Glencore Grain Rotterdam B.V. vs M/S Shivnath Rai Harnarain ...
2011 Latest Caselaw 2800 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI


+                       Date of Decision:   25.05.2011


%                    E.A. No. 342/2011 in EX.P. 72/2009



       GLENCORE GRAIN ROTTERDAM B.V.      ..... Decree Holder
                          Through:  Mr. Rajiv Nayar, Senior
                                    Advocate, with Mr. Vidhur
                                    Bhatia     &   Mr.   Darpan
                                    Wadhwa, Advocates.

                       versus

       M/S SHIVNATH RAI HARNARAIN (INDIA)
       COMPANY                              ..... Judgement Debtor
                           Through:   Mr. Sandeep Sethi, Senior
                                      Advocate, with Mr. Narendera
                                      M. Sharma & Mr. Abhishek
                                      Sharma, Advocates for the
                                      respondent No. 2/applicant.
                                      Mr. Mahinder Rana, Advocate
                                      for the respondent No. 5.


       CORAM:
       HON'BLE MR. JUSTICE VIPIN SANGHI

       1. Whether the Reporters of local papers may
          be allowed to see the judgment?           :        No

       2. To be referred to Reporter or not?             :   Yes

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


VIPIN SANGHI, J. (Oral)

1. Issue notice. Notice is accepted on behalf of the decree holder by

Mr.Vidhur Bhatia. Counsel for the decree holder has opposed this

application without filing the reply.

2. I have heard learned senior counsel for the parties and proceed

to dispose of this application.

3. The present application has been filed by the judgment debtor

No. 2 to seek a direction to ITCOT Consultancy and Services Limited

(hereinafter referred to as ITCOT) to furnish a copy of the valuation

report prepared by it, and to grant leave to the applicant to file

objections to the said valuation report. A further direction is sought to

ITCOT to keep in abeyance the public auction proposed to be held in

terms of the public notice issued by it for sale of shares of judgment

debtors No. 2 & 3 held in judgment debtor No. 5 company.

4. By an order dated 19.04.2010 passed in this execution petition,

this court had, inter alia, directed as follows:

"Since the decree is sought to be executed by sale of shares of JDs No. 2 and 3 in the Company JD No. 5, the sale of these shares be done through an authorized broker. SBI Capital Markets Limited, Word Trade Tower, 6th Floor, Barakhamba Lane, New Delhi-110 001 is appointed as authorized broker. It is directed to sell the shares of JDs No. 2 and 3 held by them in JD No. 5 and the amount so released be kept by SBI in suspense account and the court be informed about the amount realized by sale of share for satisfaction of the decree out of the amount so raised from the sale

have been attached in execution of this decree, and JD No. 5 is not a listed company these shares shall be sold by SBI Capital Markets Ltd in the manner shares of an unlisted company are sold, after getting the value of the shares assessed through a Chartered Accountant. The SBI Capital Markets Ltd shall appoint a Chartered Accountant for assessment of value/worth of shares. The charges of the Chartered Accountant shall be borne by the Decree Holder. JDs No. 2,

3 and 5 are directed to provide the account books and other necessary information to the Chartered Accountant so appointed so as to assess value/worth of the shares and once the value of the shares is assessed by the Chartered Accountant and the information is given, the shares shall be put to auction by above broker. The Decree Holder or any other person shall be at liberty to purchase these shares." (emphasis supplied)

