A. M. AHMADI, J. :, J. ( 1 ) THIS appeal is directed against the order passed by the learned Company judge in Company Application no. 80 of 1987 on 4th September, 1987 granting the plant and machinery of the Company on lease to the second respondent. The facts giving rise to this appeal, briefly stated, are as under. ( 2 ) THE Company, Messrs Shree Ramkrishna mills Company Limited, was ordered to be wound up and the Official liquidator was appointed the Provisional liquidator of the Company. After the said winding up order was passed on 23rd April 1987, the third respondent moved Company Application No. 80 of 1987 for running the unit on leave and licence basis. On receipt of the said application, the learned Company Judge directed advertisements to issue in the Times of India (Ahmedabad and Bombay Editions) and gujarat Samachar (Ahmedabad Edition) inviting applications/offers in sealed covers from members of the public desirous of running the unit on leave and licence basis. It was directed that the offers in sealed covers should reach the Liqidator on or before 14th August 1987 together with a demand Draft of Rs. 25,000/ -. The offers so received by the Liquidator were to be submitted to the Court on 17th august 1987 on which date further orders were expected to be passed. In response to this advertisement, the third respondent alone made an offer of Rs. 5,000/- per month for running the unit on leave and licence basis. This offer was raised to Rs. 12,000/- per month on 19th August, 1987 after some discussion. Thereafter before the offer could be finally accepted, the second respondent appeared before the learned Company Judge and informed him that he was interested in running the unit on leave and licence basis and was prepared to offer a higher sum by way of monthly licence fees. Thereupon the learned Company Judge directed him to deposit Rs. 25,000/- in Court to show his bona fides. The second respondent deposited the said amount of Rs. 25,000/- in Court and offered a monthly rent of Rs. 13,000/- for the unit. Thereafter the learned Company Judge asked the second and third respondents to submit their final offers in writing and accordingly the second respondent offered Rs. 21,000/- as monthly licence fees as against the offer of Rs. 15,251/- made by the third respondent. 25,000/- in Court and offered a monthly rent of Rs. 13,000/- for the unit. Thereafter the learned Company Judge asked the second and third respondents to submit their final offers in writing and accordingly the second respondent offered Rs. 21,000/- as monthly licence fees as against the offer of Rs. 15,251/- made by the third respondent. The learned Company Judge by his impugned order dated 4th September 1987 accepted the offer of the second respondent and directed the Liquidator to grant the unit to the second respondent for a period of two years with effect from 1st November 1987. Certain incidental directions were also given as regards further deposit, furnishing of bank guarantee, preparing an inventory etc. The deposit of Rs. 25,000/- made by the third respondent was ordered to be refunded to him not later than 10th September 1987. It may be mentioned that this order was passed overruling the objection of the fourth respondent, the secured creditor, to the grant of the unit on leave and licence basis. The fourth respondent had, therefore, made it clear that it desired to remain outside the winding up proceedings. ( 3 ) THE appellant before us is a shareholder of the Company in liquidation. He contends that the learned Company judge committed two grave errors, namely, (i) in disposing of the Company application without any advertisement being issued in the Times of India (Bombay Edition) as per the Courts order of 23rd July, 1987 and (ii) in permitting a party accidentally present in Court in submitting an offer and thereby participating in the process of the grant of unit on leave and licence basis. According to him the procedure adopted by the learned Company Judge was not warranted by rules and has resulted in prejudice to the Company which could have secured a higher return by way of licence fee if a fresh advertisement was issued. He, therefore, contends that the order passed by the learned Company Judge accepting the belated offer of the second respondent is clearly arbitrary and violative of article 14 of the Constitution. He has lastly added that he is prepared to offer a higher rent/licence fee and abide by all the terms and conditions imposed by the learned Company Judge. He, therefore, contends that the order passed by the learned Company Judge accepting the belated offer of the second respondent is clearly arbitrary and violative of article 14 of the Constitution. He has lastly added that he is prepared to offer a higher rent/licence fee and abide by all the terms and conditions imposed by the learned Company Judge. ( 4 ) THE second respondent contends that this appeal is filed at the behest of the third respondent who was keen to