the highest bidder, the equities in respect of his deposit regarding interest may be worked out and adjusted by the learned Company JudgeThe appeal is disposed of accordingly, but in the circumstances of the case the parties are directed to bear their own costs in this Court.