M/S. India Capacitors Ltd. ... vs Official Liquidator & Ors.
2009 Latest Caselaw 120 Del

*          IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                        Reserved on : 07.01.2009

%                                                    Date of decision : 16.01.2009


+                                   CO. APP. No. 34 OF 2006

M/S. INDIA CAPACITORS LTD. EMPLOYEES UNION                         ... APPELLANT

                                     Through :   Mr. Vikramjit Banerjee,
                                                 Advocate.

                                        -VERSUS-

OFFICIAL LIQUIDATOR & ORS.                       ...      ...    ...    RESPONDENTS

                                     Through : Mr. S.K. Luthra, Advocate for
                                               Respondent No. 1 / OL.
                                               None for Respondents No.2&3.



+                                   CO. APP. No. 42 OF 2006

M/S. OMKAM FINVEST PVT. LTD.                     ...      ...    ...     ... APPELLANT

                                     Through : Mr. Harish Malhotra,
                                               Senior Advocate with
                                               Mr. Ashim Vachher, Advocate.

                                        -VERSUS-

M/S. INDIA CAPACITORS LTD. & ANR.                       ...    ...    RESPONDENTS

                                     Through : Nemo.



+                                   CO. APP. No. 47 OF 2006

M/S. KRISHNA CELL LINKS PVT. LTD.                       ...    ...     ... APPELLANT

                                     Through : Nemo.


                                        -VERSUS-

OFFICIAL LIQUIDATOR & ANR.                       ...      ...    ...    RESPONDENTS

                                     Through : Mr. S.K. Luthra, Advocate for
                                               Respondent No. 1 / OL.
                                               None for Respondent No. 2.

Co. App. Nos. 34, 42 & 47 of 2006                                          Page 1 of 11
 CORAM :

HON'BLE MR. JUSTICE SANJAY KISHAN KAUL

HON'BLE MR. JUSTICE SUDERSHAN KUMAR MISRA


1.        Whether the Reporters of local papers
          may be allowed to see the judgment?

2.        To be referred to Reporter or not?

3.        Whether the judgment should be
          reported in the Digest?


SANJAY KISHAN KAUL, J.

1. M/s. India Capacitors Ltd. (for short, 'the said Company'),

a company incorporated and registered under the

Companies Act, 1956 (for short, 'the said Act'), was

directed by an Order of the learned Company Judge

dated 23.10.1997 to be wound up and the Official

Liquidator (for short, 'OL') was directed to take

possession of the assets of the said Company. The

endeavours to revive the said Company had failed, but

the Union of the Employees of the said Company filed an

application on 05.05.2005 under Sections 529A and 546

of the said Act submitting a proposal for revival of the

said Company along with one M/s. Cygnus Developers

Pvt. Ltd. (for short, 'M/s. Cygnus').

2. It is a case of the Employees Union that M/s. Cygnus was

directed to deposit a sum of Rs.10 lacs on 26.05.2005

with the further direction to deposit an additional sum of

Rs.65 lacs with the OL. It is further claimed that though a

cheque of Rs.65 lacs was given to the OL, the same was

never presented, but, on the other hand, the application

filed by the Employees Union was dismissed on

04.08.2005 when a bid made by M/s. Balaji High Rise Pvt.

Ltd. (for short, 'M/s. Balaji') was accepted. M/s. Cygnus is

alleged to have prepared demand drafts on 11th / 12th

August, 2005 aggregating to Rs.65 lacs and an

application was filed before the learned Company Judge

seeking acceptance of the same. This application was,

however, dismissed on 15.09.2005. The matter went on

before the learned Company Judge thereafter till the

Orders were passed on 25.05.2006 by the learned

Company Judge holding fresh auctions and accepting a

bid of M/s. Balaji for Rs.7 crores though there was no

undertaking given for re-employment of the workers of

the said Company.

3. The aforesaid, thus, forms the subject matter of Co. App.

No. 34/2006.

4. There is a second set of two appeals being Co. App. No.

42/2006 and Co. App. No. 47/2006 filed by M/s. Omkam

Finvest Pvt. Ltd. and M/s. Krishna Cell Links Pvt. Ltd.

respectively aggrieved by the same Order as it is their

case that they were also bidders for the assets of the

said Company and there were procedural infirmities in

the bid, which call for interference in the present

appeals.

5. The aforesaid three appeals have been heard together

and are being disposed of by this common Order.

