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Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6165 OF 2015 (Arising out of Special Leave Petition (Civil) No.2198 of 2015)

Vedica Procon Private Limited ...  Appellant

Versus

Balleshwar Greens Private Limited & Others …  Respondents

WITH

CIVIL APPEAL NO. 6166-6167 OF 2015 (Arising out of Special Leave Petition (Civil) Nos.10148-10149 of 2015)

Vedica Procon Private Limited ...  Appellant

Versus

Balleshwar Greens Private Limited & Others …  Respondents

J U D G M E N T

Chelameswar, J.

1. Leave granted.

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2. M/s Omex Investors Ltd. was ordered to be wound up by the

Company  Judge  of  the  Gujarat  High  Court  by  an  order  dated

6.3.1990.   The  Official  Liquidator  attached  to  the  Gujarat  High

Court was appointed as the Liquidator of the said company.   

3. By order dated 26.3.2013, the official liquidator was directed

to put the freehold land of the company admeasuring 13895 sq.

mtr.  to  auction  for  sale  by  inviting  offers  from  the  intending

purchasers in sealed covers.  By the said order, the High Court also

fixed an upset  price  at  Rs.55 crores and earnest  money deposit

(EMD) at 10% thereof.

4. Tender  Notice  (containing  the  terms and conditions  of  sale)

inviting offers from the prospective purchasers in sealed covers was

widely  published.   11  prospective  purchasers  responded  to  the

notice.   On 17.12.2013, an auction was held in the open court.

After inter-se bidding of 12 rounds, the appellant in Civil  Appeal

arising out of SLP (Civil) No.2198 of 2015 [“Vedica Procon Private

Limited”,  hereinafter  referred  to  as  “the  appellant”)  became  the

highest  bidder with an offer  of  Rs.148 crores1 –whereas the first

1 In order of the High Court dated 17.12.2013, it is recorded as follows:

7. In view of the aforesaid, it transpires that M/s Vedia Procon Pvt. Ltd. being the highest bidder, has offered Rs.148 Crores (Rupees One Hundred Forty Eight Crores) for the land admeasuring 13895 Sq. Mtrs. Approx. situated at T.P. No.18 of F.P. No.32/P, bearing Survey No.25, 27/B/1, 31, 38, Moje Rajpur Hirpur, Outside Raipur Gate, behind New Cloth Market, Opp. Hirabhai Market, Diwan Ballubhai Road, Raipur, Ahmedabad.

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respondent  (Balleshwar  Greens  Private  Limited)  in  the

abovementioned SLP  made the second highest bid.  The High Court

accepted the bid of the appellant.

5. By the same order the High Court recorded that the earnest

money deposit by the appellant and the first respondent be retained

by the official liquidator and the earnest money deposits made by

the other unsuccessful bidders be returned.

6. On 19.12.2013, the official liquidator addressed a letter to the

appellant referring to the order dated 17.12.2013 of the High Court

and informed the appellant as under:

“With  reference  to  the subject  cited  above,  I  have  to  state  that pursuant to order dated 17.12.2013 passed by the Hon’ble High Court of Gujarat in Official Liquidator Report No.43 of 2013,  the sale  of  Freehold  land  of  the  company  in  Liquidator (sic liquidation) admeasuring 13895 sq. mtrs. approx. at T.P. No.18, F.P. No.32/P, bearing Survey No.25, 27-B/1, 31, 38, Moje Rajpur – Hirpur,  Outside  Raipur  Gate,  behind  New  Cloth  Market,  Opp. Hirabhai  Market,  Diwan Ballubhai  Road,  Raipur,  Ahmedabad  is confirmed in your  favour  for Rs.148 Crores.   A copy of  said order is enclosed herewith for your ready reference and perusal. In this connection, you are requested to deposit sale proceed 25% i.e.  Rs.37.00  Crores  on  or  before  16.02.2014  and  balance remaining 75% i.e. Rs.106.50 Crores on or before 16.04.2014, after adjusting  Rs.4.50  Crores  behind  EMD in  final  payment  of  sale proceed.  You are, therefore, requested to kindly deposit the

8. Ms. Amee Yajnik, learned counsel for the Official Liquidator, Mr. D.S. Vasavada, learned counsel for respondent No.6 – Union, Mr. U.R. Bhatt, learned counsel for respondent No.1 – State Bank of India and Mr. Anip Gandhi, learned counsel for the ARCIL, have expressed that the bid of M/s. Vedica Procon Pvt. Ltd. may be accepted.

9. In view of the above discussion, the bid of M/s. Vedica Procon Pvt. Ltd. being the highest bidder, who has offered Rs.148 Crores for the land mentioned in the tender notice deserves to be accepted and is hereby accepted as per the tender conditions on as is where is basis and whatever there is basis.  

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sale proceed with this office, within stipulated time given by the  Hon’ble  High  Court  of  Gujarat  in  terms  of  order  dated 17.12.2013 and Tender document.”

[emphasis supplied]

7. Pursuant  to  the  said  letter,  the  appellant  deposited  on

06.01.2014 an amount of Rs.37 crores being 25% of the purchase

price by Demand Draft drawn on ICICI Bank.

8. By letter dated 09.1.2014, the first respondent requested the

official liquidator to refund its earnest money deposit.  The relevant

portion of the letter reads as follows:

“5. As  per  condition  no.29  of  Tender  Document,  the  EMD of second highest bidder i.e.  Baleshwar Greens Pvt. Ltd. was to be returned after 25% of the sale consideration is deposited by the successful bidder.

6. We have come to know that successful  bidder M/s.  Vedia Procon Pvt. Ltd. has deposited 25% of the sale consideration in the office of Official Liquidator.

