-1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 302 OF 2008 Shakharamseth Employees Union ) a registered and recognised union in Pal-Peugeot Limited ) having its office at B 140 Kasturi Plaza, Dombivali (East) )..Appellant versus 1. ICICI Bank Limited, a Banking Company incorporated ) under the Companies Act, 1956 and a Scheduled Bank ) within the meaning of the Reserve Bank of India ) Act, 1934 and having its registered office at Landmark, ) Race Course Circle, Vadodara-390 007 and a ) corporate office at ICICI Towers, Bandra-Kurla Complex, ) Bandra (East), Mumbai-400 051 ) 2. The Official Liquidator, High Court, having office at Bank ) of India Building, 5th floor, Mahatma Gandhi Road, ) Fort, Mumbai-400 023 as Liquidator of Pal Peugeot ) Limited having its office at Kalyan Shil Road, ) Manpada, Dombivli, Thane-421 204 ) 3. Citra Developers Limited, a Company duly incorporated ) under the Companies Act, 1956, and having its office ) at S.P. Centre,C- Wing, 41/44 Minoo Desai Marg, ) Near Radio Club, Colaba, Mumbai-400 005 )..Respondents Mr. J.P. Cama, Senior Advocate, with Mr. Venkatesh Mishra, instructed by M/s. Vimadalal & Co., for the appellant. Mr. Sachin Chandarana with Mr. Swayam Chopda & Ms. Pranika Bhatia, instructed by M/s. M.K. Ambalal & Company, for respondent No.1. None for respondent No.2. Mr. Janak Dwarkadas, Senior Advocate, with Mr. V.B. Naik and Mr. Ashish Kamat, instructed by M/s. Kartikeya Associates, for respondent No.3. -2- Mr. K.L. Vyas, Court Receiver, present. WITH APPEAL (LODGING) NO. 336 OF 2008 with PETITION NO. 477 OF 2008 WITH CHAMBER SUMMONS NO. 1000 OF 2008 WITH CHAMBER SUMMONS NO. 1193 OF 2008 WITH NOTICE OF MOTION NO. 671 OF 2009 Metropolitan Infrahousing Private Limited, ) a Company duly incorporated under the Companies Act, ) 1956, and having its registered office at Gammon House, ) Veer Savarkar Marg, Prabhadevi, Mumbai-400 025 )...Appellant versus 1. ICICI Bank Limited, a Banking Company incorporated ) under the Companies Act, 1956 and a Scheduled Bank ) within the meaning of the Reserve Bank of India ) Act, 1934 and having its registered office at Landmark, ) Race Course Circle, Vadodara-390 007 and a ) corporate office at ICICI Towers, Bandra-Kurla Complex, ) Bandra (East), Mumbai-400 051 ) 2. The Official Liquidator, High Court, having office at Bank ) of India Building, 5th floor, Mahatma Gandhi Road, ) Fort, Mumbai-400 023 as Liquidator of Pal Peugeot ) Limited having its office at Kalyan Shil Road, ) Manpada, Dombivli, Thane-421 204 ) 3. Citra Developers Limited, a Company duly incorporated ) under the Companies Act, 1956, and having its office ) at S.P. Centre,C- Wing, 41/44 Minoo Desai Marg, ) Near Radio Club, Colaba, Mumbai-400 005 )..Respondents Mr. Aspi Chinoy, Senior Advocate, with Mr. Prakash Shah, Mr. P.J. Shah, Mr. -3- Sumit Raghani and Mr. Hardik Sanghavi, instructed by M/s. PDS & Associates, for the appellant in Appeal and in Petition No. 477 of 2008. Mr. Sachin Chandarana with Mr. Swayam Chopda & Ms. Pranika Bhatia, instructed by M/s. M.K. Ambalal & Company, for respondent No.1. None for respondent No.2. Mr. Janak Dwarkadas, Senior Advocate, with Mr. V.B. Naik and Mr. Ashish Kamat, instructed by M/s. Kartikeya Associates, for respondent No.3. Mr. K.L. Vyas, Court Receiver, present. Mr. N.M.Ganguli, for the applicant – Association of Engineering Workers - in Chamber Summons No. 1000 of 200. Mrs. Suchitra Patra for the applicants- Haresh M. Sampat and two others – in Chamber Summons No. 1193 of 2008. None for the Applicant – State of Maharashtra – in Notice of Motion No. 671 of 2009. WITH APPEAL (LODGING) NO. 337 OF 2008 WITH PETITION NO. 478 OF 2008 WITH CHAMBER SUMMONS NO. 1002 OF 2008 WITH CHAMBER SUMMONS NO. 1196 OF 2008 WITH NOTICE OF MOTION NO. OF 2008 Metropolitan Infrahousing Private Limited, ) a Company duly incorporated under the Companies Act, ) 1956, and having its registered office at Gammon House, ) Veer Savarkar Marg, Prabhadevi, Mumbai-400 025 )...Appellant versus -4- 1. ICICI Bank Limited, a Banking Company incorporated ) under the Companies Act, 1956 and a Scheduled Bank ) within the meaning of the Reserve Bank of India ) Act, 1934 and having its registered office at Landmark, ) Race Course Circle, Vadodara-390 007 and a ) corporate office at ICICI Towers, Bandra-Kurla Complex, ) Bandra (East), Mumbai-400 051 ) 2. The Official Liquidator, High Court, having office at Bank ) of India Building, 5th floor, Mahatma Gandhi Road, ) Fort, Mumbai-400 023 as Liquidator of Pal Peugeot ) Limited having its office at Kalyan Shil Road, ) Manpada, Dombivli, Thane-421 204 ) 3. Citra Developers Limited, a Company duly incorporated ) under the Companies Act, 1956, and having its office ) at S.P. Centre,C- Wing, 41/44 Minoo Desai Marg, ) Near Radio Club, Colaba, Mumbai-400 005 )..Respondents Mr. Aspi Chinoy, Senior Advocate, with Mr. Prakash Shah, Mr. P.J. Shah, Mr. Sumit Raghani and Mr. Hardik Sanghavi, instructed by M/s. PDS & Associates, for the appellant in Appeal and in Petition No. 477 of 2008. Mr. Sachin Chandarana with Mr. Swayam Chopda & Ms. Pranika Bhatia, instructed by M/s. M.K. Ambalal & Company, for respondent No.1. None for respondent No.2. Mr. Janak Dwarkadas, Senior Advocate, with Mr. V.B. Naik and Mr. Ashish Kamat, instructed by M/s. Kartikeya Associates, for respondent No.3. Mr. K.L. Vyas, Court Receiver, present. Mr. N.M. Ganguli, for the applicant – Association of Engineering Workers - in Chamber Summons No. 1002 of 200. Mrs. Suchitra Patra for the applicants- Haresh M. Sampat and two others – in Chamber Summons No. 1196 of 2008. None for the Applicant – State of Maharashtra – in Notice of Motion No. 671 of 2009. -5- WITH APPEAL (LODGING) NO. 347 OF 2008 WITH NOTICE OF MOTION NO. 2380 OF 2008 Shakharamseth Employees Union ) a registered and recognised union in Pal-Peugeot Limited ) having its office at B 140 Kasturi Plaza, Dombivali (East) )..Appellant versus 1. ICICI Bank Limited, a Banking Company incorporated ) under the Companies Act, 1956 and a Scheduled Bank ) within the meaning of the Reserve Bank of India ) Act, 1934 and having its registered office at Landmark, ) Race Course Circle, Vadodara-390 007 and a ) corporate office at ICICI Towers, Bandra-Kurla Complex, ) Bandra (East), Mumbai-400 051 ) 2. The Official Liquidator, High Court, having office at Bank ) of India Building, 5th floor, Mahatma Gandhi Road, ) Fort, Mumbai-400 023 as Liquidator of Pal Peugeot ) Limited having its office at Kalyan Shil Road, ) Manpada, Dombivli, Thane-421 204 ) 3. Citra Developers Limited, a Company duly incorporated ) under the Companies Act, 1956, and having its office ) at S.P. Centre,C- Wing, 41/44 Minoo Desai Marg, ) Near Radio Club, Colaba, Mumbai-400 005 )..Respondents Mr. J.P. Cama, Senior Advocate, with Mr. Venkatesh Mishra, instructed by M/s. Vimadalal & Co., for the appellant. Mr. Sachin Chandarana with Mr. Swayam Chopda & Ms. Pranika Bhatia, instructed by M/s. M.K. Ambalal & Company, for respondent No.1. None for respondent No.2. Mr. Janak Dwarkadas, Senior Advocate, with Mr.Ashish Kamat, instructed by M/s. Kartikeya Associates, for respondent No.3. Mr. K.L. Vyas, Court Receiver, present. -6- CORAM: P.B. MAJMUDAR & R.C. CHAVAN, JJ. DATE: NOVEMBER 06, 2009. ORAL JUDGMENT (Per P.B. Majmudar, J.) Appeal No. 302 of 2008 and Appeal (Lodging) No. 337 of 2008 are directed against the order of the learned single Judge dated 27th June, 2008 by which the learned single Judge permitted the highest bidder to withdraw its bid in respect of the land admeasuring 5,41,436 sq.mtrs. and directed a fresh public auction by disposing of the Court Receiver’s Report. Appeal (Lodging) Nos. 336 and 347 of 2008 are directed against the order of the learned single Judge dated 12th March, 2008, fixing the reserve bid at Rs. 1650 crores for sale of land admeasuring 5,41,436 sq.mtrs. 2. Since the point involved in all these appeals being common, all these appeals are disposed of by this common judgment at the admission stage itself. 3. The ICICI Bank instituted a suit being Suit No.3636 of 1999 as debenture holders of the Company in liquidation i.e. Pal Peugeot under debenture deed dated 21st December, 1997 for Rs. 136.79 crores. The said suit was filed on 12th May, 1999. On 30th June, 1999, the Court Receiver was -7- appointed in connection with the suit properties. By an order dated 8th February, 2002, the Receiver was directed to sell the property. On 5th July, 2002, the first auction sale was held and 41 offers were received but the same were rejected as all the bids were below the reserve price. On 3rd September, 2002, second auction was held and it seems that 5 offers were received in connection with the aforesaid second auction. The learned single Judge did not accept the said offers. Even the third and the fourth auctions which were held on 5th May, 2003 and 17th January, 2004 respectively met with the same fate. Since bid received in the aforesaid auctions did not exceed Rs. 60 crores and since it was much below the reserve price fixed by the Court, the said auction proceedings were ultimately resulted into a failure. Subsequently, by an order dated 4th March, 2008, the learned single Judge directed sale of 5,41,436 sq.mtrs. of land. Four valuation reports were submitted and the learned single Judge fixed the reserve