5. This order was challenged by the judgment debtors in appeal,

being EFA(OS) No. 15/2010. The said appeal was dismissed by the

Division Bench vide order dated 11.06.2010. Consequently, the order

dated 19.04.2010 has attained finality. Subsequently, SBI Capital

Markets Limited was substituted by ITCOT vide order dated

22.02.2011. The said order, inter alia, states as follows:

"I, therefore, appoint ITCOT Consultancy and Services Limited 50-A, Greames Road, Murugesan Naicker Complex, Chennai-600006 Ph.# 044-28290324, 42936800 Fax # 044-28293512 as the firm to undertake valuation of the shares held by JD No. 2 & 3 in JD No. 5 and after valuing the shares to sell the shares. The work shall be split in two parts. The first part shall be the valuation of the shares and second part shall be selling of the shares. JDs shall provide all necessary information to the above said broker for valuation of the shares and shall cause no hindrance. The aforesaid company shall complete the valuation work as early as possible, in all probabilities within 60 days. The initial charges for the first part of the work shall be borne by the decree holder to be recovered from JDs as a part of the decreetal amount. The final fee for the work shall also be recovered by the DH as a part of the decree. The sale of shares shall be undertaken within 30 days after valuation of the shares. The agent shall give its report after completion of entire work to the Court. The money so realized shall be kept by agent in a nationalized bank and the same shall be utilized in satisfaction of decree and in payment of fees of the agent. Any hindrance caused by the JDs in the work of the agent shall be viewed seriously." (emphasis supplied)

6. ITCOT had completed the process of valuation and has tendered

the valuation report on confidential basis in this court on 04.05.2011.

This fact has been communicated to the decree holder, as well as to

the judgment debtor No. 5-Shri Lal Mahal Limited. I may note that

judgment debtor No. 2, the applicant, is the Managing Director of

judgment debtor No. 5 company. The ignorance of the said

communication feigned by judgment debtor No. 2 is, therefore,

unbelievable and rejected.

7. ITCOT has also proceeded to issue a public notice to conduct a

public auction for sale of 96,67,400 shares amounting to 28.445% of

the paid up capital of judgment debtor No. 5 company as on

31.03.2011. The said notice notes the fact that judgment debtor No. 5

is an unlisted public limited company. It also notes the fact that the

company reported a turnover of Rs.1295 Crores for the year ended

March 2010, and has informed that for year ending March 2011, it has

achieved a much higher turnover. In relation to the decretal amount

this notice indicates "as per HC order in EP 279/2009". The number of

shares offered for sale is 96,67,400 shares of the face value of Rs.10/-

each. The notice also gives the breakup of shares held by judgment

debtors No. 2 & 3, which are to be sold as one lot amounting to

28.445% of the paid up capital as on 31.03.2011. The reserve price has

been fixed at Rs.55.10 Crores. This notice has been issued on

16.05.2011. The last date for sale of the bid document is 16.06.2011.

The submission of bids can take place up to 17.06.2011 at the office of

ITCOT in Chennai. The sale in front of bidders is scheduled to take

place on 18.06.2011 at ITCOT, Chennai.

8. The submission of the learned senior counsel for the judgment

debtor No. 2/applicant firstly is that the judgment debtors have not

been provided with a copy of the valuation report prepared by ITCOT.

The judgment debtors do not know on what basis the said valuation

has been done.

9. I may note that the court had not directed ITCOT to supply a

copy of its valuation report to either the decree holder, or the

judgment debtors. The bid document, which is publicly available on the

website of ITCOT, and also specifically given to the judgment debtor

No. 5 vide ITCOT communication dated 12.05.2011 gives the

"Executive Summary of Valuation Report". The said report takes note

of the following facts:

"

 In spite of being a longtime company, it is closely held  It has a star status in the industry it operates with its pricing of commodities being referred as "Gold Standards" for reference; yet margins are not high.  It has shown robust growth but has no history of issuing dividends so far.

 The Company has highly valuable status & labels (brands) of established nature but the shares have remained "unquoted" to indicate a value.  The company allotted 1,00,00,000 (100 lakhs) shares to three entities during 2009 at Rs.10/- per share at par value. Managing Director of the company Mr. Prem Chand Garg (JD 2) and Mrs. Anita Garg (JD 3) filed an affidavit in the Delhi High Court that the estimated market value of their shares were Rs.100/- per share and that on March 31, 2011, SLML has allotted

additional shares of 9,91,160 to one U.K. entity at Rs.225/- per share. The Company had not provided reasons for difference in valuation of over 2000%.  Subsequent to enterprise valuation of SLML, value of shares of JD2 and JD3 constituting 28.445% of shares amounting to INFLUENTIAL MINORITY SHARE HOLDING is to be carried out.

