Milestone Gears Pvt. Ltd. vs Industrial Finanace Corporation ...
2009 Latest Caselaw 660 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     WRIT PETITION (CIVIL) 585/2009

                               Reserved on :     6th February, 2009
                           Date of Decision :   26th February, 2009

      MILESTONE GEARS PVT. LTD.                        ....... Petitioner

                          Through : Mr. S. Ganesh, Sr. Adv. with
                                    Mr. Chirag M. Shroff and
                                    Mr. Manish Sharma, Advs.

                 versus

      INDUSTRIAL FINANACE CORPORATION OF INDIA & ANR.
                                          ..... Respondents

                          Through : Mr. Ashwini Matta, Sr. Adv. with
                                    Mr. Suresh Dobhal and
                                    Mr. Tanmaya Sinha, Advs. for
                                    Respondent No.1.
                                    Mr. Neeraj Kumar Jain and Mr. D.
                                    Kohli, Advocates for Respondent
                                    No.2.


    % CORAM:
      HON'BLE MR. JUSTICE MADAN B. LOKUR
      HON'BLE MR. JUSTICE SIDDHARTH MRIDUL

      1.    Whether reporters of local papers may be allowed to see
            the judgment?                                            Yes.
      2.    To be referred to the Reporter or not?                   Yes.
      3.    Whether the judgment should be reported in
            the Digest?                                              Yes.


                            JUDGMENT

SIDDHARTH MRIDUL, J.

1. By way of the present writ petition the Petitioner seeks

quashing of the letter dated 19th January, 2009 issued by Industrial

Finance Corporation of India (IFCI)-Respondent No.1 to the Petitioner

cancelling the contract of sale of land and building with the Petitioner,

as well as the sale of the same to Respondent No.2.

2. IFCI issued advertisement in the „Economics Times‟ dated

12th December, 2008 to invite tender bids for the sale of assets of one

VHEL Industries Ltd. under the Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002

(in short „SRFAESI Act‟). The sealed tenders were for the sale of

assets of said VHEL Industries Ltd., offered as a composite unit on "as

is where is and whatever there is basis" at Village Harraipur, Tehsil

Nalagarh, District Solan, Himachal Pradesh. The relevant clauses of

the terms and conditions of the said tender are as follows:

"2.4 The assets offered for sale may be inspected at the factory premises of VHEL Industries Ltd at Village Harraipur, Tehsil Nalagarh, District Solan, Himachal Pradesh on 12/01/2009 and 13/01/2009 between 11:00 a.m. to 4:00 p.m.

2.6 All the assets offered for sale are on "AS IS WHERE IS AND WHATEVER THERE IS BASIS. The quantity indicated, if any, are purely indicative & without any guarantee" and IFCI Ltd shall not entertain any claim/complaint from the buyer for any deficiency in quantity/size/number etc. for recovery of whole or any part of the bid/purchase money, loss of profit/interest, damages etc.

2.7 The unit may have certain outstanding liabilities which are to be met by the purchaser and which will be over and above the purchase consideration. The prospective purchaser may carry out due-diligence in respect of likely liabilities pertaining to the unit before submitting the tender. It may be noted that the purchaser will be responsible for meeting these liabilities, if arise, and Secured Creditors will not be liable to meet any such liabilities whatsoever.(emphasis supplied)

2.10 Tenders accompanied by short EMD and/or with their own conditions are liable to be rejected/ignored summarily.(emphasis supplied)

2.14 The contract shall be treated as having been entered into as soon as the letter of acceptance is issued by Authorized Officer, IFCI Ltd, to the successful tenderer and the validity of contract shall be of 30

days from the date of such acceptance.

4.2 The tenderer(s) should thoroughly satisfy themselves about the nature, conditions and quality of the assets. IFCI Ltd. gives no guarantee or warranty as to the conditions of the assets/material or/its quality of fitness for any specific purpose or use. It should be clearly understood that no claim/complaint about the quality/conditions/fitness for use will be entertained by IFCI Ltd.

5.5 In case the tender is accepted and purchaser refuses/fails to make further payment towards balance purchase consideration on any account the earnest money so deposited shall be forfeited without prejudice to the rights of IFCI Ltd, to claim such further damages in this regard without further reference to the tenderer/purchaser.

6.1 All tenders must be submitted in the prescribed form only and in a sealed cover. The tender must be addressed to Shri O.P. Yadav, AGM, Authorized Officer, IFCI Ltd., IFCI Tower (14th Floor), 61, Nehru Place, New Delhi- 110019 and super scribing "OFFER FOR PURCAHSE OF ASSETS" of M/s VHEL Industries Ltd, as a Composite Unit. The tender must be submitted by the prescribed date and time at the Registered Office of IFCI Ltd. at New Delhi as indicated at para 2.2.

