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Madhya Pradesh High Court · body

2009 DIGILAW 967 (MP)

AMBO EXPORTS LTD,KOLKATA v. SHRI ISHAR AGRO LTD.

2009-08-12

MANJUSHA P.NAMJOSHI, S.L.KOCHAR

body2009
Judgment S.L. Kochar,J. ( 1. ) Appellant has filed this appeal against the impugned order dated 05.08.08 passed by the learned Company Court in Company Petition No. 19/02 whereby OLR No.25/08 has been accepted and interim application No. 4938/08(Annexure P/l to this appeal) filed by the appellant for grant of permission to intervene to participate in further negotiations and proceedings for the purposes of purchasing the property of respondent No. 1 herein (a Company in liquidation) has been dismissed. ( 2. ) Short resume of the facts necessary for resolving the controversy arises as follows:- A reference to this High Court was made vide letter dated 14.06.2000 by the Registrar of Board for Industrial and Final Reconstruction, New Delhi ( for brevity BIFR)to record opinion under section 20(1) of the Sick Industrial Companies (Special Provisions) Act,1985 with Respondent No.1 -M/s Ishar Agro Ltd. be wound-up and to take further action in accordance with the provisions of law. ( 3. ) Upon the said reference, Official Liquidator (for short the O.L)was appointed and he took possession of a,ssets of respondent No.1-Company. O.L. submitted O.L.R. No. 21/05 dated 31.03.05 for grant of permission to invite tenders for sale of land, building, plant and machinery etc. of Respondent No. 1- Company. The O.L. also prayed for formation of Assets Sales Committee of representatives of secured creditors and to obtain report of Government approved valuer. This prayer was accepted by the learned Company Court. ( 4. ) Tenders were invited for sale of assets of respondent No.1-Company and on 11.08.05, highest offer of Rs.3.48 crores(Three Crore Forty Eight lac) was received. The Court was not satisfied with the offer and directed the Sale Committee to proceed for fresh sale by publication in more news papers. On 25.08.05, highest offer of Rs.4.27 crores(Four crore twenty seven lac) was received. Learned Company Court did not sanction the sale of property and O.L. was directed to obtain expert opinion regarding value of property with a view to find out as to how best maximum price can be fetched in the given circumstances and then to invite fresh tenders from public at large. In compliance of this order, the O.L. sent letter to SOPA which had widely circulated for calling offers by the O.L. and in pursuance thereto,five parties submitted their offers. In compliance of this order, the O.L. sent letter to SOPA which had widely circulated for calling offers by the O.L. and in pursuance thereto,five parties submitted their offers. They are Ishar Engineering,Dhan Laxmi Solvex Pvt. Ltd,(Respondent No. 2 herein),Shajapur Solvent Extraction, Kartik Solvex Pvt Ltd and Pratibha Exims Pvt. Ltd. ( 5. ) However, learned Company Court was not satisfied with the offers and directed the committee to hold negotiations with these tenderers to receive more bid amount. On 07.04.08 learned Company Court issued direction to the Sale Committee to hold negotiations with the bidders whose names were mentioned in O.L.R. No. 11/08 dated 07.08.08 with a view to fetch maximum price to secure the interest of creditors. Learned Court also directed every tenderer to deposit E.M.D. of Rs.25,00,000(Twenty five lacs). The tenderer deposited the E.M.D. amount and took part in negotiation before the Sale Committee and in these negotiation proceedings Respondent No. 2 M/s Dhan Laxmi Solvex raised final offer from Rs.6.03 crores to that of Rs.8.01 crores (Eight crore one lac). Other tenderer also raised the price, but they all were less than Rs.8.01 crores(Eight crore one lac). ( 6. ) Learned Company Court called the representatives of Financial Institutions i.e. State Bank of India and IDBI in person to ascertain their views about the price. They appeared in person and submitted that the offer made by respondent No. 2 was reasonable and commensurate with the valuation of the assets. The Court also called the views of Government regarding sale/transfer of land, leased out to the Company in liquidation. The O.L. submitted the details after receiving the same from the State Government. They were filed in O.L.R.No.32/08 dated 12.06.08. ( 7. ) When the matter was pending before the learned Company Court, whether the offer of Respondent No:2 M/s Dhan Laxmi Solvex Pvt. Ltd. should be accepted or not, the appellant filed I.A.No.4938/08 for grant of permission to intervene in the sale-proceedings. ( 8. ) The appellant contended in the I.A. that he had send a letter to Stress Assets Stabilization Funds Committee (for short SASF)and made offer of Rs.6.01 crores,a copy whereof dated 02.07.07 was sent to the O.L., but the O.L. had not called them to participate in negotiation. ( 8. ) The appellant contended in the I.A. that he had send a letter to Stress Assets Stabilization Funds Committee (for short SASF)and made offer of Rs.6.01 crores,a copy whereof dated 02.07.07 was sent to the O.L., but the O.L. had not called them to participate in negotiation. Before the learned Company Court appellant prayed for grant of