price by a separate order. The said order was passed on 12th March, 2008. The learned single Judge at the time of fixing the reserve price for sale of the aforesaid land directed that the envelope containing the reserve price should not be opened during the auction sale. Subsequently, the auction was held on 22nd April, 2008. Citra Developers Ltd., hereinafter referred to as the “highest bidder”, gave its bid at Rs. 676 crores. The Court Receiver accordingly accepted the said bid on the ground that the same is the highest bid and the said bidder was treated as successful bidder by the Court Receiver. In -8- view of clause 16 of the terms and conditions of the sale, the highest bidder deposited Rs. 139 crores, in addition to the earnest money of Rs. 30 crores, to make 25 per cent of the purchase price of Rs. 676 crores. The Court Receiver thereafter submitted his Report No. 162 of 2008 and sought various directions as to whether the offer of highest bidder should be accepted or not and whether the sale should be concluded on that basis. In case if the said offer is not accepted, whether the Court Receiver should re-advertise the sale and re-auction the said property. The matter thereafter came up for hearing before the learned single Judge on 5th May, 2008. The learned single Judge found that the amount offered by the highest bidder is much below the reserve price fixed by the Court and, therefore, the same cannot be accepted. The matter was adjourned to 6th May, 2008. At the request of the highest bidder and another bidder, the Court disclosed the reserve price to the parties. Accordingly, the Court opened the sealed cover and pointed out that the reserve price is fixed at Rs. 1650 crores. The Court passed the following order on 5th May, 2008. “1. The reserve bid has been kept in a sealed cover by the Court Receiver. It is opened. The reserve bid is seen by the Court. 2. The offer made by the highest bidder is far below the reserve bid. Hence, it cannot be accepted. 3. Upon the request of Mr. Dwarkadas on behalf of the highest bidder requesting to disclose the reserve bid to enable the highest bidder as well as the other bidder Metropolitan Infrahousing Pvt. Ltd. To bid, the reserve bid which is sealed is -9- disclosed to the parties. For the area of ,41,446 sq.meters it is fixed at Rs. 1650,00,00,000/-. 4. The property which was to be sold in auction was to be demarcated. The DILR has submitted his report. The demarcation is made. The Plaintiff has deposited Rs. 1 lac on account of costs of demarcation. The DILR’s fees is shown to be Rs. 1,95,750/-. The plaintiffs shall deposit Rs. 95,750/- in the office of Court Receiver within 4 weeks from today. 5. All parties shall be entitled to take xerox copies of the DILR’s report.” 4. The Court Receiver’s report was adjourned to 6th June, 2008. It seems that the highest bidder has raised a point before the learned single Judge to the effect that there seems to be some error in fixation of reserve price, either it may be an arithmetical or some clerical error. The said submission was made on the basis of earlier valuation reports as well as on the ground that earlier attempts for auction were made but the sale resulted into failure. On 12th June, 2008, the advocate for the highest bidder submitted a note for speaking to the minutes of the order regarding fixing the reserve price. Accordingly the matter was placed before the learned single Judge who had fixed the reserve price earlier. However, the learned single Judge who fixed the reserve price earlier came to the conclusion that there was no arithmetical or clerical error in the valuation of the land and that the reserve price was fixed consciously. It was further observed by the Court that if the reserve bid fixed is not workable it is for the learned Chamber Judge to entertain any application for modification -10- thereof. Accordingly, the learned Judge found that there was no arithmetical or clerical error while fixing the reserve price and that it was fixed after considering all the relevant aspects. Subsequently, on behalf of highest bidder, a praecipe was filed requesting for placing the matter before the Court on the ground that the highest bidder was desirous of making an application for confirmation of sale in their favour. Before the learned single Judge, the Union viz. Sakharamseth Employees Union asserting its right as a recognised Union of the Company i.e. Pal Peugeot, filed an affidavit to the effect that the reserve price should be reduced to Rs. 661 crores and to accept the bid of highest bidder i.e. Citra Developers Ltd. As per the claim of the said Union, the claim was lodged on