6.5 Incomplete tender or tenders submitted with qualifying conditions or with conditions variance with the prescribed Terms and Conditions of Tender are liable to be rejected summarily. (emphasis supplied)

7.3 The balance amount i.e. 75% of the sale consideration is to be paid on or before 15th day from the date of "confirmation of sale" in favour of the purchaser.

9.1 All taxes/duties etc. as applicable and related to purchase of assets of M/S VHEL Industries Ltd. (VHEL) shall be paid by the purchaser.

11.1 In the event of non-fulfillment of the terms and conditions of the tender and matters related thereto, by the tenderer, IFCI Ltd. shall have the liberty to do any or all of the following:-

(a) Cancel the contract with immediate effect, in which case, the EMD shall stand forfeited.

13.4 The tenderers shall have no right to issue addends to tender documents to clarify supplement or delete any of the conditions/clauses or items stated therein. (emphasis supplied)

13.8 The submission of the tender means and implies that the tenderer/bidder has unconditionally agreed to and accepted all the above terms and conditions of the tender.

13.9 Intending tenderer(s) may obtain any clarification required before tendering. Submission of tender implies, the tenderer(s) has obtained all the clarification required and that he has agreed to all Terms and Conditions herein specified."

3. Further the guidelines for tenderers provided as follows:

"The Tenderers prior to submitting their Tender for the assets are expected to visit and examine the plant site and related documents and surroundings at their expenses as the plant is being offered on an "AS IS WHERE IS BASIS AND WHATEVER THERE IS BASIS". They should ascertain on their own responsibility all information, technical data, market study etc. including actual conditions, existing services statutory and other liabilities etc.

2. It shall be presumed that all these factors were accounted for by the Tenderer while quoting their tender. The tendered shall be deemed to have full knowledge of the assets, whether he inspects it or not."

4. The Petitioner submitted its bid in respect of the said tender on

16th January, 2009.

5. According to the Petitioner, as per Clause 2.7 in the tender

document regarding the due diligence to be carried out by the bidder,

the Petitioner had on 15th January, 2009 got the revenue records

searched, which exercise revealed that there were liabilities of the

Company, VHEL Industries Ltd. fastened on the land and building in

the revenue records with Tehsildar, running into several crores of

rupees. According to the Petitioner after clarifications from

authorized officer of the IFCI, the Petitioner submitted alongwith their

bid a Supplementary Annexure of tender bid forming an integral part

of the said bid. The contents of the said Supplementary Annexure are

relevant and are reproduced as under:

"1. Please refer pt. 2.7 of "Terms & Conditions" of the tender document. As per our understanding of the same; liabilities of "Unit" are distinctly & Clearly different than the liabilities of the "Company" i.e. VHEL Industries as a legal entity and our tender bid is only for the purchase of assets specified in the tender on "As is where is and whatever there is basis". It is clarified that our tender bid excludes any direct/indirect liabilities of VHEL Industries as a legal entity.

2. We are attaching the "Jamabandi" of M/s VHEL Industries, N. Delhi dated 15th Jan. 2009; which lists various restraint orders, attachment orders and Court orders/decrees etc. on record against the said company (i.e. Sales Tax and Excise Deptt. Hindustan Development Corpn. Ltd. etc.). Our tender bid is subject to specific & unambiguous confirmation in writing by IFCI Ltd. that the assets being sold are free from any charges, encumbrances or any claims whatsoever claims the transfer as well as physical possession of assets being sold, with clear title in revenue records; at the time of balance consideration money payment before the Registering Authority."(emphasis supplied)

6. Since the Petitioner was the solitary bidder and its bid of 401

lakhs was more than the reserve price of 400 lakhs, IFCI Ltd. vide its

letter dated 16th January, 2009 declared the Petitioner as the highest

bidder and accepted the said bid in the following terms:

"IFCI LIMITED

Delhi Regional Office: IFCI Tower, 61, Nehru Place, New Delhi-110019.

DRO/Legal/VHEL/2009 16th January, 2009.

M/s Milestone Gears Pvt Ltd 58, Sector-I Industrial Area Parwanoo, District Solan

Dear Sir,

Sub: VHEL Industries Ltd: Your offer for purchase of Land and building

Please refer to you Tender Document giving your offer you purchase of Land and Building in the Captioned Company situated at Village Harriapur, Tehsil Nalagarh, District Solan, Himanchal Pradesh for Rs 401 Lakh (Rupees Four hundred and one Lakh only) It is informed to you that you have been declared as the highest bidder and your bid of Rs. 401 Lakh (Rupees Four

hundred and one Lakh only) has been accepted for the purchase of Land and building situated at Village Harraipur, Tehsil Nalagarh, District Solan, Himanchal Pradesh. We request you to kindly deposit 25 % of the bid amount today and balance amount within 15 days. (emphasis supplied)

Yours Faithfully

(O P Yadav) Authorised officer"

7. However, on the very next day i.e. 17th January, 2009 the

Petitioner addressed a communication to IFCI Ltd. stating as under:

"Milestone GEARS PRIVATE LTD.

