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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION NOS. 34782-34783 OF 2012

MANOJ I NAIK & ASSOCIATES            Petitioner(s)

                       VERSUS

OFFICIAL LIQUIDATOR                     Respondent(s)

J  U  D  G  M  E  N  T

DIPAK MISRA, J.  

The  factual  exposition  that  is  capable  of  being  

encapsulated  in  a  real  small  compass,  has,  with  some  

passage of time and turn of events, grown into a colossal  

structure  having  the  effect  potentiality  to  amaze  and  

perplex  any  prudent  man.   The  chronology  of  events  

pyramids a gradual financial structure, making it limpid  

how on certain occasions properties are sold for a song in  

so  called  sales  made  in  the  proceedings  under  the  

provisions  of  the  Companies  Act,  1956  (for  brevity  ‘the

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Act’) and how with some intervention the said competitors  

metamorphose themselves into different incarnations, and  

the roses on the table turn into pearls and diamonds in  

the private closets.  To put it succinctly, the price fixed at  

Rs.6.25  crores  for  291  plots  has  fetched,  by  the  

intervention of this Court, Rs.70 crores for 113 plots.  It is  

not  change  of  heart,  but  the  price  reality  that  gets  

manifest.  Not for nothing it has been said, “money can  

solve  the  problems  concerned  with  money”.   The  large  

amount of money, we are inclined to think, would solve  

the problems of the company in question.  

2. The short narration.  A  company,  namely,  M/s  

Vitta Mazda Ltd. went into liquidation and on 21.02.2002,  

the High Court of Gujarat directed the Official Liquidator  

to  put  up  the  properties  of  the  company in  liquidation  

(except  those  for  which  applications  are  pending  before  

the  said  Court  for  regularisation  of  transactions)  to  

auction for sale.  Thereafter many an order was passed.  

On 18.12.2004,  the  learned Company Judge,  by  taking  

into consideration many aspects,  declined to accept the  

report of the Official Liquidator for acceptance of the offer

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made before the sale Committee.  An appeal was preferred  

being O.J.  Appeal No. 81 of 2004, wherein the Division  

Bench  of  the  High  Court  on  30.08.2011  passed  the  

following order:

“1.  The present  appeal  arises against  the  order  dated 18.12.2004 passed by the learned Company  Judge  in  OLR  No.  100  of  2003,  whereby  the  learned  Company  Judge  has  not  accepted  the  report of the OL for acceptance of the offer made  before the Sale Committee.

3. It is an admitted position that the appellant  was  one  of  the  offerers,  who  submitted  the  highest offer before the Sale Committee and when  the report was made by the OL for approving the  offer accepted by the Sale Committee subject to  approval  of  the  company  Court,  the  learned  Company Judge found that it would not be a case  for acceptance of the offer and, therefore, rejected  the report submitted by the OL.

5.  Apart from the above, even if the matter is to  be  considered  for  the  test  of  exercise  of  the  judicial  discretion  exercised  by  the  learned  Company  Judge,  it  appears  that  the  learned  Company Judge,  at  paragraph 5,  recorded  that  the valuation made by the Bank of Baroda of the  property is much more than the offer submitted  by  the  appellant.  If  the  said  aspect  is  further  considered,  it  appears  that  the  offer  of  the  appellant was Rs. 1.03 crore, whereas it is a part  of the record of the Sale Committee's proceedings  that as per Bank of Baroda, the valuation of the  property was Rs. 6.25 crore.  It  has been stated  that  there  was  also  another  report,  which  was  shown to the Court.

6. Be that as it may, even if it is considered that

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the offer of the bank of Baroda was of Rs. 6.25  crore as per the valuation report available and the  highest  offer  was  of  Rs.  1.03  crore  coming  on  record  and  under  these  circumstances,  if  the  learned  Company Judge  found it  proper  not  to  accept the offer by confirming the sale, such an  exercise cannot be said to be erroneous.  On the  contrary,  the  exercise  would  be  in  the  larger  interest of the corpus of the company.