6. The subject matter of dispute is the factory premises of

the said Company situated at 99, Motilal Gupta Road,

Behala, Kolkata - 700008 (for short, 'the said factory

premises). There are only two secured creditors, namely,

M/s. Suman Investment Ltd. and the Employees Union.

The OL representing the said Company has placed today

before us the status of the claims received, which are as

under :-

              S.No.                 Particulars         Number      Amount Admitted
                                                        of Claims       (In Rs.)

              1.         Workers Including 2 Officers         78      1,81,57,417.83
              2.         Secured Creditors                     1        87,54,076.00
              3.         Unsecured Creditors                   7        71,82,000.00
              4.         Investors                            Nil                 Nil
              5.         Preferential Claims                  Nil                 Nil
              6.         Claim Rejected                        1                    -

                                       GRAND TOTAL            87     3,40,93,493.83

Thus, the aforesaid is the total liability of the said

Company and a sum of Rs.7 crores stands deposited by

the successful purchaser for purchase of the said factory

premises.

7. A perusal of the impugned order shows that none

appeared for M/s. Cygnus on 25.05.2006. The position is

the same for the other two appellant companies. It is the

case of the appellant companies that they had sought

details from the office of the OL specifically in respect of

some land, which vested with the Government as also

demarcation of the actual land. Since such documents

were not made available, there could not be a proper bid

made by these two companies.

8. Learned Company Judge has taken note of the fact that

the Order for liquidation was passed as far back as on

23.10.1997. In order to facilitate the disposal of the

assets more specifically the immovable assets being the

factory and land, an Order was passed on 27.01.2000

appointing a Valuer, who submitted a valuation report on

10.04.2000 valuing the property at Rs.3.5 crores. Since

there was an issue involved about the mortgage of the

land of the said factory premises with the Government of

West Bengal, the said aspect was directed to be looked

into. It emerged from these directions passed in that

behalf that 1.29 acres of land belong to the State of West

Bengal while the remaining land vested with the said

Company.

9. In pursuance to the valuation report, the learned

Company Judge by an Order dated 15.04.2004 directed

the sale proclamation to be issued and ten bids were

received on 22.07.2004. Even at that stage, an issue

arose about the proper demarcation of the land

segregating the area which vested with the State of West

Bengal. The Government of West Bengal filed a

compliance report dated 02.05.2005 in respect of the

demarcation along with maps with the total area under

occupation of the said Company being specified as 4.74

acres.

10. Learned Company Judge has, thus, taken note of the fact

that the issue of demarcation itself took more than three

years and the relevant reports were placed on record. It

is only after the maps were filed before the Court an

open bid was held on 12.05.2005 in which six bidders

participated. The highest bid was of Rs.2.5 crores

coming by M/s. Balaji, but in view of the application filed

by M/s. Cygnus, further sale process got stalled till the

application of M/s. Cygnus was dismissed on 04.08.2005.

11. The endeavour of M/s. Cygnus to rake up the issue of

demarcation by filing a subsequent application was not

successful and in the inter se bid held, the highest bid

received was of M/s. Balaji of Rs.3.15 crores.

12. The aforesaid once again gave rise to another set of

applications by M/s. Efflon Tie Up Pvt. Ltd. (for short, 'M/s.

Efflon') and M/s. Chitrakoot Agencies Pvt. Ltd. (for short,

'M/s. Chitrakoot'). M/s. Chitrakoot stated that it was

willing to give a substantial higher bid than Rs.3.15

crores. This very applicant claimed in the proceedings

resulting in the Order dated 25.05.2006 that there was

no demarcation. In fact, the auction held on 04.08.2005

was not confirmed, but the option was given to the

various applicants to visit the land at their own risk and

expenses in terms of the Order dated 22.09.2005.

13. The OL was directed on 21.04.2006 to once again take

out an advertisement / sale proclamation in the

newspaper requiring the bidders to deposit an Earnest

Money Deposit (for short, 'EMD') of Rs.31.50 lacs for

participating in the bidding process and the parties were

given opportunity to again visit the said factory premises

on 12.05.2006 and 13.05.2006 to examine the land. It is

also noticed in the impugned order that M/s. Maruti Real

Estates Pvt. Ltd. and M/s. Chitrakoot had only furnished

cheques and not demand drafts, which were dishonoured

/ payment stopped. The valid bids given were considered

and inter se bidding was held on the date of the

impugned order, which substantially increased the

bidding amount to Rs.7 crores by M/s. Balaji, which had

already deposited the EMD and the said bid was

consequently accepted.