opportunity to participate in the bid ana made offer of Rs.8.05 crores(Eight crore five lac) as against Rs.8.01 crores(Eight crore one lac), already offered by Respondent No. 2. Counsel for the appellant also submitted before the learned Company Court that the appellant is ready to raise more amount, if permitted to bid. ( 9. ) The O.L. in his reply to the I.A. denied receiving of such letter sent by either the appellant or the SASFC,therefore, there was no occasion for him to invite the appellant for negotiation. The respondents opposed the prayer of the appellant to allow him to bid and submitted that the appellant did not take any part at any point of time in last three years, when twice tenders were invited from public at larger after wide publication. ( 10. ) Learned Company Court, after hearing both the parties at length dismissed the application of the appellant for grant of permission to intervene and take part in the bid mainly on the ground that since last three years, tenders were being invited and matter was widely published in various news-papers, but no tender was submitted by the appellant and no documentary proof was filed to show the sending of offer to O.L. and the Court cannot convert itself into an auction pendal for acceptance or rejection of a tender at the instance of one person who had come directly to the Court. In the opinion of learned Company Court, it is clear case of business rivalry inter-se between two businessmen to forestall the transaction rather than to become a bona fide tenderer at proper time. Learned Court has also observed that all effective measures, as could be possible were taken to fetch highest sale price which is acceptable to all secured creditors who have given their consent for its acceptance and by the impugned order, accepted the OLR No.25/08. Learned Court has also observed that all effective measures, as could be possible were taken to fetch highest sale price which is acceptable to all secured creditors who have given their consent for its acceptance and by the impugned order, accepted the OLR No.25/08. Learned court directed the O.L. to execute necessary transfer deeds in relation to the properties which were the subject matter of sale in favour of successful bidder-Respondent No. 2. It is this order which is under challenge in this appeal. We have heard learned counsel for the parties and perused the entire record. ( 11. ) Learned counsel for the appellant has made his submissions as under.-That on 02.09.07, Stressed Assets Stabilization Fund(SASF) had sent a proposal of the appellant to IL regarding proposal of the appellant to purchase assets of the company worth Rs.6.01 crores which was higher than the previous bids received at the time of last auction in the month of August, 2006, but the OL has not considered this letter ( filed along with application for intervention). On 09.05.08, the appellant has also directly sent proposal to the OL for purchasing the entire movable and immovable property of respondent No. 1 for Rs.8.05 crores,but the OL has not considered these letters and also did not apprise the learned Company Court for the reasons best known to him. Relying on the Supreme Court judgments passed in the cases of FCS Soft Ware Solution Ltd. V/s Law Medical Devices Ltd. and Ors [(2008)144 Company Cases 391 (Supreme Court )]and Divya Manufacturing Co. (P).Ltd.V/s Union of India and others [(2000)102 Company Cases Page 67] urged that approach of the Company Judge should have been to get highest price so as to satisfy the maximum claims against the company in liquidation and even if bid has been finalized the Company Judge or in appeal the Appellate Court can accept highest offer for purchasing the assets of the company. Learned Company Court expressed its dissatisfaction on the manner in which the auction sale was conducted by the OL and directed him to return the earnest money of the tenderers. The OL was also directed to consult some expert as to how the property in question should be sold in best possible way. Learned Company Court expressed its dissatisfaction on the manner in which the auction sale was conducted by the OL and directed him to return the earnest money of the tenderers. The OL was also directed to consult some expert as to how the property in question should be sold in best possible way. The O.L. despite letter dated 02.07.07 sent to him by SASF did not call the appellant to participate in negotiations and also did not apprise the learned Company Court about his offer. ( 12. ) Learned counsel has also pointed out that in this appeal on 12.08.08, both counsel for the parties sought time to seek further instructions from their respective clients to increase the purchase amount and learned counsel for the Respondent undertook not to get the documents executed in favour of his client. On this date, the Court was not apprised by the counsel for the Respondent No. 2 and O.L. about handing over the possession of the property of company to respondent on 07,08.08 and deposit of entire sale amount on 06.08.08, just on the next day of passing of impugned order ( 05.08.08) by the learned Company Court. On 10.09.08, counsel for the appellant has apprised the Court about offer of