NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 20902 OF 2017

LMJ INTERNATIONAL LTD. .....APPELLANT(S)

VERSUS

DANKUNI STEELS LIMITED & ORS. .....RESPONDENT(S)

J U D G M E N T

A.K. SIKRI, J.

There  is  some  litigation  pending  between  the  appellant

herein and respondent Nos. 1 to 4.  Though, it is not necessary to

state in detail the nature of dispute between them, some aspects

thereof which are relevant for this case shall be taken note of at

the appropriate stage.  At this juncture, it is pertinent to note that

the  Division  Bench  of  the  High  Court  in  those  proceedings

between the appellant and respondent Nos. 1 to 4 had passed

direction for sale of 10000 Metric Tons (MT) of Metallurgical Coke

(Met Coke) by public auction.  The Special Officer was appointed

for  this  purpose  who  conducted  the  sale.   Four  bids  were

received.  Bid of respondent No. 5 was the highest as it offered

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the price of Rs.14000/- per MT.  By the impugned order dated

May 15, 2017, the High Court has accepted the said offer after

rejecting the objections of  the appellant.   The appellant  herein

feels aggrieved by the acceptance of that offer by the High Court.

2) The  relevant  facts  which  need to  be  noticed  for  resolving  the

controversy are stated below:

Respondent No. 2 herein is  Handling-cum-Clearing Agent

for and on behalf of respondent No. 1 and respondent No.4.  On

the intimation given by respondent No. 4 that some consignment

of Met Coke was arriving at Vishakapatnam Port, respondent No.

2 was given instructions to clear the consignment on his behalf.

The appellant herein, which is an export house, claimed that it

had a title over 10000 MT of the aforesaid consignment of Met

Coke  out  of  the  entire  consignment.   Goods  were  cleared  by

respondent No. 2 and the cargo was stored at the custom bonded

warehouse.  However, respondent No. 2 turned down the request

of the appellant to keep separate stock of 10000 MT of Coke over

which it was making his claim.  This led to filing of application by

respondent  No.  2  under  Section  9  of  the  Arbitration  and

Conciliation  Act,  1996  in  which  certain  orders  were  passed.

Respondent No. 1 also filed Civil  Suit  No. 17 of  2013 seeking

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decree for  delivery of  entire consignment.   These proceedings

travelled upto the High Court wherein order dated July 29, 2015

was passed giving directions to sell 10000 MT of Met Coke out of

the aforesaid stock.  The High Court in that order noted that the

issue as to whether the appellant had justified claim over 10000

MT of Met Coke or not is to be decided by the Court after trial.

Since no definite conclusion could be arrived at this stage on the

basis of affidavits alone, the High Court deemed it proper that the

said  quantity,  namely,  10000  MT  of  Coke  be  sold  and  the

proceedings thereof be kept apart so that this money is ultimately

handed over to the parties succeeding in the suit.  The relevant

portion of  the directions contained in  the order  dated July  29,

2015 is as under:

“We are also of the view that in view of the vagaries of the  market  and the  likelihood of  price  of  coke going down  and  to  avoid  further  escalation  demurrage charges it would be prudent to sale 10000 MTs of coke out of the remainder stock to secure the claim of R-2 (LMJ).   Appellant  and/or  R-4  (Concast)  shall  be  at liberty to take delivery of remainder of the goods after clearing of the customs duty and port charges thereon in accordance with law.

In this backdrop, we are of the opinion that a Special Officer be appointed to inspect the aforesaid godowns and make an inventory of the goods lying therein and thereafter to take steps for sale of 10000 MTs of coke out of the stock lying at R-5 and Ripley godown.  The sale price of the aforesaid consignment after clearance of  customs  duty  and  port  charges  thereon  shall  be deposited  by  the  special  officer  with  the  Registrar, Original  Side, who shall  keep the same in an interest

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bearing  fixed  deposit  account  in  a  nationalized  bank subject to the result of the suit.  The appellant and/or R- 4  (Concast)  shall  be  at  liberty  to  take  delivery  of remainder  of  the  stock  lying  in  the  godowns  after clearing the customs duty and port charges thereon, if any,  in  accordance  with  law.   This  order  shall  not preclude R-1 (Sarat) from taking steps for recovery of its handling and other service charges in accordance with law, if so advised.”

