Case: Pravin Gada  Vs. Central Bank Of India

3. Shorn of unnecessary details, the facts which are essential to be stated for disposal of these appeals are that a company by the name of Jay Electric Wire Corporation Ltd. had a factory at Mysore situate on land admeasuring approximately 4.4 acres comprised in plots 44 and 47 in Serial Nos. 55 and 69 in the Industrial Area of village Habal and Serial No. 33 of Metagally, Hobla Kasba. The said company, which closed down in February, 1995, had about 149 workers. As dispute arose between the workmen and the management because of termination, the matter was referred to the Industrial Tribunal at Mysore after the reference made under Section 10 of the Industrial Disputes Act, 1947 and the said tribunal, vide award dated 5th January, 2001, directed the employer to pay back wages to the workmen with effect from 6th February, 1995 and to continue payment during the subsistence of the relationship of employer and employee between the parties4. As the facts are further unfurled, on 18th December, 2006, a recovery certificate was issued by the Deputy Labour Commissioner at Bangalore for recovery of a sum of Rs.4.44 crores towards the dues of the workmen under the award passed by the Industrial Tribunal. A proceeding was initiated before the Company Judge of the High Court of Bombay in 1996 forming ther of Company Petition No. 336 of 1996. Subsequently, on a reference made by the BIFR under Section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985, the company court held that it was just and equitable for the company to be wound up. The official liquidator was appointed as provisional liquidator by order dated 6th October, 2005 to take charge of the books, assets and business of the company and to exercise necessary powers under the Companies Act, 1956. On 15th October, 2008, the said order was made absolute. The official liquidator was commanded to proceed in the matter in accordance with law to deal with the assets of the company in liquidation5. It is pertinent to state here that in the year 1999, the ICICI Bank had instituted a suit before the High Court in its original side for recovery of its dues against the company. The learned single Judge, vide order dated 8th July, 1999, appointed a Receiver who was granted liberty to sell the assets by public auction or by private treaty and to apply the net sale proceeds as between the ICICI Bank and the Central Bank of India which was impleaded as the second defendant to the suit in satisfaction of the respective charges on the immoveable property. The suit eventually stood transferred to the DRT and the DRT, by order dated 26th August, 2003, allowed the application filed by the ICICI Bank Ltd. for a sum of Rs.1.12 crores together with future interest at 12% per annum. It was further directed that on failure on the part of the borrower to repay the amount within six months, the immoveable property would be sold and the net sale proceeds would be paid to the applicant bank and the Central Bank of India in proportion to their respective charges6. In June, 2004, a public notice was issued for sale of the moveable and immoveable properties of the borrower and notice for the proposed sale was published in the newspapers. Though the movables of the borrower came to be sold, yet no proper offer was received for the sale of immoveable property. In a meeting dated 24th July, 2006, it was noted that two offers were received, one amounting to Rs.1.10 crores and the other Rs.80 lacs. The Central Bank of India stated that the offer was not acceptable to it. At that stage, the Standard Chartered Bank appeared before the Receiver stating that the ICICI Bank had assigned its debts to it. The meeting convened by the Receiver was adjourned to 9th August, 2006 and eventually, on 21st August, 2006, bidding took place inter se the two bidders who submitted their offers when the first and second respondents enhanced their bid to Rs.2.50 crores. The meeting was adjourned to 5th September, 2006 and the successful bidder was directed to enhance the amount representing 25% of the offer by 28th August, 2006. In the said meeting, the representative of the Central Bank of India was not present. On 29th September, 2006, a letter was addressed by the Receiver to the advocates of the two banks enclosing the report seeking the confirmation of sale. He also required the banks to send expression of interest in the property from two parties. On receipt of the letter, the Chief Manager of the Central Bank of India visited the office of the Receiver on 17th October, 2006 and informed about the expression of interest of two other bidders who were willing to pay higher price7. As is evincible from the Judgment of the High Court, certain meetings took place and the bank had difficulty in contacting the advocate. On 27th October, 2006, when both the bidders arrived at the office of the Receiver, they were informed that the sale had been confirmed in the morning. On 30th October, 2006, an application was filed by the Central Bank of India for setting aside the sale. Many a procedural irregularity was alleged including the one that it had no intimation of the proceeding until it received the letter dated 29th September, 2006 of the Receiver stating that the property had been sold for a sum of Rs.2.50 crores and the sale had been confirmed on 27th October, 2006. It was contended by the Central Bank of India that in the absence of intimation, it had been unable to remain present when the bidding took place on 21st August, 2006. A prayer for fresh auction and to consider the offers submitted by the two bidders who had expressed interest in the purchase of the property was made. It is apt to mention here that the official liquidator had filed report on 1st December, 2006 before the DRT stating that an application had been received from the workers contending that the sale which had been confirmed in favour of the first and second respondents, the appellants herein, was at a price which was neither fair nor reasonable. A submission was put forth that no notice was sent to the liquidator through the Registrar despite the mandate of law8. As is reflected from the proceedings of the fora below and the order passed by the High Court, the Recovery Officer, vide order dated 5th December, 2006, had set aside the confirmation of the sale holding that it was obligatory to ensure that a higher price was fetched for the property and the assets of the company in liquidation, if the sale price offered by an auction purchaser was inadequate. He ultimately set aside the sale and directed for conduct of a fresh auction in the presence of secured creditors, the Receiver and the official liquidator after notice. In