Judgment 1. On 6th August, 2008, we passed the following order:- "The Official Liquidator issued a sale notice initially on 3rd December, 2007, pursuant to the order of the Company Judge inviting offers for sale of movable/immovable assets and properties of the factory unit belonging to M/s Pyrites Phosphate & Chemicals Ltd. (in liquidation) situated at Amjoore, District-Rohtas. The sale notice sets out the assets and properties of the Company (movable/immovable) described in Schedule-I and Schedule-II and also upset price and earnest money. We deem it proper to reproduce the sale notice dated 3rd December, 2007 as it is:- SALE NOTICE 1. Pursuant to the Orders of the Honble Company Judge, High Court, Patna, Offers on the Prescribed Tender Form are invited for sale of Scheduled below movabie/immovable assets & properties of the Factory Unit belonging to the company in liquidation situated at Amjhore, Distt.-Rohtas, State of Bihar. The motto of sale is strictly on "as is where is and whatever there is" basis. Schedule-1 -Factory Building, Plant Sheds, Plant & Machineries related with Phosphate Fertilizer Plant, Lab Equipments, Furniture & Fixtures, Stores, Tube-wells, Motor Vehicles, Loose scraps tems etc. lying and situated within the compound wall of Plant. Schedule-2.-Non-Residential Buildings, Residential Buildings, alongwith land (free-hold) admeasuring to Acres 318.2675 whereupon the said buildings are constructed and the Factory Unit is installed. Other Eventualities.-Upset price & Earnest Money Deposit for the above scheduled property:- Schedule-1 - Rs. 13.00 Crores & Rs. 50.00 Lacs Schedule-2- Rs. 08.00 Crores & Rs. 40.00 Lacs Whole (Schedule-1 + 2) Rs. 21.00 Crores & Rs. 90.00 Lacs Tender Forms can be obtained on payment of Rs. 1,000/- either in cash or demand drafts and assets and properties can be inspected at the Factory Site on 27.12.2007. Offers may be submitted either for any one or for both of the Scheduled properties as a whole. The Sealed tenders should reach the under signed on or before 1.1.2008 upto 6.00 p.m. The sealed tenders will be opened on 3.1.2008 at 10.30 a.m. before the Honble Company Judge. The Terms and Conditions of Sale can be downloaded from our website:www.olhcpatna.com. Place : Patna Sd/- Dated-3.12.2007 (G.C. Yadav) Tel. No. 0612-221002 Official Liquidator, High Court, Patna Mouryalok Complex, 4th floor, B1-A Dak Bunglow Road, Patna-800 001. 2. The Terms and Conditions of Sale can be downloaded from our website:www.olhcpatna.com. Place : Patna Sd/- Dated-3.12.2007 (G.C. Yadav) Tel. No. 0612-221002 Official Liquidator, High Court, Patna Mouryalok Complex, 4th floor, B1-A Dak Bunglow Road, Patna-800 001. 2. It is pertinent to notice that pursuant to the sale notice dated 3.12.2007, three offerers viz., M/s Fantassy Ventures, M/s Jhunjhunwala Vanaspati Ltd. and M/s Rajendra Ispat put in their offers. 3. On 15th February, 2008, these three offerers were present before the Company Judge. M/s Fantassy Ventures (respondent no. 2) on that date revised its offer to Rs. 13.75 crores. The Company Judge accepted the same being highest bid on that date although conditionally with a direction to the Official Liquidator to issue a fresh sale notice for both Schedule-I and Schedule-II properties fixing 7th March, 2008 as the date of sale. In his order dated 15th February, 2008, the Company Judge made it clear that if some better offer is not received on 7th March, 2008, then the sale shall be confirmed in favour of M/s Fantassy Ventures at Rs. 13.75 crores. The Company Judge ordered return of security deposited to other two offerers, namely, M/s. Rajendra Ispat and M/s Jhunjhunwala Vanaspati Ltd. (present appellant). These two offerers were, however, given liberty to submit fresh offer on 7th March, 2008. 4. Pursuant to the order dated 15th February, 2008, the Official Liquidator issued a fresh sale notice dated 20th February, 2008. We deem it proper to reproduce the said notice as it is:- "SALE NOTICE "Pursuant to the Orders of the Honble High Court, Patna dated 15.2.2008 Offers are invited from the intending purchasers on prescribed Tender Form in sealed cover in one Lot as a whole, for the sale of land (free-hold) admeasuring to Acres 318.2675 approximate situated at Amjhore, Distt.