3) Pursuant thereto, the Special Officer got public notice published

in the daily newspapers ‘The Hindu’ and ‘Andhra Jyoti’ for sale of

10000 MT of coke fixing reserved/base price of Rs.13000 per MT.

Four offers were received along with 10% of earnest money.  All

these four  bids were submitted by the Special  Officer  with his

report to the High Court on April 3, 2017.  Offer of respondent

No.5 herein at Rs.14000 per MT was the highest.   

4) Before  the  High  Court  could  consider  these  offers,  one  M/s.

Suyati Impex Pvt. Ltd. intervened and requested the High Court

that it  should be permitted to bid.  The Court vide order dated

April  24,  2017  permitted  him  to  participate  and  deposit  the

earnest  money  by  April  28,  2017  by  extending  the  time  of

submission of  bids upto April  30,  2017.  However,  said Suyati

Impex  Pvt.  Ltd.  failed  to  give  earnest  money.   In  these

circumstances, report was given by the Special Officer that M/s.

Suyati Impex Pvt. Ltd. did not participate in the bidding process.

Civil Appeal No. 20902 OF 2017 Page 4 of 15

In the aforesaid backdrop, bid of respondent No. 5 remained the

highest bid.  However, the appellant opposed the acceptance of

the said bid with the contention that one Siona Enterprise had

appeared before the Court in the meantime and offered price of

Rs.14500 per MT inclusive of taxes, custom duty, Value Added

Tax, port charges etc.  Objection to the bid made by respondent

No.  5 was also raised on the ground that  the paid amount  of

Rs.14000  per  MT  was,  in  fact,  less  than  the  reserve  price

inasmuch as the aforesaid amount offered by respondent No. 5

was inclusive of all taxes etc. and once those taxes are reduced

from the said amount, it was much less than Rs.13000 per MT

which was the reserved price.

5) The High Court refused to consider the bid of Siona Enterprise on

the ground that it was made after a lapse of 20 days from the last

date of submitting the bids thereby seeking to reopen the entire

process, which was not permissible.  Insofar as objection of the

appellant in respect of bid of respondent No. 5 is concerned, as

per the High Court, it is the Special Officer who was to pay the

statutory  duties  and  taxes  etc.   On  this  ground  rejecting  this

objection of the appellant as well, the High Court has given its

imprimatur to the bid of respondent No. 5.

Civil Appeal No. 20902 OF 2017 Page 5 of 15

6) Mr. Ajit  Kumar Sinha, learned senior counsel appearing for the

appellant, at the outset, submitted that when the instant matter

was taken up by the Court  during vacation on May 29,  2017,

learned counsel for Respondent No. 5 had made a categorical

statement that  Respondent no.  5 wanted to withdraw from the

auction with liberty to approach Special Officer appointed by the

Calcutta High Court.  Having withdrawn this offer, Respondent no.

5  had  no  right  to  now contend  that  he  was  still  interested  in

accepting auctioned material.  He further pointed out on the same

day, the learned counsel of Respondent No. 5 appeared later and

made a statement that his first statement was that he should be

permitted to withdraw the amount deposited by Respondent no.5.

However,  this  was  done  in  the  absence  of  counsel  for  the

appellant though his appearance was recorded wrongly.  In these

circumstances, matter was mentioned again on June 06, 2017 by

Mr. Sinha and the Court clarified that Respondent No. 5 had not

only sought permission to withdraw from the auction but also to

withdraw the amount which he had initially deposited with his bid.