Rs.8.75 crores of his client for purchasing the assets which was 74,00,000/- (Seventy four lac) higher than the bid finalized by the learned Company Court and the Respondent No. 2 was given opportunity to increase the offer, but he declined. Appellant was directed to deposit the amount of Rs.8.75 crores ( eight crore seventy five lac) to judge his bona fides and he obeyed the order of this Court and deposited this amount in CCD of the High Court, receipt whereof has already been filed. It is also submitted that the OL has acted in hasty manner and without executing the documents as directed by the learned Company Court, granted possession of the Solvent Extraction Plant and allowed the respondent No. 2 to bring it into operation. According to the learned counsel in the case of F.S. Soft Ware (supra) even after execution of sale-deed, handing over of possession and incurring of expenses by the purchaser, the Court set aside the sale and accepted the highest offer granting soletium to the purchaser for his trouble and disappointment. According to the learned counsel in the case of F.S. Soft Ware (supra) even after execution of sale-deed, handing over of possession and incurring of expenses by the purchaser, the Court set aside the sale and accepted the highest offer granting soletium to the purchaser for his trouble and disappointment. In sum and substance, the argument of the learned counsel for the appellant is that paramount consideration for sale of assets of the company under liquidation must to fetch the highest price and the appellant has increased a handsome amount of 74,00,000/-(Seventy Four lac) against which Respondent No. 2 has declined to increase the offer, therefore, the impugned order may be set aside and offer of the appellant be accepted. ( 13. ) In reply, learned counsel for the Respondent No. 2 has urged as under:- That after, acceptance of offer of Respondent No.2,the O.L. has given possession of the factory and normally in such case, possession is being given first in time and thereafter, the documents are to be executed, therefore, the O.L. has not committed any breach of law especially when there is no provision of law that first document of transfer or sale should be executed and thereafter, possession must be given. Possession was given prior to passing of interim order by this Court dated 12.08.08 and again on 10.09.08 directing the respondents not to execute the documents of transfer in favour of respondent No. 2. The respondent No. 2 has invested 8.40 crores in addition to the bid amount and commenced production in the plant. On 07.04.08, learned Company Court had directed the OL- Respondent No. 1 to call those five parties for negotiation mentioned in OLR No. 11/08, therefore, the OL could not calla other person/party to participate in the negotiation and if the appellant was interested, he should have filed an application for recalling of the order and granting him permission to take part in negotiation, but he did not do so and impugned final order was passed by the learned Company Court and offer of respondent No. 2 has been accepted. About offer of Rs.6.01 crores. SASF has not filed any document before the Company Court showing receipt of application of the appellant regarding his interest in the purchase of assets and offer of Rs.6.01 crore. About offer of Rs.6.01 crores. SASF has not filed any document before the Company Court showing receipt of application of the appellant regarding his interest in the purchase of assets and offer of Rs.6.01 crore. The appellant was not a party to the bid and also in negotiation, therefore, has no right to file appeal. Learned counsel has placed reliance on the Supreme Court judgment passed in the case of B. Arvind Kumar V/s Government of India and others [(2007)5 SCC745], wherein it is held that when an auction purchaser derives title on confirmation of sale in his favour and a sale certificate is issued evidencing such sale and title, no further deed of transfer from the Court is contemplated or required. The inadequacy of price could not be a ground for setting aside the sale by Court when there is no fraud or material irregularity in the conduct of Courts auction is found. Learned counsel has also placed reliance on the Apex Court pronouncements in the cases of Rajender Singh V/s Ramdhar Singh and others [(2001)6 SCC213],M/s Kayjay Industries(P).Ltd V/s M/s Asnew Drums (P).Ltd(AIR 1974 SC1331],Valji Khimji and Co. V/s Official Liquidator [2008)9 SC299], K. Basavarajappa V/s Tax Recovery Commissioner [AIR 1997 SC215 and Laxmi Devi V/s Mukund Kanwar and others [AIR 1965 SC834]. ( 14. ) Having heard learned counsel for the parties and after perusing the entire record, as well giving our anxious consideration over the issue, we do not find any merit for interference in this appeal. ( 15. ) It is evident from the impugned order and the record of the learned Company Court that the matter was pending for sale of assets of the company under liquidation since 2005 and from time to time the Company Court has taken effective, adequate legal steps for fetching highest price for assets of the company. The Sale Committee was constituted of representatives of the secured creditors, valuation report