-Rohtas, State of Bihar, alongwith Factory Unit i.e. Phosphatic Fertilizer Plant to produce 2.64 Lakhs TPY or SSP (single super phosphate), with all necessary utilities, off sites with dense plantation, and infrastructures i.e. School Building, Guest House, Residential Quarters, Flats, etc., and any other movable and immovable property lying and situated thereon, to which the Company in Liquidation is entitled. The motto of sale is strictly on "as is where is and whatever there is" basis. Tender Form can be obtained on payment of Rs. 1,000/- either in cash or demand drafts. The motto of sale is strictly on "as is where is and whatever there is" basis. Tender Form can be obtained on payment of Rs. 1,000/- either in cash or demand drafts. The sealed tenders quoting the price substantially higher to Rs. 13.75 crores containing the Demand Draft of Rs. 90 Lakhs as Earnest Money, be submitted to the officer of the under signed on or before 5.3.2008 up to 6 p.m. and the same will be opened on 7.3.2008 at 10.30 a.m. before the Honble Company Judge. The interested buyers may take further notice that the Honble High Court has accepted the offer to Rs. 13.75 Crores with condition that if no better offers are received pursuant to the instant Sale Notice, the sale shall stand confirmed on 7.3.2008. The Sale Notice and "Terms and Conditions of Sale" can be downloaded from our website www.olhepatna.com. Place: Patna Sd/- Dated: 20.2.08 (G.C.Yadav) Tel. No.:0612-221002 Official Liquidator, High Court, Patna Mouryalok Complex, 4th floor, B1.-A Dak Bunglow Road, Patna-800 001." 5. The matter appeared before the Company Judge on 7th March, 2008. It was noticed that no fresh offer was received by the Official Liquidator. The Company Judge, accordingly, accepted the offer already made by M/s Fantassy Ventures at Rs. 13.75 crores (which had already been conditionally accepted on 15th February, 2008). M/s Fantassy Ventures was directed to deposit the balance sale consideration within a period of 60 days therefrom. 6. M/s Fantassy Ventures failed to deposit the balance sale consideration within a period of 60 days as was granted by the order dated 7th March, 2008. They filed a petition for extension of time on 8th May, 2008. By that time they had only deposited Rupees two crores out of the total consideration of Rs. 13.75 crores. Despite opposition by the State Bank of India, the Company Judge extended the time for deposit of the balance sale consideration by a further period of 60 days therefrom. The said order seems to have been passed as the purchaser (M/s Fantassy Ventures) had undertaken to deposit the entire sale consideration within 60 days of 8th May, 2008. 7. M/s Fantassy Ventures failed to honour the undertaking given by them before the Company Judge while seeking extension that the balance sale consideration would be deposited within 60 days. Another application for extension of time for depositing the sale consideration on 10th July, 2008. 7. M/s Fantassy Ventures failed to honour the undertaking given by them before the Company Judge while seeking extension that the balance sale consideration would be deposited within 60 days. Another application for extension of time for depositing the sale consideration on 10th July, 2008. The Company Judge was persuaded to grant indulgence and permitted the purchaser to deposit the entire consideration by the next date i.e. 17th July, 2008. In his order dated 11th July, 2008, the Company Judge clarified that in case the purchaser failed to deposit the entire sale consideration by 17th July, 2008, the offer of the next highest bidder, namely, M/s Jhunjhunwala Vanaspati Ltd. (appellant herein) shall be considered. 8. On 18th July, 2008 the matter came-up before the Company Judge. The purchaser (M/s Fantassy Ventures) informed the Company Judge through a petition that the entire consideration has been deposited by means of diverse pay orders and demand drafts. This position was accepted by the Official Liquidator. The present appellant (M/s Jhunjhunwala Vanaspati Ltd.) on that date filed two petitions for stay of sale confirmation as well as delivery of possession in favour of M/s Fantassy Ventures as they intended to file company appeal from the order of extension of time granted to the purchaser. On that date the present appellant also seems to have offered to purchase the subject property for a consideration of Rs. 14.75 crores. One M/s Nilamber Trexim & Credit Pvt. Ltd. also made a petition before the Company Judge on that date making their offer for purchase of the subject property at a consideration of Rs. 14.25 crores. The Company Judge rejected the petition filed by M/s Nilamber Trexim & Credit Pvt. Ltd., from which we are informed that a company appeal has been preferred. The two petitions filed by the present appellant M/s Jhunjhunwala Vanaspati Ltd. also came to be rejected by the Company Judge on 18th July, 2008. It is from this order that the present appeal has been preferred. 9. During the course of motion hearing, Mr. D.V. Pathy, counsel for the appellant, inter alia, submitted that the appellant is ready and willing to purchase the subject property at a higher price than Rs. 14.75 Crores which was offered before the Company Judge. After seeking instructions, he made a firm offer of Rs. 16 crores. 9. During the course of motion hearing, Mr. D.V. Pathy, counsel for the appellant, inter alia, submitted that the appellant is ready and willing to purchase the subject property at a higher price than Rs. 14.75 Crores which was offered before the Company Judge. After seeking instructions, he made a firm offer of Rs. 16 crores. The counsel also placed reliance upon the decision of the Supreme Court in the case of Divya Manufacturing Company (P) Ltd. Vs. Union Bank of India, (2000)6 Supreme Court Cases 69. 