# 75, Sector-7 Panchkula- 134109 (Hr.) INDIA Ph.+91-172-599078-79 Fax: +91-1792-33863 E-mail: [email protected]

To: 17.1.2009

THE AUTHORISED OFFICER IFCI LTD.

IFCI TOWER (14TH FLOOR) 61, NEHRU PLACE N. DELHI- 110019

Sub: Your Letter DRO/LEGAL/VHEL/2009 OF 16TH JAN. REGARDING OUR OFFER FOR PURCAHSE OF LAND & BUILDING.

Dear Sir,

THIS HAS REF. TO OUR DISCUSSIONS REGARDING OUR TENDER-BID AND YOUR ABOVE MENTIONED LETTER. IN VIEW OF THE FRAME NEEDED FOR ADDRESSING THE MENTIONED ENTRIES OF "JAMABANDI" IN REVENUE RECORDS; WE AGREE TO PROVIDE BANK GUARANTEE OF RS. 3 CRORES BALANCE AMOUNT, ENCASHABLE AT THE TIME OF SALE DEED REGISTRATION.

WE CONFIRM HAVING TRANSFERRED 15% OF THE SALE CONSIDERATION AMOUNT THROUGH RTGS YESTERDY. PLEASE CONFIRM YOUR ACCEPTANCE OF BANK GUARANTEE IN LIEU OF BALANCE CONSIDERATION MONEY.

THANKING YOU,

Sd/-

For Milestone Gears Pvt. Ltd.

(A.K. TANDON)"

8. In response thereto vide the impugned letter dated 19th January,

2009 IFCI wrote to the Petitioner as under:

"IFCI Delhi Regional Office: IFCI Tower 61, Nehru Place, New Delhi-110019

IFCI/DRO/2008-603A Dated January 19, 2009

FAX MESSAGE

Milestone Gears Private Ltd.

75, Sector-7 Panchkula-Haryana Pincode- 134109

Dear Sir,

Sub: M/s. VHEL Industries Ltd. Purchase of Land & Building

Please refer your letter dated 17.1.2009 on the above subject. In this connection we have to advise that we have examined your proposal and we have to convey you that we are not in a position to accept your conditional offer for purchase of land & Building of M/s VHEL Industries Ltd. Accordingly the amount of Rs. 12500000.00 deposited by you is being returned to you.

Please acknowledge receipt of the same.

Yours faithfully,

(O.P. Yadav) Authorized Officer"

9. The Petitioner is aggrieved by the said impugned

communication dated 19th January, 2009 and by the sale of the tender

property to one M/s Micro Turners, Respondent No.2 herein after

tender closing date.

10. On behalf of the Petitioner it was strenuously urged that the

action of the Respondent No.1 in cancelling the valid contract dated

16th January, 2009 of the Petitioner, whereby the Respondent No.1

had accepted the offer with the clarifications contained in the

Supplementary Annexure to the tender attached by the Petitioner, is

arbitrary and consequently liable to be quashed and set aside.

Secondly, it was argued by learned counsel that the sale of the unit of

VHEL Industries Ltd. to Respondent No.2 outside the bidding process

was actuated by malice and for extraneous considerations. On the

other hand it was urged by the Respondents that the supplementary

conditions sought to be imposed by the Petitioner were at variance

with the prescribed terms and conditions of the tender and were

therefore liable to be rejected summarily. It was further urged on

behalf of the Respondent No.1 that, under the provisions of Section 7

of the Contract Act, in order to convert a proposal into a promise the

acceptance must be absolute and unqualified and in the present case

the parties to the contract were not ad idem on the terms of the

contract and as such the proposal and counter proposal of the

Respondent No.1 and the Petitioner respectively did not result in a

valid and binding contract of sale of the said assets. It was also urged

on behalf of the Respondent No.1 that since the sale of assets was

under the SRFAESI Act, the Respondent No.1 after validly cancelling

the non-responsive tender of the Petitioner was justified in law to sell

the said unit of VHEL Industries Ltd. to Respondent No.2 in terms of

the provisions of said Act.

11. Before considering the rival submissions it would be relevant to

extract the provision of Section 7 of the Contract Act.

"7. Acceptance must be absolute.- In order to convert a proposal into a promise the acceptance must - (1) be absolute and unqualified; (2) ................"

