Case: M.V. Janardhan Reddy Vs. Vijaya Bank &amp; Another

Act has to be exercised with judicial discretion regard being had to the interests of the Company and its creditors as well. This principle was followed in Rathnaswami Pillai v. Sadapathi Pillai and S. Soundarajan v. Roshan & Co. In A. Subbaraya Mudaliar v. K. Sundarajan, it was pointed out that the condition of confirmation by the Court being a safeguard against the property being said at an inadequate price, it will be not only proper but necessary that the Court in exercising the discretion which it undoubtedly has of accepting or refusing the highest bid at the auction held in pursuance of its orders, should see that the price fetched at the auction is an adequate price even though there is no suggestion of irregularity or fraud. It is well to bear in mind the other principle which is equally well-settled namely that once the Court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already received. [See the decision of the Madras High Court in Roshan & Cos case (supra)]. 25. It is true that the Recovery Officer confirmed the sale in favour of the appellant. But as we have already noted, in view of condition imposed by the Company Court, Recovery Officer did not have the power to confirm sale. An order passed by an officer having no authority of law has no effect. It neither creates any right in favour of a party for whom such order is made nor imposes any obligation on the opposite party against whom it was passed. 26. In Sikander Khan v. Radha Kishan, (2002) 9 SCC 405 : JT 2001 (10) SC 29 , auction sale of agricultural land was confirmed by the Collector. The judgment-debtor filed an application under Order 21, Rule 90 of the Code of Civil Procedure, 1908 contending that the Collector had no jurisdiction to confirm the sale and his action, therefore, was null and void. 27. Upholding the contention and setting aside the sale, this Court said; Learned counsel appearing for the appellants urged that the view taken by the High Court that the Collector had jurisdiction to confirm the auction-sale was patently erroneous. In other words, what the learned counsel contends is that under Section 71 of the Code read with Order 21 Rule 92 CPC, the Collector is only authorised to hold and conduct the auction-sale but he has no power to confirm the sale. According to him, the confirmation of auction-sale can only be done by the civil court after deciding the objections, if filed. We find substance in the argument. Order 21 Rule 92 of the Code of Civil Procedure provides that the civil court shall have power to make an order confirming the sale and thereupon the sale shall become absolute. What Section 71 of the Code provides is that where the execution of the decree is passed by the competent civil court, which cannot be satisfied and requires sale of the agricultural holding of a pakka tenant, the auction-sale of such land shall be conducted by the Collector on fulfilment of certain conditions. It is, therefore, crystal clear that only the auction-sale of an agricultural land is to be held and conducted by the orders of the Collector and not the confirmation of such sale. In view of the fact that in the present case the auction-sale of the appellants land was not confirmed by the civil court, the auction-sale was a nullity and the executing court was right when it set aside the impugned auction-sale. 28. It is true that when the Company Judge set aside the sale on March 17, 2006, the order was reversed by the Division Bench of the High Court since it was in breach of natural justice. That does not, however, mean that the Company Court could not pass fresh order after affording opportunity of hearing to the parties. In our opinion, the Company Court was right in passing fresh order after hearing the parties. If the Recovery Officer could not have confirmed the sale, obviously all actions taken in pursuance of confirmation of sale, such as, issuance of sale certificate, registration of documents, etc., would be of no consequence. Since the Company was in liquidation and Official Liquidator was in charge of the assets of the Company, he ought to have been associated with the auction proceedings, which was not done. This is also clear from the report submitted by the Official Liquidator and on that ground also, the auction sale was liable to be set aside. 29. Thus, taking into account overall circumstances, it cannot be said that by setting aside the sale, any illegality had been committed by the Court or the appellant had suffered. The grievance voiced by the appellant, therefore, is not well founded and cannot be upheld. 30. One thing, however, may be noted. In the auction held on December 19, 2005, the appellant was the highest bidder. His bid of Rs.67.50 lakhs was accepted and he paid the earnest money. Sale was confirmed albeit illegally, by the Recovery Officer on February 13, 2006 and he paid the remaining amount. The appellant thus paid the entire amount of Rs.67.50 lakhs. The sale was confirmed, sale certificate was issued and sale deed was registered in his favour. It is the case of the appellant that he had paid stamp duty of Rs.4 lakhs. Taking into consideration all these factors, in our opinion, ends of justice would be met if respondent No.3-M/s MSN Organics (P) Ltd., who has purchased the property for Rs.1.80 crores is directed to pay an amount of Rs.20,00,000/- (twenty lakhs only) to the appellant herein. In our judgment, payment of this amount to the appellant (auction-purchaser) would work as some solatium for his trouble and disappointment for the loss of that which is, perhaps, a good bargain [Chundi Charan v. Bankey Behary, (1899) 26 Cal 449 (FB)].