10. In Divya Manufacturing Company (P) Ltd., which related to confirmation of sale pf the properties belonging to the company in liquidation, the Supreme Court expounded the legal position thus:- "12. The law on this subject is well settled. In the case. of Navalkha and Sons after the appellants offer was accepted, a fresh offer from one Gopaldas Darak for higher amount was received by stating that he could not offer in time because he came to know of the safe only 2 days prior to the date of the application and there was possibility of higher bids. Instead of directing a fresh auction or calling for fresh offers, the learned Judge thought it proper to arrange an open bid in the Court itself on that very day as between M/s Navalkha and the higher offerer Gopaldas Darak. M/s Navalkha thereafter offered higher bid at Rs. 8,82,000 and its bid was accepted and the learned Judge concluded the sale in its favour with a direction to pay the balance amount. Thereafter an application was filed offering Rs. 10 lakhs. A contention was raised that due publicity of the safe of the property was not made, but that application was rejected by the Court. Hence, an appeal was filed by the applicant who made an offer of Rs. 10 Lakhs and another by one contributory against the order of confirmation. Both appeals were allowed by the Division Bench and the order passed by the learned Judge was set aside with a direction to take fresh steps for sale of the property either by calling sealed tenders or by auction in accordance with iaw. That order was challenged before this Gourt by M/s Navalkha. It was contended that there was no justification for the Division Bench to interfere with the order of the learned Single Judge. That order was challenged before this Gourt by M/s Navalkha. It was contended that there was no justification for the Division Bench to interfere with the order of the learned Single Judge. In that context, after quoting Rule 273 of the Company (Court) Rules, 1959, the Court observed (SCC pp. 540-41, para 6):- "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 offerer 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 Dakuwala Vs. T. Sirman Kanthimathinatha Pillai, it was observed that where the property is authorized to be sold by 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 Ratnasami Pillai Vs. Sabapathy Pillai and S. Soundararajan Vs. Khaka Mahomed Ismail Saheb of Roshan & Co. In A. Subbaraya Mudaliar Vs. This principle was followed in Ratnasami Pillai Vs. Sabapathy Pillai and S. Soundararajan Vs. Khaka Mahomed Ismail Saheb of Roshan & Co. In A. Subbaraya Mudaliar Vs. K. Sundararajan 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." 13. From the aforesaid observation, it is abundantly clear that the court is the custodian of the interests of the company and its creditors. Hence, it is the duty of the court to see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularity or fraud. As stated above, in the present case, the sale proceedings have a chequered history. The appellant started its offer after having an agreement with the Employees Samity for Rs. 37 Lakhs. This was on the face of it under bidding for taking undue advantage of court sale. At the intervention of the learned Single Judge, the bid was increased to Rs, 85 lakhs. Subsequently, before the Division Bench, the appellant increased it to Rs. 1.30 crores. At that stage, Respondent 7 "Sharma" was not permitted to bid because it had not complied with the requirements of the advertisement. It is to be stated that on 26.6.1998 the Division Bench has ordered that offers of Eastern Silk Industries Ltd. and Jay Prestressed Products Ltd. would only be considered on 2.7.1998 and confirmation of sale would be made on the basis of the offers made by the two parties. Further, despite the fact that the appellant "Divya" had withdrawn its earlier offer, the Court permitted it to take part in making further offer as noted in the order dated 2.7.1998. In this set of circumstances there was no need to confine the bid between three offerers only. 14. In LICA (P) Ltd. (1) Vs. Further, despite the fact that the appellant "Divya" had withdrawn its earlier offer, the Court permitted it to take part in making further offer as noted in the order dated 2.7.1998. In this set of circumstances there was no need to confine the bid between three offerers only. 14. In LICA (P) Ltd. (1) Vs. Official Liquidator this Court dealing with a similar question observed thus:- "The purpose of an open auction is to get the most remunerative price and it is the duty of the court to keep openness of the auction so that the intending bidders would be free to participate and offer higher value. If that path is cut down or closed the possibility of fraud or to secure