In such a scenario, ITCOT has made reference to

 Government approved methodologies  Generally accepted methodologies in Indian Market  Internationally accepted practices

to envisage all scenarios."

10. The method of valuation has been indicated by ITCOT by

enumerating the guidelines which have been taken into consideration

as well as the methodology adopted by it for arriving at its valuation of

the shares of judgment debtor No. 5. I may set out hereinbelow these

factors as well:

"4. Guidelines:

 Disinvestment Ministry  CCI Guidelines  Dept. of Economic Affairs, Ministry of Finance

Reference books (for intricacies in using tools and techniques)

1. Damodaran on Valuation, Aswath Damodaran, Wiley Finance (India) 2nd Edition, 2006

2. Valuation for Mergers, Buyouts and Restructuring - Enrique R. Arzac, WILEY - FINANCE (INDIA) - R 2010

5. Methodology:

All applicable methodologies were adopted.

1. Discounted Cash Flow Methodology

2. Net Asset Value Method

3. Relative Valuation Technique or Valuation Multiples

o Price-Earning Ratio (P/E) o Price-Book Ratio (P/B) o Price-EBITDA per share o Price-EBIT per share

4. Comparative Transaction Valuation

As all values so arrived were found in a very close range, an average of these values have been taken. Since valuation of shares of JD2 and JD3 together accounting to 28.445% alone were required appropriate correction factors of lack of management control in view of influential minority shareholding represented by this 28.4455 stake and for lack of liquidity in view of these being unquoted shares were applied.

Value of shares held by JD2 and JD3 were arrived and the same was also put under validation of market price of similar sized peer companies and validated."

11. From the aforesaid, it is evident that though the detailed

valuation report has not been supplied by ITCOT to the judgment

debtors or the decree holder, the factors considered by ITCOT, and the

methodology adopted by it for arriving at its valuation has been

sufficiently disclosed. The reserve price has been fixed by ITCOT on

the basis of its valuation. Therefore, I find no merit in the grievance

raised by the judgment debtor applicant with regard to non-supply of

the valuation report prepared by ITCOT.

12. The submission of Mr. Sethi is that the valuation is extremely low

inasmuch, as, the company had allotted shares on 31.03.2011 @

Rs.225/- per share, i.e., at a premium of Rs.215/- per share. This aspect

has been noticed and commented upon by ITCOT even in its summary

above extracted. Even before me, the judgment debtor/applicant has

not advanced any basis for its claim that the valuation of shares is

about Rs.225/- per share. Moreover, assuming for the sake of

argument that this submission has force, the judgment debtors, who

are also entitled to bid in the auction process, can also submit their bid

to acquire the said shares which have been put on sale at the said

valuation of Rs.225/- per share.

13. The next submission of Mr. Sethi is that the proposed sale is in

the teeth of Order XXI Rule 64 CPC. He submits that the decree holder

has not yet quantified the exact amount recoverable under the decree

in question. The said amount has also not been indicated in the public

notice issued by ITCOT. Under Order XXI Rule 66 (2)(d), the sale

proclamation should specify fairly and as correctly as possible, the

amount for the recovery of which the sale is ordered. He submits that

merely disclosing that the amount to be recovered is as per the decree

sought to be executed in the present execution petition is not

sufficient. He submits that the reason for knowing the exact amount to

be recovered is that under Rule 64 of Order XXI CPC, the court

executing the decree cannot order attachment and sale of a property,

beyond what is necessary to satisfy the decree. He submits that even

as per the valuation of the ITCOT, the lot of shares to be sold is valued

at Rs.55 Crores at the least, whereas the amount recoverable under

the decree is to the tune of Rs.40 Crores. Therefore, the sale of the

entire block of shares is not justified and would be illegal, if permitted.

