JUDGMENT
A.K. Banerji, J.
1. By means of the application (A-59) filed on behalf of the company (in liquidation), it has been prayed that the confirmation of the sale of the assets of the company which were sold may not be confirmed. A similar prayer has been made, in the application (A-63) filed on behalf of the applicant IFCI and others for recalling the order accepting the highest offer of Rs. 65 lakhs and for readvertising the sale of the assets after fixing a reserve price.
2. The relevant facts are that M/s. SIDCO leathers Ltd. (in liq.) was ordered to be wound up vide order dated December 16, 1993, passed by this court and the official liquidator/High Court has been appointed the liquidator. On an application filed by the official liquidator, this court had ordered that the
movable and the immovable assets of the company (in liq.) may be sold by calling for tenders. Vide the order dated October 9, 1998, the highest offer to Rs. 65 lakhs in favour of M/s. Enrich Engineering Works Ltd. was accepted, who were directed to deposit the entire amount of sale consideration in four monthly instalments. The official liquidator has reported vide his report No. 19 of 1999, that the full sale consideration has been deposited in four instalments, the last of which fell due on February 9, 1999. Consequently, the official liquidator has prayed that the sale be confirmed.
3. I have heard Shri G. D. Srivatsava, learned senior counsel in support of his application (A-59) filed on behalf of the company (in liq.), Shri Vikram Nath, learned counsel appearing for the IFC and two others in support of his application (A-63) and the official liquidator. I have also heard Shri R.P. Agrawal, learned counsel who had put in appearance on behalf of the highest bidder M/s. Enrich Engineering.
4. The main submission of Shri Srivastava is to the effect that the valuation of the assets of the company (in liq.) had not been properly done and it should be revalued by a technical expert so that the proper valuation of the price of the said assets could be ascertained. It was also contended that the value of the assets of the company is many times more than what has been offered. Consequently, the said offer should not be accepted and fresh offers be invited after getting the assets revalued. It has also been contended that the applicant had no opportunity to raise objection to the valuation, consequently also it is in the interest of justice that the sale may not be confirmed and the matter reconsidered.
5. Shri Vikram Nath appearing for the IFCI and two other financial corporations has contended that the respondent-company is indebted to the said applicants of a huge amount and the amount for which the assets had been sold is wholly inadequate. It has also been submitted that the applicants had not received any notice for appearance on the date when the tenders were opened in chambers. Consequently, they had no opportunity to object to the offer. It has therefore been contended that the order be recalled and a minimum reserve price may be fixed for the assets as per the valuer’s report and fresh offers be invited.
6. The official liquidator has filed a counter affidavit to the said application and has stated that the valuation was got done by a Government approved valuer from the panel of the valuers maintained in the office of the official liquidator as per the orders passed by the court and the said value could not be said to be wrong or incorrect in view of the fact that valuable parts of the machinery have been removed prior to handing over possession and the machines presently found at the factory site have only scrap value. It has further been submitted that the notice inviting the tenders, had been advertised in a number of newspapers having wide circulation and though a number of
parties had turned up to make inspection but only three offers were given as the machinery found therein has only scrap value. It has further been submitted that the notices calling for tenders had been advertised twice earlier but the offer was not accepted, as the same was low. The offer, which has been given on the third time, is higher than the earlier two offers. It has been further stated that the real motive of the ex-management of the company (in liq.) is to put hurdles in the disposal of the property and to delay the same. Consequently, it has been stated that the objections may be rejected.
7. Shri R.P. Agrawal, learned counsel appearing for the party which has given the highest offer has submitted that the sale of the assets was duly advertised in as many as four newspapers and also in the Auction Journal and had been given wide publicity. The concerned party had given the highest offer and there is no reason why the same should be rejected. It has been submitted that the sale should not be set aside merely on general and vague allegations specially when no higher offer has been given. A valuable right has accrued in favour of the concerned party and the sale should be confirmed as the entire amount of sale consideration has been deposited within the time granted by this court.
8. I have perused the averments made in the affidavits and have carefully considered the respective submissions made by learned counsel for the parties and the official liquidator.