He, thus,  submitted that  in view of  the aforesaid statement on

behalf of respondent No.5 itself, his offer needs to be rejected.

Civil Appeal No. 20902 OF 2017 Page 6 of 15

7) On merits, Mr. Ajit Kumar Sinha, argued that the impugned order

of the High Court was flawed for two reasons, viz.:

(i) The High Court committed an error in observing that the bid

amount offered by Respondent no. 5, i.e., 14000/- per MT

was more than the reserve price fixed.  He submitted that

no doubt the reserve price was 13000/- per MT but it was

exclusive of all  taxes and port charges etc.  He drew our

attention to the valuation report dated September 21, 2016

which was prepared by the Surveyors and Assessors fixing

the reserved price at Rs. 13000/- per MT and submitted that

this  was  based  on  the  cost  of  Russian  Origin  Imported

Coke.  He pointed out that various charges and taxes were

in the neighboured of Rs. 5100/-and if  they are deducted

from the price offered by respondent no. 5, it stood reduced

to  Rs.  8900  approx.  The  appellant  has  given  the

calculations of these taxes which are filed along with the

special leave petition paper book as Annexure P-12.  On

that  basis,  it  was  argued  that  the  net  price  offered  by

Respondent no. 5, excluding charges and taxes, comes to

much less than Rs. 13000/- MT.  

Civil Appeal No. 20902 OF 2017 Page 7 of 15

(ii) His second submission was that  in  the matter  of  auction

through court, basic principle which is to be kept in mind is

that the property to be auctioned fetches maximum price.

According to him, the High Court ignored this principle by

discarding the offer made by Siona Enterprise which had

offered the price of Rs. 14,500/- per MT exclusive of other

charges and taxes.

8) Mr. Shyam Diwan, senior counsel appearing for respondent no. 5

argued, per contra, that both the submissions were untenable.  As

per him, in the order dated July 29,  2015 passed by the High

Court charges and taxes were to be borne by the Special Officer

and  not  the  bidder.   This  fact  was  duly  taken  note  of  in  the

impugned order while rejecting the submission of the appellant to

this  effect.  Insofar  as  bid  of  Siona  Enterprise  is  concerned,

argument of Mr. Diwan was that that was made in the court by the

said party which was much after the last date of submission of

bids.  Moreover, there was no seriousness shown in making that

offer  as  application  was  filed  through  an  advocate  which

contained  that  offer  wherein  it  was  only  stated  that  if  an

opportunity is given to Siona Enterprise it would be in a position

to offer Rs. 14500/- per MT.  Again without depositing 10% of the

Civil Appeal No. 20902 OF 2017 Page 8 of 15

offer value, only a statement was made that the intending bidder

was  willing  to  deposit  that  amount  immediately  with  Special

Officer.  It was contended that such an offer was no offer in the

eyes of law.  

9) Insofar as dispute about the withdrawal of bid by Respondent no.

5 in the form of statement given by its counsel in the Court on

May 29, 2017 is concerned, Mr. Shyam Diwan argued that the

statement  by  the  counsel  for  Respondent  no.  5  was made in

mistaken belief as the respondent no. 5 only wanted to withdraw

the amount.  He submitted that since the bid of Respondent no. 5

was for a total sum of Rs. 14,00,00,000/- (Rs. 14 crores only) and

1,40,00,000/- (one crore forty lakhs only) thereof was deposited

as EMD (10% of the bid amount) after the acceptance of a bid by

the  High  Court.   Respondent  no.  5  had  also  deposited  the

balance amount of  Rs.  12,60,00,000/-  (twelve crores and sixty

lakhs only).  Intention was to withdraw said amount of Rs. 12.60

crores only since this Court had granted stay of the order of the

High  Court  on  May  25,  2017.   In  fact,  only  this  amount  was

withdrawn thereafter  leaving Rs.  1,40,00,000/-  (one crore  forty

lakhs only) still in deposit as  EMD amount.  This was a bona fide

statement made to withdraw the said amount as Respondent no.