7. Therefore we hereby request you to kindly refund our EMD of Rs.4.5 Cr and late fees of Rs.23.5 lakhs at the earliest.

[emphasis supplied]

9. Admittedly, the EMD of the first respondent was returned.   

10. On 16.01.2014, the appellant informed the official liquidator

that they had deputed security persons to “protect the possession”

of the property in question for various reasons detailed in the said

letter.   In  response,  the  official  liquidator  by  its  letter  dated

24.01.2014 informed the appellant inter alia as follows: 4

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“Besides  this  it  is  brought  to  your  notice  that  the  office  of  the Official  Liquidator  has  already  deployed  security  at  the  mills premises of the company in Liquidation.  However, keeping in view the facts and apprehension stated by you in the aforesaid letters, if you so desire,  you can post  your security  outside  the premises purchased by you to protect your interest and avoid the possibility of any casualty under the control and supervision of the security posted  by  official  liquidators  office  at  your  risk,  cost  and consequence in addition to existing security arrangement made by this office.”

11. On 25.03.2014, the appellant filed an application before the

High  Court  seeking  extension  of  time  to  deposit  the  balance

consideration of Rs.106.5 crores.  The said application was allowed

after hearing the secured creditors, by an order dated 31.03.2014,

extending the time for payment up to 31.07.2014.  However, the

appellant deposited the entire balance amount of Rs.106.5 crores

on 16.04.2014 without availing the benefit of the extended time by

the order of  the High Court (referred to supra).  The said fact is

acknowledged  by  the  official  liquidator  in  his  letter  dated

16.04.2014 calling upon the appellant to take over the possession

of  the  said  land on 17.04.2014 at  11.30 am in presence  of  the

representatives of the official liquidator.  The relevant portion of the

letter reads as follows:

“Accordingly,  you  have  deposited  the  entire  full  sale consideration i.e.  Rs.148.00 Crores with this office.   In this connection,  you  are  requested  to  depute  your  authorized representative  at  freehold  land  admeasuring  13895  Sq.  Mtrs. Approx.  situated  at  T.P.  No.18,  F.P.  No.32/p,  bearing  Survey

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No.25, 27-B/1, 31, 38 Moje Raipur-Hirapur, Outside Raipur Gate, behind New Cloth market, Opp. Hirabhai market, Diwan Ballubhai Road, Raipur, Ahmedabad for taking over possession of the said land on 17.04.2014 at 11.30 am,when the representatives of this office will remain present for handing over possession of the said land to you, in terms of  order dated 17.12.2013 passed by the Hon’ble High Court of Gujarat in Official Liquidator Report No.43 of 2013.”  

[emphasis supplied]

12. The first respondent preferred OJ Appeal No.9/2014 against

the order dated 31.03.2014 of the High Court granting extension of

time to deposit the balance amount by the appellant.  In the said

appeal,  the first  respondent expressed its willingness to raise its

offer to an amount of Rs.160 crore for the land in question and also

offered to deposit the said amount within 72 hours.

13. On 17.04.2014, a possession memo was drafted purporting to

handover the property in question.  It appears from the copy of the

said possession memo that it was signed by two UDC officials of the

Official Liquidator by name S.R. Meena, STA and C.G. S. Karki and

one Ganesna Venkataramana on behalf of the appellant.  The first

respondent disputes the fact that the possession of the property in

question was infact delivered to the appellant herein.   However,

the Division Bench of the High Court by the impugned order found

no substance in the objection of the first respondent:

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“...  Though it  is disputed by the present application, the record reveals that on 17.4.2014 when O.J. Appeal No.9 of 2014 came to be heard and disposed of by the Division Bench of this Court, the Official  Liquidator  handed  over  the  possession  of  the  lands  in question to opponent No.9.   However,  it  is an admitted position that the sale deed is not executed. ...”

14. The  first  respondent’s  appeal  (OJ  Appeal  No.9/2014)  was

disposed of by an order2 dated 17.04.2014 by issuing directions.

The substance is:

1. That the first respondent herein would move an application before  the learned Company Judge showing his  desire  “to apply afresh for the bid”;

2. That the parties are directed to maintain status quo till such a period;

3. The  respondent  herein  is  directed  to  handover  a  DD  of Rs.160 crores to the Deputy Official Liquidator;

4. That it would be open to the learned Single Judge to decide the application of the respondent herein (if made) on merits.

2  1. The appellant before us will move before the learned Company Judge within a period of one week with an appropriate application showing his desire to apply afresh for the bid, as according to Mr. Trivedi, the order dated 17.12.2013 is not finalized and it still requires confirmation of the learned Single Judge.  Be that as it may, if the application is not made within one week, the benefit of this order will not ensure for the benefit of present appellant. The parties are directed to maintain status-quo till the appellant files an application before the learned Single Judge and the learned Company Judge shall decide the question of interim relief on merits.  

2. The appellant  shall  handover the Demand Draft  of Rs.160 crores  to Mr. R.C. Mishra,  Deputy Official Liquidator, who is present in the Court, today itself.  The Deputy Official Liquidator has accepted it and shall pass the receipt of the same to the present appellant.  The Official Liquidator shall see that the amount is kept in Fixed Deposit at least for one month so that there is no loss of interest.

3. It goes without saying that we have not entered into the merits of the matter and the deposit of Rs.160 crores with Official Liquidator is without prejudice to the rights and contentions of the parties and we have adopted this only because of the view expressed by the Apex Court in the case of Shradhha Aromatics Private Limited (supra).

4. It goes without saying that once the application is made, it will be open for the learned Single Judge to decide the same on merits.  The status-quo thereafter will be subject to the order which may be passed by the learned Single Judge after hearing the parties.

5. The order  dated  31.03.2014 passed  in  Misc.  Civil  Application  No.53  of  2014 by the  learned Company Judge is interfered with to the above extent only.