In support of his submission Mr. Sethi has placed reliance on Ambati

Narasayya Vs. M. Subba Rao and Another, AIR 1990 SC 119; Lal

Chand Vs. VIIIth Addl. District Judge and Others, AIR 1997 SC

2106; and Smt. Arati Daw Vs. Pradip Roy Chowdhury and

Others, AIR 2003 CALCUTTA 218.

14. On the other hand, the submission of Mr. Nayar, learned senior

counsel appearing on behalf of the decree holder, is that the order

directing the sale of entire shareholding of judgment debtors No. 2 & 3

in judgment debtor No. 5, passed on 19.04.2010 has attained finality

with the dismissal of the first appeal by the Division Bench. He submits

that a perusal of the said order dated 19.04.2010 as well as the order

passed by the court on 22.02.2011 shows that the entire shareholding

of the judgment debtors No. 2 & 3 was directed to be sold as a block;

the entire proceeds realized after sale of shares was to be kept in a

"suspense account" and; out of that, the satisfaction of the decree was

to be done. He submits that the reason for sale of the entire

shareholding of judgment debtors No. 2 & 3 in the judgment debtor No.

5 company as a block was considered appropriate and necessary, as

judgment debtor No. 5 is an unlisted company and the shareholding of

judgment debtors No. 2 & 3 put together constitutes a block of about

28% shareholding of the issued and paid-up equity of judgment debtor

No. 5 as of now. He submits that the sale of a lesser shareholding in

the said unlisted company would be meaningless, as it is well-known

that any sale of shares below 26% shareholding/voting rights in such a

company would not give the purchaser any meaningful rights of

influence on the management of the company, because special

resolutions can be passed only by a majority of 75% or more.

15. He further submits that mere failure to mention the amount, for

the recovery of which the sale is being undertaken, in the public

notice, is not fatal. In this regard, he places reliance on a Division

Bench judgment of this court in State Bank of India & Etc. vs.

Hon'ble Debts Recovery Appellate Tribunal & Ors., AIR 2010

Delhi 83 (DB). He submits that the judgment debtor no.2 himself being

a judgment debtor, would be aware of the recoverable amount under

the decree. He further submits that the judgment debtor/applicant, in

any event, does not have the locus standi to raise any such objections.

Mr.Nayar further submits that the amount to be recovered under the

decree in question as computed by the decree holder is to the tune of

Rs.86 Crores and not 40 Crores, as alleged by the judgment

debtor/applicant. He has tendered a chart/tabulation which shows the

amounts recoverable as per the award under execution and the date

on which the award was held to be enforceable has been taken as the

date for applying the conversion rate of US Dollars and Pound Sterling.

16. Mr. Nayar also places reliance on Order XXI Rule 78 CPC which

states that "no irregularity in publishing or conducting the sale of

movable property shall vitiate the sale; but any person sustaining any

injury by reason of such irregularity at the hand of any other person

may institute a suit against him for compensation or (if such other

person is the purchaser) for the recovery of the specific property and

for compensation in default of such recovery".

17. Having heard learned counsel for the parties, I am of the view

that the present application is without any merit.

18. What is to be appreciated is the peculiar situation that, to realize

the decretal amount, the Court has directed attachment of sale of the

shareholding of judgment debtor nos.2 and 3 in the judgment debtor

no.5 company, which is not a listed company. The entire shareholding

of judgment debtor no.5 is privately held. Therefore, as the shares of

judgment debtor no.5 are not traded in the stock market, only such

persons/entities would be interested in purchasing the shares proposed

to be disposed of, who by purchasing the said shares, get some

meaningful/influential rights in the management of the judgment

debtor no.5 company.

19. Pertinently, the shareholding of judgment debtor nos.2 and 3,

put together, constitutes about 28% of the paid up share capital of

judgment debtor no.5. This means that any person/entity who buys

the said chunk of shares (which is a little over 26%) of the paid up

share capital of judgment debtor no.5, would become a minority

shareholder with right to assert itself in the management of the

company, as a company would need the support of such a purchaser to

pass any special resolution.

