Case: Pegasus Assets Reconstruction P.Ltd Vs. M/S Haryana Concast Limited

deposit in this Court.31. The argument on behalf of Mr. Rajaliwala and the intervener Himalayan Infra Projects Private Limited is that this Court should take a practical view and allow the offer of Rs.50 crores in comparison to Rs.32 crores deposited by the auction purchaser. In reply, on behalf of Venus Realcon- respondent No. 3, it was pointed out that Mr. Rajaliwala is himself a property dealer and a PIL at his instance, in this matter, does not deserve any consideration for lack of good faith, in view of Judgment in the case of Arun Kumar Agrawal vs. Union of India, 2014 (2) SCC 609. It was pointed out from materials on record that the valuation of property has been changing from 2002 when it was estimated to be Rs.10.13 crores. In January 2010 its market value was around Rs.24-25 crores and the distress value was Rs.18-20 crores approximately as per two different valuation reports. The valuation of Rs.75 crores approximately in 2008 was unrealistic, solely on the basis of oral communication from the Collector said to be based upon valuation for commercial plot and not for an industrial plot. It is pointed out that one bid in 2005 by M/s. Radha Raman Builders and Developers Private Limited for Rs.29 crores approximately for a larger plot than the actual land, could not materialize. The first offer by M/s. Venus Realcon on 9.4.2010 was Rs.26 crores which on negotiation was raised to Rs.26.50 crores. Subsequently on allegations made by Mr. Rajaliwala the Company Judge on 13.5.2010 held an open bid in Court, wherein M/s. Venus Realcon raised its bid to Rs.32 crores. The Court then ordered for fresh advertisement pursuant to which no bidder, including Mr. Rajaliwala offered more than Rs.32 crores. Hence the Company Court confirmed the sale in favour of M/s. Venus Realcon for Rs.32 crores but it was made subject to Special Leave Petitions filed by Pegasus and HSIIDC.32. On considering the submissions of parties, we find that the sale confirmed in favour of M/s. Venus Realcon for Rs.32 crores does not require any interference particularly at the instance of Petitioner-Vinod Rajaliwala. There was no illegality or irregularity established against the conduct of auction and once it is found that the offer of Rs.32 crores was a fair offer in a competitive bid conducted fairly and the offer has been accepted and the sale confirmed, it would not be proper for this court to undermine the value of such auction sale conducted not only by the secured creditor but also by the Official Liquidator who was permitted to be associated with the whole process of finding out of valuation as well as the conduct of sale. M/s. Venus Realcon has rightly placed reliance upon the judgments of this court in the case of Valji Khimji & Co. vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. 2008(9) SCC 299 and Vedica Procon Private Limited vs. Balleshwar Greens P. Ltd., 2015(8) SCALE 713. In Valji Khimji, the law was enunciated in Paragraph 28 in the following words: “If it is held that every confirmed sale can be set aside the result would be that no auction-sale will ever be complete because always somebody can come after the auction or its confirmation offering a higher amount. It could have been a different matter if the auction had been held without adequate publicity in well-known newspapers having wide circulation, but where the auction-sale was done after wide publicity, then setting aside the sale after its confirmation will create huge problems. When an auction-sale is advertised in well-known newspapers having wide circulation, all eligible persons can come and bid for the same, and they are themselves to be blamed if they do not come forward to bid at the time of the auction. They cannot ordinarily later on be allowed after the bidding (or confirmation) is over to offer a higher price. Of course, the situation may be different if an auction-sale is finalized, say for Rs.1 crore, and subsequently somebody turns up offering Rs.10 crores. In this situation it is possible to infer that there was some fraud because if somebody subsequently offers Rs.10 crores, then an inference can be drawn that an attempt had been made to acquire that property/asset at a grossly inadequate price. This situation itself may indicate fraud or some collusion. However, if the price offered after the auction is over which is only a little over the auction price, that cannot by itself suggest that any fraud has been done.” 33. In Vedica Procon’s case (supra) the aforesaid view was noticed and after considering many judgments in Paragraph 39, the Court approved the view taken in Navalkha and Sons vs. Sri Ramanya Das & Ors., 1969 (3) SCC 537 that there is a discretion in the Company Court either to accept or reject the highest bid before an order of confirmation of sale is made. However, once the Company Court is satisfied that the price is adequate, the subsequent higher offer cannot be a ground for refusing confirmation. The price of immoveable property keeps on varying depending upon the market conditions and availability of a buyer. Such fluctuations may attract fresh higher offers but normally such offers cannot be made the basis for reopening the confirmed sale which was otherwise valid. In the present case, we are satisfied that the sale made in favour of M/s. Venus Realcon does not require any interference. There is no good reason why the full price paid by Venus Realcon should be ordered to be refunded with interest etc. and possession which was delivered to Venus Realcon at the time of sale should be disturbed after passage of so much time. In such circumstances, while granting leave in SLP(C) Nos.117-118, the consequent Civil Appeals are hereby dismissed but without any order as to costs. The money deposited in this case by the intervener M/s. Himalayan Infra Projects Private Limited should be refunded to it forthwith along with interest accrued thereupon.