secure the unit on leave and licence basis but could not do so because his offer was far below the offer made by the second respondent. While conceding the fact that no advertisement had appeared in the Times of India (Bombay edition), he contends that the learned company Judge had after receiving the report of the Liquidator waived the advertisement and, therefore, the grant of the unit to the second respondent was in order. As regards the second objection he admits that although he had not forwarded any offer in pursuance of the advertisement to the Liquidator, he had, on coming to know that the unit was offered on lease or leave and licence basis, appeared in Court and had shown his willingness to offer a higher rent/fee. The learned Company Judge thereupon directed him to show his bona fides by depositing a sum of Rs. 25,000/- as required by the advertisement and by making his offer in writing. He accordingly deposited Rs. 25,000 and offered Rs. 13,000/- per month which offer was subsequently raised to rs. 21,000/ -. This, contends the second respondent, has fetched a substantially higher rent/fee to the Company in liquidation and, therefore, it is obvious that the procedure adopted by the learned company Judge was to secure the maximum return for the Company in liquidation. In the circumstances the contention that the procedure adopted by the learned Company Judge has caused prejudice to the Company in liquidation must be rejected out of hand. Lastly, he contends that if the order passed by the learned Company Judge is set aside at this belated stage, it will result in considerable hardship to the second respondent who has in pursuance of the order, taken steps for starting the unit at an early date. Lastly, he contends that if the order passed by the learned Company Judge is set aside at this belated stage, it will result in considerable hardship to the second respondent who has in pursuance of the order, taken steps for starting the unit at an early date. ( 5 ) IT is clear from the above facts that the learned Company Judge had by his order dated 23rd July 1987 directed an advertisement to issue in the times of India (Ahmedabad and Bombay Editions) and in the local Gujarati daily gujarat Samachar (Ahmedabad edition) for inviting tenders from members of the public desirous of running the unit on lease. It is an admitted fact that the advertisement appeared in the Times of India and Gujarat Samachar (Ahmedabad Editions) only. It is clear from the copy of the letter of the times of India dated 18th August 1987 appended to the affidavit-in-reply filed by the second respondent that the advertisement could not be printed in the bombay Edition of the newspaper as it was received late. The Liquidator by his report dated 17th August 1987 pointed out that he had received only one offer in response to the advertisement and sought directions whether a fresh advertisement should be inserted for a better public response. It appears that when the matter came up before the learned Company Judge on 17th August 1987, the learned Judge directed the liquidator to submit a fresh report in regard to the non-publication of the advertisement in the Bombay Edition of the Times of India. Thereupon the Liquidator submitted a further report on the next day and sought directions of the Court. The learned Company Judge does not appear to have passed any orders on the aforesaid two reports filed by the Liquidator. Copies of these reports have been filed at Annexure d to the affidavit-in-reply of the second respondent. It is clear from the above facts that the public response was rather poor since only one offer was received from the third respondent in response to the advertisements issued in the local newspapers. The offer made by the third respondent was a meagre rs. 5,000/- per month and that is why the liquidator thought that a fresh advertisement was called for. Be that as it may, the fact remains that the learned company Judge did not pass any orders on the said two reports. The offer made by the third respondent was a meagre rs. 5,000/- per month and that is why the liquidator thought that a fresh advertisement was called for. Be that as it may, the fact remains that the learned company Judge did not pass any orders on the said two reports. On 19th august 1987 the third respondent raised his offer to Rs. 12,000/- per month. The proceedings could not be completed before 27th August 1987 on which date the second respondent who was present in Court informed the learned company Judge that he was ready and willing to offer a higher amount for running the unit on lease. Thereupon the learned Company Judge directed the second respondent to deposit Rs. 25,000/- in Court as per the terms of the advertisement and make his offer. The second respondent deposited Rs. 25,000/- and offered Rs. 13,000/- per month for running the unit on lease. It was thereafter that the learned Company Judge directed the second and the third respondents to make their