inadequate price or underbidding would loom large. The court would, therefore, have to exercise its discretion wisely and with circumspection and keeping in view the facts and circumstances in each case." 15. The matter was again brought before this Court and in LICA (P) Ltd. (2) Vs. Official Liquidator the Court held:- "Proper control of the proceedings and meaningful intervention by the court would prevent the formation of a syndicate, underbidding and the resultant sale of property for an inadequate price. The order passed by this Court yielded the result that the property which would have been finalized at Rs. 45 lakhs, fetched Rs. 1.10 crores and in this Court a further offer of Rs. 1.25 crores is made. In other words, the property under sale is capable of fetching a higher market price. Under these circumstances, though there is some force in the contention of Shri Ramaswamy that the court auction may not normally be repeatedly disturbed, since this Court, on the earlier occasion, had limited the auction between the two bidders, the impediment will not stand in the way to direct sale afresh. Even today the parties are prepared to participate in the bid." 16. Further, there is a specific Condition 11 in the terms and conditions of sale as quoted above which empowers the court to set aside the sale even though it is confirmed for the interests of creditors, contributories and all concerned and/or public interest. In this view of the matter, it cannot be said that the court became functus officio after the sale was confirmed. In this view of the matter, it cannot be said that the court became functus officio after the sale was confirmed. 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 crores 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 sate. 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 in the market forces and prices. 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 the shortest time." 11. It has, thus, been held that even after confirmation of sale but before the delivery of possession and execution of sale-deed, if higher price is offered then it is within the discretion of the Court, even though there is no suggestion of irregularity or fraud, to set aside the confirmation of the sale. It was observed by the Supreme Court that although 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 the Court precincts and not by the business house well versed in the market forces and prices. 12. In the backdrop of the aforesaid legal position and a firm offer by the appellant to purchase the subject property at Rs. 16 crores, prima facie, it appears to us that a relook to the offers needs to be done in the interest of all concerned. We, accordingly, asked the counsel for the purchaser (respondent no. 12. In the backdrop of the aforesaid legal position and a firm offer by the appellant to purchase the subject property at Rs. 16 crores, prima facie, it appears to us that a relook to the offers needs to be done in the interest of all concerned. We, accordingly, asked the counsel for the purchaser (respondent no. 2) as to whether the purchaser is ready and willing to offer a fresh price or would like to stick to the earlier offer of Rs. 13.75 crores. 13. Mr. R.K. Chowdhary, counsel for the respondent no. 2 sought instructions and submitted that respondent no. 2 is ready and willing to enhance the offer that was made before the Single Judge at Rs. 13.75 crores. He, on behalf of M/s. Fantassy Ventures, offered Rs. 16.25 crores for purchase of the subject property. 14. The counsel for the appellant as well as counsel for respondent no. 2, however, submitted that if short time of few days was granted, their respective clients would keep ready the offer amount through demand drafts on that date. They did not seem averse to the idea that whosoever brings the higher amount may be finally permitted to purchase the subject property. 15. Mrs. Anjana Prakash, senior counsel for M/s Nilamber Trexim & Credit Pvt. Ltd. submitted that since the said offerer had also offered to purchase the property in the sum of Rs. 14.25 crores before the Company Judge which was higher than the offer made by respondent no. 2 and lower than the offer made by the present appellant, they may also be given liberty to bring in the offer amount on the adjourned date and if that amount is higher than the amount offered by the appellant and the respondent no. 2, M/s Nilamber Trexim & Credit Pvt. Ltd., may be permitted to purchase the subject property. Her proposal seems to be fair and reasonable. 16. We, accordingly, adjourn this appeal to 11th August, 2008. The senior counsel for M/s Nilamber Trexim & Credit Pvt. Ltd. submits that matter will be taken up the registry to ensure that the appeal preferred by them is also posted before the Court on that date. 17. By way of foot note, we clarify that whosoever amongst the three offerers, noticed above, brings in the highest offer amount on 11th August, 2008, shall be permitted to purchase the subject property. 