NON-REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.4767          OF 2011   (Arising out of Special Leave Petition No.23849 of 2008)

Shradhha Aromatics Private Limited … Appellant

Versus

O.L. of Global Arya Industries Limited and others … Respondents

J U D G M E N T

G.S. Singhvi, J.

1. Leave granted.

2. The  appellant  is  aggrieved  by  judgment  dated  12.9.2008  of  the  

Division Bench of the Gujarat High Court whereby the appeal preferred by  

respondent No.2 – Bipin B. Lathia against order dated 12.11.2007 passed by  

the learned Company Judge in Company Application No. 504 of 2007 was  

allowed and the Official Liquidator was directed to complete the formalities

for execution of the sale deeds in respect of the property belonging to M/s.  

Global Arya Industries Limited (hereinafter referred to as, “the Company”)  

in his favour.

3. By an order dated 27.4.2006 passed in Company Petition No. 106 of  

2002, the learned Company Judge ordered winding up of the Company and  

appointed the Official Liquidator attached to the High Court as Liquidator of  

the  Company.   The proposal  submitted  by the  Liquidator  in  the  form of  

Report No.162 of 2006 for sale of the assets of the Company including land,  

building,  plant  and machinery,  furniture,  fixtures  and all  other  movables  

(except  records)  at  L.S.  No.202/3P,  SIDC  Main  Road,  village  Veraval,  

District Rajkot was approved by the Company Judge and a committee was  

appointed for conducting the sale.  After due deliberations, the committee  

decided to advertise sale of the assets of the Company. In furtherance of that  

decision, advertisements were issued in vernacular and English newspapers  

showing reserve price of the land etc. as Rs.64 lakhs.  After considering the  

bids and further offers made before the Court, the learned Company Judge  

passed an order dated 30.8.2007 and approved the highest offer of Rs.127  

lakhs  given  by  respondent  No.2.   Soon  thereafter,  the  appellant  filed  

Company Application No. 450 of 2007 for recall of order dated 30.8.2007  

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by stating that it was interested in making an offer of Rs.141 lakhs.  The  

learned  Company  Judge  dismissed  the  application  by  observing  that  the  

revised offer made by the appellant was an afterthought and there was no  

tangible reason to review the earlier order.

4. Undeterred by rejection of one application, the appellant filed another  

application, which came to be registered as Company Application No.504 of  

2007,  for  recall  of  order  dated  30.8.2007.    After  considering  the  rival  

submissions,  learned  Company  Judge  vide  his  order  dated  27.11.2007  

allowed  the  second application.   The  relevant  portions  of  that  order  are  

extracted below:

“13. If the above conduct of the applicant is to be viewed in  light of the latest judgment of the Hon'ble Supreme Court in the  case of Divya Manufacturing Company (P) Limited (Supra),  it  is  clear  that  though  the  sale  was  confirmed  in  favour  of  respondent  No.2,  neither  the  possession  of  the  movable  properties was handed over nor the sale deed was executed in  favour of respondent No.2. Unless and until  these formalities  are over, it cannot be said that the transaction is complete and  before that, if higher offer is made, the Court would certainly  consider and at that point of time, it is to be seen as to whether  the earlier transaction is by virtue of fraud. The real criteria is  that  the property of the Company in liquidation should fetch  maximum price and whether the properties can be adjudged on  the basis of the offers which are received. Here in the present  case, the applicant has offered Rs.1.51 Crores. If that is to be  considered as market value then in that case, certainly the offer  of Rs. 1.27 Crores made by respondent No.2 and accepted by  the Court earlier  cannot be said to be an adequate price and  

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hence, the Court is well within its power to reconsider the case.  The authorities cited by the learned advocate appearing for the  respondent No.2 are confining to the facts of those cases. Even  in the case of Divya Manufacturing Company (P) Limited,  a  distinction was sought to be drawn by submitting that there was  condition laid  down in  the  tender  document empowering the  Court to set aside the sale. Irrespective of the fact whether any  such condition is there or not, the Court is well within its power  to  reconsider  its  decision  especially  when  higher  amount  is  offered and ultimately, it is in the advantage and benefit of the  Secured Creditors and workers.  

