Rajesh Kumar Agarwal vs Official Liquidator Allahabad ...
2015 Latest Caselaw 606 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Court No.37
 
A.F.R.
 

 
Special Appeal No.332 of 2015
 

 
Rajesh Kumar Agarwal 			...	Appellant
 

 
Versus
 

 
Official Liquidator Allahabad
 
M/s Seema Ice & Cold Storage
 
Pvt. Ltd. and another 			...	Respondents
 

 
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Hon'ble Dinesh Maheshwari,J.

Hon'ble Mukhtar Ahmad,J.

[Per Dinesh Maheshwari, J.]

By way of this intra Court Appeal, the appellant, said to be the second highest bidder in the proceedings for auction of the assets of M/s Seema Ice & Cold Storage Pvt. Ltd. [the Company in liquidation], seeks to question the order dated 24.04.2015 as passed in Company Petition No.29 of 1995, whereby the learned Company Judge has condoned the delay in depositing the amount by the highest bidder and, while enlarging the time for depositing, has ordered acceptance of the demand drafts belatedly submitted by the highest bidder towards the balance amount of bid.

For ready reference, the impugned order dated 24.04.2015 is reproduced, in extenso, as under:-

"The Official Liquidator has filed a reply dated 24.4.2015 informing the Court that the highest bidder in whose favour the sale has been confirmed by this Court had defaulted in payment of entire bid amount. It was submitted that against the bid of Rs.7 crores, till date the bidder had only deposited a sum of Rs. 1.78 crores. When this matter was taken up today, Sri S.D. Singh, learned Senior Counsel assisted by Sri Sheel Ojha appeared for the highest bidder and submitted that the default had taken place due to unforeseen circumstances and that there was no intention of the highest bidder of reneging from its commitment. Sri Singh submits that the total balance of Rs.5.22 crores in the shape of bank drafts has already been prepared and is ready to be handed over to the Official Liquidator subject to the delay in the deposit thereof being condoned by this Court. The Official Liquidator, on the other hand and in terms of the prayers carried in his reply has prayed for forfeiture.

Having heard the learned counsel for parties, this Court finds that the terms and conditions of the bid itself provided for leeway in the matter of deposit of the bid amount. Apart from prescribing the initial period for deposit to be 30 days from the acceptance of bid, the tender document carried a further clause of the remaining amount being deposited within another 30 days without interest or within 120 days from the date of acceptance of the bid along with interest on 18% per annum. The tender condition did not stop at this. Even after expiry of this 120 days period further discretion was conferred upon the Court to condone the delay which may be larger in span of time than 120 days. The condition of deposit within the time prescribed was not an inviolable condition. Considering the amount of time and effort spent in finalising the sale of the assets of the Company in Liquidation coupled with the fact that Sri Singh has produced in Chambers the drafts for the entire balance amount of Rs.5.22 crores, in the opinion of this Court, forfeiture and annulment of all proceedings which have taken place till now would clearly be harsh and unjust.

Accordingly, the delay in depositing the amount is hereby condoned. The 49 drafts representing the balance amount of Rs.5.22 Crores have been handed over by Sri Singh to the Official Liquidator in Chambers. The same has been accepted and taken on record by the Official Liquidator. The Official Liquidator shall now proceed to finalise and complete further formalities in the matter."

Seeking to question the order aforesaid, the appellant, second highest bidder, seeks to submit that the terms and conditions prescribed by the Official Liquidator for the sale proceedings having been clearly violated by the highest bidder [respondent No.2 herein], he was not entitled to the relief of enlargement of time as granted by the learned Company Judge.

