M/S Delhi Stock Exchange Assocn. ... vs Ujala Leasing Ltd.
2011 Latest Caselaw 6159 Del

$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CO.PET. 386/2000

M/S DELHI STOCK EXCHANGE
ASSOCN. LTD.                            ..... Petitioner
                  Through               None

                    versus

UJALA LEASING LTD.                      ..... Respondent
                             Through    Mr. Ashish Makhija,
                                        Advocate for Official
                                        Liquidator.
                                        Mr. Mayank Kumar,
                                        Advocate for applicant in CA
                                        2183/2011.
                                        Mr. S.K. Bhattacharya with
                                        Mr. Niraj Bobby Paonam,
                                        Advocates for Auction
                                        Purchaser.

%                              Date of Decision: 15th December, 2011

CORAM:
HON'BLE MR. JUSTICE MANMOHAN

                             JUDGMENT

MANMOHAN, J : (Oral)

CO. APPL. 2183/2011

1. Present application has been filed by a third party praying for

setting aside the auction dated 5th October, 2011.

2. It is pertinent to mention that by virtue of order dated 5 th

October, 2011 this Court had confirmed the auction of respondent-

company's flat situated at 111, Pratap Chamber, First Floor,

Gurudwara Road, Karol Bagh, New Delhi, in favour of Auction

Purchaser for a sum of ` 42,00,000/-.

3. The present applicant has offered to purchase the aforesaid

property at ` 50,00,000/-. To test the bona fides of the applicant,

this Court vide order dated 8th November, 2011, had directed the

applicant to deposit with the Registry of this Court a sum of `

50,00,000/- within a period of seven days - which the applicant has

done.

4. Mr. Mayank Kumar, learned counsel for the applicant stated

that the applicant could not participate in the auction conducted by

this Court on 5th October, 2011 due to short notice and as the

representative of the applicant was not in Delhi between the date of

auction notice and the date when auction was conducted. He pointed

out that the Valuer, M/s. Context Associates had valued the property

in question at ` 63,83,200/-. Mr. Mayank Kumar also relied upon a

judgment of Supreme Court in Shradhha Aromatics P. Ltd. Vs.

Official Liquidator of Global Arya Industries Ltd. and Ors.(2011)

164 Comp.Cas. 396 (SC) wherein it has been held as under:-

"We have considered the respective submissions and carefully perused the record. Ordinarily, the Court is loathe to accept the offer made by any bidder or a third party after acceptance of the highest bid/offer given pursuant to an advertisement issued or an auction held by a public authority. However, in the peculiar facts of this case, we are inclined to make a departure from this rule. Admittedly, total area of the land advertised by the committee is 12,500 square meters and the same is situated in an important district of Gujarat. It is also not in dispute that the area has been substantially developed in the last four years. The initial offer made by M/s. Patel Agro Diesel Ltd. was of Rs.83 lakhs and the highest revised offer given before the learned Company Judge was of Rs.127 lakhs. After acceptance of the revised offer by the learned Company Judge, the appellant stepped in and made an offer to pay Rs.141 lakhs. The first application filed by it was dismissed but the second application was allowed and the increased offer of Rs.151 lakhs was accepted by the learned Company Judge vide order dated November 27, 2007. That order did not find favour with the Division Bench, which restored the first order passed by the learned Company Judge. If the order of the Division Bench is sustained, the creditors of the Company are bound to suffer because the amount available for repayment of the dues of the creditors would be a paltry sum of Rs.127 lakhs. As against this, if the offer made by the intervenor-cum-promoter is accepted, the Official Liquidator will get an additional amount of more than Rs.4.25 crores. The availability of such huge amount will certainly be in the interest of the creditors including GSIIC. Therefore, it is not possible to approve the order passed by the Division Bench of the High Court. In a somewhat similar case - FCS Software Solutions Ltd. v. La Medical Devices Limited and others (supra), this Court approved the acceptance of revised bid of Rs.3.5 Crores given by the

appellant with a direction to compensate the earlier highest bidder by payment of the specified amount."