20. The significance of holding 26% of the paid up share capital in a

company can be gauged from the fact that following resolutions can be

passed only by a special resolution, i.e. by a majority of 75% or more

shareholding:

"

1. To alter the provisions of the memorandum, to change the objects of the company, and to change the place of the registered office from one state to another [Section 17].

2. To change the name of the company (also requires approval of the Central Government) [Section 21].

3. To omit the word "Limited" or "Private Limited" from the name of the company [Section 21].

4. Change of name of charitable or other non-profit company by omitting the word or words "Limited" or "Private Limited". [Section 25(3)].

5. To alter or add to the articles [Section 31].

6. To purchase the Company's own shares or specified securities [Section 77A(2)].

7. To issue sweat equity shares [Section 79A].

8. To issue further shares without pre-emptive rights [Section 81(1) to non members [section 81(1-A)] or to convert loans or debentures into shares [Section 81(3)].

9. To determine that any portion of the share capital not already called up shall not be called up except in the event of, and for the purpose of, winding up the company [Section 99].

10. To reduce the share capital (this requires authorization by the articles and confirmation by the Court) [Section 100].

11. Approval of variation of rights of special classes of shares [Section 106].

12. To remove the registered office of the company outside the local limits of the State, Town, or Village in which it is situated [Section 146].

13. To commence any new line of business [Section 149 (2A)].

14. To keep registers and returns at any other place than within city, town or village in which the registered office is situated [Section 163].

15. To authorize the payment of interest on the paid-up amount of share capital raised for the purpose of defraying the expenses of construction of any work or building or the provisions of any plant that cannot

be made profitable for a lengthy period [Section 208(2)].

16. To appoint auditors in the case of a company in which the Central and/or any State Government, and/or public financial institution or institutions together hold twenty-five per cent or more of its subscribed capital [Section 224A].

17. To request the Government to investigate the affairs of the company and to appoint inspectors for the purpose [Section 237].

18. To appoint sole selling or buying or purchasing agent in the case of companies having paid-up share capital of rupees fifty lakhs or more [Section 294-AA].

19. To fix remuneration of directors, where the articles require such resolution [Section 309(1)].

20. To sanction remuneration to directors other than managing or whole-time directors on percentage of profit basis in certain instances [Section 309(4)] and renewal under sub-section (7)].

21. To consent to a director or his relative or partner or firm or private company holding an office or place of profit, except that of managing director, manager, banker, or trustee for debenture-holders of the company [Section 314].

22. To make the liability of any director or manager unlimited where so authorised by the articles [Section 323].

23. To make inter-corporate loans and investments or guarantee/security to be given, etc., if the aggregate amount thereof, exceeds the limit of 60 per cent of the company's paid-up share capital and free reserves or 100 per cent of its free reserves, whichever is more (S. 372A).

24. To apply to a Court to wind-up the company [Section 433(a)].

25. To wind-up the company voluntarily [Section 484(1)(b)].

26. To bind the company by arrangement made under Section 517.

27. For various other matters pertaining to the winding up of the company. [See sections 433(a), 494(1)(b), 507, 512(1), 546(1)(b), 550(1)(b)].

28. To alter the constitution of a company registered under Part IX [Section 579(1)].

21. Even from the Executive Summary of Valuation Report prepared

by ITCOT, it appears that the judgment debtor no.5 company, though

having robust growth, has no history of issuing dividends so far.

Therefore, those investors, who are looking to earn dividends, would

not get attracted to the proposed sale. It would only be

persons/entities, who would be interested in becoming the "influential

minority shareholders" (as noticed by ITCOT in its Executive Summary

of Valuation Report), who would be interested in buying into the

shareholding of the company which is on offer.