7. Additionally the learned Company Judge, in  the impugned order,  has also  recorded the fact  that  the  total  chunk  of  property  comprises  of  various plots of different characteristics namely;  that on some plots, there were encroachments, for  some plots, there were litigations and some plots  were  clear.   Therefore,  the  learned  Company  Judge found that if the properties are sold as it is,  comprising of all the plots simultaneously, it may  create  complications and,  therefore,  the learned  Company Judge directed the OL to prepare a list  of the plots, which were not occupied by anyone  and in respect of which, there was no dispute or  litigation and thereafter to undertake the process  to sell and dispose of the plots at a later stage.  In  view of  the  above,  if  the  property  is  segregated  into  various  compartments  of  clear  property,  property  with  clog  and/or  property  with  encroachment, while disposing of the immovable  properties, it would be rather in the interest of the  company,  since  the  clear  property  is  bound  to  fetch higher price in comparison to the other two  properties  namely;  with clog  in the title  and/or  with encroachment or otherwise.”

3. When the matter was listed on various dates, it  

was thought it appropriate that there should be a proper  

auction and, accordingly, the following order came to be

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passed on 02.07.2014:-

“This Court, while issuing notice on 02.11.2012  had passed the following order:

    "Learned   senior   counsel appearing for  the petitioner submits   that the   petitioner  is  willing  to  match  the  offer  of  Rs.6.25  crores  made  by  the  Bank  of  Baroda.  Submission recorded."

   Thereafter,  the  matter  has  been adjourned  and  certain  applications  have  been  filed  for  impleadment, which are allowed.

 Mr.  Ahmadi,  learned  senior  counsel  appearing for  the applicant      M/s.     SNDT  Enterprises    in     IA     6-7/2013     has  submitted that the applicant therein is prepared  to pay Rs.25   crores      for   the property   that  was    sought   to    be auctioned.  

    Not intending to lag behind, Mrs. Meenakshi  Arora,  learned  senior  counsel  appearing   for  M/s.  Star  and  Associates      in  IA  No.  10- 11/2013 submitted that the applicant herein is  prepared to pay Rs.30 crores.  

     Mr.  Pradhuman  Gohil,  learned  counsel  appearing for Mr. Ranjitsinhji N. Parmar in IA 8- 9/2013 equalises the offer given by Mr. Ahmadi,  i.e. Rs. 25 crores.  

    Mr. Sharan, learned senior counsel appearing  for the petitioner has expressed the skepticism to  the  offers  made  by  the  applicants.  It  is  his  submission that if they intend to show their bona  fides, they should deposit at least Rs.10 crores  before this Court as the petitioner is also inclined  to deposit Rs.10 crores.  

     In view of the aforesaid submission, we direct  that  the  applicants,  whose  names   have  been

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mentioned hereinabove as well as the petitioner  shall deposit a sum of Rs. 10 crores each by way  of  bank draft  drawn in favour of  the Secretary  General  of  this  Court  within  three  weeks  from  today.   Needless to say that this amount may be  treated as off-set price and thereafter this Court  may think of going through the bidding process,  if  required.  Let  it  be  stated  the  offer  is  made  keeping in view the auction notice. Nothing more,  nothing less. After the deposit  of  the amount,  the   same shall    be   kept   in   a nationalised  bank  in   a  short-term     interest   bearing  account.

        List on 11.08.2014.”

4. After the said order was passed, certain deposits  

were made by 3 firms/companies. Regard  being had to  

the said situation,  on 19.08.2014,  after  referring to  the  

earlier orders, the following order came to be passed :-

“We  have  been  apprised  by  the  Registry  that  deposits which were directed by this Court have  already been made and, therefore, all the parties  have  complied  with  the  order.    In  view  of  the  aforesaid position, we direct the Official Liquidator  to proceed with the fresh auction. The factum of  auction  shall  be  advertised  in  local  Newspapers  one   in English and    another    in     vernacular  language.  That  apart  there  should  be  an  advertisement  in  any  daily  National  Newspaper  having   adequate  circulation  in  the  country,  regard being had to the issue involved in such a  matter. The upset price shall be fixed at  Rs. 10  crores. The advertisement shall  be issued within  a  period  of  two  weeks  from today.  The  bidding  process  shall  be  completed  within  four  weeks  therefrom. As far as M/s Star and Associates is  concerned, if they offer a bid less than Rs.30 cores

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that bid shall not be accepted but their claim of  amount  shall  be  considered  subject  to  further  orders  of  this  Court.   Similarly,  as  far  as  Mr.  Ranjitsinh Parmar is  concerned, his bid for less  than Rs.25 crores shall not be considered but he  would be entitled to claim refund of the amount  subject to further orders of cost.