Civil Appeal No. 20902 OF 2017 Page 9 of 15

5  did  not  want  to  block  the  said  money  till  the  settlement  of

dispute and he had all intention to give back the said money in

case order of the High Court is sustained.  Therefore, there was

no intention to withdraw from the bid itself.

10) Prima facie,  we find that the submission of Mr. Sinha is correct.

On May 29, 2017, when the matter was taken up for arguments

on application filed by Respondent no. 5 for vacation of the stay,

order  was  passed  on  May  25,  2017  and  this  Court  was  not

inclined to vacate the stay,  counsel  for  Respondent  no.  5 had

stated that he wanted to withdraw from the auction and this was

recorded  in  the  order.   Thereafter,  the  learned  counsel  for

Respondent no. 5 mentioned the matter at the end of the list but

at that time Mr. Sinha, learned senior counsel for the appellant

was not present.  It is for this reason, he mentioned the matter on

June 06, 2017 and on that day following order was passed:

 “Shri  Ajit  Kumar  Sinha,  learned  senior  counsel has  produced  two  orders  dated  29th May,  2017  and stated  that  the  second  order  was  passed  in  his absence.

 There  seems  to  be  some  error  in  the  second order passed on 29th May, 2017.  When the first order was  passed  learned  counsel  stated  on  instructions received from the applicant that he will  withdraw from the auction.  At that time, Mr. Ajit Kumar Sinha, learned senior  counsel  was  present  and  did  not  raise  any objection.

Civil Appeal No. 20902 OF 2017 Page 10 of 15

 On  the  same  date,  the  matter  was  again mentioned by the learned counsel or the applicant and he  had  submitted  that  the  applicant  may  also  be permitted  to  withdraw  the  amount  deposited  by  the applicant when he had submitted that bid.

When  the  second  order  was  passed  Mr.  Ajit Kumar  Sinha  was  not  present  and  his  presence was wrongly  marked.  However,  no  request  was  made  on behalf of the applicant that he may be permitted to take part  in  the  auction.   We  therefore,  clarify  that  the applicant  has  been  permitted  to  withdraw  from  the auction and also to withdraw the amount which he had initially deposited with his bid, but was not permitted to take in the auction.”  

11) In this order which was passed in the presence of counsel for

Respondent no. 5, it is specifically clarified that the Respondent

no. 5 had been permitted to withdraw from the auction and also to

withdraw the amount which he had initially deposited with his bid.

Generally, one has to go by the record and as per the order sheet

reproduced above it  is  noted that  Respondent no.  5 had been

permitted to withdraw from the auction as well.  

12) Notwithstanding  the  above,  we  have  examined  the  matter  on

merits as well and are of the opinion that the order of the High

Court warrants to be interdicted.  The valuation report has fixed

the value at Rs. 13000 per MT as the price of the Met Coke which

is exclusive of other charges and taxes etc.  Therefore, the High

Court  is  not  correct  in  its  observations  that  the  amount  was

inclusive of other charges and taxes.  May be some confusion is

Civil Appeal No. 20902 OF 2017 Page 11 of 15

created by the public notice that was published for inviting bids as

it does not categorically state as to whether the reserve price of

Rs. 13000/- per MT was exclusive of or inclusive of the taxes.