final offers in writing and accepted the offer of Rs. 21,000/- per month made by the second respondent by his impugned order of 4th september 1987. Although the learned judge did not pass any orders on the two reports submitted by the Liquidator, it is clear from the impugned order of 4th September 1987 that he did net direct fresh advertisements to issue nor did he consider the non-publication of the advertisement in the Bombay Edition of the Times of India a serious lapse. He proceeded to deal with the offers made by the second and the third respondents and on the second respondent ultimately emerging as the highest bidder, he passed the impugned order directing the Liquidator to give the unit to the second respondent for a period of two years with effect from 1st november 1987. Keeping in mind the events that took place on different dates before the learned Company Judge culminating in the final order of 4th September 1987, it can be said that the learned Company Judge did not consider the non-publication of the advertisement in the Bombay Edition of the times of India a lapse necessitating the issuance of fresh advertisements. ( 6 ) IT is noticed that in response to the advertisements issued in the local dailies, only one party, the third respondent, made an offer for running the unit on lease. ( 6 ) IT is noticed that in response to the advertisements issued in the local dailies, only one party, the third respondent, made an offer for running the unit on lease. There can, therefore, be no doubt that the public response was rather poor. The initial offer of the third respondent was of Rs. 5,000/- per month only which was raised to Rs. 12,000/- on 19th August 1987. On 27th august 1987 the second respondent made a chance appearance and offered a higher rent/fee. On the Courts direction he deposited an amount of Rs. 25,000/- and offered Rs. 13,000/- per month. Later these offers were further raised to Rs. 15,251/- and Rs. 21,000/- by the third and the second respondents respectively. These developments would show that the initial offer made by the third respondent was very much on the lower side. Had it not been for the chance appearance of the second respondent, the unit would not have fetched Rs. 21,000/- per month. The escalation of the monthly rent from Rs. 5,000/- to Rs. 21,000/- in the course of a few days was a clear indication that the unit was capable of fetching a better return. Mr. Shelat, therefore, contended that these developments should have put the learned Company judge on guard that even the monthly rent of Rs. 21,000/- offered by the second respondent may not be adequate. He submitted that it was hazardous to accept the offer of the second respondent merely because it was the highes between the too competitors. In support of his contention he went a step further and offered a monthly licence fee of rs. 31,000/- on the same terms and conditions. The third respondent also raised his offer to Rs. 30,000/- per month during the hearing of the appeal. Both the appellant and the third respondent have deposited a sum of Rs. 25,000/- in Court to show their bona fides. Mr. Shelat, therefore, submitted that the procedure adopted by the learned Company Judge Was not conducive to fetching the best offer for the unit in question. We think there is considerable force in this submission. ( 7 ) THE learned Company Judge was right in directing an advertisement to issue in the newspapers on receipt of company Application No. 80 of 1987 from the third respondent offering to run the unit on leave and licence basis. We think there is considerable force in this submission. ( 7 ) THE learned Company Judge was right in directing an advertisement to issue in the newspapers on receipt of company Application No. 80 of 1987 from the third respondent offering to run the unit on leave and licence basis. After issuing the advertisement, when the learned Company Judge found that only one offer was received in response thereto, he should have realised that the public response was poor. He had two options at that point of time, namely, to accept the offer made by the third respondent if he considered the same adequate or to direct a fresh advertisement as proposed by the Liquidator by his report of 17th August 1987. He did not consider the offer made by the third respondent as adequate and, therefore, the third respondent raised it to Rs. 12,000/ -. The chance appearance of the second respondent in Court when the learned Company Judge was hearing the application made it abundantly clear that even this offer of Rs. 12,000/- was on the lower side. The subsequent raising of the offers by the two competitors was a clear indication that the unit was capable of fetching a better rent/ fee. In such cases it is the duty of the company Court to satisfy itself that the offer which it is about to accept is a reasonable one. It would not confirm or accept the offer unless it feels assured that the rent/fee offered is adequate having regard to the