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15. In  order  to  complete  the  narration  of  facts,  it  may  be

mentioned  herein  that  the  appellant  herein  moved  a  review

application Misc. CA No.90 of 2014 O.J. Appeal No.9 of 2014 before

the  Division Bench of  the  High Court  which was  partly  allowed

making some minor modification in the order dated 17.04.2014, the

details of which may not be relevant for our purpose.  

16. Pursuant to the order dated 17.04.2014, the first respondent

moved an application OJMCA 89 of 2014 seeking recall of the order

dated 17.12.2013 on various grounds.  The said application was

allowed  by  an  order  dated  11.08.2014.   By  the  said  order,  the

learned Single Judge had set-aside the sale made in favour of the

appellant  herein  on  17.12.2013  and  ordered  the  return  of  the

amount already paid by the appellant.  The learned Single Judge

also directed a fresh auction of the property in question.   He also

directed the first respondent to pay an amount of Rs.25 lakhs to the

appellant herein.  

17. Aggrieved by the order dated 11.08.2014, the appellant carried

the matter to the High Court in O.J. Appeal No.36 of 2014 which

was dismissed by the Division Bench vide order dated 04.12.2014.

The said order is the subject matter of SLP (Civil) No.2198 of 2015. 8

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The appellant also chose to prefer SLP (Civil)  No.10148-10149 of

2015 against  the  order  dated 17.04.2014 passed in O.J.  Appeal

No.9 of  2014 as modified vide order dated 22.04.2014 passed in

Review Application (Misc. Civil Application No.90 of 2014).   

18. The order dated 17.04.2014 of the Division Bench of the High

Court is passed in appeal (OJA No.9 of 2014) preferred by the first

respondent against the order dated 31.03.2014 with leave of  the

Division  Bench.   The  only  ground  on  which  the  respondent

challenged the order of the learned Single Judge granting extension

of time in favour of the appellant herein for depositing the balance

sale consideration was that the first respondent had been deprived

of  making  a  better  offer.   According  to  the  first  respondent,  he

believed that the appellant herein would faithfully comply with the

tender  conditions  and the earlier  order  of  the  Court  in  terms of

which  the  appellant  was  bound  to  deposit  the  entire  sale

consideration on or before 16.01.2014.  If only the respondent had

known that the time schedule for the payment of sale consideration

is flexible even the respondent would have offered price higher than

what had been offered (Rs.148 crores) by the appellant.   

19. The  Division  Bench  without  examining  or  recording  any

finding in regard to the tenability of the submissions made by the 9

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respondent chose to dispose of the matter with certain directions

which are already extracted in the earlier  part  of  this  judgment.

The reason given by the Division Bench for such an order is that

the Division Bench has adopted such a course of action in view of

an earlier decision of this Court in  Shradhha Aromatics Private

Limited  v.  Official  Liquidator  For  Global  Arya  Industries

Limited & Others, (2011) 6 SCC 207.   

20. The Division Bench recorded the submission made by the first

respondent that  by order dated 17.12.2013, the Company Judge

accepted  only  the  offer  of  Rs.148  crores  made  by  the  appellant

herein but no order  of  confirmation of  sale was made.   But the

Division  Bench  did  not  record  any  finding  whether  such  a

submission was accepted or not.  From the order, it appears that

the Division Bench was greatly influenced by the fact that the first

respondent was willing to enhance the bid to Rs.160 crores.

21. From direction No.3 contained in the order, it is clear that the

Division  Bench  did  not  adjudicate  the  rights  of  the  respective

parties.  At the cost of repetition, we reproduce direction No.3 as

under:

“3. It goes without saying that  we have not entered into the merits  of  the  matter and  the  deposit  of  Rs.160  crores  with Official  Liquidator  is  without  prejudice  to  the  rights  and

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contentions of the parties and we have adopted this only because of the view expressed by the Apex Court in the case of Shradhha Aromatics Private Limited (supra).”

[emphasis supplied]

A procedure which is not very desirable. It is inconsistent with the

principle  that  the  judicial  process  and  adjudication  demand

certainty and finality.  

22. Pursuant  to  the  abovementioned  direction  of  the  Division

Bench, the learned Company Judge, on an application filed by the

first respondent, by his order dated 11.08.2014, recalled the order

dated  17.12.2013 and  set  aside  the  sale  made  in  favour  of  the

appellant.   When the said order was challenged by the appellant

herein before the Division Bench of the High Court, the same was

dismissed by the impugned judgment.

23. It is interesting to notice that the respondent in its application

took various grounds (for setting aside the order dated 17.12.2013

of the Company Judge) other than the ground which the respondent

pleaded  in  its  earlier  appeal  OJA  No.9  of  2014.   This  time  the

respondent pleaded:

1. That  there  was  a  change  in  the  share-holding

pattern of the appellant company which amounted

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to  the  violation  of  condition  no.31  of  the  tender

notice  which  provided  that  the  nomination  would

not be allowed by the successful bidder;

2. That by virtue of a subsequent event the value of

the  land  in  question  was  likely  to  fetch  a  much

higher price than the price at which the property

was  sold  on  17.12.2013.    The  event  being  the

revision  of  certain  regulations  (the  Gujarat  Town

Planning  and  Urban  Development  Act,  1976)

whereby  the  Floor  Space  Index  (FSI)  for

construction  applicable  to  the  area  in  which  the

property in question is located had been increased

from 1.0  to  1.8.   In  other  words,  in  view  of  the

revised regulations, it would be open to construct a

much  larger  built  up  area  on  the  property  in

question  than  what  was  permissible  as  on

17.12.2013.

