Case: Vedica Procon Private Limited Vs. Balleshwar Greens Private Limited

date of the original sale was worth around Rs.6.25 crores as against the highest offer of Rs.1.3 crores of the appellant herein. Therefore, the decision of the Company Judge to reject the highest offer is perfectly justified. 44. A survey of the abovementioned judgments relied upon by the first respondent does not indicate that this Court has ever laid down a principle that whenever a higher offer is received in respect of the sale of the property of a company in liquidation, the Court would be justified in reopening the concluded proceedings. The earliest judgment relied upon by the first respondent in Navalkha & Sons (supra) laid down the legal position very clearly that a subsequent higher offer is no valid ground for refusing confirmation of a sale or offer already made. Unfortunately, in Divya Manufacturing Company (supra) this Court departed from the principle laid down in Navalkha & Sons (supra). We have already explained what exactly is the departure and how such a departure was not justified. 45. Coming to the decision in FCS Software Solutions Ltd., we have already noticed that this Court rightly reopened the finalized sale on the ground that there was material irregularity in the conduct of the sale. 46. Shradhha Aromatics (supra), as already noticed, is a decision rendered on the peculiar facts of the case and, in our opinion, does not lay down any principle applicable across the board. Whereas in Manoj I Naik (supra) the Company Court itself declined to accept the highest offer, therefore, it has no relevance in the context of the case on hand. 47. In our opinion, in the case on hand, the High Court was not justified in recalling the order dated 17.12.2013 for following reasons: 48. The highest bid of the appellant herein was accepted by the Company Court and all the stake-holders of the company in liquidation were heard before such an acceptance. Nobody ever objected including the first respondent herein at that stage on any ground whatsoever, such as, that there was any fraud or irregularity in the sale nor was there any objection from any one of them that the price offered by the appellant herein was inadequate. No doubt, the property in question became more valuable in view of the subsequent development. In our opinion, it is not a relevant consideration in determining the legality of the order dated 17.12.2013. Imagine, if instead of increasing the floor space index for construction from 1.0 to 1.8 the State of Gujarat had decided to reduce it below 1.0 subsequent to 17.12.2013, could the appellant be heard to argue that it would be legally justified in resiling from its earlier offer which was accepted by the Court and not bound by the contractual obligation flowing from such an offer and acceptance? 49. Certain incidental questions raised by the first respondent are required to be answered at this stage. 50. The first respondent submitted that the order dated 17.12.2013 only accepted the highest bid but it did not confirm the sale and, therefore, the Court is at liberty to decline confirmation of the sale in view of the subsequent developments. In our opinion, the said submission is to be rejected because there is no specific format in which a sale conducted by the official liquidator is to be confirmed by the Company Court. The mere absence of the expression “that the sale is confirmed” in the order dated 17.12.2013 is not determinative of the question. The totality of the circumstances, such as, the very tenor of the order (Footnote 1 supra) that none of the stake-holders of the Company in liquidation ever objected to the offer of the appellant herein on the ground that it is inadequate consideration for the property; the fact that the official liquidator himself understood the order dated 17.12.2013 to be an order not only accepting the highest bid of the appellant herein but also as an order confirming the sale in favour of the appellant, as evidenced by his letter dated 19.12.2013, (the relevant portion of which is already extracted earlier) and the fact that the first instalment of the payment of 25% of the sale consideration was accepted both by the official liquidator and the Company Court without raising any objection for the same and the fact that the first respondent withdrew its earnest money deposit without raising any objection regarding adequacy of the price offered by the appellant herein, in our view, clearly indicate that the sale in favour of the appellant was confirmed by the order dated 17.12.2013. Assuming for the sake of argument that there is no confirmation, in the absence of any legally tenable ground for not confirming the sale, it cannot be declined to the appellant as it was observed in Navalkha case (supra) that “…no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already made”. 51. The other submission made before the Division Bench of the High Court and before us by the first respondent that there was a change in the share-holding pattern of the appellant company subsequent to the order dated 17.12.2013 and that such a change would virtually amount to a nomination by the successful bidder in favour a of third party contrary to the conditions of the tender notice, in our opinion, does not deserve any consideration. This was not the ground on which the first respondent initially sought recall of the order dated 17.12.2013. Such a recall was sought only on one ground, the details for which are already noted earlier in this judgment. The first respondent kept on adding new grounds from stage to stage for attacking the order dated 17.12.2013. The conduct of the first respondent is understandable. The value of the property in question must have escalated substantially in view of the developments subsequent to the order dated 17.12.2013 but allowing such an attempt, in our opinion, would rob the sales conducted by the Courts of all sanctity.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]No doubt, the penultimate statement of the paragraph recognises the discretion of the Company Court either for accepting or refusing the highest bid at the auction, it also emphasizes the obligation of the Court to see that the price fixed at the auction is adequate price even though there is no irregularity or fraud in the conduct of the sale.But the fact remains that one of the secured creditors objected to the sale in favour of the appellant before this Court on the ground that the value of the property even on the date of the original sale was worth around Rs.6.25 crores as against the highest offer of Rs.1.3 crores of the appellant herein. Therefore, the decision of the Company Judge to reject the highest offer is perfectly justified.In our opinion, in the case on hand, the High Court was not justified in recalling the order dated 17.12.The highest bid of the appellant herein was accepted by the Company Court and all theof the company in liquidation were heard before such an acceptance. Nobody ever objected including the first respondent herein at that stage on any ground whatsoever, such as, that there was any fraud or irregularity in the sale nor was there any objection from any one of them that the price offered by the appellant herein was inadequate. No doubt, the property in question became more valuable in view of the subsequent development. In our opinion, it is not a relevant consideration in determining the legality of the order dated 17.12.2013. Imagine, if instead of increasing the floor space index for construction from 1.0 to 1.8 the State of Gujarat had decided to reduce it below 1.0 subsequent to 17.12.2013, could the appellant be heard to argue that it would be legally justified in resiling from its earlier offer which was accepted by the Court and not bound by the contractual obligation flowing from such an offer andour opinion, the said submission is to be rejected because there is no specific format in which a sale conducted by the official liquidator is to be confirmed by the Company Court. The mere absence of the expressionthe sale isin the order dated 17.12.2013 is not determinative of theThe other submission made before the Division Bench of the High Court and before us by the first respondent that there was a change in thepattern of the appellant company subsequent to the order dated 17.12.2013 and that such a change would virtually amount to a nomination by the successful bidder in favour a of third party contrary to the conditions of the tender notice, in our opinion, does not deserve any consideration. This was not the ground on which the first respondent initially sought recall of the order dated 17.12.2013. Such a recall was sought only on one ground, the details for which are already noted earlier in this judgment. The first respondent kept on adding new grounds from stage to stage for attacking the order dated 17.12.2013. The conduct of the first respondent is understandable. The value of the property in question must have escalated substantially in view of the developments subsequent to the order dated 17.12.2013 but allowing such an attempt, in our opinion, would rob the sales conducted by the Courts of all sanctity.