22. The submission of Mr. Sethi that only so much of the judgment

debtors' asset should be sold, as are necessary to raise sufficient funds

to meet the liability under the decree, in normal situations and

circumstances, cannot be questioned. But in a case like the present,

the entire shareholding of judgment debtor nos.2 and 3, constituting

about 28% of the paid up share capital of judgment debtor no.5, has to

be treated as a single lot. An endeavour to sell the shares in smaller

lots, of say, 100 shares or even 1% of the paid up share capital of

judgment debtor no.5 at a time, would not provide any comfort to any

prospective buyer, of his acquiring an influential minority

shareholding/stake in the judgment debtor no.5 company. In fact, such

a process would fail to secure the best price of the shareholding of

judgment debtor nos.2 and 3 in the judgment debtor no.5 company.

23. To me, it appears that the Court, while passing the orders dated

19.04.2010 and 22.02.2011, was conscious of the aforesaid position

and that is why it directed the sale of the shareholding of judgment

debtor nos.2 and 3 in judgment debtor no.5. Pertinently, the Court had

directed that the sale proceeds be kept in a no lien account and from

the amount received, the necessary funds were to be utilized to satisfy

the decree in question and in payment of fees of the agent. Such a

direction is obviously premised on the understanding that the entire

shareholding of judgment debtor nos.2 and 3 would be sold as a lot,

even if the value thereof is more than the decretal amount and the

costs incurred in conducting the sale.

24. In Ambati Narasayya (supra), the Supreme Court held that the

executing court has to decide whether it is necessary to bring the

entire attached property to sale or such portion thereof as may be

necessary to satisfy the decree. If the property is large and the decree

to be satisfied is small, the Court must bring only such portion of the

property, the proceeds of which would be sufficient to satisfy the claim

of the decree holder. Even if the property is one, if a separate portion

could be sold without violating any provision of law, only such portion

of the property should be sold as may be necessary to satisfy the

decree. This decision has been followed in Lal Chand (supra).

25. In my view, the aforesaid decisions relied upon by the

applicant/judgment debtor no.2 are of no avail in the facts of this case.

I have already discussed herein above the rationale behind selling the

entire shareholding of judgment debtor nos.2 and 3, which constitutes

about 28% of the paid up share capital of judgment debtor no.5

company, as a single lot. The shares held by judgment debtor nos.2

and 3 cannot be sold in smaller tranches/lots, because judgment

debtor no.5 is an unlisted and privately held company. The sale of

very small lots of shares is bound to drastically reduce the realizable

value of the shares. The said shares, to realize their full value and

potential, should go into the hands of the same person/entity or group

of persons acting together. If the said shares get disbursed into hands

of various buyers/purchasers, who are strangers and do not have

commonality of interest and objective, it would serve no purpose for

any of them. This factor itself will dissuade any prudent, or any person

of reasonable financial intelligence and understanding from involving

himself in the proposed sale.

26. In Smt. Arati Daw (supra), the learned Single Judge of the

Calcutta High Court has taken the view that the executing court cannot

blindly accept the valuation supplied only by the decree holder in

respect of the immovable property, and acceptance of such valuation

by the Court would tantamount to gross carelessness on its part. In

that case, no publication of sale was made by the decree holder as

mandated by Order 21 Rule 67. It was in these circumstances, that the

Court set aside the auction sale. In para 51, the Calcutta High Court

took note of the decision of the Supreme Court in Gajadhar Prasad v.

Babu Bhakta Ram, AIR 1973 SC 2593, wherein it has been held that

it is not necessary for the Court to state its own estimate of the value

of the property. However, all material facts have to be mentioned by

the Court when stating its estimate of the value of the property to be

sold and that the Court must not accept the ipse dixit of one side.

27. This decision of the Calcutta High Court has no application in the

facts of this case. The Court is not acting on or accepting the valuation

of the decree holder. The Court had appointed an independent expert

and experienced professional body to carry out the process of

valuation. The valuation report has been received. Even from the

summary, it is evident tht the same has been prepared on the basis of

relevant materials and by application of well recognized principles and

methods of valuation. The applicant has not been able to point out,

even by reference to the said summary, any patent infirmity in the said

process of valuation undertaken by ITCOT. Secondly, unlike in the

Calcutta case, in the present case, ITCOT has not only issued the

publication of the sale notice, it has placed sufficient relevant materials

in the public domain to enable the interested parties to make an

informed decision before they participate in the auction process.