market conditions. In the present case there was no material before the Court to ascertain whether the offer made by the second respondent was a reasonable one having regard to the prevailing market conditions. There were only two competitors and they hiked up their offers; but merely because the second respondent offered Rs. 21,000/- there was no guarantee that the said offer was an adequate one, particularly because there was hardly any public response to the advertisement issued in the local dailies. Besides, the procedure of permitting a party accidentally present in Court to make an offer after the fixed date can hardly be said to be reasonable or proper. If the learned Company Judge felt that the offer made by the third respondent was not adequate after the second respondent made a higher offer and showed his bona fides by depositing a sum of Rs. If the learned Company Judge felt that the offer made by the third respondent was not adequate after the second respondent made a higher offer and showed his bona fides by depositing a sum of Rs. 25,000/-, the proper course to adopt was to direct fresh advertisements to issue. It is always a matter of discretion to be exercised by the company Court for accepting such offers but the discretion must be exercised on sound judicial principles so that one member of the public does not steal a march while the others have no opportunity to participate and bid after the fixed date. It must be realised that once a party which has missed the bus is allowed to participate without the knowledge of other members of the public similarly situated, the action becomes open to challenge on grounds of discrimination, etc. In the present case admittedly the second respondent had not made any offer on or before the stipulated date, 14th August 1987, and, therefore, when the learned Company Judge permitted him to intervene and make an offer he adopted a procedure which enabled only one member of the public to participate in the bid to the exclusion of others. If other members of the public who too had missed the bus were informed that it was open to them to make an offer notwithstanding the expiry of the stipulated date, the possibility of some others like the appellant coming forward to make the offer could not be ruled out. The subsequent developments in the appeal show that the unit can fetch much more than Rs. 21,000/- per month which is indicative of the prejudice likely to be caused to the Company in liquidation due to the method adopted by the learned Company Judge. ( 8 ) IN the above view that we take, we are fortified by a decision of the supreme Court in Navalkha and Sons v. Ramanya Das, AIR 1970 SC 2037 . In that case the Official Liquidator sought permission of the Court for the sale of immovable and movable properties and actionable claims of the Company in liquidation. A similar request was made by a shareholder of the Company. On these applications an order was made appointing respondents Nos. In that case the Official Liquidator sought permission of the Court for the sale of immovable and movable properties and actionable claims of the Company in liquidation. A similar request was made by a shareholder of the Company. On these applications an order was made appointing respondents Nos. 2, 3 and 4 as Joint Commissioners for selling the properties and actionable claims of the company, in accordance with the terms and conditions set out in the order. One of the conditions was that the proclamation of sale was to be advertised twice in each of the five leading dailies named therein to ensure wide publicity. The Commissioners got published the proclamation in four leading dailies only. The advertisement was also not issued twice as directed by the Court. The last date of receipt of the offers was 8th September, 1964. "not a single offer was received by that date. The time for receipt of offers was extended by the Court to the end of November 1964. The appellant was the sole offerer within the extended period. It restricted the offer to immovable and movable properties but made no offer for the actionable claims. The offer was accepted by the Court Commissioners on 2nd December 1964. Before the sale could be confirmed, one Gopaldas darak made an offer for a higher amount saying that he could not offer in time because he came to know of the sale only a couple of days before the due date. To show his bona fides, he gave a demand Draft for a sum of Rs. 1,00,015/ -. The learned Company Judge decided that the properly did not fetch its proper price and there was possibility of higher bids. Instead of directing a fresh auction or calling for fresh offers, as in the case on hand, the learned Company Judge thought it proper to arrange an open bid between the appellant and Gopaldas Darak. The appellant consented to the course adopted by the learned Judge and volunteered to take part in the bid and became the highest bidder. The learned Judge accepted the said bid as final and concluded the sale