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

Explanation:
1[ds]27. We grant leave in SLP(C) No.7074 of 2010 preferred by HSIIDC but only to dismiss this case as we have found the grievance of Pegasus to be justified; it was entitled not only to stay outside the winding up proceeding in view of provisions of SARFAESI Act which is a special and later Act but was also entitled to exercise its rights without any fetters that were erroneously placed upon it by the company Judge and were approved also by the Division Bench. Hence, the grievance of the HSIIDC that Pegasus should not have been permitted to stay outside the winding up proceeding is found meritless. Consequently its appeal has to be dismissed.28. As we have approved the judgment of the Division Bench of Delhi High Court in the case of Megnostar, the appeals preferred against the judgment in Civil Appeal Nos. 9293-94 of 2014 are hereby dismissed. In the facts of the case there shall be no order as to costs.29. With respect to the case of Vinod Rajaliwala, it has been indicated earlier that approximately 36 acres of land of Haryana Concast Limited was put to auction and sale by Pegasus in association with official liquidator and was ultimately sold for Rs.32 crores in favour of M/s. Venus Realcon Private Limited. Vinod Rajaliwala challenged the orders of the company Judge confirming the sale by preferring a company appeal and also through a public interest litigation (a writ petition). Both were dismissed by the Division Bench of Punjab and Haryana High Court by orders passed on 23.9.2010. These orders in company appeal No. 10/2010 and PIL being CWP No.8422 of 2010 are under challenge at the instance of Mr. Rajaliwala through special leave petition (C) Nos. 117-118 of 2011.30. Since the larger issue arising out of the conflicting judgments of Punjab and Haryana High Court and Delhi High Court has already been addressed by us, the case of Mr. Rajaliwala requires adjudication, mostly on facts as to whether the sale confirmed by the Company Judge and approved by the Division Bench in favour of M/s. Venus Realcon requires any interference. It is not at all necessary to go into the facts which preceded the sale in favour of M/s Venus Realcon for Rs.32 crores which till date stands confirmed. It is against confirmation of sale that Mr. Rajaliwala has preferred appeal as well as a PIL on the ground that the consideration money does not reflect the correct value of the secured assets, i.e., the land sold to M/s. Venus Realcon. In order to substantiate this claim, Mr. Rajaliwala was granted an opportunity by the Division Bench to find out a higher bid. One M/s. ACHASTES Promoters Private Limited through an application in Company Appeal No. 10/2010 claimed to offer a bid of Rs.33 crores but later withdrew the same. Thereafter, another buyer made an offer of Rs.37 crores but tendered a meagre amount of Rs.1 crore only before the Division Bench. On these facts the Division Bench dismissed company appeal on 23.9.2010. As a consequence, the PIL was also dismissed on the same date. In this Court, the petitioner claimed that the property was worth hundred of crores but ultimately petitioner persuaded another entity M/s. Himalayan Infra Projects Private Limited to offer a higher bid. This company was allowed to intervene and be impleaded, and it deposited 10 crores in January, 2011 and Rs. 40 crores in April, 2011. That money is lying in deposit in this Court.31. The argument on behalf of Mr. Rajaliwala and the intervener Himalayan Infra Projects Private Limited is that this Court should take a practical view and allow the offer of Rs.50 crores in comparison to Rs.32 crores deposited by the auction purchaser. In reply, on behalf of Venus Realcon- respondent No. 3, it was pointed out that Mr. Rajaliwala is himself a property dealer and a PIL at his instance, in this matter, does not deserve any consideration for lack of good faith, in view of Judgment in the case of Arun Kumar Agrawal vs. Union of India, 2014 (2) SCC 609. It was pointed out from materials on record that the valuation of property has been changing from 2002 when it was estimated to be Rs.10.13 crores. In January 2010 its market value was around Rs.24-25 crores and the distress value was Rs.18-20 crores approximately as per two different valuation reports. The valuation of Rs.75 crores approximately in 2008 was unrealistic, solely on the basis of oral communication from the Collector said to be based upon valuation for commercial plot and not for an industrial plot. It is pointed out that one bid in 2005 by M/s. Radha Raman Builders and Developers Private Limited for Rs.29 