17. By way of foot note, we clarify that whosoever amongst the three offerers, noticed above, brings in the highest offer amount on 11th August, 2008, shall be permitted to purchase the subject property. None of them will be permitted to make further bid or offer. If the present appellant or M/s Nilamber Trexim & Credit Pvt. Ltd. does not bring offer amount exceeding Rs. 16.25 crores, the offer given by respondent no. 2 before us at Rs. 16.25 crores shall stand accepted. On the other hand if on 11th August, 2008, the respondent no. 2 does not bring the offer amount of Rs. 16.25 crores after excluding the amount already deposited, the acceptance of the offer in its favour shall stand set aside. 18. Let these appeals come-up under the caption "For Orders" on 11th August, 2008, aiongwith the appeal of M/s Nilamber Trexim & Credit Pvt. Ltd. 2 Mr. R.K. Chowdhary, counsel for the respondent no. 2-M/s. Fantassy Ventures, submits that respondent no. 2 sticks to the offer of Rs. 16.25 crores, which was madew before the Court on 6th August, 2008. He submits that an amount of Rs. 13.75 crores has been deposited with the Official Liquidator up to 17th August, 2008 already and the demand drafts in the sum of Rs. 1.45 Crores have been handed over to the Official Liquidator in Court. Thus, in all an offer amount of Rs. 15.40 Crores stands deposited. There is shortfall of Rs. 85 facs in deposit of the offer amount by M/s Fantassy Ventures. 3. On the other hand, the appellant M/s Jhunjhunwala Vanaspati Ltd. has offered to purchase the subject property in the sum of Rs. 16.86 Crores. The counsel for the appellant handed in demand drafts in the sum of Rs. 14.86 Crores and the cheques payable at par in the sum of Rupees two Crores to the Official Liquidator. The counsel would submit that the demand drafts of Rupees two Crores could not be purchased as the banks server was down. An undertaking has been filed on behalf of the appellant that the cheques issued by the appellant in the sum of rupees two Crores will be honoured and if the said cheques are returned by the Bank, the amount of Rs. 14.86 Crores deposited with the Official Liquidator today may be forfeited. An undertaking has been filed on behalf of the appellant that the cheques issued by the appellant in the sum of rupees two Crores will be honoured and if the said cheques are returned by the Bank, the amount of Rs. 14.86 Crores deposited with the Official Liquidator today may be forfeited. In view of the onerous condition imposed by the appellant on itself, we are persuaded not to doubt the bona fides of the appellant. 4. In so far as M/s Nilamber Trexim & Credit Pvt. Ltd. is concerned, no offer amount has been brought in. 5. In our order dated 6th August, 2008, it was clarified that whosoever amongst the three offerers, viz.; M/s Fantassy Ventures, M/s Jhunjhunwala Vanaspati Ltd. and M/s Nilamber Trexim & Credit Pvt. Ltd. brings in the highest offer amount, shall be permitted to purchase the subject property. Since the offer amount brought in by the appellant, M/s Jhunjhunwala Vanaspati Ltd., is the highest, and substantially high, we have no hesitation in accepting the offer made by the appellant-M/s Jhunjhunwala Vanaspati Ltd. No sooner the cheques in sum of rupees two crores are encashed by the Official Liquidator, the offer so accepted in favour of M/s Jhunjhunwala Vanaspati Ltd. shall stand confirmed. The Official Liquidator shall, then take steps for delivery of possession to M/s Jhunjhunwala Vanaspati Ltd. without any delay and shall do whatever is necessary in law for transfer of ownership of the subject property in favour of the purchaser. 6. In the event of cheques of rupees two crores given by the appellant to the Official Liquidator being dishonoured, an amount of Rs. 14.86 crores deposited by way of demand drafts shall stand forfeited. Besides that the appellant may expose itself to contempt jurisdiction of this Court for breach of the undertaking. 7. Now, since the offer of the appellant-M/s Jhunjhunwala Vanaspati Ltd. has been accepted as soon as the cheques in the sum of rupees two crores given by the appellant are encashed and the offer in their favour stands confirmed, the Official Liquidator shall return the amount of Rs. 13.75 crores aiongwith the interest accrued thereon, if any, to respondent no. 2-M/s Fantassy Ventures. The demand drafts of Rs. 1.45 Crores handed in by the counsel for respondent no. 2 to the Official Liquidator today be returned forthwith. 8. 13.75 crores aiongwith the interest accrued thereon, if any, to respondent no. 2-M/s Fantassy Ventures. The demand drafts of Rs. 1.45 Crores handed in by the counsel for respondent no. 2 to the Official Liquidator today be returned forthwith. 8. The order dated 18th July, 2008 passed by the Company Judge stands set aside. 9. The appeal is disposed of in aforesaid terms. The parties shall bear their expensae litis.