28. The submission that the publication/advertisement issued by

ITCOT does not indicate, in rupee terms, the decretal amount, for the

realization of which, the sale of shares is proposed to be undertaken,

and therefore, the proposed sale is illegal, has to be rejected for two

reasons. Firstly, as I have already noticed above, the shares of

judgment debtor nos.2 and 3 have to be sold as a single lot. The

purpose and relevance of indicating the decretal amount in terms of

rupees in the public notice is to put the prospective buyers to notice

that, a part only (and not the whole) of the attached property, may be

sold, as the purpose of the sale is to realize only the decretal amount

and the costs involved in the process of sale. However, in a case like

the present, the entire shareholding has to be sold as a single lot,

irrespective of the amount payable under the decree. Secondly,

according to the decree holder, the amount payable under the decree

is to the tune of nearly 87 crores whereas the value of the

shareholding of JD nos. 2 and 3 (as per the valuation of ITCOT) is

about Rs.55.10 crores. The decree holder has tendered in Court the

following computation made by it of the amount payable under the

decree, as on 25.05.2011:

"

Head of Claims Principal Amount Interest @ 6.5 per cent per annum compounded annually until 25 May 2011 ( on 365 day year)

Default damages US$5,538,285.14 US$9,322,861.33

(from 25 September 1995)

Demurrage US$538,509.70 US$835,029.27

(from 15 July 1996)

Detention US$206,255 US$337,262.83 Damages-

(from 8 January 1996) M.V. "Sidor Kovpak"

        Detention                 US$240,034.72         Us$387,931.52
       Damages-
                                                       (From 19 February
       M.V. "Negotiator"                               1996)

       Deadfreight               US$2,626.25           US$4,526.24

                                                       (from 1 July 1995)

       Total                     US$6,525,710.81       US$10,887,611.19

       Amount due in             Rs. 32,53,06,683.90   Rs.54,27,47,417.80
       Rupees @
       Exchange rate of
       USDI =Rs.49.85
       on November
       26,2008 as per
       RBI website)

       Costs of the              GBP5,850
       award

       Amount due in             Rs.4,48,110
       Rupees @
       Exchange rate of
       GBP1=Rs.76.60
       on November
       26,2008 as per
       RBI website)

As on 25 May 2011 (Principal + Interest+ Costs)

Amount due = Rs.86,85,02,211.70 (Approximately Rs.86.85 crores)"

29. On the other hand, the judgment debtor/applicant, who claims

that the amount payable under the decree is Rs.40 crores, has not

given the basis of its estimation. The judgment debtor has not, while

making its submissions, questioned any entry in the aforesaid

computation furnished by the decree holder. Therefore, it appears to

me that the value of the shares put to sale may not even fetch the

amount sufficient to satisfy the decree, even if all the shares of

judgment debtors No. 2 and 3 are sold.

30. Even if one were to assume for the sake of arguments, that the

amount payable under the decree is only Rs.40 crores or thereabout,

for the reasons aforesaid, only on the sale of the entire lot of shares

held by judgment debtor nos.2 and 3 in the judgment debtor no.5

company, the said amount is realizable. The sale of the shares in

much smaller lots is bound to result is no prospective buyer interested

in the shares in question.

31. In State Bank of India (supra), a Division Bench of this Court

has held that the mere absence, in the sale notice, of the exact

amount of secured debt to be recovered would not be fatal to the

process of sale, unless it results in injury to the mortgager. The

Division Bench took note of Order 21 Rule 90 CPC, which inter alia

states that no sale shall be set aside on the ground of irregularity or

fraud in publishing or conducting the auction sale, unless upon the

facts proved, the Court is satisfied that the applicant has sustained

substantial injury by reason of such irregularity or fraud.