It has strenuously been argued by the learned Counsel for the appellant, with reference to the terms and conditions of the sale proceedings and the orders earlier passed in the said Company Petition, that there was no such leeway available in the matter that the bid amount may be deposited at any time; and the defaulter could not have been extended the latitude of enlargement of time after an inordinate delay of over 7 months. The learned Counsel has particularly referred to clause nos. (2) and (4) of the terms and conditions of the sale proceedings as also the orders dated 12.5.2014, 17.9.2014 and 26.11.2014 passed in the said Company Petition. According to the learned Counsel for the appellant, in the face of such orders and the terms and conditions, the highest bidder having failed to deposit the consideration within the stipulated time and within the time granted by the Court, the entire amount of earnest money deposited by him was required to be forfeited.

The learned counsel would suggest that if the sale proceedings were to remain open in the matter of deposit of the amount at the choice of the bidder, the appellant would have also given a higher bid and then sought enlargement of time. It is submitted that the appellant bona fide proceeded on the terms and conditions of the sale proceedings, but the relaxation extended by the learned Company Judge practically gives a premium to a defaulter and hence, the impugned order deserves to be interfered with. The learned Counsel for the appellant has also referred to and relied upon the decision of the Supreme Court in the case of Maa Binda Express Carrier and another versus North-East Frontier Railway and others [(2014) 3 SCC 760].

The learned Counsel for the contesting respondent, on the other hand, has duly supported the order impugned and submitted, inter alia, that as back as by the date 21.9.2013, the respondent No.2 had, in fact, deposited an amount of Rs.1.18 crores with the Official Liquidator in view of the offer earlier made by him for the assets in question, which always remained in deposit with the Official Liquidator; and in relation to the present offer for purchase of the assets for an amount of Rs.7 crores, the contesting respondent had already deposited, in all, an amount of Rs.1.78 crores with the Official Liquidator. According to the learned counsel, there did occur some delay in arranging and depositing the remaining bid amount, but the delay was duly explained and in any case, the terms and conditions of the sale in question clearly kept everything open at the discretion of the Court; and the learned Company Judge has rightly exercised the discretion of condoning the delay on relevant considerations. It is submitted that the appellant was only the second highest bidder and he has no legal right to question the condonation of delay ordered by the learned Company Judge in this case.

However, the stand of the learned Counsel appearing for the Official Liquidator, the respondent No.1, is that the offer of remaining deposit having been made by the respondent No.2 at a much belated stage and that too without payment of interest, the learned Company Judge ought to have allowed him to forfeit the earnest money deposited by the respondent No.2.

Having given thoughtful consideration to the rival submissions and having examined the record, we are not persuaded to consider any interference in the considered order passed by the learned Company Judge in this matter.

In the first place, it need be noticed that even if the appellant had participated in the sale proceedings, he only stood as the second highest bidder and the amount offered by him was lower than the amount offered by the respondent No.2. It is but apparent that the sale proceedings had been conducted for realizing the best value of the assets of the company in liquidation. The amount offered by the appellant being lower than that of the highest bidder, even if the prayer of the highest bidder for enlargement of time was at all to be declined, the appellant was not having a corresponding right to be sold the assets on the price offered by him. In the given fact situation, it is difficult to accede a direct legal right to the appellant that he could question the order passed by the learned Company Judge on the prayer made by the highest bidder for enlargement of time.

In the memo of this appeal, the relief sought for is stated at the beginning in the following terms:-

"The relief sought in this Special Appeal is that this Hon'ble Court may graciously be pleased to allow this appeal, set-aside the Judgment dated 24.04.2015 passed by Hon'ble Yashwant Verma, J. in Company Petition No.29 of 1995, in the matter of M/s Seema Ice & Cold Storage Pvt. Ltd. Vs. Bank of Baroda and accept the offer/bid of the appellant for purchase of the assets of M/s Seema Ice & Cold Storage Pvt. Ltd. and or to pass such other and further order which this Hon'ble Court may deem fit and proper in the circumstances of the case failing which appellant shall suffer irreparable loss."

We are clearly of the view that the core relief sought for by the appellant, i.e., acceptance of his lower bid for purchase of assets of the company in liquidation, deserves not be granted for the same being not in the interest of the liquidation proceedings.

Apart from the above, even the submissions on merits by the appellant, in our view, fall much short of substance.