5. On the other hand, Mr. S.K. Bhattacharya, learned counsel for

the Auction Purchaser submitted that the auction should not be

disturbed as the same had been conducted after due publicity in well-

known newspapers. He further submitted that since no allegation of

fraud had been made, a confirmed sale should not be set aside just

because a third party is now willing to pay slightly higher price. In

this connection, he referred to a judgment of the Supreme Court in

Valji Khimji and Company Vs. Official Liquidator of Hindustan

Nitro Product (Gujarat) Limited and Others, (2008) 9 SCC 299.

The relevant paras of the said judgment are reproduced

hereinbelow:-

"11. It may be noted that the auction-sale was done after adequate publicity in well-known newspapers. Hence, if anyone 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 not ordinarily be allowed, except on very limited grounds like fraud, otherwise no auction-sale will ever be complete.

12. It is not in dispute that the auction was an open auction after wide publicity in well-known newspapers. Hence, there was nothing to prevent M/s. Manibhadra Sales Corporation and M/s. Castwell Alloys Ltd. to have participated in the auction, but they did not do so. There is no allegation of fraud either in this case. Hence, in our opinion, there was no justification to set aside the confirmation of the sale."

6. Mr. Ashish Makhija, learned counsel for Official Liquidator

supported the case of the applicant on the ground that as today a

higher auction price is being offered, the Court must accept the same

as it would be in the interest of the creditors and workers of the

company in liquidation.

7. Having heard the parties, this Court is of the view that a

Company Court is the custodian of the properties of the company in

liquidation and the Court's endeavour is always to sell the

company's properties at the highest price. In fact, in every auction,

the company's interest is supreme.

8. Ordinarily, Courts are reluctant to accept an offer made by any

bidder or a third party after acceptance of the highest bid/offer given

pursuant to an advertisement issued. However, keeping in view the

fact that the reserve price in the present instance was fixed by the

Valuer, M/s. Context Associates at ` 63,83,200/- and it was only

because no bidder had come forward to purchase the property at the

said price, this Court at the instance of the ex-Director of the

company in liquidation had lowered the reserve price to `40,00,000/.

9. Further, in the present case, the bid of the Auction Purchaser

had been accepted on 5th October, 2011 and the present application

for setting aside the auction has been filed on 3 rd November, 2011.

In fact, till date the Auction Purchaser has only paid 35% of the

auction price, i.e., ` 14,51,520/-. Till date, neither a sale deed has

been executed nor possession has been handed over to Auction

Purchaser.

10. This Court also takes judicial note of the allegations that in a

Court conducted auction/sale, there is normally a cartel of brokers/

purchasers that operates. Consequently, if the Court gets a higher

price, the Court must normally accept the same as by doing so, a fair

price would be obtained and it would be in the best interest of the

creditors, workmen and the company.

11. Accordingly, keeping in view the aforesaid as well as the fact

that the present application for setting aside the auction/sale has been

filed within a month of the order accepting the bid, the order dated

5th October, 2011 is recalled and the Official Liquidator is directed to

prepare a fresh draft sale notice/advertisement and hand over the

same to the applicant within one week. The advertisement would

clearly stipulate that the reserve price would be Rs. 50,00,000/- and

tender would be opened in Court on 26th March, 2012. It is made

clear that the public at large including the applicant as well as

Auction Purchaser would be entitled to participate in the said bid.

12. To meet the ends of justice, it is directed that the applicant

shall pay costs of ` 25,000/- directly to the Auction Purchaser within

one week and the new auction would be conducted at the expense of

the applicant.

13. Accordingly, the applicant is directed to get the said sale

notice/advertisement published at its own expense in the

newspapers, 'Hindustan Times' (English edition) and 'Nav Bharat

Times' (Hindi edition) within two weeks of receipt of the draft

advertisement from the Official Liquidator.

14. Since the Auction Purchaser has already deposited a sum of

` 14,51,520/- with the Official Liquidator, this Court directs the

Official Liquidator to forthwith refund the same. Accordingly, the

Official Liquidator is directed to refund the said sum to the Auction

Purchaser.

15. With the aforesaid direction, the present application stands

disposed of.

CO. PET. 386/2000

List on 26th March, 2012.

MANMOHAN, J.

DECEMBER 15, 2011 rn