The  Managing  Director  of  M/s.  SNDT  Enterprises on  whom cost of Rs.5 lakhs       was  imposed  shall  remain  personally  present  on the  next date of hearing if the cost, as directed, is not  deposited before the Registry of this Court. In case  the deposit is made, an affidavit shall be  filed and  he  need   not   appear  in  person.  Needless  to  emphasise  that in the event of non-deposition, he  shall  personally  appear  and  this  Court  may  consider  passing  appropriate  orders  in  that  regard.

   We may add that anyone who intends to bid, he  has to deposit a sum of Rs.10 crores as earnest  money so that he can claim parity with the three  contenders  who  are  before  this  Court.  Barring  what we have stated, the other conditions in the  initial notice for auction shall remain the same. As  the  three  bidders  have  deposited  Rs.10  crores,  they need  not  to  deposit  earnest  money,  as  the  deposition of that       amount    before     this  Court  tantamounts  to  deposition  of  earnest  money.

   The place of  auction will  be at  Ahmedabad.  There  will  be  stay  of  further  proceedings  before any Court relating to the property involved  in this case.

    The Registry shall keep the deposited amount  in F.D.Rs. in a nationalised bank in a short-term  interest bearing account.”

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5. In the meantime, certain unwarranted, unhappy  

and  uncalled  for  situation  took  place.  The  Official  

Liquidator  filed  a  report  before  the  learned  Company  

Judge  seeking  permission to  exclude  certain  plots  from  

the  original  list  and,  accordingly,  the  learned  Company  

Judge granted  the extension of  time.  In our considered  

opinion, when the mater was subjudice before this Court,  

the learned Company Judge should not have dealt  with  

the same regard being had to the fundamental concept of  

judicial  discipline.   Be  that  as  it  may,  the  Official  

Liquidator issued an advertisement in respect of 291 plots  

wherein it was clearly mentioned that the sale had been  

confirmed by the learned Company Judge in respect of 87  

plots and the said confirmations were the subject matter  

of  appeals  before  the  Division  Bench  which  were  

subjudice. Similarly, it was also mentioned that the order  

of  status quo was operational in respect of 10 plots and  

the  said  order  of  status  quo had  been  passed  by  a  

coordinate  Bench  of  this  Court.  It  was  also  postulated  

therein that certain plots had been encroached upon and  

certain plots were subject matter of registered sale deeds,

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though no application had been filed before the Court for  

validation. In course of hearing of these petitions, we have  

been apprised that applications for validation are pending  

before the learned Company Judge.

6. On a perusal of the advertisement, it is clear as  

crystal  that 113 plots admeasuring 91,960.70 sq.  mtrs.  

forming a part of Annexure- A/I of the Corrigendum was  

absolutely free and available for auction.

7. At this juncture, it  is pertinent to mention that  

the bids which were offered in respect  of  the plots that  

were put to auction were opened before us.  M/s Manoj I  

Naik  &  Associates,  the  appellant  herein,  has  offered  

Rs. ten crores eleven thousand; Mr. Laxmi Narayan Garg  

has made an offer of Rs. 10 crores; M/s Star & Associates  

has offered Rs. 31 crores.  It is submitted by Mr. A. Saran,  

learned senior counsel for the appellant, that the Official  

Liquidator had no authority to issue a Corrigendum or to  

place  a  clarificatory  note  in  respect  of  the  plots.   That  

apart,  submits  Mr.  Saran,  the  Official  Liquidator  has  

committed grave illegality and, in a way, contempt of the

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Court by approaching the High Court and stating that this  

Court had made certain oral observations which was really  

not correct, for everything was unequivocally stated in the  

order. Ordinarily, we would have proceeded to address the  

submissions made with emphasis by Mr. A. Saran, but as  

advised at  present,  we are refraining from doing so,  for  

what has happened in the course of hearing.