in favour of the appellant and issued certain incidental directions. The appellant paid the balance of the amount on January 30, 1965. On the same day one Padam Ghand Agarwal made an application offering Rs. 10 lakhs. The learned Judge accepted the said bid as final and concluded the sale in favour of the appellant and issued certain incidental directions. The appellant paid the balance of the amount on January 30, 1965. On the same day one Padam Ghand Agarwal made an application offering Rs. 10 lakhs. He too complained that the publicity of the sale of the property was not adequately made and he came to know about the advertisement very late. He had expressed his willingness to participate in open bid if the Court so decided. The learned Judge rejected his request. Padam Ghand Agarwal thereupon filed an appeal. One Ramnuja Das, a contributory, also chose to prefer an appeal. Both the appeals were allowed and the order of the learned single Judge was set aside. It was directed that the learned Judge should take fresh steps for the sale of the property either by calling sealed tenders or by auction in accordance with law. The minimum offer or starting bid was fixed at Rs. 10,00,000/ -. In further appeal to the Supreme Court, Their Lordships after referring to Rule 273 of the companies (Court) Rules, 1959, observed : ". . . . 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:" dealing with the contention that the decision of the learned Single Judge to have an open bid as between the appel- itself on that very day was not justified, the Supreme Court observed as under: "the auction in question no doubt was conducted in a public place but it was not a public auction because it was not open to the general public but was confined to two named persons. Secondly, it was not held after due publicity. It was held immediately after it was decided upon. It is, therefore, obvious that the sale in question was not a public sale which implies sale after giving notice to the public wherein every member of the public is at liberty to participate. " the Court, therefore, took the view that the denial of opportunity to purchase the property is a serious matter which had caused prejudice to the company. " the Court, therefore, took the view that the denial of opportunity to purchase the property is a serious matter which had caused prejudice to the company. ( 9 ) IN the present case also we have already pointed out earlier that there was very little public response to the advertisements in the daily newspapers. Only one bid was received and that too of the party which had filed the Company Application for taking the unit on lease. This offer was very much on the lower side and was more than doubled within a few days. The chance appearance of the second respondent in Court disclosed that even this hiked offer was not adequate. The inter se bidding between respondents Nos. 2 and 3 indicated that the unit could fetch a much better rent/fee if properly advertised. In these circumstances we think the proper course to adopt was to issue a fresh advertisement after fixing the reserved bid at the rent/fee offered by the second respondent. That would have given other members of the public who too had missed the bus an opportunity of participating in the public auction. Instead, the learned Company Judge confined the bidding between respondents Nos. 2 and 3 and thereby kept the fray which, in our opinion, was not proper. The facts of the Supreme Court judgment referred to above were more or less similar when the learned Company judge held a public auction confined to the appellant and Gopaldas Darak. The supreme Court, therefore, held that though the auction was conducted in a public place, it was not open to the general public which was not proper. We are, therefore, of the opinion that in the present case also when the learned judge allowed the second respondent to participate in the bidding after the due date he confined the auction to two parties only thereby denying to other members of the public who too were similarly situated, namely, who had missed the bus of participating in offering to take the unit on lease/leave and licence basis. The learned Advocate general submitted that the decision of the Supreme Court turns on the language of Section 273 which refers to sale and has nothing to do with the unit being granted on rent on leave and licence basis. In our view, this distinction sought to be made is artificial and not real. The learned Advocate general submitted that the decision of the Supreme Court turns on the language of Section 273 which refers to sale and has nothing to do with the unit being granted on rent on leave and licence basis. In our view, this distinction sought to be made is artificial and not real. Whether the properly of the company is being sold or rented should not make any difference because once the Court decides on public participation, the principle governing sale of company property should apply even to cases