For the purpose of dealing with the contentions urged on behalf of the appellant, we may take note of the relevant background aspects as also the terms and conditions of sale and the orders referred. The Company in liquidation was ordered to be wound up by the order of Court dated 22.8.1996. In accordance with the orders passed by the Court, the Official Liquidator acquired possession of all the assets of the company in liquidation. However, the physical possession of the assets appears to have been obtained by the Official Liquidator only in the year 2011. The learned Company Judge ordered on 27.9.2011 for sale of the property of the company in liquidation while directing the Official Liquidator to issue an advertisement notifying Rs.3.69 crores as the reserved price. The advertisement issued on 13.10.2011 was not fruitful as no offers were received. Then, the Court received directly an offer from Prem Chandra Sharma [respondent No.2] and Deo Raj Singh at a sum of Rs.4.7 crores and they deposited 25% of the amount so offered with the Official Liquidator. Thereafter, the Court, by its order dated 1.10.2013, directed for re-advertisement, whereupon the Official Liquidator issued yet another advertisement on 13.10.2013 mentioning the reserve price at Rs.4.7 crores but again, none turned up in response to the advertisement.

There had been several applications and different offers later on made by different persons before the Court which need not be dilated upon in this order. Suffice it to notice for the present purpose that ultimately, in the order dated 12.5.2014, the learned Company Judge directed the Official Liquidator to re-advertise the property for sale by public auction on usual terms and conditions. As regards the money deposited in relation to the offers earlier made, the learned Company Judge took note of the submissions on behalf of the respondent No.2 and his co-offerer that they intended to make a fresh offer and hence, their earnest money may be retained by the Official Liquidator. The learned Company Judge, however, left it open to the bidders to withdraw the amount or continue with the same. The relevant part of the order dated 12.5.2014 could be taken note of as under:-

"Accordingly, in all fairness it is considered appropriate that sticking to the reserve price of Rs. 4 crores 70 lacs which had already been fixed by the Court, the Official Liquidator is directed to re-advertise the property for sale by public auction on the usual terms and conditions. The advertisement for sale in two newspapers Hindustan Times and Dainik Jagran having circulation in the area shall be published by 30th June 2014 inviting tenders upto 31st July 2014 and to permit inspection of the property, if necessary on 21st and 22nd July 2014 as may may be found suitable by the Official Liquidator. The tenders shall be submitted in a sealed cover along with earnest money as usual and would be opened on 20th August 2014 in Chamber in the presence of the parties as far as possible.

The advertisement would specify that all persons even those who may have participated or have submitted offers earlier including Subhash Chadnra Goyal and others are eligible to participate.

The Official Liquidator is directed to return the earnest money deposited by K.P. Cold Storage/K.P. Agrawal as well as Prem Chandra Sharma and Dev Raj Singh and Mahesh Chandra at the earliest.

Sri S.D. Singh submits that instead of refunding the earnest money deposited by Sri Prem Chandra Sharma and Dev Raj Singh, as both of them intends to make a fresh offer, their earnest money be retained by the Official Liquidator and they may be permitted to furnish the difference, if any, while making the fresh bid.

In view of the above, it is left at the option of the bidders to withdraw the amount or to continue with the same."

In pursuance of the directions above-referred, the Official Liquidator issued a fresh advertisement and stated the terms and conditions for the sale of assets of the company in liquidation. The relevant clauses bearing numbers (2) and (4) in the terms and conditions,which have been referred to by the learned Counsel for the appellant, could be taken note of at this juncture as follows:-

"(2) PAYMENT TERMS:- The highest bidder is required to deposit sale amount 25% of bid amount excluding earnest money within 30 days of acceptance of bid and the remaining amount shall be deposited within another 30 days without interest or the same can be deposited within 120 days from acceptance of bid along with interest of 18% per annum or as directed by the Hon'ble High Court. Further delay in payment unless allowed by the Court tender acceptance will be void.