8. Here the sad sad story begins. Mr. Tushar Mehta,  

learned Additional Solicitor General, while defending the  

stand  of  the  Official  Liquidator,  though  made  certain  

efforts to justify his action, yet ultimately realised that it  

was  a  sisyphean endeavour  because  the  action may be  

genuine  but  should  not  have  been  undertaken.   Mr.  

Tushar  Mehta  learned  Additional  Solicitor  General,  and  

Mr.  Gaurav Agrawal,  learned counsel,  appearing for  the  

Official Liquidator, while expressing regret about the steps  

taken  by  the  Official  Liquidator  who  has  also  rendered  

unconditional  apology,  submitted  that  the  prices  of  the  

land have gone up and there is a valuation report by the  

Gujarat  Industrial  and  Technical  Consultancy  

Organisation Ltd (GITCO) which has estimated the price at

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Rs.  66,15,22,000/-  in  respect  of  total  freehold  land  

available for sale, that is, 113 plots.

9. The said valuation report compelled us to think in  

a  different  way  and  impelled  us  to  recapitulate  certain  

authorities of this Court.  In Ram and Shyam Company  

Vs. State of Haryana1, the Court observed thus:

“12. ...Owner  of  private  property  may  deal  with it in any manner he likes without causing  injury to any one else.   But the socialist  or if  that word is jarring to some, the community or  further the public property has to be dealt with  for public purpose and in public interest.  The  marked  difference  lies  in  this  that  while  the  owner of private property may have a number of  considerations which may permit him to dispose  of his property for a song.  On the other hand,  disposal  of  public  property  partakes  the  character of a trust in that in its disposal there  should  be  nothing  hanky  panky  and  that  it  must be done at  the best  price so that larger  revenue  coming  into  the  coffers  of  the  State  administration would serve public purpose viz.  the availability of larger funds.  This is subject  to  one  important  limitation  that  socialist  property may be disposed at a price lower than  the  market  price  or  even  for  a  token  price  to  achieve some defined constitutionally recognized  public purpose, one such being to achieve the  goals set out in Part IV of the Constitution.  But  where disposal  is  for  augmentation of  revenue  and  nothing  else,  the  State  is  under  an  obligation  to  secure  the  best  market  price  available  in  a  market  economy.   An  owner  of  

1  (1985) 3 SCC 267

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private  property  need not  auction it  nor  is  he  bound to dispose it of at a current market price.  Factors such as personal attachment, or affinity,  kinship, empathy, religious sentiment or limiting  the choice to whom he may be willing to sell,  may permit him to sell  the property at a song  and  without  demur.   A  welfare  State  as  the  owner  of  the  public  property  has  no  such  freedom while disposing of the public property.  A welfare State exists for the largest good of the  largest number more so when it proclaims to be  a  socialist  State  dedicated  to  eradication  of  poverty.  All its attempt must be to obtain the  best  available  price  while  disposing  of  its  property  because  the  greater  the  revenue,  the  welfare activities will get a fillip and shot in the  arm.   Financial  constraint  may  weaken  the  tempo of  activities.   Such an approach serves  the larger public purpose of expanding welfare  activities  primarily  for  which  the  Constitution  envisages the setting up of a welfare State.”

10. In the aforesaid case, the Court held auction in  

Court  in  respect  of  some  quarries  relating  to  minor  

minerals.  The appellant therein who initially had given an  

offer  of  Rs.5.5  lakhs,  eventually  offered  Rs.25  lakhs.  

Taking note of the state of affairs, the Court observed:

“6. Shock and surprise  was visible  on the  face  of  each  one  in  the  Court.   Shock  was  induced  by  the  fact  that  public  property  was  squandered away for a song by persons in power  who hold  the  position  of  trust.   Surprise  was  that how judicial  intervention can serve larger  public interest.  One would require multi-layered  blind-fold to reject the appeal of the appellant on

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any tenuous ground so that the respondent may  enjoy  and  aggrandize  his  unjust  enrichment.  On this point we say no more.”