24. Two factors  weighed  heavily  before  the  Company  Judge  for

recalling  the  earlier  Order  dated  17.12.2013 by  his  Order  dated

11.8.2014.   They are: (i) by a notification dated 04.03.2014 of the

Government of Gujarat, the FSI applicable to the area in which the 12

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land is located is increased from 1.0 to 1.8.  As a consequence, the

value of the property in question increased considerably, (ii)  that

during the pendency of the recall application, the first respondent

herein, who had already deposited an amount of Rs. 160 crores as a

condition  precedent  for  filing  the  recall  application,  further

enhanced his offer by another Rs. 40 crores, pursuant to the order

of  the  Company  Court  dated  9.5.2014  and  deposited  the  said

amount,  and  it  appears  that  the  respondent  agreed  to  further

enhance the offer by another Rs.14 crores, making it a total of Rs.

214 crores.

25. In  view  of  the  above-mentioned  two  facts,  the  High  Court

recorded  the  conclusion  that  the  Company  Judge’s  order  dated

17.12.2013 (accepting the bid of  the appellant herein of  Rs. 148

crores) is vitiated (i) by an irregularity inasmuch as the Company

Judge failed to take note of the potential value of the land and the

possibility of its fetching a higher price than Rs. 148 crores, (ii) the

bid of  the appellant herein of  Rs. 148 crores was an inadequate

price to the property in question, (iii) because of the failure of the

company  court  to  discharge  its  obligation  (as  custodian  of  the

properties of a company in consideration) to secure the best price

possible, when the assets of the company in liquidation are sold, (iv)

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when  the  facts  and  circumstances  indicate  that  the  property  in

question is in fact capable of securing a much higher price, the sale

of the property at a lesser price also resulted in an injury to the

interest of various stakeholders who are entitled for the distribution

of  the  proceeds  of  the  sale  of  the  assets  of  the  company  in

liquidation.

26. The  learned  counsel  for  the  appellant  submitted  that  the

impugned order is untenable for the following reasons:-

(i) That the offer of  Rs. 148 crores made by the appellant and

accepted by the Company Court was the best price for  the land

having regard to the facts and circumstances as they existed on

that date of the order i.e. 17.12.2013.   The fact that some two and

a  half  months  later  (on  4.3.2014),  the  Government  of  Gujarat

decided to increase the FSI which resulted in increase in the value

of the land in question can legally never be a relevant consideration

for determining the regularity and the legality of the order dated

17.12.2013, (ii) the Division Bench chose to recall the order dated

17.12.2013  on  erroneous  logic  and  recorded  an  untenable

conclusion:

“….However, it is required to be noted that the averments in the application before the learned Company Court by respondent No. 1

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herein  –  original  applicant  that  everybody  was  aware  of change/increase in FSI, but it was not brought to the notice of the learned Company Court, considering the submissions made by the appellant  before  the  learned  Company  Court  recorded  in  the impugned order, it does not appear that the aforesaid was disputed by the appellant.   As observed herein above and even at the cost of repetition it is to be noted that the learned Company Court has recalled  its  earlier  order  dated  17.12.2013 accepting  the  higher offer of the appellant of Rs. 148 crores and the relevant factors like potential development of the land were not considered which had a direct bearing on the determination of the market price….”

27. The learned counsel argued that the submission made by the

first respondent herein that everybody knew the fact which was not

in existence as on 17.12.2013 could not have been accepted by the

High  Court  on  the  ground  that  the  appellant  herein  did  not

specifically dispute the same.  Such a logically absurd submission

was made and the first respondent made no effort to prove such an

assertion though in law the burden of proving such an assertion

lies on the maker of such assertion.   

28. The learned counsel submitted that assuming for the sake of

argument that  the conclusion recorded by the Division Bench is

legally  tenable,  such  a  conclusion  is  based  on  the  plea  of  the

respondent  herein  that  “everybody  was  aware  of  the

change/increase in FSI, but it was not brought to the notice of the

learned Company Court……” necessarily implies that even the first

respondent herein was aware of it and he also failed to bring that

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fact  to  the  notice  of  the  Company  Court.  Obviously,  the  only

inference that can be drawn from the conduct of such respondent is

that it would disentitle the respondent to seek any remedy from the

court.    

29. It is further submitted that the conduct of the respondent in

writing to the official liquidator on 9.1.2014 claiming the refund of

his  EMD without  indicating  even at  that  stage  that  the  land  in

question is more valuable than Rs. 148 crores and that the first

respondent was willing to make a higher offer would only go to show

that  all  the  allegations  made  in  the  recall  application  are  tailor

made  to  suit  the  convenience  of  the  respondent  in  view  of  the

increase in the FSI and the consequential escalation of the price of

the property in question.

30. The  learned  counsel  argued  that  no  doubt  the  subsequent

events  made  the  property  in  question  more  valuable,  but  such

subsequent events are wholly irrelevant in determining either the

adequacy of the bid made by the appellant on the relevant date or

the  regularity  and  legality  of  the  order  dated  17.12.2013  of  the

Company Judge in assessing the injury to the stakeholders.

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31. In the alternative, it is submitted on behalf of the appellant

that in the absence of any plea and proof that sale was vitiated by

fraud, the inadequacy of consideration especially when none of the

stakeholders in the company liquidation raised such an objection

on  17.12.2013  can  never  be  a  ground  for  recalling  an  order  of

accepting the highest bid at the instance of an unsuccessful bidder

on a subsequent date on the ground that on a subsequent date

such unsuccessful bidder is willing to offer higher price.  Approving

such course of action would denude the proceedings of a court of

law and the sales undertaken in the course of judicial proceedings,

of all element of certainty and finality. Such uncertainty would be a

disincentive for genuine prospective purchasers.  It adversely affects

the possibility of attracting best offers in court sales and would be

detrimental to the public interest

32. On the other hand, it is argued by the learned counsel for the

first respondent that  (i) the substantial hike in the offer made by

the first respondent (Rs.66 crores) is a relevant factor as the benefit

of  such enhanced  price  would  go  to  all  the  stakeholders  in  the

company in liquidation. Therefore, the High Court rightly recalled

the order dated 17.12.2013.  (ii)  by the impugned order, the first

respondent is not going to get the property in question, but it only

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throws open for everybody an opportunity to participate in the fresh

auction to be conducted; (iii) the property would still be sold to the

highest bidder, (iv) but in the process all the stakeholders would be

benefited. Therefore, the impugned order calls for no interference.