of the company assets was called from authorized experts, publication was made for inviting tenders and as many as five companies (parties) made offers. The Company Court was not satisfied by offer in secret tenders, directed the OL to negotiate with the parties with a sole intention to fetch maximum price to satisfy the creditors. ( 16. The Company Court was not satisfied by offer in secret tenders, directed the OL to negotiate with the parties with a sole intention to fetch maximum price to satisfy the creditors. ( 16. ) The proceeding of sale was going on since 2005, but the appellant did not participate before the OL and filed intervention application before the Company Court with a contention that SASF sent letter dated 02.07.07 to the OL informing that the appellant is interested in purchasing the assets for Rs.6.01 crores which was the highest bid by that time amongst all the participants, but failed to file any proof about sending of this letter to OL and the OL has denied receipt of this letter. If really the letter was sent, the appellant could have kept proof for sending the letter. The appellant has filed another letter dated 09.05.08 sent to the OL in which he has expressed his desire to purchase the assets of the company for Rs.8.05 crores. It is pertinent to mention here that the intervention application was also flied on 09.06.08 before the learned Company Court, therefore, it creates doubt on the bona fide of the appellant. No proof has been filed by the appellant to show as to when the application was sent to the OL. It does not contain any acknowledgment. In intervention application, he made offer of Rs.8.05 crores (Eight crore five lac), only Rs.4,00,000/- (Four lacs rupees) more than the offer of Respondent No. 2 as accepted by the learned Company Court. ( 17. ) In the intervention application as well as before this Court, no allegations have been levelled by the appellant in regard to fraud or collusion against the respondents, therefore, merely by increase of Rs.4,00,000/- (four lacs rupees), final bid of Respondent No. 2 cannot be refused and we find substance in the observation of the learned Company Court that intervention was made by the appellant to forestall the transaction, rather than to become a bona fide tenderer at a proper time on account of business rivalry. In the case of FCS Software (supra), fresh auction was called even after confirmation of sale, because certain facts which were necessary to be brought to the notice of intending purchasers relating to valuation of movable and immovable properties, fixation of reserve price, non-inventory of plant and machinery were not set out in proclamation of sale nor disclosed at the time of sale notice, because of which the participants could not make proper and maximum offer. Such is not the situation in the instant case. Learned Company Court had taken all required effective legal steps for fetching maximum price and confirm the sale after satisfaction of the Committee and creditors. There is no dispute on legal position that for fetching maximum price, the order of confirmation of sale can be set aside by the Company Court and the Appellate Court can also exercise his power, if no effective steps were taken or there was fraud and collusion between the parties. In the instant case, neither of both elements is present. Mere highest offer of Rs.4,00,000/-four lac ) before the Company Court and increase of offer before the Appellate Court after more than one month would not be a ground for interference in appeal in view of the Supreme Court judgment passed in the case of Valaji Khimji(supra) when there is no fraud or collusion can be inferred or alleged. ( 18. ) It is pertinent to mention here that the OL has acted in hasty manner by giving possession of the assets of the company to Respondent No. 2 immediately on the next day of passing of impugned order by the learned Company Judge in favour of Respondent No. 2 and he had not apprised the Appellate Court when the appeal was heard at motion stage itself on 12.08.08. in presence of both the respondents and learned counsel for the Respondent No. 2 could not undertake not to get the documents executed in favour of his client. Probably if this Court would have been apprised of handing over of possession, the interim order would not have been passed or the respondent No. 2 could have been restrained from incurring expenditure for bringing the company into order. ( 19. Probably if this Court would have been apprised of handing over of possession, the interim order would not have been passed or the respondent No. 2 could have been restrained from incurring expenditure for bringing the company into order. ( 19. ) In view of the aforesaid legal and factual position and the appellant has not controverted the averments of respondent No. 2 about taking of possession and incurring expenditure, this Court is of the opinion that there is no point in favour of the appellant to interfere in the impugned order,. The appeal is, therefore, dismissed. Appellant is allowed to take back the cash amount of Rs.8.75 crores( eight crore seventy five lac ) in accordance with the provisions of law as may be applicable in this regard. Appeal dismissed.