14. Even the Division Bench of this Court has taken the view  in O.J. Appeal No. 80 of 2007 decided on 28.06.2007 where the  Learned  Single  Judge  has  rejected  the  application  for  de- confirmation  of  sale  and  while  considering  the  higher  offer  made by that appellant, since the original successful bidder had  increased its offer to match with the offer made by the appellant  in the appeal, the matter was accordingly decided.  

15. Considering the over all view of the matter and looking  to the facts and circumstances of the present case, the Court is  of the view that since the present applicant is offering Rs. 1.51  Crores and it is already deposited with the Official Liquidator,  there is no reason not to accept the said offer. Therefore, the  order dated 30.08.2007 passed by this Court in OLR No. 143 of  2007  is  hereby  recalled  and  the  sale  of  Lot  No.  A  of  the  Company in liquidation confirmed in favour of respondent No.2  is hereby cancelled. The Court hereby confirms the sale of Lot  No. A of the Company in liquidation in favour of the present  applicant  for  Rs.  1.51  Crores.  Since  the  entire  sale  consideration has already been deposited by the applicant with  the  Official  Liquidator,  the  Official  Liquidator  is  hereby  directed to hand over the possession of the movables within one  week from today and the sale deed be executed in favour of the  present applicant within one week from the date of receipt of  the draft of sale deed from the present applicant.  

16. Since the respondent No.2 has already paid an amount of  Rs. 1.27 Crores, now the said amount is required to be refunded  

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to the respondent No.2. The equity, however, demands that the  respondent No. 2 should be adequately compensated by way of  interest on the said amount. The present applicant is, therefore,  directed to pay interest @ 12% p.a. on the actual amount of the  respondent  No.2  lying  with  the  Official  Liquidator.  The  calculation be made accordingly and the applicant shall deposit  the  said  amount  of  interest  with  Official  Liquidator  and  on  deposit  of  the  said  amount  of  interest,  the  possession of  the  property would be handed over as well as the sale deed would  be executed in his favour. The amount of interest so deposited  by  the  applicant  would  be  refunded  to  the  respondent  No.2  along with the amount of Rs. 1.27 Lacs.”

5. Respondent  No.2  challenged  the  aforesaid  order  in  O.J.  Appeal  

No.248 of 2007.  During the pendency of the appeal, the Division Bench of  

the High Court gave opportunity to the parties to give higher offers.  This is  

evident from order sheets dated 28.2.2008, 3.3.2008 and 27.3.2008, which  

read as under:

“DATE: 28.02.2008

It is stated that when the property was auctioned, offer of  Rs. 1.51 crore was given by respondent No.4, and option was  given to the appellant if he is prepared to pay Rs. 1.51 crores.

Counsel  for  the  appellant  prays  for  time  to  seek  instruction from his client, whether appellant is prepared to pay  Rs. 1.51 crores. List on 3.3.2008.

DATE: 03.03.2008

On 28.02.2008, when some other party offered Rs.1.50  Crores,  we  gave  the  option  to  the  appellant  to  offer  similar  

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amount, as the Court felt that preference should be given to the  appellant, if similar amount is offered by the appellant.

Today,  respondent  No.1  Shradhha  Aromatics  Pvt.  Ltd.  offered Rs.1.61 Crores. Counsel for the appellant prays time to  consult his client, whether he can offer the amount similar to  which is offered by the respondent No.1

. List it on 05.03.2008.

DATE: 27.03.2008

On 05.03.2008, respondent no.1 was prepared to deposit  Rs.1.51 crores. The parties were directed to appear in person in  Court and submit their bids. However, today, the appellant has  backed out and submits that he does not want to participate in  the bidding.

Respondent  no.1  Shradhha  Aromatics  Pvt.  Ltd.  has  already  deposited  an  amount  of  Rs.1.51  crores.  Respondent  No.1 is,  therefore, directed to deposit  a demand draft for the  balance  amount  of  Rs.10  lakhs  within  three  weeks  and  thereafter the matter will be taken up for hearing.

However, it is made clear that as the appellant does not  want to pay higher amount as has been offered by respondent  no.1, he will not be permitted to submit any bid by offering a  higher  amount  hereafter.  The  appellant  submits  that  he  shall  only make his submissions on the next date.

List it on 22.04.2008.”

6. After undertaking the aforesaid exercise, the Division Bench of the  

High Court  considered the  question whether  the  learned Company Judge  

was justified in reviewing/recalling order dated 30.8.2007 on the ground that  

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the  appellant  herein  had  offered  better  price  and  answered  the  same  in  

negative.  The Division Bench opined that the confirmed auction sale cannot  

be set aside merely because subsequently a higher price is offered by one of  

the bidders.