33. It is also submitted on behalf of the first respondent that there

is  no  confirmation  of  the  sale  in  favour  of  the  appellant  herein

though the order dated 17.12.2013 recorded that the highest bid by

the appellant is accepted by the Court.  Acceptance of the bid is

different  from  confirmation  of  the  sale.   Confirmation  of  sale

requires an active application of mind by the court to ensure that

there is  no irregularity  in  the  conduct  of  the sale  and the price

fetched is the best price for the value of the property.  It is also

argued on behalf of the respondent that the company court being

the custodian of the property of the company in liquidation, should

always make an endeavour to secure the best price for the property

put  to  sale  in  order  to  give  maximum benefits  to  all  the  stake

holders who are entitled for the distribution of sale proceeds of the

assets of the company in liquidation.

34. In  support  of  the  submission  that  a  concluded  sale  in  an

auction by the court cannot be reopened except on the ground of

fraud, learned counsel for the appellant relied upon a judgment of 18

Page 19

this  Court  reported  in  Valji  Khimji  &  Company v.  Official

Liquidator  of  Hindustan  Nitro  Product  (Gujarat)  Limited  &

Others, (2008) 9 SCC 299.  It was a case where the properties of a

company in liquidation were put to sale in an auction.  In the said

auction, the highest bid was Rs.3.51 crores which was accepted by

the  court  and  the  sale  was  confirmed.   The  court  directed  the

auction purchaser to pay the consideration in certain instalments.

Some two and a half months later, a third party sent a letter to the

official  liquidator  offering  a  higher  amount  of  Rs.3.75  crores.

Almost a year later, another party offered an amount of Rs.5 crores.

Subsequently,  both  the  parties  approached  the  Company  Judge

seeking  a  recall  of  the  order  of  confirmation  of  the  sale.   Such

application  was  allowed  by  the  Company  Court.   The  auction

purchaser  unsuccessfully  carried  the  matter  in  an  intra  court

appeal and finally landed up in this Court.  This Court allowed the

appeal upholding the order confirming the sale.  This Court held:

“11. It  may  be  noted  that  the  auction-sale  was  done  after adequate publicity in well-known newspapers.  Hence, if anyone wanted to make a bid in the auction he should have participated in the  said  auction  and  made  his  bid.   Moreover,  even  after  the auction  the  sale  was  confirmed  by  the  High  Court  only  on 30.7.2003,  and any  objection  to  the  sale  could  have  been  filed prior to that date.  However, in our opinion, entertaining objections after the sale is confirmed should not ordinarily be allowed, except on very limited grounds like fraud, otherwise no auction-sale will ever be complete.”

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Page 20

35. On the other hand, learned counsel for the first respondent

relied upon decisions of  this  Court in  Navalkha & Sons v.  Sri

Ramanya  Das  &  Others,  (1969)  3  SCC  537,  Divya

Manufacturing  Company  (P)  Ltd. v.  Union  Bank  of  India  &

Others,  (2000)  6  SCC 69,  FCS Software  Solutions  Ltd. v.  LA

Medical Devices Ltd. & Others, (2008) 10 SCC 440,  Shradhha

Aromatics  Pvt.  Ltd  v.  Official  Liquidator  for  Global  Arya

Industries  Limited & Others,  (2011)  6  SCC 207 and  Manoj  I

Naik & Associates v. Official Liquidator, (2015) 3 SCC 112.

36. In Navalkha & Sons v. Sri Ramanya Das & Others, (1969)

3  SCC  537,  certain  moveable  and  immovable  properties  of  a

company in liquidation were brought to sale.  The Company Court

directed the sale to be conducted by three persons jointly appointed

as Commissioners for the conduct of sale.  The sale was conducted.

The appellant before this Court was the only offeror.  The offer was

accepted  by  the  Commissioners.   The  Commissioners  made  an

application to the Company Court for the confirmation of sale.  At

that stage, a third party made an application claiming that he was

willing to offer a higher price.  The Company Court then decided to

put  the  property  once  again  for  auction  but  only  between  the

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original offeror and the objector.  In such a process, the original

offeror  once  again  became  the  highest  bidder.   That  bid  was

accepted by the Company Judge.  At that stage, another third party

came forward objecting to the procedure adopted by the High Court

for confining the auction only between the two parties without any

fresh  advertisement.   Such  an  objection  was  rejected  by  the

Company Judge.  Aggrieved by the same, the objector carried the

matter in an intra court appeal to the Division Bench successfully.

Hence the appeal  before this Court by the original  offeror.   This

Court  dismissed  the  appeal  approving  the  view  of  the  Division

Bench that the procedure adopted by the learned single Judge was

not legally sustainable.   In the process, this Court indicated the

principles  governing  the  confirmation  of  sales  conducted  by  the

Company Courts by the official liquidators.  