Fact remains that when as per the valuation report, the reserve

price is fixed at Rs. 13000/- per MT without taxes etc., the offer of

Rs. 14000/- per MT, after excluding the taxes would be well below

Rs.  13000/-  per  MT.   Calculations  which  are  given  by  the

appellant of charges and taxes payable, which is not refuted by

Respondent no. 5, are as under:

“CALCULATION  (APPROX)  BASIS  RS.  14000  PER  MT INCLUDING OTHER CHARGES

Duty Calculation met Coke PMT in INR Value  in INR

A RATE GIVEN BY MS TYCOON  QTY IN METRIC TON

14,000.00          1.00

PER MTS INR 14,000.00 14,000.00

B LANDING  CHARGES  1%  ON IMPORTED PRICE

    189.00

BCD 5% ON IMPORTED PRICE      945.00 CVD  DUTY  6%  ON  IMPORTED PRICE

  1,134.00

CUSTOMS EDUCATIONAL CESS 2%

      41.58

CUS.  SEC.  &  HIGHER  EDU. CESS 1%

      20.79

Energy Cess Rs. 400 / mt      400.00    2730.37 2730.37

C A-B  (ACTRUAL  PRICE  AFTER DEDUCTING THE DUTY)

11,269.63

VAT 5% ON BASIC VALUE     563.48 563.48 PORT CHARGES (APPROX)   2000,00 TOTAL  EXPENSES  INCLUDING DUTY AND VAT  

5,104.85

5,104.85 NET REALISABLE VALUE AFTER DEDUCTING THESE EXPENSES

8,895.15

Civil Appeal No. 20902 OF 2017 Page 12 of 15

          13) Therefore,  it  would  be  impermissible  to  accept  the  offer  of

Respondent  no.  5  which  turned  out  to  be  in  the  sum  of

Rs. 8895.15 paisa per MT.

14) It  is  clear  that  value of  Met  Coke is  much higher  (which gets

substantiated by the valuation report as well) and may be for this

reason Siona Enterprises came forward with much higher offer,

i.e., Rs. 14,500/- per MT exclusive of taxes.  Though, High Court

was right in rejecting that offer on technical grounds, this fact is

emphasised to point out that the goods in question are capable of

receiving much higher price.  It would, therefore, be in the overall

interest of the parties to have fresh auction.   

15) We, therefore, allow this appeal and set aside the order of the

High Court. Special Officer is directed to get the valuation done

again so that present day valuation of the goods is ascertained

and on that basis fresh public notice for inviting the bids for the

goods  in  question  be  issued  with  clear  stipulation  that  the

reserved price is exclusive of taxes.  If it is possible to ascertain

the  exact  amount  of  charges  and  taxes  those  may  also  be

indicated in the public notice so that the intending bidders have

Civil Appeal No. 20902 OF 2017 Page 13 of 15

clear picture while making their bids.  In view of the fact that fresh

auction  is  ordered,  the  amount  which  was  deposited  by  the

auction purchaser shall be refunded.   

There shall, however, be no order as to costs.    

.............................................J. (A.K. SIKRI)

.............................................J. (ASHOK BHUSHAN)

NEW DELHI; DECEMBER 14, 2017.

Civil Appeal No. 20902 OF 2017 Page 14 of 15

ITEM NO.1501               COURT NO.6            SECTION XVI

              S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS

Civil Appeal No. 20902/2017

LMJ INTERNATIONAL LTD.                         Appellant(s)

VERSUS

DANKUNI STEELS LIMITED                         Respondent(s)

Date : 14-12-2017  This appeal was called on for pronouncement of judgment

today.

For Appellant(s) Mr. Deepak Goel, AOR

                   For Respondent(s)

M/S.  Legal Options, AOR

Mr. Parijat Sinha, AOR Ms. Reshmi Rea Sinha, Adv. Mr. Rudra Dutta, Adv.

Mr. Ankur S. Kulkarni, AOR

Mrs. Pragya Baghel, AOR                      

Hon'ble Mr. Justice A. K. Sikri pronounced the

judgment  of  the  Bench  comprising  His  Lordship  and

Hon'ble Mr. Justice Ashok Bhushan.

The appeal is allowed in terms of the signed non-

reportable judgment.

(NIDHI AHUJA)                (MALA KUMARI SHARMA) COURT MASTER    COURT MASTER

(Signed Non-reportable judgment is placed on the file.]

Civil Appeal No. 20902 OF 2017 Page 15 of 15