7. In the special leave petition filed by the appellant, this Court ordered  

notice  on  24.9.2008.   After  about  two  years,  learned  senior  counsel  

appearing for the appellant gave out that his client is ready to deposit an  

additional amount of Rs.39 lakhs and that will make its bid as Rs.2 crores.  

After taking note of his statement, the Court passed order dated 4.10.2010  

and gave an opportunity to the contesting parties to give fresh bids in sealed  

envelopes.  On the next date of hearing i.e. 10.12.2010, learned counsel for  

the parties produced sealed envelopes containing the revised bids of their  

respective clients.  The sealed envelopes were opened in the Court and the  

offers  made  by  the  parties  were  perused.   At  that  stage,  Shri  Pallav  

Shishodia,  learned  senior  counsel  appearing  for  the  intervenor-cum-

promoter – M/s. Chiripal Textile Mills Private Limited submitted that his  

client is willing to give a better offer.  Thereupon, the case was adjourned to  

15.12.2010, on which date the following order was passed:

“At  the  commencement  of  hearing,  Shri  Pallav  Shishodia,  learned  senior  counsel  appearing  for  the  promoter  produced  

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before the Court an envelope containing the offer of his client.  The envelope was opened in the Court. We have perused the  contents thereof. The two envelopes produced by the learned  senior  counsel  appearing  for  the  petitioner  and  respondent  No.2,  which  were  sealed  on  the  last  date  of  hearing  were  opened in the Court.

After perusing the offers, we are prima facie of the view that  the  property  should  be  put  to  re-auction.  However,  before  recording any conclusion on the issue,  we deem it  proper to  give an opportunity  to  the  learned counsel  for  the  parties  to  make their submissions.

As requested and agreed by all the learned counsel, the case is  adjourned to January 5, 2011.  

The Court Masters shall reseal all the envelopes and keep the  same in safe custody.”

On 5.1.2011, the case was adjourned because learned counsel for the  

parties  made a  request  that  their  clients  may be given an opportunity  to  

submit fresh revised offers.  While adjourning the case, the intervenor-cum-

promoter was directed to deposit a Demand Draft of Rs.2 crores with the  

Registrar  (Judicial).   On 25.1.2011,  learned counsel  for  respondent  No.2  

made a statement that his client is not willing to give a bid higher than what  

was offered before the Division Bench of the High Court.  Thereafter, the  

appellant  and  the  intervenor-cum-promoter  gave  their  respective  bids.  

However,  the  matter  could  not  be  finalised  because  counsel  for  the  

intervenor-cum-promoter  sought time for two days to give a bid higher than  

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the  bid  of  Rs.7.5  crores  given  by  the  appellant.   On  10.2.2011,  learned  

counsel for the intervenor-cum-promoter submitted a note suggesting that  

his client is willing to offer Rs.7.55 crores.  After considering the same, the  

Court indicated the parties that an order may be passed for public auction of  

the  property.   On  11.2.2011,  learned  counsel  for  the  appellant  and  

intervenor-cum-promoter stated that if the property is to be auctioned afresh,  

then their  clients  are not  willing to  deposit  the amount in terms of  their  

revised offer.   

8. On 18.2.2011, the Court, after hearing learned counsel for the parties,  

intervenor-cum-promoter  and  Gujarat  State  Industrial  Investment  

Corporation (GSIIC), passed the following order:

“At  the  commencement  of  further  hearing,  Shri  S.  Ganesh,  learned  senior  counsel  appearing  for  Gujarat  Industrial  Investment  Corporation,  submitted  that  as  on  date  a  sum of  about Rs.12 crores are due to his client being a secured creditor  and it will be in public interest if the Court, instead of remitted  the matter to the High Court, may accept the offer made by the  intervenor on behalf of M/s. Chiripal Textile Mills Pvt. Ltd. in  case it agrees to pay Rs.7.58 crores.

Shri Pallav Shisodia, learned senior counsel appearing for the  intervenor-cum-promoter, submitted that his client is prepared  to offer Rs.7.58 crores but would require three months' time for  making payment.