“6. The principles which should govern confirmation of sales are well-established.  Where  the  acceptance  of  the  offer  by  the Commissioners is subject to confirmation of the Court the offeror does not by mere acceptance get any vested right in the property so that he may demand automatic confirmation of his offer. The condition  of  confirmation by  the  Court  operates as a  safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the Court to satisfy itself that having regard to the market value of the property the price offered  is  reasonable.  Unless  the  Court  is  satisfied  about  the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion. In  Gordhan Das Chuni Lal v. S. Sriman Kanthimathinatha Pillai, AIR 1921 Mad 286, it was observed  that  where  the  property  is  authorised  to  be  sold  by

21

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private contract or otherwise it is the duty of the Court to satisfy itself that the price fixed ’is the best that could be expected to be offered. That is because the Court is the custodian of the interests of the Company and its creditors and the sanction of the Court required under the Companies Act has to be exercised with judicial discretion regard being had to the interests of the Company and its creditors as well. This principle was followed in Rathnaswami Pillai v.  Sadapathi Pillai,  AIR 1925 Mad 318 and  S. Soundajan v.  M/s. Roshan  & Co., AIR 1940 Mad 42.  In  A.  Subbaraya  Mudaliar v. K.Sundarajan,  A.I.R. 1951 Mad 1986, it was pointed out that the condition of confirmation by the Court being a safeguard against the property being sold at an inadequate price, it will be not only proper but necessary that the Court in exercising the discretion which it undoubtedly has of accepting or refusing the highest bid at the auction held in pursuance of its orders, should see that the price  fetched  at  the  auction,  is  an adequate  price  even  though there is no suggestion of irregularity or fraud. It is well to bear in mind the other principle which is equally well-settled namely that once the court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already received. (See the decision of the Madras High Court in Roshan & Co’s case).”

37. Divya Manufacturing Company (P) Ltd.  v.  Union Bank of

India & Others, (2000) 6 SCC 69 was a case where the assets of

the  company in  liquidation  were  sold  in  favour  of  the  appellant

before  this  court  and  the  sale  was  confirmed  by  the  Company

Court.  Within a week thereafter, an application came to be filed by

one of the participants in the auction proceedings praying that the

order of confirmation be recalled and the applicant was willing to

offer  an  amount  higher  than  what  was  offered  by  the  appellant

before  this  Court.   Subsequently,  more  number  of  applications

came  to  be  filed  before  the  Court  offering  higher  amounts.

Therefore,  the  Company  Court  recalled  the  order  confirming  the

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sale.   Hence,  the  appeal  before  this  Court.   This  Court,  while

reiterating  the  principles  laid  down  in  Navalkha  case (supra),

declined to interfere with the order of the court and held as follows:

“16. ….As stated above, neither the possession of the property nor the sale deed was executed in favour of the appellant. The offer of Rs.1.30 crore is totally inadequate in comparison to the offer of Rs.2 crores and in case where such higher price is offered, it would be in the interest of the Company and its creditors to set aside the sale.  This may cause some inconvenience or loss to the highest bidder but that cannot be helped in view of the fact that such sales are conducted in Court precincts and not by a business house well versed with the market forces and price. Confirmation of the sale by a Court at a grossly inadequate price, whether or not it  is a consequence of  any irregularity or fraud in the conduct  of  sale, could be set aside on the ground that it was not just and proper exercise  of  judicial  discretion.  In  such  cases,  a  meaningful intervention  by  the  Court  may  prevent,  to  some  extent, underbidding at the time of auction through Court. In the present case,  the  Court  has  reviewed  its  exercise  of  judicial  discretion within a shortest time.”

38. We cannot help pointing out that their Lordships came to such

a conclusion placing reliance on para 6 of Navalkha case (supra).

Their  Lordships  failed  to  take  note  of  the  last  sentence  of  the

paragraph but placed reliance on the penultimate sentence of the

paragraph. No doubt, the penultimate statement of the paragraph

recognises the discretion of the Company Court either for accepting

or refusing the highest bid at the auction, it also emphasizes the

obligation of the Court to see that the price fixed at the auction is

adequate price even though there is no irregularity or fraud in the

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conduct of the sale.  However, the penultimate sentence restricts

the scope of such discretion in the following words:

“It  is  well  to  bear  in  mind the other  principle  which is  equally well-settled namely that once the court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already received. (See the decision of the Madras High Court in Roshan & Co’s case.”

39. In other words, in Navalkha case, this Court only recognized

the  existence  of  the  discretion  in  the  Company  Court  either  to

accept or reject the highest bid before an order of confirmation of

the sale is made.  This Court also emphasized that it is equally a

well-settled  principle  that  once  the  Company  Court  recorded  its

conclusion  that  the  price  is  adequate,  subsequent  higher  offer

cannot be a ground for refusing confirmation.  

40. In FCS Software Solutions Ltd. v. LA Medical Devices Ltd.

&  Others,  (2008)  10  SCC  440,  the  property  of  a  company  in

liquidation  was  brought  to  sale  and  confirmed  by  the  company

court.  The Company Court directed the official liquidator to deliver

possession of the property after executing the sale deed in favour of

the successful bidder after receiving full and final payment.  The

official  liquidator  instead  of  delivering  the  possession  of  the

property, filed an application before the Company Court saying that

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he  had  received  two  higher  offers.  Upon  such  application,  the

Company  Court  stayed  the  delivery  of  the  possession  of  the

property.  The successful bidder moved the Company Court praying

that the liquidator be directed to execute the sale deed and deliver

the  possession  of  the  property.  However,  the  Company  Court

directed  the  official  liquidator  to  issue  fresh  advertisements.

Pursuant to fresh advertisement, much higher offers were received.

The original purchaser unsuccessfully challenged in an intra court

appeal the decision of the Company Judge to reopen the concluded

proceedings  and  thereafter  approached  this  Court.   This  Court

rejected the case of the original purchaser on the ground that in the

proceedings which culminated in the sale in favour of the appellant

before  this  Court,  there  were  certain  irregularities  and  that  the

Company  Judge  failed  to  notice  such  irregularities  until  such

irregularities were brought to his notice by the third parties who

subsequently offered higher price.