9. As already noticed above, the company (in liq.) was ordered to be wound up on December 16, 1993 and the official liquidator was appointed the liquidator. However the official liquidator could not take possession as–firstly, an application was filed for recalling the said order and, thereafter various dilatory tactics were adopted. It is on record that twice the sale of the assets was advertised but as the offer given was not found to be adequate, the same was rejected. On the third time the highest offer was of Rs. 45,50,000 and the parties were asked to increase their offer by bidding amongst themselves and the offer was increased to Rs. 65 lakhs, which was the highest and also approved by the court. While approving the said offer, this court vide the order dated October 9, 1998, had given reasons why the price offered appeared to be reasonable and why the same was accepted. The court has recorded that despite wide publication in four newspapers and journals, better offer was not received. Each time the official liquidator has to advertise the sale he has to incur huge expenses. It has been stated in the report of the official liquidator that so far he has incurred an amount of about Rs. 10 lakhs towards the security and other expenses whereas, he does not have any funds of the company in his hands. The amount of expenses has been taken from loans taken from the account of other companies. From the order dated May 23, 1995, passed on the order sheet, it appears that the official liquidator had reported that some of the directors of the company have surreptitiously and in
a clandestine manner removed many important parts of the machinery and other valuable assets from the factory premises prior to giving possession. In his report No. 82 of 1995, submitted by the official liquidator, it has been pointed out that out of 116 items of plant and machinery more than 70 items like, motors and other valuable machinery parts have been removed or have been stolen. Vide his report No. 64 of 1997, the official liquidator had also reported that a fire had broken out in a room of the factory on August 12, 1997, and the fire brigade had taken 4 to 5 hours in controlling the fire. On account of the same, the leather sheets and certain articles, which were stored, had been totally destroyed. In the same report it was pointed out that the expenditure which the official liquidator was incurring each month towards security was Rs. 10,300. Though the company (in liq.) had given an undertaking before this court that they would be paying for the security of the factory site but except paying an initial amount of Rs. 10 thousand they have not paid anything and they were disputing their liability to pay the said amount despite specific orders passed by the court directing them to make payment. It has also been pointed out by the official liquidator that even for the last 5 years, the statement of affairs has not been filed by the ex-management of the respondent-company. While considering the objections raised on behalf of the ex-management and the financial corporations, these factors could not be lost sight of.
10. So far as the submission made by Shri Srivastava that according to the balance-sheet of the company for the year 1992, the assets of the company ran into several crores is concerned, the same may not be very relevant in view of the fact that the report of the official liquidator that the major and valuable parts of the machinery had been removed prior to handing over possession in the year 1995. Consequently, the machines have lost their value and were merely scrap. It is for that reason the valuation given in the balance-sheet of the year 1992-93 will not be a correct reflection of the market value of the machines now existing. It is for that reason that despite wide publicity and the sale notice being advertised thrice, genuine buyers were not attracted. So far as the submission that a technical expert should have been employed to value the machinery is concerned it is noteworthy that the valuer who had gone to value the assets in question was also an engineer and was a Government-approved valuer. His report therefore will carry weight and cannot be said to be of no value. So far as the objection that the applicant had no opportunity to object to the valuation is concerned, learned counsel for the applicant was fully aware of the orders being passed by the court and had been appearing on each date the case was listed. This fact has not been denied that learned counsel had knowledge about the order for sale of the assets and had also been informed by the official liquidator to be present on the date when the tenders were to be opened but nobody was present on behalf of the respon-
dent-company possibly wilfully so that a ground for challenging the sale would be available.
11. On behalf of the financial corporations, Shri Vikram Nath has submitted that the price for which the assets have been sold was not adequate and the applicants did not have any notice regarding the opening of tenders. It has also been contended that a reserve price for the land, building, plant, machinery and the movable items ought to have been fixed before publishing the notice. So far as this submission is concerned, it has already been noticed that the machinery, which was sold, had lost its utility as valuable parts had been taken out or sold by the ex-management prior to the handing over of the possession and this fact was brought to the notice of the court much before the sale in the year 1995. While accepting the highest offer, the court has already given the reasons why the same was acceptable. Consequently, it is not necessary to repeat the same again in this order. On consideration of the said fact, the court was satisfied that the offer now being received after advertising the properties thrice appeared to be adequate. Consequently, I do not find any merit in this submission.