12. In the present case it is seen that under Clause 2.7 of the terms

and conditions of the said tender, it was clearly stipulated that the

unit may have certain outstanding liabilities which were to be met by

the purchaser and which would be over and above the purchase

consideration. In this behalf a prospective purchaser was advised to

carry out due diligence in respect of the likely liabilities before

submitting the tender. Clauses 2.10, 6.5 and 13.4 collectively

provided that tenders accompanied with their own conditions were

liable to be rejected summarily. It was further provided that tenders

submitted with qualifying conditions or with conditions at variance

with the prescribed terms and conditions of the tender were also

liable to be rejected summarily. It was also stipulated that the

tenderers would have no right to issue addends to tender documents

to clarify supplement or delete any of the conditions/clauses or items

stated therein. In other words the tenderers were required, in order

to bid responsively, to adhere strictly with the stipulated terms and

conditions of the tender and any counter conditions or stipulations

could not be imposed on behalf of the tenderers. Further, it is seen

that vide its letter dated 17th January, 2009 the Petitioner wrote to the

Respondent No.1 stating that "in view of the frame needed for

addressing the mentioned entries of "Jamabandi" in revenue records, we

agreed to provide bank guarantee of Rs.3 crores balance amount,

encashable at the time of sale deed registration". This conditional offer

made on behalf of the Petitioner to the Respondent No.1 was contrary

to the aforementioned Clauses 2.10, 6.5 and 13.4 as well as to Clause

7.3 of the terms and conditions of the said tender which specifically

required that the balance amount of 75% of the sale consideration

was to be paid on or before the 15th day from the date of confirmation

of sale in favour of Respondent No.1. Thus in our view the conditional

offer made on behalf of the Petitioner to the Respondent No.1 did not

result in a valid and binding contract of sale between the parties since

they were not ad idem on the terms thereof, and the Respondent No.1

was perfectly justified in refusing to accept the offer on the terms

arising out of such a counter proposal at variance with the terms and

conditions of the said tender.

13. With regard to the second submission made on behalf of the

Petitioner it is seen that the Respondent No.1 vide its said

communication dated 19th January, 2009 not only cancelled the

contract and rejected the conditional offer for purchase of land and

building of VHEL Industries Ltd. but further refunded the amount of

Rs.1,25,00,000/- deposited by the Petitioner towards 25% of the sale

consideration. It is observed that the Petitioner received this amount

without cavil and did not pay over the balance consideration within

the stipulated time. Further, the Petitioner kept insisting upon the

transfer of title in its favour in the revenue records as also the date of

handing over of the physical possession of the assets aforesaid as a

condition for the payment of the sum of Rs.401 lakhs under the

contract of sale. On the other hand the Respondent No.1 after

cancellation of the contract with the Petitioner sold the said land and

building of VHEL Industries Ltd. to Respondent No.2 for a sale

consideration of Rs.451 lakhs, a sum of Rs.50 lakhs over and above

what had been offered by the Petitioner herein. Furthermore, during

the course of the arguments, on a specific query from the Bench, the

Petitioner agreed to match the offer made by Respondent No. 2,

however, subject to its condition that the assets would be sold without

any encumbrance and without calling upon the Petitioner to discharge

the liabilities arising out of the „Jamabandi‟ in relation to the unit of

the said VHEL Industries Ltd. On the other hand the Respondent No.2

had made an offer in the sum of Rs. 451 lakhs exclusive of all the

other liabilities which arose in respect of the sale of the said unit of

the said VHEL Industries Ltd. i.e. strictly in terms of the terms and

conditions of the subject tender. It is also observed that under the

provisions of Section 13 of the SRFAESI Act the Respondent No.1 was

entitled to sell the secured assets of the borrower for realizing its

outstanding liability by any and every mode. Therefore, the Petitioner

has been unable to make out a case of malafides in the present case,

which in any event had not been specifically pleaded by it in the

petition. Even otherwise in a matter of contract with the State the

Court does not interfere with the action taken on behalf of a statutory

corporation unless and until it is in the larger public interest so to do.

In the present case public interest does not require that the sale of

the said assets to Respondent No. 2 be stopped. On the contrary it is

in the paramount public interest to secure the ends of the public

exchequer by permitting the sale of the said assets to Respondent

No.2, for an amount of Rs.50 lakhs more than what was being offered

by the Petitioner even without calculating the remaining liabilities

which would be to the account of Respondent No.2, the subsequent

purchaser.

14. For the foregoing reasons we find that the writ petition is wholly

devoid of merits and hereby dismiss the same. However, the

Petitioner is liable to pay costs of the proceedings to the Respondents

which are directed to be paid in the sum of Rs.50,000/- (Rupees fifty

thousand) by way of deposit before this Court within a period of four

weeks from the date of this order.

15. List for compliance on 3rd April, 2009.

SIDDHARTH MRIDUL, J.

MADAN B. LOKUR, J.

February 26, 2009 mk