“28. … From the facts stated above, it is clear that in November, 2004, the bid of the appellant was highest and was accepted by the Official Liquidator. But it is also clear that certain facts which were necessary to be brought to the notice of intending purchasers were not set out in the proclamation of sale nor were disclosed at the time  of  sale  notice.  They  related  to  valuation  of  movable  and immovable  properties,  fixation of  reserve  price,  non-inventory  of plant and machinery, etc. The attention of the Company Judge was invited  by  other  bidders  by  filing  Company  Applications.  The Company Judge considered the objections and having prima facie satisfied himself, ordered fresh auction. We find no illegality in the

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said approach. When fresh bids were received, it was found that the highest  offer  was of  respondent  No.  3-Society  which was of Rs.3.5 crores. The Company Judge extended an opportunity to the appellant to raise its bid. It, however, appears that the appellant was adamant to get the property for Rs.1.47 crores on the ground that the said offer was highest and all the proceedings taken by the Official  Liquidator  and  Company  Judge  thereafter  were  totally illegal and unlawful. In our opinion, the respondents are right that in such cases, the approach of the Company Judge should be to get  highest  price  so  as  to  satisfy  maximum claims against  the Company in liquidation. The procedure followed by the Company Judge, therefore, cannot be said to be illegal.”

41. In Shradhha Aromatics Pvt. Ltd v. Official Liquidator for

Global  Arya Industries  Ltd & Others,  (2011)  6  SCC 207,  the

Company  Judge  approved  the  highest  bid  of  the  2nd respondent

before this Court for the purchase of the property of a company in

liquidation.   Subsequently,  an application came to  be  filed by a

third party offering a higher amount for  the property which was

rejected by the Company Court.  However, a second application was

filed by the same third party with a further enhancement of  the

offer.   This  time,  the  Company Judge thought  it  fit  to  recall  its

earlier order confirming the sale in favour of the above mentioned

2nd respondent by placing reliance on the judgment of this Court in

Divya Manufacturing Company (supra).   Aggrieved, the original

purchaser carried the matter in an intra court appeal before the

Division Bench.  Once again, the Division Bench permitted both the

parties  to  give  further  offers.   However,  after  such  a  strange

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exercise, the Division Bench opined that learned Company Judge

could not have recalled the confirmed sale because subsequently a

higher price was offered by somebody else. Even before this Court,

an intervener made a better offer.  It may be mentioned here that

there was a time gap of more than three years between the original

confirmation and such subsequent higher offer made in this Court.

However,  this  Court  disposed  of  the  appeal  accepting  the  much

higher offer made by the intervener in this Court and directing the

execution  of  the  sale  deed  in  favour  of  such  intervenor  for  the

following reasons:

“15. We  have  considered  the  respective  submissions and carefully perused the record. Ordinarily, the Court is loathe to accept the offer made by any bidder or a third  party  after  acceptance  of  the  highest  bid/offer given  pursuant  to  an  advertisement  issued  or  an auction  held  by  a  public  authority.  However,  in  the peculiar facts of this case, we are inclined to make a departure from this rule. Admittedly, total area of the land  advertised  by  the  Committee  is  12,500  square meters and the same is situated in an important district of Gujarat. It is also not in dispute that the area has been substantially developed in the last four years. The initial offer made by M/s Patel Agro Diesel Ltd. was of Rs. 83 lakhs and the highest revised offer given before the  learned  Company  Judge  was  of  Rs.  1.27  crores. After  acceptance  of  the  revised  offer  by  the  learned Company Judge, the appellant stepped in and made an offer to pay Rs. 1.41 crores. The first application filed by it was dismissed but the second application was allowed and the increased offer of Rs. 1.51 crores 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

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bound  to  suffer  because  the  amount  available  for repayment of the dues of the creditors would be a paltry sum of Rs. 1.27 crores. As against this, if the offer made by the intervenor-cum-promoter is accepted, the Official Liquidator will get an additional amount of more than Rs. 4.25 crores. The availability of such huge amount will certainly be in the interest of the creditors including GSIIC. Therefore, it is not possible to approve the order passed by the Division Bench of the High Court. In a somewhat similar case—FCS Software Solutions Ltd. v. La Medical Devices Ltd.,  (2008) 10 SCC 440, 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.”

[emphasis supplied]

As indicated in the above extract, such a decision was rendered on

the PECULIAR FACTS of that case.

42. Manoj I Naik & Associates v.  Official Liquidator, (2015) 3

SCC  112,  once  again  was  a  case  where  certain  properties  of  a

company in liquidation was brought to sale.  The company Judge

declined to accept the highest offer received on the ground that the

value of the property would be much higher than what was offered.

Eventually, when the matter reached this Court at the instance of

the highest bidder, the highest bidder himself substantially raised

his  offer  whereas  certain  other  respondents  also  offered  much

higher amounts for the property.  From the judgment, it appears

that there was virtually a scramble for the property,  each of the

parties  to  the  proceedings  offering  very  high  prices.   While  the 28

Page 29

original successful bidder’s offer was only Rs.1.3 crores, by the time

the matter was heard and disposed of by this Court, it reached an

amount of Rs.70 crores.  Once again, it must be noticed that there

is a time gap of almost a decade.  It is not possible to cull out from

the  judgment  the  actual  date  of  the  auction  by  the  official

liquidator.   

43. But the fact remains that one of the secured creditors objected

to  the  sale  in  favour  of  the  appellant  before  this  Court  on  the

ground  that  the  value  of  the  property  even  on  the  date  of  the

original  sale  was  worth  around  Rs.6.25  crores  as  against  the

highest offer of Rs.1.3 crores of the appellant herein.  Therefore, the

decision  of  the  Company  Judge  to  reject  the  highest  offer  is

perfectly justified.