(4) The highest bidder if fails to deposit the whole consideration within time stipulated above or time granted by the Hon'ble High Court at the time of accepting the bid, the entire amount of earnest money deposited by the bidder shall be forfeited."

It is not in dispute that the respondent No.2 stood as the highest bidder with his offer at Rs.7 crores. The learned Company Judge accepted this offer and directed the Official Liquidator to proceed further in the matter by the order dated 17.9.2014, the relevant part thereof could also be taken note of as under:-

"9. The bid of Sri Prem Chandra Sharma of Rs.7,00,00,000/- is highest. The Official Liquidator is directed to send intimation of the highest bid to all the secured creditors within a week from today and ask them to submit their comments. Secured creditors are directed to submit their comment with respect to the bid in question within three weeks. The Official Liquidator may proceed in accordance with terms and conditions of the tender. A report be submitted by the Official Liquidator within four weeks in the matter. The highest bidder may comply with the terms and conditions of the tender and deposit the amount. The Official Liquidator is directed to return forthwith the bank draft submitted by the bidder, Sri Rajesh Kumar Agarwal by registered post at the address given in the tender form."

It appears further that on 26.11.2014, the submissions were made before the learned Company Judge that the highest bidder had not deposited the amount, whereupon the learned Judge passed the following order:-

"Sri Subham Agarwal, learned counsel appearing on behalf of Official Liquidator filed Judicial Report No. 294 of 2014. It is contended that the highest bidder has not deposited the bid amount, therefore, prays that the amount of sale proceeds along with interest @ 18% per annum as prescribed under the terms and conditions of the tender be paid by the highest bidder.

Sri R.K. Upadhyay, learned counsel for the Ex-director, prays for and is granted time to deposit the bid amount along with interest as the terms and conditions of the tender.

List on 07.01.2015."

It had been in the backdrop of the aforesaid facts and the proceedings that the respondent No.2 ultimately made an application before the learned Company Judge on 8.4.2015, inter alia, with the submissions that after finalization of bid, he had applied for loan which was denied by some banks due to previous history of litigation; and ultimately, the Bank of India, Agra Branch, after conducting detailed enquiry and scrutiny, accepted the request for granting loan under the letter dated 5.1.2015; and after completion of formalities, the Bank prepared the drafts in favour of Official Liquidator on 26.3.2015 for a sum of Rs.4.82 crores. The respondent No.2 further submitted that after receiving such drafts, he tried to deposit the same with the Official Liquidator, but the Official Liquidator declined to accept because of lapse of time. The respondent No.2 yet further submitted that on 7.4.2015, he got prepared another bank draft for the remaining amount of Rs.40 lakhs and was submitting the entire balance amount of Rs.5.22 crores against his bid. The Official Liquidator submitted a reply to the application so moved by the respondent No.2 and, with reference to the aforesaid clause nos. (2) and (4) of the terms and conditions, submitted that the applicant having failed to deposit the amount within the permissible time under the said conditions, he may be permitted to forfeit the earnest money deposited by the highest bidder.

The learned Company Judge, however, found it justified to enlarge the time for making the deposit and hence passed the impugned order dated 24.4.2015, which has been reproduced hereinbefore.

It is not in dispute that the proceedings in question are the winding up proceedings under the orders of the Court. The Official Liquidator is required to conduct the proceedings of winding up of the company while performing such duties in reference thereto as the Court may impose and is to exercise the powers subject to the sanction of the Court. In the present case, ultimately, by the order dated 12.05.2014, the Court ordered fresh sale proceedings to be taken up in relation to the assets of the company in liquidation. Such sale proceedings took place and the respondent No. 2 stood as the highest bidder with the bid of Rs. 7 crores. He had already deposited an amount of Rs. 1.78 crores with the Official Liquidator, of which, an amount of about Rs. 1.18 crores had been with the Official Liquidator since the month of September, 2013. The bid offered by the respondent No. 2 was accepted by the learned Company Judge on 17.09.2014.