behalf of 1712 workers amounting to Rs. 122 crores. Appellant- Metropolitan Infrahousing Pvt. Ltd. filed an affidavit requesting the Court to accept the bid of Citra Developers Ltd. at Rs. 676 crores by confirming the sale in their favour. Subsequently, the Court Receiver’s report came up for consideration before the learned Judge on 27th June, 2008. On the aforesaid date, on behalf of the highest bidder i.e. Citra Developers Ltd., a request was made that it may be permitted to withdraw from the auction as it did not desire to raise their offer. The learned single Judge accordingly accepted the request and the amount of Rs. 169 crores deposited by the highest bidder in short term FDR was permitted to be refunded to the highest bidder by the learned single Judge. The learned single Judge also directed the Court Receiver to once again -11- auction the suit property and accordingly the Court Receiver’s report was disposed of by the learned Judge. As stated above, two separate appeals are preferred against the order dated 27th June, 2008 of the learned single Judge by which the learned single Judge has permitted the highest bidder to withdraw its bid in respect of the land admeasuring 5,41,436 sq.mtrs. and directed a fresh public auction and two separate appeals are also filed against the order dated 12th March, 2008, of the learned single Judge fixing the reserve bid of Rs. 1650 crores for sale of land admeasuring 5,41,436 sq.mtrs. 5. Earlier when these appeals came up before a Division Bench of this Court (Coram D.K.Deshmukh & R.S. Mohite, JJ.) on 23rd June, 2009, the Division Bench came to the conclusion that the learned single Judge has not considered the question about reduction of reserve price. It was also observed by the Division Bench that the learned single Judge has not taken into account as to whether the amount deposited by the highest bidder could have been refunded. It was found that the procedure adopted by the learned Judge had caused serious prejudice to the workers, looking to the history of the matter. The Division Bench found that it was necessary for the learned Judge to decide the question whether order fixing reserve price deserved to be modified or not. On the aforesaid basis, the Division Bench set aside the order dated 27th June, 2008 on the Receiver’s report. The matter was remitted to the -12- learned Judge for de novo consideration in accordance with law. It is required to be noted that in the meanwhile the highest bidder had already withdrawn the amount as per the order dated 27th June, 2008 with interest. However, the highest bidder has already given an undertaking before the Court in the Appeal to the effect that if so directed, the amount which has already been withdrawn by the highest bidder shall be re-deposited before the Court. 6. The aforesaid order of the Division Bench of this Court was carried further by the highest bidder, Citra Developers Limited, before the Hon’ble Supreme Court being Civil Appeal Nos. 5568-5571 of 2009. The Hon’ble Supreme Court by its order dated 17th August, 2009 set aside the order of the Division Bench and the matter was sent back to this Court for de novo consideration in accordance with law. The undertaking given by the highest bidder was ordered to be continued till the decision in the appeals by this Court. The said order is reproduced hereunder: “Leave granted. Heard both sides. On 5.5. 2008, the bid of the Appellant herein was rejected as its bid was for Rs. 676 crores against the reserve price of Rs. 1650 crores. The question that arises for determination is – whether an unsuccessful bidder, who is allowed to withdraw its own bid, could make the appellant bound by its offer dated 22.4.2008 or face the consequence of -13- forfeiture of Rs. 139 crores, particularly when the Court had committed an error in the calculation of the reserve price. For the above reasons, we set aside the impugned order passed by the Division Bench and we remit the matter for de novo consideration by a Division Bench in accordance with law. We request the Division Bench to decide the matter expeditiously and preferably within three months from today. Since the amount has been withdrawn by the appellant herein on its giving undertaking dated 3rd July, 2008, the said undertaking will continue till the Division Bench dispose of the appeals as directed hereinabove. We express no opinion on merits. The Civil Appeals are disposed of accordingly.” 