32. The Division Bench took note of the decision of the Supreme

Court in Saheb Khan v. Mohd. Yousufuddin & Others, (2006) 4

SCC 476, wherein the Supreme Court while dealing with an auction

under the CPC observed as under:

"12. We are unable to sustain the reasoning of the High Court. Order 21 Rule 90 of the Code of Civil Procedure allows, inter alia, any person whose interests are affected by the sale to apply to the court to set aside a sale of immovable property sold in execution of a decree on the

ground of "a material irregularity or fraud in publishing or conducting" the sale. Sub-rule (2) of Order 21 Rule 90 however places a further condition on the setting aside of a court sale in the following language : "90.(2) No sale shall be set aside on the ground of irregularity or fraud in publishing or conducting it unless, upon the facts proved, the court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud."

33. The Division Bench went on to observe as follows:

"13. Therefore, before the sale can be set aside merely establishing a material irregularity or fraud will not do. The applicant must go further and establish to the satisfaction of the court that the material irregularity or fraud has resulted in substantial injury to the applicant. Conversely even if the applicant has suffered substantial injury by reason of the sale, this would not be sufficient to set the sale aside unless substantial injury has been occasioned by a material irregularity or fraud in publishing or conducting the sale. (See Dhirendra Nath Gorai v. Sudhir Chandra Ghosh (1964) 6 SCR 1001 : AIR 1964 SC 1300; Jaswantlal Natvarlal Thakkar v. Sushilaben Manilal Dangarwala, 1991 Supp (2) SCC 691 and Kadiyala Rama Rao v. Gutala Kahna Rao, (2000) 3 SCC 87).

14. A charge of fraud or material irregularity under Order 21 Rule 90 must be specifically made with sufficient particulars. Bald allegations would not do. The facts must be established which could reasonably sustain such a charge. In the case before us, no such particulars have been given by the respondent of the alleged collusion between the other respondents and the auction-purchaser. There is also no material irregularity in publishing or conducting the sale. There was sufficient compliance with Order 21 Rule 67(1) read with Order 21 Rule 54(2). No doubt, the trial court has said that the sale should be given wide publicity but that does not necessarily mean by publication in the newspapers. The provisions of Order 21 Rule 67 clearly provide if the sale is to be advertised in the local newspaper, there must be specific direction of the court to that effect.. ... .... ...."

34. The Division Bench further observed:

"15. We find, in the present case, that none of the requirements, which can affect the mortgagor, had been violated. It is not the case of the mortgagor that he is in a position to pay the amount and redeem the mortgage. In fact, even on a specific query being posed during the course of hearing, no willingness to pay the amount to redeem the mortgage was even expressed. The only violation of the said Rules was not to specify the amount secured by the mortgage. This in no manner affected the rights of the mortgagor. It is in these circumstances that we find force in the contention of learned counsel for the petitioners that the observations in Saheb Khan‟s case (supra), albeit applicable in the case of an auction under the said Code, would have relevance. There was undoubtedly no injury to the mortgagor arising from non-statement of the amount of the debt due. There was nothing pleaded in this behalf. The question arises as to whether the sale should be set aside only on account of non-statement of the exact amount of the secured debt and our answer to this is in the negative. The rationale, as explained above, is the absence of any injury to the mortgagor. It has been stated in the auction notice that the mortgaged property was being sold for a secured debt, but only the amount was not specified. This is, thus, an irregularity, which has caused no damage to the mortgagor and with which the auction purchaser is not aggrieved."

35. Though, the sale is yet to take place, the sale notice has been

published and the bids are in the process of being invited. As the

process is already underway, I am not inclined to interfere with the

same at this stage, as the so-called irregularity in the sale notice is not

of any material significance.

36. For all the aforesaid reasons, the application is dismissed.

VIPIN SANGHI, J MAY 25, 2011 'BSR'/SR