44. A survey of the abovementioned judgments relied upon by the

first  respondent  does  not  indicate  that  this  Court  has  ever  laid

down a principle that whenever a higher offer is received in respect

of the sale of the property of a company in liquidation, the Court

would be  justified in reopening  the  concluded proceedings.   The

earliest judgment relied upon by the first respondent in Navalkha

& Sons (supra)  laid  down the  legal  position  very  clearly  that  a

subsequent higher offer is no valid ground for refusing confirmation 29

Page 30

of  a  sale  or  offer  already  made.   Unfortunately,  in  Divya

Manufacturing  Company  (supra) this  Court  departed  from  the

principle laid down in Navalkha & Sons (supra).  We have already

explained what exactly is the departure and how such a departure

was not justified.

45. Coming to the decision in FCS Software Solutions Ltd.,  we

have already noticed that this Court rightly reopened the finalized

sale  on  the  ground  that  there  was  material  irregularity  in  the

conduct of the sale.

46. Shradhha  Aromatics  (supra),  as  already  noticed,  is  a

decision  rendered  on  the  peculiar  facts  of  the  case  and,  in  our

opinion,  does  not  lay  down  any  principle  applicable  across  the

board.  Whereas in Manoj I Naik (supra) the Company Court itself

declined to accept the highest offer, therefore, it has no relevance in

the context of the case on hand.  

47. In our opinion, in the case on hand, the High Court was not

justified  in  recalling  the  order  dated  17.12.2013  for  following

reasons:   

48. The highest bid of the appellant herein was accepted by the

Company  Court  and  all  the  stake-holders  of  the  company  in

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liquidation were heard before  such an acceptance.   Nobody ever

objected including the first respondent herein at that stage on any

ground  whatsoever,  such  as,  that  there  was  any  fraud  or

irregularity in the sale nor was there any objection from any one of

them that the price offered by the appellant herein was inadequate.

No doubt, the property in question became more valuable in view of

the subsequent development.  In our opinion, it is not a relevant

consideration  in  determining  the  legality  of  the  order  dated

17.12.2013.  Imagine, if instead of increasing the floor space index

for construction from 1.0 to 1.8 the State of Gujarat had decided to

reduce it below 1.0 subsequent to 17.12.2013, could the appellant

be heard to argue that it would be legally justified in resiling from

its earlier offer which was accepted by the Court and not bound by

the  contractual  obligation  flowing  from  such  an  offer  and

acceptance?  

49. Certain incidental questions raised by the first respondent are

required to be answered at this stage.

50. The  first  respondent  submitted  that  the  order  dated

17.12.2013 only accepted the highest bid but it did not confirm the

sale and, therefore, the Court is at liberty to decline confirmation of

the sale in view of the subsequent developments.  In our opinion, 31

Page 32

the said submission is to be rejected because there is no specific

format in which a sale conducted by the official liquidator is to be

confirmed  by  the  Company  Court.   The  mere  absence  of  the

expression  “that  the  sale  is  confirmed”  in  the  order  dated

17.12.2013 is not determinative of the question.  The totality of the

circumstances,  such as,  the  very  tenor  of  the  order  (Footnote  1

supra) that none of the stake-holders of the Company in liquidation

ever objected to the offer of the appellant herein on the ground that

it  is  inadequate  consideration for  the property;  the  fact  that  the

official liquidator himself understood the order dated 17.12.2013 to

be  an order  not  only  accepting  the  highest  bid  of  the  appellant

herein but also as an order confirming the sale in favour of  the

appellant, as evidenced by his letter dated 19.12.2013, (the relevant

portion of which is already extracted earlier) and the fact that the

first instalment of the payment of 25% of the sale consideration was

accepted  both  by  the  official  liquidator  and  the  Company  Court

without raising any objection for the same and the fact that the first

respondent withdrew its earnest money deposit without raising any

objection regarding adequacy of the price offered by the appellant

herein, in our view, clearly indicate that the sale in favour of the

appellant was confirmed by the order dated 17.12.2013.  Assuming

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for  the  sake  of  argument  that  there  is  no  confirmation,  in  the

absence of any legally tenable ground for not confirming the sale, it

cannot be declined to the appellant as it was observed in Navalkha

case (supra) that “…no subsequent higher offer can constitute a

valid ground for refusing confirmation of the sale or offer already

made”.

51. The other submission made before the Division Bench of the

High Court and before us by the first respondent that there was a

change  in  the  share-holding  pattern  of  the  appellant  company

subsequent to the order dated 17.12.2013 and that such a change

would virtually amount to a nomination by the successful bidder in

favour  a  of  third  party  contrary  to  the  conditions  of  the  tender

notice,  in our opinion, does not deserve any consideration.  This

was not the ground on which the first respondent initially sought

recall of the order dated 17.12.2013.  Such a recall was sought only

on one ground, the details for which are already noted earlier in this

judgment.  The first respondent kept on adding new grounds from

stage  to  stage  for  attacking  the  order  dated  17.12.2013.   The

conduct of the first respondent is understandable.  The value of the

property in question must have escalated substantially in view of

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the developments subsequent to the order dated 17.12.2013 but

allowing  such  an  attempt,  in  our  opinion,  would  rob  the  sales

conducted by the Courts of all sanctity.  

52. For all the abovementioned reasons, we allow the appeals of

the appellant Vedica Procon Private Limited, with costs.

….………………………….J.                                                              (J. Chelameswar)

…….……………………….J.  (Abhay Manohar Sapre)

New Delhi; August 13, 2015  

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