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

Explanation:
1[ds]19. Having heard the learned counsel for the parties and having given anxious consideration to the facts and circumstances in their entirety, in our opinion, it cannot be said that by setting aside sale, either the learned Company Judge or the Division Bench has committed any illegality which deserves interference in exercise of discretionary power under Article 136 of the Constitution22. The above orders leave no room of doubt that the Bank was permitted to go ahead with the proposed sale of the assets of the Company under liquidation by way of auction but such sale was subject to confirmation by the Company Court. It is, therefore, clear that all parties were aware about the condition as to confirmation of sale by the Company Court. It was, therefore, not open to Recovery Officer to confirm sale. The order passed and action taken by the Recovery Officer was in clear violation of and inconsistent with the specific condition imposed by the Company Court. In our considered opinion, therefore, the appellant cannot take any advantage of confirmation of sale by the Recovery Officer who did not possess the power to confirm sale25. It is true that the Recovery Officer confirmed the sale in favour of the appellant. But as we have already noted, in view of condition imposed by the Company Court, Recovery Officer did not have the power to confirm sale. An order passed by an officer having no authority of law has no effect. It neither creates any right in favour of a party for whom such order is made nor imposes any obligation on the opposite party against whom it was passed28. It is true that when the Company Judge set aside the sale on March 17, 2006, the order was reversed by the Division Bench of the High Court since it was in breach of natural justice. That does not, however, mean that the Company Court could not pass fresh order after affording opportunity of hearing to the parties. In our opinion, the Company Court was right in passing fresh order after hearing the parties. If the Recovery Officer could not have confirmed the sale, obviously all actions taken in pursuance of confirmation of sale, such as, issuance of sale certificate, registration of documents, etc., would be of no consequence. Since the Company was in liquidation and Official Liquidator was in charge of the assets of the Company, he ought to have been associated with the auction proceedings, which was not done. This is also clear from the report submitted by the Official Liquidator and on that ground also, the auction sale was liable to be set aside29. Thus, taking into account overall circumstances, it cannot be said that by setting aside the sale, any illegality had been committed by the Court or the appellant had suffered. The grievance voiced by the appellant, therefore, is not well founded and cannot be upheld30. One thing, however, may be noted. In the auction held on December 19, 2005, the appellant was the highest bidder. His bid of Rs.67.50 lakhs was accepted and he paid the earnest money. Sale was confirmed albeit illegally, by the Recovery Officer on February 13, 2006 and he paid the remaining amount. The appellant thus paid the entire amount of Rs.67.50 lakhs. The sale was confirmed, sale certificate was issued and sale deed was registered in his favour. It is the case of the appellant that he had paid stamp duty of Rs.4 lakhs. Taking into consideration all these factors, in our opinion, ends of justice would be met if respondent No.3-M/s MSN Organics (P) Ltd., who has purchased the property for Rs.1.80 crores is directed to pay an amount of Rs.20,00,000/- (twenty lakhs only) to the appellant herein. In our judgment, payment of this amount to the appellant (auction-purchaser) would work as some solatium for his trouble and disappointment for the loss of that which is, perhaps, a good bargain [Chundi Charan v. Bankey Behary, (1899) 26 Cal 449 (FB)]