11. In  Committee  of  Management  of  

Pachaiyappa’s  Trust  Vs.  Official  Trustee  of  Madras  

and Another2, the Court placing reliance on paragraph 12  

in  Ram  &  Shyam  Company (supra) and  Para  27  in  

Chenchu Rami Reddy V. Govt. of A.P.3, opined thus:  

“28. The  aforesaid  observations  in  the  context  of  public  property  and  property  belonging  to  religious  and  charitable  endowments  and  institutions  would  equally  apply to trust property as in the present case.”

12. In  Meerut  Development  Authority  V.  

Association  of  Management  Studies  and  Another4,  

after referring to number of decisions including Ram and  

Shyam Co. (supra), the Court reproduced a passage from  

Wayde’s  treatise  on  Administrative  Law5,  which  is  as  

follows:

“The powers of public authorities are therefore  essentially  different  from  those  of  private  

2  (1994) 1 SCC 475 3  (1986) 3 SCC 391 4  (2009) 6 SCC 171 5  Administrative Law, 9th Edn., H.W.R. Wade & C.F. Forsyth

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persons.  A man making his will may, subject to  any  rights  of  his  dependants,  dispose  of  his  property just as he may wish.  He may act out of  malice or a spirit of revenge, but in law this does  not affect his exercise of his power.  In the same  way a private person has an absolute power to  allow whom he likes to use his land, to release a  debtor,  or,  where  the  law  permits,  to  evict  a  tenant,  regardless  of  his  motives.   This  is  unfettered  discretion.   But  a  public  authority  may  do  none  of  these  things  unless  it  acts  reasonably  and in good faith and upon lawful  and relevant grounds of  public interest.   So a  city  council  acted  unlawfully  when  it  refused  unreasonably to get a locally rugby football club  use the city’s  sports  ground, though a private  owner  could  of  course  have  refused  with  impunity.  Nor may a local authority arbitrarily  release  debtors,  and  if  it  evicts  tenants,  even  though in accordance with a contract,  it  must  act  reasonably  and  ‘within  the  limits  of  fair  dealing’.   The  whole  conception  of  unfettered  discretion is inappropriate to a public authority,  which possesses powers solely  in order that it  may use them for the public good.”

13. At this juncture, we are obliged to state that in  

the case at hand, we are dealing with properties owned by  

a Company under liquidation and there has  been price  

fixation by the Company Court.  GITCO has estimated the  

valuation in praesenti.   It  is  not  in dispute,  as  per the  

orders  passed  by  the  Company  Court  as  well  as  the  

Division Bench in Company Appeal and as understood by

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this Court, 291 plots were to be put to auction and for the  

total  number  of  plots  the  prices  were  offered  by  the  

bidders who had shown interest before this Court to bid  

and this Court had fixed the reserve price at Rs.10 crores.  

Counsel  for  the  parties  on 02.07.2014 had gone to  the  

extent of saying that they were prepared to offer Rs.25-30  

crores  in  the  auction  and  we  have  already  mentioned  

offers have come in the sealed cover.   

14. Ordinarily,  what  we  would  have  done  is  

absolutely  another  matter.   There  can  be  no  speck  of  

doubt that the properties of a company under liquidation  

when sold, there has to be a proper auction, a fair one.  It  

must fetch the maximum price.  It takes care of statutory  

dues, dues of the workmen and the creditors.  It has its  

own public character.  In any case, it cannot be allowed to  

be sold for a song.  The estimated price given by GITCO is  

more  than  Rs.66  crores  for  113  plots,  which  are  free.  

Therefore, we thought it seemly to ask the learned counsel  

appearing for the parties,  if  they are agreeable for open  

auction by giving their offers before this Court.