where the Company property is sought to be leased or given on leave and licence basis if the procedure to be adopted is one of public auction or inviting sealed tenders from members of the public. Once public participation is expected by inviting bids in sealed covers, we think, the ratio of the Supreme court decision in the above case must apply with all force. ( 10 ) XXX XXX XXX ( 11 ) IT was argued that the appeal was delayed. The impugned order was passed by the learned Company Judge on 4th September 1987 and in seven days time this appeal came to be filed. We, therefore, do not think that there is such delay as would warrant the dismissal of the appeal on that ground. ( 12 ) IT was next submitted that in pursuance of the order passed by the learned Company Judge the second respondent had taken steps to start the unit. Inventory of the stock, machinery and other articles of the unit was taken and the Liquidator had also addressed letters to the Telephone Department and the Electricity Company for reconnection. It was, therefore, submitted that if the order passed by the learned company Judge is set aside, it will result in hardship to the second respondent. We see no merit in this submission. Merely because an inventory is made and the Liquidator has written letters to the Telephone Department and the Electricity Company, it cannot be said that the second respondent would suffer irreparable loss or undue hardship if the impugned order is set aside. The interest of the Company must be paramount to the Court since the Court is the custodian of the Company. If it has to choose between individual interest and the interest of the Company, it would certainly lean in favour of the latter. The interest of the Company must be paramount to the Court since the Court is the custodian of the Company. If it has to choose between individual interest and the interest of the Company, it would certainly lean in favour of the latter. In the present case, however, the so-called hardship or incovenience is more imaginary than real. We, therefore, do not see any merit in this contention. ( 13 ) FOR the above reasons we allow the appeal and set aside the impugned order of 4th September 1987 passed by the learned Company Judge. We direct that (i) a fresh advertisement in the Times of India and Gujarat Samachar (Ahmedabad Editions) should be issued inviting offers from members of the public on the same terms and conditions for running the unit on leave and licence basis. Needless to say that the appellant and the respondents Nos. 2 and 3 will be entitled to submit fresh offers offering a higher licence fee than already offered; (ii) the amount of rs. 25,000/- deposited by the appellant and the third respondent pursuant to this Courts order will be retained by the Liquidator till further orders. If the unit is offered to any of these parties on leave and licence basis on the terms and conditions agreed to and the party refuses to take it, the Liquidator will forfeit the deposit money and the concerned party will have no claim to it; (iii) in the fresh advertisement it will be stated that the offer for the licence fee shall not be less than rs. 31,000/ -. Every offer must be accompanied by a Demand Draft of Rs. 25,000/ -. An offer offering less than Rs. 31,000/- as licence fee or an offer not accompanied by a Demand Draft of rs. 25,000/- shall not be entertained. It is clarified that the offers of the appellant and respondent Nos. 2 and 3 need not be accompanied by a deposit of Rs. 25,000/- since they have already deposited the same; and (iv) after the offers are received, the Liquidator will open the sealed covers in the presence of the learned Company Judge. Out of the offers which are found in order, the learned Company Judge will offer the unit to the highest bidder and if he fails to accept the same, to the next highest bidder down the line and so on. Out of the offers which are found in order, the learned Company Judge will offer the unit to the highest bidder and if he fails to accept the same, to the next highest bidder down the line and so on. ( 14 ) THE deposits of the first three highest bidders will be retained till the deal is finalised by the execution of a leave and licence agreement while the deposits of the others may be refunded. If the person making the highest offer does not abide by the terms and conditions on the basis whereof the offers were invited and does not enter into a leave and licence agreement, his deposit of rs. 25,000/- will be forfeited and the next best offer will be accepted and so on. After the deal is finalised and the agreement is accepted, the amount of deposit will be refunded to the non-defaulting parties. The appellant to deposit the charges for advertisement in the first instance. ( 15 ) THE matter will now go back to the learned Company Judge for being disposed of in accordance with law in the light of the directions given hereinabove. The appeal is allowed accordingly with no order as to costs. .