pursuance of the said order, on 5th December, 2006, a sale was conducted without making a fresh notification. The Recovery Officer noted that the original auction purchasers did not participate in the fresh bidding process, but the two bids were received by the Recovery Officer and the highest bid amounting to Rs.6.45 crores was offered by one Umrah Developers. Regard being had to the said position, the Recovery Officer directed the bid of Umrah Developers to be accepted and the successful bidder was directed to pay the purchase consideration. The said Umrah Developers deposited the full consideration of Rs.6.45 crores on 10th November 2006 and 11th December, 2006. Taking note of the same, the Recovery Officer declared them as the successful bidder9. Being grieved by the aforesaid order, the first and second respondents therein preferred an appeal before the DRT which set aside the sale. Taking note of the facts in entirety, it opined that there was something wrong on the part of the valuer inasmuch as the offer of Rs.6.45 crores was received when the bids were conducted only amongst a few persons and not in the public realm and that was good enough indicative of the fact that the property could fetch a higher value. The DRT further opined that it would have been proper to issue a public notice and invite fresh offers. Being of this view, it directed, while retaining the offers which were received until 5th December, 2006, that the Recovery Officer should publish a public notice to determine as to whether offers higher than the bid of Rs.6.45 crores of Umrah Developers could be realized and if no further offers were received, the Recovery Officer was directed to accept the highest bid after inter se bidding between the earlier bidders10. Being dissatisfied with the aforesaid, an appeal was preferred by the first respondent before the DRAT which granted stay on 26th February, 2007 as a consequence of which the entire process of holding a fresh auction came to a standstill. At this juncture, an application was filed by Umrah Developers to permit it to withdraw the amount which it had deposited. The application was rejected by the DRT which compelled the company to file an application before the tribunal to withdraw the amount and the company was allowed to withdraw 90% of the bid amount leaving the balance, i.e., Rs.64.5 lacs in deposit before the Recovery Officer. Eventually, the DRAT dismissed the appeal by order dated 2nd July, 2008 mainly on the foundation that offer of Rs.6.45 crores was higher than the offer of Rs.2.50 crores furnished by the first and second respondents. The said order came to be challenged before the writ court and during the pendency of the writ proceedings, an application was filed by Umrah Developers for refund of the balance sum which was allowed. The writ petition preferred by the first and second respondents was disposed of on 11th August, 2010 in terms of the agreed minutes. As per the agreed order, the matter stood remanded to DRAT for a fresh decision11. As is demonstrable, on remand, the DRAT, by its order dated 15th October, 2010, allowed the appeal and directed restoration of the confirmation of sale in favour of the first and second respondents. The said order of the DRAT was assailed by theunion and the High Court remitted the matter to the DRAT for fresh consideration. The DRAT, considering the facts in entirety, allowed the appeal vide order dated 3rd March, 2011 and restored the confirmation of sale. The said order came to be assailed by the secured creditors and thes union on the ground that the confirmation suffered from material irregularities. The High Court noticed that the DRAT had opined that the power of the official liquidator was restricted to participate at the stage of disbursement of the dues of the workmen but not in conducting of the sale. It did not agree with the said finding on the basis of the proposition of law laid down in Rajasthan Financial Corpn. and Anr. V. Official Liquidator & Anr. [AIR 2006 SC 755 ]. While noting that aspect, the High Court proceeded to address the fundamental question whether the procedure that was followed in the sale of the property was fair and proper or whether there was any fraud and material irregularity. It adverted to the facts in a chronological manner and came to hold that the manner in which the sale proceedings had been conducted was neither fair nor transparent as a consequence of which the possible price that could be realized had become an unfortunate casuality. It took note of the offer made by Umrah Developers after a month of confirmation of sale and opined that the proper price had not been realized. The finding of the DRT that the Central Bank of India had remained absent could not be a justification to sustain the manner in which the sale had been conducted as it was manifestly contrary to the basic concept of fairness and transparency. The Court referred to number of authorities to highlight the conception that in every case, the duty of the court is to satisfy itself that the price offered is reasonable and the said satisfaction is to be based on the bedrock of the prevalent market value. Expressing the aforesaid view, the High Court allowed the writ petition, set aside the order of the DRAT dated 3rd March, 2011 and proceeded to direct as follows:12. The said order has been assailed by the first and second respondents before this Court, the successful bidders who had deposited Rs.2.50 crores in pursuance of the order passed by the DRT.

Reasoning: As is noticeable, the highest offer in the auction has come up to rupees 5.04 crores at such a distance of time. Regard being had to the totality of the circumstances, we are disposed to think that the sale should be confirmed subject to the appellants depositing a further sum of Rs. 50 lacs before the DRAT within a period of three months from today and we order accordingly18. On a perusal of the record, it transpires that the official liquidator had appeared before the recovery officer on number of dates. However, the DRT had returned a finding that he has a restricted role which has been found fault with by the High Court. In our opinion, the High Court is absolutely correct in its analysis and we concur with the same, but, a pregnant one, the fact remains that the High Court had set aside the sale on the foundation that a fair and transparent procedure had not been adopted. Having given due respect to the same, this court had passed orders on earlier occasions which we have reproduced hereinabove to get the auction conducted in a fair and transparent manner and recorded our conclusion. Therefore, the confirmation of sale as has been directed by us shall be treated to have attained finality.