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15. Mr.  A.  Saran,  learned  senior  counsel,  Mr.  Braj  

Kishore Mishra, learned counsel, Mr. Vivek Singh, learned  

counsel and Mr. Amar Dave, learned counsel, conceded to  

the said suggestion.  In the High Court initially Rs.6.25  

crores had been offered, and we had fixed the reserve price  

at Rs. 10 crores and, to test the bona fide of the bidders,  

we had directed them to deposit Rs. 10 crores each before  

the Registry of this Court which has been done.  Now the  

initial  thought,  graduated  to  a  shock.   When  auction  

commenced,  Mr.  Braj  Kishore  Mishra,  learned  counsel,  

along  with  Mr.  Vivek  Trivedi,  learned  counsel,  after  

obtaining instructions from Mr. S.D. Verma, a partner of  

M/s Star & Associates, informed the Court that they  are  

willing to offer Rs. 31 crores for 113 plots which are free.  

Determined  not  to  lag  behind,  Mr.  A.   Saran,  being  

instructed by Mr. Amit Kumar, learned counsel, on behalf  

of the petitioner, ultimately raised the figure upto Rs.65  

crores.  Be it stated, we had requested the bidders to hike  

their price by Rs.5 crores so that the auction becomes real  

and  not  unnecessarily  time-consuming.   Mr.  A.  Saran,  

learned senior counsel, Mr. Braj Kishore Mishra, learned

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counsel, Mr. Vivek Singh, learned counsel and Mr. Amar  

Dave, learned counsel, co-operated. Eventually, Mr. Braj  

Kishore Mishra, learned counsel, appearing for  M/s Star  

& Associates enhanced the price to Rs. 70 crores.  Mr. A.  

Saran, Mr. Vivek Singh and Mr. Amar Dave did not think,  

as  instructed  by their  respective  clients,  to  bid  further.  

Thus, we find that the report submitted by GITCO appears  

to be correct. That is a redeeming feature to pardon the  

Official Liquidator and we do so.

16. In view of the aforesaid, we direct M/s. Star and  

Associates to deposit a sum of Rs.20 crores by the end of  

November, 2014 and another Rs.40 crores by March 15,  

2015 before the Registry of this Court.  The amount shall  

be deposited in an interest bearing fixed deposit in a UCO  

Bank, Supreme Court Compound, New Delhi.  After Rs.60  

crores  are  deposited,  Rs.  10  crores  that  have  been  

deposited  by  the  company  before  the  Registry  shall  be  

added and handed over by way of a banker’s cheque to the  

Official  Liquidator  along  with  interest.  Needless  to  

emphasise, if any of the directions is not complied with or  

for any reason, extension is sought, Rs. 10 crores that has

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been deposited before this Court along with interest shall  

stand  forfeited  and  go  to  the  account  of  the  company.  

This aspect is also conceded to by Mr. Braj Kishore Mishra  

and Mr. Vivek Trivedi.

17. As far as deposits made by the petitioner and Mr.  

Ranjitsinh Parmar  before  this  Court  are  concerned,  the  

deposits shall be refunded along with interest within two  

weeks  hence.  The  amount  deposited  by  Mr.  Laxmi  

Narayan Garg  with  the  Official  Liquidator  shall  also  be  

refunded within a week from today.  Any earnest money  

that has been deposited with the Official Liquidator shall  

also be refunded to the concerned company/person.

18. At this juncture, it is appropriate to mention that  

the rest of the plots in respect of which there is an order of  

status quo by this Court or which are subjudice before the  

appellate  court  on  the  company  side  before  the  High  

Court,  needless  to  say,  shall  be  dealt  with  at  the  

subsequent date.

19. At this juncture, we are obligated to clarify that  

interlocutory  applications  which  have  been  filed  before

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this  Court  can  be  filed  before  the  High  Court  and  the  

orders passed by the High Court shall be filed before this  

Court in these special leave petitions so that they can be  

appositely dealt with.  The order of stay granted earlier,  

that  is,  directing stay of  further proceedings before  any  

Court  relating  to  the  property  involved  in  this  case,  is  

modified to the extent indicated above.

20. Let  the  matter  be  listed  for  further  hearing  on  

March 24, 2015.

........................J. (DIPAK MISRA)

........................................J. (ROHINTON FALI NARIMAN)

      ................................J.        (UDAY UMESH LALIT)

NEW DELHI; OCTOBER 28, 2014