7. All these appeals are accordingly placed before us for hearing de novo in view of the directions of the Supreme Court in the appeals which had been preferred by the highest bidder i.e. Citra Developers Ltd. During the course of hearing it is pointed out to the Court that by another order dated 4th September, 2009, the Supreme Court clarified its earlier order in view of the application submitted by Metropolitan Infrahousing Pvt. Ltd. as well as by the Trade Union. The said application was in the nature of correction of the order dated 17th August, 2009. The Supreme Court clarified the order on 4th September, 2009, by observing as under: “ I.A. Nos. 9-12 of 2009 are moved by Metropolitan -14- Infrahousing Private Limited and I.A. Nos. 5-8 are moved by the Trade Union for correction. In our order dated 17th August, 2009 the words ‘139 crores’ in para 1, should be read as ‘169 crores’. In para 2 while remitting the matter we have used the words ‘we remit the matter’. They should be read as ‘we remit the matters’. It is the case of Metropolitan Infrahousing Private Limited that in para 1 of the order dated 17th August, 2009 while framing the question for remand to the High Court, this Court has stated as follows:- “...Whether an unsuccessful bidder, who is allowed to withdraw its own bid, could make the appellant bound by its offer dated 22.4.2008 or face the consequence of forfeiture of Rs. 139 crores (now to be read as 169 crores)” According to the applicant(s) the word “unsuccessful” be deleted or that it should be clarified that Citra Developers Limited claim to be “unsuccessful bidders”. We make it clear that it is the case of Citra Developers Limited that they are unsuccessful bidders and on that basis they sought withdrawal of their bid and consequentially the refund of the amount deposited by them. Subject to above clarification, Interlocutory Applications stand disposed of. “ 8. At the time of hearing of these appeals, Mr. Chinoy, learned Counsel appearing for Metropolitan Infrahousing Pvt. Ltd., submitted that in view of the observations of the Supreme Court, these appeals are required to be heard de novo. He further submitted that the question about reducing the amount of -15- reserve price as well as question about confirmation of the bid of the highest bidder is required to be considered by this Court in these appeals so that the matter is not further delayed. Mr. Chinoy further submitted that this Court, on its own, may consider the appropriate reserve price and, in his submission, the appropriate reserve price may be fixed at Rs. 600 crores which may be the workable reserve price, in view of the fact that in the past four times auctions were held but it could not materialise. Mr. Chinoy submitted that the Supreme Court has not concluded the issue in any manner and the entire question is kept open for consideration of this Court. It is further submitted by Mr. Chinoy that the highest bidder had already submitted a praecipe asking the single Judge to confirm their bid and at that stage it was not open for the highest bidder to withdraw from the bid. It is further submitted that it cannot be said that on 5th May, 2008 the learned single Judge rejected the bid by not confirming the sale as it was merely a tentative decision and that is why on 6th May, 2008 the amount was ordered to be deposited in the fixed deposit initially for a period of six weeks and subsequently the said period was further extended. The bid was not rejected outright by the learned Judge but the question was still kept open. Mr. Chinoy submitted that during the process of confirmation of the sale, the appellants were entitled to request the Court to reduce the reserve price as the appellants were also pursuing the matter in their capacity as creditors of the debtor Company. It is further submitted by Mr. Chinoy that in -16- view of the same, the impugned order passed by the learned Judge on 27th June, 2008, by which the highest bidder was permitted to withdraw from the bid and further permitted to take back its deposited amount back, is required to be set aside as the same is not sustainable in law. It is further submitted that even if the highest bidder is not willing to continue with the auction proceedings, it may do the same at its own risk and peril and the amount deposited should be forfeited and re-auction is required to be held at its cost. Mr. Chinoy further submitted that as per the conditions prescribed in the terms, the amount so deposited by the highest bidder is required to be forfeited. Mr. Chinoy further submitted that this Court may examine the question of fixation of reserve price de novo by taking into consideration the facts and circumstances of the case and a realistic and workable reserve price is required to be fixed by reducing the reserve price fixed by the learned single Judge by his order dated