In  our  view,  it  is  not  possible  to  give  a  long  rope  to  the  intervenor-cum-promoter  for  producing  evidence  of  its  

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willingness to pay Rs.7.58 crores. Therefore, we deem it proper  to grant four weeks' time for the purpose.  

List  the  case  on  1.4.2011  after  the  category  “Adjourned  Matters”.

On the next  date  of  hearing,  the  Court  will  decide the  issue  relating to compensation, if any, which may be awarded to the  petitioner,  who had  deposited  Rs.1.61  crores  and respondent  no.1, who had deposited Rs.1.27 crores.

The Registry is directed to keep the amount deposited on behalf  of intervenor in a short term fixed deposit  of six weeks in a  nationalized Bank.”

On  9.5.2011,  the  Court  noted  that  counsel  appearing  for  the  

intervenor-cum-promoter has produced two bank drafts for a sum of Rs.5.58  

crores and Rs.2 lakhs respectively.  The same were ordered to be deposited  

with the Registrar (Judicial).   

9. Shri Amar Dave, learned counsel for the appellant submitted that if  

the Court is inclined to accept the offer made by intervenor-cum-promoter,  

then the Official Liquidator may be directed to return the amount deposited  

by  his  client  with  interest.   Shri  Dhruv  Mehta,  learned  senior  counsel  

appearing for respondent No.2 also made a similar submission and relied  

upon the judgments of this Court in Punjab Wirelsess Systems Employees’  

Union v. Winsome Yarns Ltd. and others (2006) 7 SCC 233 and  FCS  

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Software  Solutions  Ltd.  v.  La  Medical  Devices  Limited  and  others  

(2008) 10 SCC 440.  Shri S. Ganesh, learned senior counsel appearing for  

GSIIC submitted that  the Court  may accept  the  offer  made on behalf  of  

intervenor-cum-promoter  but  may  not  award  interest  on  the  amount  

deposited by the appellant and respondent No.2 because both the parties had  

given higher offers after receipt of the initial bids and so far as the appellant  

is concerned, it had offered to pay higher amount only after finalisation of  

the bid of respondent No.2.  He submitted that GSIIC has first charge on the  

assets of the Company and there is no reason why it should be deprived of  

its legitimate dues by directing payment of interest on the amount deposited  

by the bidders.  Learned senior counsel emphasized that the offer given in  

the  first  instance  was extremely low and,  therefore,  the  offer  of  Rs.7.60  

crores made by the intervenor-cum-promoter should be accepted.

10. 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  

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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 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  27.11.2007.   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  

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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.

11. In the result, the appeal is disposed of in the following terms:

(i) The impugned order is set aside.   

(ii) The offer of Rs.7.60 crores including additional amount of Rs.2 lakhs  

made  by  the  intervenor-cum-promoter-M/s.  Chiripal  Textile  Mills  

Private Limited is accepted.   

(iii) The Registry is directed to encash the fixed deposits of Rs.7.60 crores  

and get  prepared a demand draft  of the  total  amount including the  

interest in the name of the Official Liquidator attached to the Gujarat  

High Court.  The latter shall depute an authorised officer to collect the  

demand draft from the Registry of this Court.

(iv) Within four weeks from today, the intervenor-cum-promoter shall pay  

Rs.6 lakhs to the appellant and Rs.5 lakhs to respondent No.2 by way  

of compensation because on account of pending litigation, they were  

prevented  from  utilising  the  amount  deposited  with  the  Official  

Liquidator.

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(v) Within four weeks from the date of receipt of demand draft by the  

Official Liquidator attached to the Gujarat High Court and production  

of  receipt  showing  payment  of  money  by  the  intervenor-cum-

promoter  to  the  appellant  and  respondent  No.2  in  terms  of  sub-

paragraph (iv) above, GSIIC shall execute sale deed(s) in favour of  

the  nominee  of  the intervenor-cum-promoter,  namely,  M/s  Chiripal  

Energy Ltd. and handover possession of the land etc. to the purchaser.

(vi) The  tax  etc.,  if  any,  payable  to  the  State  Government  and/or  

agencies/instrumentalities of the State in respect of the assets of the  

Company shall be paid by the purchaser.

The Registry is directed to send by fax a copy of this judgment to the  

Official Liquidator attached to the Gujarat High Court, Ahmedabad.  

….………………….…J. [G.S. Singhvi]

…..…..………………..J. [Asok Kumar Ganguly]

New Delhi May 24, 2011.

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