True it is that on 26.11.2014, the respondent No. 2 was granted time to deposit the bid amount along with interest ''as per the terms and conditions of the tender' and true further it is that there had been further delay on the part of the respondent No. 2 in making the deposit, but we are unable to find any restriction on the powers of the learned Company Judge as regards enlargement of the time and acceptance of delayed deposit even without interest. Though as per clause No. (4) of the terms and conditions, in case of default on the part of the highest bidder, the earnest money is to stand forfeited but then, this clause would operate only if the highest bidder fails to deposit the whole of consideration within time stipulated in the preceding clause or time granted by the Court at the time of accepting the bid. For the expressions employed and looking to the purpose and object, this clause is, obviously, required to be read as being subject to the preceding clause No. (2). Now, in clause (2) of the terms and conditions, even while providing certain time limit for deposit of the different components of bid amount, i.e., the initial 25% amount and then, the remaining amount without or with interest, ultimately, the question of enlargement of time and all related aspects have been left at the discretion of the Court with the specific stipulation in the alternative that the deposit would otherwise be as per the directions of the Court. Moreover, even while providing that further delay would make the tender acceptance void, the ultimate discretion has yet been left with the Court, as is evident from the expression ''unless allowed by the Court'.

On the basic rules of construction of such terms and conditions, we are at one with the observations of the learned Single Judge that such conditions are not of rigidity or inflexibility; and sufficient leeway is available for condoning the delay and for enlargement of time.

True it is that even if such option of enlargement of time by the Court is available, the discretion in that regard ought to be exercised judiciously and a bidder cannot be acceded a right to seek such enlargement of time at mere askance. However, in the present case, when the background aspects are taken note of that receiving of reasonable bids for the assets in question had been a matter of dispute and contentions for a long length of time; that several previous attempts failed to evoke sufficient response; that it had been the respondent No. 2 who came forward at the earlier point of time with an offer much above the amount than fixed as reserved price by the Court and indeed, deposited about an amount of Rs. 1.18 crores which remained in deposit with the Official Liquidator throughout; that the respondent No. 2 had indeed deposited an amount of Rs. 1.78 crores with the Official Liquidator for the present bid; that before any final order for forfeiture, the respondent No. 2 had indeed offered the bank drafts towards the remaining amount of his bid; and when the respondent No. 2 had assigned reasonable cause for delay, in our view, in a comprehension of all these factors, the discretion exercised by the learned Company Judge cannot be said to be unjustified and rather remains unexceptionable.

The suggestion that if such an inordinate delay was available to be condoned, the appellant would have also made a higher bid and then prayed for more time has only been noted to be rejected. The appellant had consciously made the offer as deemed fit and proper by him. His offer was definitely lower than that of the respondent No. 2. The terms and conditions of the sale were available to the appellant too. The appellant cannot be heard in raising a grievance which is based on his own assumption and interpretation of the terms and conditions of the sale proceedings or, may be, ignorance of the same or ignorance of the powers of the Court. A feeble suggestion on the part of the appellant of the requirement of fair play and reasonableness in award of public contracts with reference to the decision of the Hon'ble Supreme Court in Maa Binda Express Carrier and another (supra) does not appear apt for the present case where the Court has exercised its judicial discretion to enlarge the time for deposit and to condone the delay after being satisfied that it was just and proper to do so.

So far the Official Liquidator is concerned, he had indeed made a prayer before the learned Company Judge for allowing him to forfeit the amount deposited by the respondent No. 2, but as aforesaid, final decision lay with the learned Company Judge concerned; and the learned Company Judge cannot be said to have committed any error in rejecting such a suggestion of the Official Liquidator.

In view of what has been observed and discussed hereinabove, we are satisfied that this appeal remains totally bereft of substance.

Accordingly, this appeal stands dismissed.

 
 
 
Order Date :- 21.5.2015
 
lakshman)
 

 
(Mukhtar Ahmad,J.)       (Dinesh Maheshwari, J.)