Case: Chairman &amp; M.D. Sipcot  Vs. Contromix P. Ltd

that rightly no grievance had been made that there was anything illegal in SIPCOT taking possession of the unit because in spite of the fact that several opportunities were given to respondent No. 1 for repaying the amount as per the instalments, it failed to repay. The only fault that has been found in the action taken by SIPCOT is in the matter of the procedure followed for sale of the mortgaged assets of respondent No. 1. The learned single Judge as well as the Division Bench of the High Court have held that the said sale was not conducted in accordance with the guidelines laid down by this Court in Mahesh Chandra case (1992 AIR SCW 3629) (supra) inasmuch as (i) the sale was not held by auction and was held by inviting tenders followed by negotiations; (ii) there price for which the properties were sold was low; and (iii) before accepting the offer of Rs. 38 lakhs made by respondent No. 2, no intimation was given to respondent No. 1 so as to enable it to make a higher offer. 12. In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and every body has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price. But many times it may not be possible to secure the best price by public auction when the bidders join together so as to depress the bid or the nature of the property to be sold is such that suitable bid may not be received at public auction. In the event, the other suitable mode for selling of property can be by inviting tenders. In order to ensure that such sale by calling tenders does not escape attention of an intending participant, it is essential that every endeavour should be made to give wide publicity so as to get the maximum price. These considerations which govern the sale of public property have been held to be applicable to a sale of property by the State Financial Corporations under Section 29 of the Act in Mahesh Chandra case (1992 AIR SCW 3629 (supra). In that case this Court has held that sale by public auction is universally recognised to be the best and most fair method and is beyond reproach and, if it is not possible to adopt the said method, sale may be held by inviting tenders, but in that event every endeavour should be made to give wide publicity to get the maximum price. The said decision cannot, therefore, be construed as laying down that a sale by tender is impermissible and invalid. The learned judges, in that case, have referred to the decisions of this Court in Sachidananda Pandey v. State of West Bengal, 1987(2) SCR 223 and Haji T.M. Hassan v. Kerala Financial Corporation, 1988(1) SCR 1079 wherein it has been held that one of the modes of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. It cannot, therefore, be said that a sale by inviting tenders is ipso facto invalid. The validity of such a sale will have to be considered in the light of the facts and circumstances of the particular case. 13. In the facts and circumtances of this case, it cannot be said that the failure on the part of SIPCOT to sell the property by public auction and selling it to respondent No. 2 by inviting tenders is bad for the reason that the said property has not received the best price in the market. As indicated earlier in response to the first advertisement no offer was received from anybody and in response to the second advertisement also only one offer was received from respondent No. 2 and that too was only for Rs. 14.26 lakhs. Through negotiations SIPCOT was able to secure a revised offer of Rs. 38 lakhs, which was more than the amount of Rs. 36.44 lakhs, at which the unit had been valued. Respondent No. 1 had suficient opportunity, during the pendency of the matter in the High Court as well as in this Court, to secure an offer higher than Rs. 38 lakhs made by respondent No. 2, but he has not been able to bring any higher offer. In the circumstances it cannot be said that the price at which the unit was sold was low. The sanction of the loan of Rs. 44.80 lakhs in 1987 cannot afford a basis for holding that the value of the unit in 1993 could not be less than Rs. 44.80 lakhs. The value of the plant and machinery could have fallen on account of its being used during the period from 1987 to 1993 or due to the same getting outdated. If the value of the unit was higher than Rs. 38 lakhs it would have been possible for respondent No. 2 to obtain a better offer. His failure to do so negatives the inference that the sale price of Rs. 38 lakhs is low. Similarly, the failure on the part of SIPCOT to give intimation to respondent No. 1 before accepting the offer of Rs. 38 lakhs made by respondent No. 2, is of little consequence in the facts of this case because respondent No. 1 has had sufficient opportunity both before the High Court as well as in this Court to obtain a higher offer, but he has failed to do so.14. In these circumstances no fault can be found with the action of SIPCOT in selling the unit to respondent No. 2 for Rs. 38 lakhs and the Judgment of the High Court, in setting aside the said sale cannot be upheld.

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

Explanation:
1[ds]12. In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and every body has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price. But many times it may not be possible to secure the best price by public auction when the bidders join together so as to depress the bid or the nature of the property to be sold is such that suitable bid may not be received at public auction. In the event, the other suitable mode for selling of property can be by inviting tenders. In order to ensure that such sale by calling tenders does not escape attention of an intending participant, it is essential that every endeavour should be made to give wide publicity so as to get the maximum price.These considerations which govern the sale of public property have been held to be applicable to a sale of property by the State Financial Corporations under Section 29 of the Act in Mahesh Chandra case (1992 AIR SCW 3629 (supra). In that case this Court has held that sale by public auction is universally recognised to be the best and most fair method and is beyond reproach and, if it is not possible to adopt the said method, sale may be held by inviting tenders, but in that event every endeavour should be made to give wide publicity to get the maximum price.The said decision cannot, therefore, be construed as laying down that a sale by tender is impermissible and invalid. The learned judges, in that case, have referred to the decisions of this Court in Sachidananda Pandey v. State of West Bengal, 1987(2) SCR 223 and Haji T.M. Hassan v. Kerala Financial Corporation, 1988(1) SCR 1079 wherein it has been held that one of the modes of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. It cannot, therefore, be said that a sale by inviting tenders is ipso facto invalid. The validity of such a sale will have to be considered in the light of the facts and circumstances of the particular case.In the facts and circumtances of this case, it cannot be said that the failure on the part of SIPCOT to sell the property by public auction and selling it to respondent No. 2 by inviting tenders is bad for the reason that the said property has not received the best price in the market. As indicated earlier in response to the first advertisement no offer was received from anybody and in response to the second advertisement also only one offer was received from respondent No. 2 and that too was only for Rs. 14.26 lakhs. Through negotiations SIPCOT was able to secure a revised offer of Rs. 38 lakhs, which was more than the amount of Rs. 36.44 lakhs, at which the unit had been valued. Respondent No. 1 had suficient opportunity, during the pendency of the matter in the High Court as well as in this Court, to secure an offer higher than Rs. 38 lakhs made by respondent No. 2, but he has not been able to bring any higher offer. In the circumstances it cannot be said that the price at which the unit was sold was low. The sanction of the loan of Rs. 44.80 lakhs in 1987 cannot afford a basis for holding that the value of the unit in 1993 could not be less than Rs. 44.80 lakhs. The value of the plant and machinery could have fallen on account of its being used during the period from 1987 to 1993 or due to the same getting outdated. If the value of the unit was higher than Rs. 38 lakhs it would have been possible for respondent No. 2 to obtain a better offer. His failure to do so negatives the inference that the sale price of Rs. 38 lakhs is low. Similarly, the failure on the part of SIPCOT to give intimation to respondent No. 1 before accepting the offer of Rs. 38 lakhs made by respondent No. 2, is of little consequence in the facts of this case because respondent No. 1 has had sufficient opportunity both before the High Court as well as in this Court to obtain a higher offer, but he has failed to do so.14. In these circumstances no fault can be found with the action of SIPCOT in selling the unit to respondent No. 2 for Rs. 38 lakhs and the Judgment of the High Court, in setting aside the said sale cannot be upheld.