12. Shri Vikram Nath has also submitted that this court had in its order dated May 24, 1996, observed that the assets could be sold jointly by the official liquidator and the applicant-corporations. However, subsequently this court had vide order dated December 18, 1997, directed the official liquidator alone to advertise the sale, therefore, the subsequent order is contradictory and against the interest of the secured creditors. So far as this submission is concerned, the order dated May 24, 1996, was passed by this court on the application fifed by the financial corporations for appointing a receiver over the said property. While rejecting the said application, this court had merely observed that the assets could be disposed of jointly by the applicants as well as the official liquidator and the advertisement could also be published jointly. However, there were no specific orders in respect thereof. Subsequently, after hearing learned counsel for the parties including Shri O.P. Mishra, who appeared for the corporation, this court had vide its order dated December 18, 1997, directed the official liquidator to advertise the sale and call for tenders. This order had become final as the applicants did not contest the said order or made any prayer for the joint sale of the assets. The official liquidator has submitted that the applicants were informed about the dates and they had full knowledge of the date when the tenders were opened and on earlier occasions they were represented. However, merely because on the last date when the tenders were opened neither representatives nor counsel for the corporations were present makes no difference as the approval of the parties is not required when the highest offer was being accepted. They have a right to oppose the confirmation and for the said reason they have already filed their objections before the court and have been given an opportunity to
press their objections. It cannot therefore be submitted that the applicants did not get the adequate opportunity to oppose the highest offer. In the case of. Kayjay Industries (P.) Ltd. v. Asnew Drums (P.) Ltd., AIR 1974 SC 1331, where a similar objection regarding inadequacy of price was raised, it was observed as follows (page 1333) :
“A court sale is a forced sale and, notwithstanding the competitive element of a public auction, the best price is not often forthcoming. The judge must make a certain margin for this factor. A valuer’s report, good as a basis, is not as good as an actual offer and variations within limits between such an estimate, however careful, and real bids by seasoned businessmen before the auctioneer are quite on the cards. More so, when the subject-matter is a specialised industrial plant, which has been out of commission for a few years, as in this case, and buyers for cash are bound to be limited. The brooding fear of something out of the imported machinery going out of gear, the vague apprehensions of possible claims by the Dena Bank which had a huge claim and was not a party, and the litigious sequel at the judgment debtor’s instance, have ‘scare’ value in inhibiting intending buyers from coming forward with the best offers. Businessmen make uncanny calculations before striking a bargain and that circumstance must enter the judicial verdict before deciding whether a better price could be had by a postponement of the sale. Indeed, in the present case, the executing court had admittedly declined to affirm the highest bids made on May 16, 1969, June 5, 1969 and August 28, 1969, its anxiety to secure a better price being the main reason. If court sales are too frequently adjourned with a view to obtaining a still higher price it may prove a self-defeating exercise, for industrialists will lose faith in the actual sale taking place and may not care to travel up to the place of auction being uncertain that the sale would at all go through. The judgment debtor’s plea for postponement in the expectation of a higher price in the future may strain the credibility of the court sale itself and may yield diminishing returns as was proved in this very case.”
13. In para. 9 of the same decision, it has been further observed as follows page 1335) :
“But it is not as if the court should go on adjourning the sale till a good price is got, it being a notorious fact that court sales and market prices are distant neighbours. Otherwise, decree holders can never get the property of the debtor sold. Nor is it right to judge the unfairness of the price by hindsight wisdom. May be, subsequent events, not within the ken of the executing court when holding the sale, may prove that had the sale been adjourned a better price could have been had. What is expected of the judge is not to be a prophet but a pragmatist and merely to make a realistic appraisal of the factors, and, if satisfied that, in the given circumstances, the bid is acceptable, conclude the sale. The court may consider the fair value of the property, the
general economic trends, the large sum required to be produced by the bidder, the formation of a syndicate, the futility of postponements and the possibility of litigation, and several other factors dependent on the facts of each case. Once that is done, the matter ends there. No speaking order is called for and no meticulous post mortem is proper. If the court has fairly, even if silently, applied its mind to the relevant considerations before it while accepting the final bid, no probe in retrospect is permissible. Otherwise, a new threat to certainty of court sales will be introduced.”
14. The observations made in the aforesaid case apply in all force to the facts of the present case at hand. While accepting the highest bid, this court had applied its mind and considered various factors for holding that the price appeared to be adequate. Merely because some party approaches the court subsequently and makes vague and general allegation that the price was not adequate is not enough for the court to set aside the sale specially when it has been repeatedly held but no offers had been received. Merely because the company (in liquidation) owes huge debt to the financial corporations could not mean that the market value of the assets would match with their dues.
15. Shri Vikram Nath had then contended that this court while approving the sale had directed the purchaser to deposit the full amount in 4 instalments. It has been stated that admittedly there was some delay in depositing the instalments which has been admitted by the official liquidator. In para. 7 of his report No. 19 of 1999, the official liquidator has mentioned that there was a delay of about 28 days in depositing the first instalment, about 13 days in the deposit of the second instalment and about 7 days in the deposit of the third instalment. The fourth instalment was however deposited within the time granted by the court. On the basis of these facts learned counsel for the corporations has submitted that the earnest money submitted by the purchaser should be forfeited and fresh offers be invited as a default had been committed. So far as this submission is concerned undoubtedly the entire amount of sale consideration has been paid within four months. It is true that in depositing the first, second and third instalments there had been some delay. So far as this is concerned the court can always direct that the purchaser will have to pay interest for the delay in depositing the instalments.
16. As a result, I do not find any merit in the objections filed by the ex-management of the company (in liq.) and by the financial corporations. The said applications (A-59) and (A-63) are accordingly rejected. However, the purchaser has committed a few days delay in depositing the first, second and third instalments, for the same it shall pay simple interest at the rate of 15 per cent. for the period of delay in depositing the respective instalments. The official liquidator has filed his report No. 19 of 1999 stating that the sale may be confirmed as the entire sale consideration has been paid. It is, therefore, directed that on the payment of the amount of interest as indicated above, the sale in favour of the purchaser M/s. Enrich Engineering works Ltd., Kanpur,
shall stand confirmed and the official liquidator is directed to take necessary steps in pursuance thereof and for handing over possession to the said purchaser.