crores approximately for a larger plot than the actual land, could not materialize. The first offer by M/s. Venus Realcon on 9.4.2010 was Rs.26 crores which on negotiation was raised to Rs.26.50 crores. Subsequently on allegations made by Mr. Rajaliwala the Company Judge on 13.5.2010 held an open bid in Court, wherein M/s. Venus Realcon raised its bid to Rs.32 crores. The Court then ordered for fresh advertisement pursuant to which no bidder, including Mr. Rajaliwala offered more than Rs.32 crores. Hence the Company Court confirmed the sale in favour of M/s. Venus Realcon for Rs.32 crores but it was made subject to Special Leave Petitions filed by Pegasus and HSIIDC.32. On considering the submissions of parties, we find that the sale confirmed in favour of M/s. Venus Realcon for Rs.32 crores does not require any interference particularly at the instance of Petitioner-Vinod Rajaliwala. There was no illegality or irregularity established against the conduct of auction and once it is found that the offer of Rs.32 crores was a fair offer in a competitive bid conducted fairly and the offer has been accepted and the sale confirmed, it would not be proper for this court to undermine the value of such auction sale conducted not only by the secured creditor but also by the Official Liquidator who was permitted to be associated with the whole process of finding out of valuation as well as the conduct of sale. M/s. Venus Realcon has rightly placed reliance upon the judgments of this court in the case of Valji Khimji & Co. vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. 2008(9) SCC 299 and Vedica Procon Private Limited vs. Balleshwar Greens P. Ltd., 2015(8) SCALE 713. In Valji Khimji, the law was enunciated in Paragraph 28 in the followingit is held that every confirmed sale can be set aside the result would be that no auction-sale will ever be complete because always somebody can come after the auction or its confirmation offering a higher amount. It could have been a different matter if the auction had been held without adequate publicity in well-known newspapers having wide circulation, but where the auction-sale was done after wide publicity, then setting aside the sale after its confirmation will create huge problems. When an auction-sale is advertised in well-known newspapers having wide circulation, all eligible persons can come and bid for the same, and they are themselves to be blamed if they do not come forward to bid at the time of the auction. They cannot ordinarily later on be allowed after the bidding (or confirmation) is over to offer a higher price. Of course, the situation may be different if an auction-sale is finalized, say for Rs.1 crore, and subsequently somebody turns up offering Rs.10 crores. In this situation it is possible to infer that there was some fraud because if somebody subsequently offers Rs.10 crores, then an inference can be drawn that an attempt had been made to acquire that property/asset at a grossly inadequate price. This situation itself may indicate fraud or some collusion. However, if the price offered after the auction is over which is only a little over the auction price, that cannot by itself suggest that any fraud has been done.case (supra) the aforesaid view was noticed and after considering many judgments in Paragraph 39, the Court approved the view taken in Navalkha and Sons vs. Sri Ramanya Das & Ors., 1969 (3) SCC 537  that there is a discretion in the Company Court either to accept or reject the highest bid before an order of confirmation of sale is made. However, once the Company Court is satisfied that the price is adequate, the subsequent higher offer cannot be a ground for refusing confirmation. The price of immoveable property keeps on varying depending upon the market conditions and availability of a buyer. Such fluctuations may attract fresh higher offers but normally such offers cannot be made the basis for reopening the confirmed sale which was otherwise valid. In the present case, we are satisfied that the sale made in favour of M/s. Venus Realcon does not require any interference. There is no good reason why the full price paid by Venus Realcon should be ordered to be refunded with interest etc. and possession which was delivered to Venus Realcon at the time of sale should be disturbed after passage of so much time. In such circumstances, while granting leave in SLP(C) Nos.117-118, the consequent Civil Appeals are hereby dismissed but without any order as to costs. The money deposited in this case by the intervener M/s. Himalayan Infra Projects Private Limited should be refunded to it forthwith along with interest accrued thereupon.