14. Learned senior counsel for one of the appellant

companies once again seek to rake up the issue of

demarcation and their inability to properly inspect the

said factory premises as the area was not clean,

completely ignoring the fact that the status report about

the demarcation was on record.

15. We cannot lose sight of the fact that a period of almost

nine years had elapsed from the date of winding up of

the said Company till the bidding process and the assets

could not indefinitely be kept in abeyance without them

being sold. The bidding had taken place on 'as is where

is basis' and the two appellant companies were not even

represented on the relevant date. There had been

repeated moves to stall the sale of property though the

passage of time did result in the increase of the price,

which is a natural consequence of the increase in the

land prices. The long pendency has also resulted in theft

of movable assets worth more than Rs.22 lacs.

16. Learned Company Judge, in our considered view, rightly

evolved the process of inter se bidding in the Court itself

amongst the bidders, who cared to be present and the

resultant price fetched was of Rs.7 crores almost double

the amount of the liability of the said Company.

17. Learned senior counsel referred to the judgment of the

Apex Court in FCS Software Solutions Ltd. v. La Medical

Devices Limited & Ors., (2008) 10 SCC 440 to advance

the proposition that even after an auction sale has been

completed, re-auction can be carried out if appropriate

prices are not fetched due to non-disclosure of necessary

facts.

18. Learned senior counsel emphasized that a sale

conducted under the provisions of the said Act was

different from one under Order XXI Rule 92 of the Code of

Civil Procedure, 1908 and in that behalf referred to the

judgment of the Apex Court in Divya Manufacturing

Company (P) Ltd., Tirupati Woollen Mills Shramik

Sangharsha Samity & Anr. V. Union Bank of India & Ors.,

Official Liquidator & Ors., (2000) 6 SCC 69. In the facts of

the case, prior to the delivery of possession and

execution of the sale deed, certain other parties had

offered higher amounts.

19. Learned senior counsel also emphasized that in a recent

judgment by learned Single Judge of this Court In The

Matter Of : Saraf Paper Mills Ltd. (In Liquidation) Through

Official Liquidator, 155 (2008) DLT 517, the Company

Court took note of the fact that where the process of

issuance of sale proclamation, initiation of bids and

making of bids by only handful of persons resulted in

limited inter se bidding in Court, the same was vitiated

by gross material irregularity if not fraud with inadequate

price.

20. The aforesaid are well settled principles. The Company

Judge is to make every endeavour to get the best price.

No doubt, learned senior counsel for one of the appellant

companies on instructions stated that the said appellant

was willing and is still willing to pay now Rs.8.5 crores for

the same land, i.e., the said factory premises. But what

is to be seen is whether there was any impropriety or

procedural irregularity in the manner of conduct of the

auction or the bidding done in the Court. We find none.

21. The matter has been prolonged on one pretext or the

other postponing the inevitable sale of the property. Not

only has the property been sold, but also the possession

handed over to the successful auction purchaser. The

physical possession was handed over on 27.09.2006 as

per the affidavit filed by the OL affirmed on 23.10.2008.

22. Learned senior counsel did seek to contend that the

successful auction purchaser has been selling portions of

the property, but that is the prerogative of the auction

purchaser to make best use of the said land purchased

by it. After all, no one is performing a charitable

function, but the bidding has taken place for commercial

interest.

23. It cannot be lost sight of that the bid is sufficiently high

to not only meet all the claims of the secured creditors,

but the leave a substantial balance of almost the equal

amount. The workers, in our considered view, can make

no grievance when each and every of their claim is being

honoured. Their endeavour to have some scheme with

the third-party proved unsuccessful. They can hardly

raise a grievance.

24. Learned Company Judge has made the best endeavour to

get an appropriate price at the relevant stage of time and

vested rights have been created in favour of the auction

purchaser over a period of time subsequent to the

deposit of the amount, possession being handed over

and the property even alleged to have been further dealt

with. The clock cannot be set back because one of the

parties offers an additional 20% of the amount now. If

such a process is followed, there can never be any end to

a transaction of this nature where assets have to be sold.

25. In our considered view, the endeavour by the appellant is

to clearly drag on the litigation on one pretext or the

other. We find the appeals without any merits.

26. The appeals (Co. App. Nos. 42 and 47 of 2006) are

dismissed with costs of Rs.10,000/- each, but in view of

the fact that Co. App. No. 34/2006 is by the Employees

Union, we desist from imposing costs in that appeal.

SANJAY KISHAN KAUL, J.

JANUARY 16, 2009 SUDERSHAN KUMAR MISRA, J. dm