Case: LMJ International Ltd Vs. Dankuni Steels Limited

There is some litigation pending between the appellant herein and respondent Nos. 1 to 4. Though, it is not necessary to state in detail the nature of dispute between them, some aspects thereof which are relevant for this case shall be taken note of at the appropriate stage. At this juncture, it is pertinent to note that the Division Bench of the High Court in those proceedings between the appellant and respondent Nos. 1 to 4 had passed direction for sale of 10000 Metric Tons (MT) of Metallurgical Coke (Met Coke) by public auction. The Special Officer was appointed for this purpose who conducted the sale. Four bids were received. Bid of respondent No. 5 was the highest as it offered the price of Rs. 14000/per MT. By the impugned order dated May 15, 2017, the High Court has accepted the said offer after rejecting the objections of the appellant. The appellant herein feels aggrieved by the acceptance of that offer by the High Court.2. The relevant facts which need to be noticed for resolving the controversy are stated below:Respondent No. 2 herein isAgent for and on behalf of respondent No. 1 and respondent No.4. On the intimation given by respondent No. 4 that some consignment of Met Coke was arriving at Vishakapatnam Port, respondent No. 2 was given instructions to clear the consignment on his behalf. The appellant herein, which is an export house, claimed that it had a title over 10000 MT of the aforesaid consignment of Met Coke out of the entire consignment. Goods were cleared by respondent No. 2 and the cargo was stored at the custom bonded warehouse. However, respondent No. 2 turned down the request of the appellant to keep separate stock of 10000 MT of Coke over which it was making his claim. This led to filing of application by respondent No. 2 under Section 9 of the Arbitration and Conciliation Act, 1996 in which certain orders were passed. Respondent No. 1 also filed Civil Suit No. 17 of 2013 seeking decree for delivery of entire consignment. These proceedings travelled upto the High Court wherein order dated July 29, 2015 was passed giving directions to sell 10000 MT of Met Coke out of the aforesaid stock. The High Court in that order noted that the issue as to whether the appellant had justified claim over 10000 MT of Met Coke or not is to be decided by the Court after trial. Since no definite conclusion could be arrived at this stage on the basis of affidavits alone, the High Court deemed it proper that the said quantity, namely, 10000 MT of Coke be sold and the proceedings thereof be kept apart so that this money is ultimately handed over to the parties succeeding in the suit. The relevant portion of the directions contained in the order dated July 29, 2015 is asare also of the view that in view of the vagaries of the market and the likelihood of price of coke going down and to avoid further escalation demurrage charges it would be prudent to sale 10000 MTs of coke out of the remainder stock to secure the claim of(LMJ). Appellant and/or(Concast) shall be at liberty to take delivery of remainder of the goods after clearing of the customs duty and port charges thereon in accordance with law.In this backdrop, we are of the opinion that a Special Officer be appointed to inspect the aforesaid godowns and make an inventory of the goods lying therein and thereafter to take steps for sale of 10000 MTs of coke out of the stock lying atand Ripley godown. The sale price of the aforesaid consignment after clearance of customs duty and port charges thereon shall be deposited by the special officer with the Registrar, Original Side, who shall keep the same in an interest bearing fixed deposit account in a nationalized bank subject to the result of the suit. The appellant and/or(Concast) shall be at liberty to take delivery of remainder of the stock lying in the godowns after clearing the customs duty and port charges thereon, if any, in accordance with law. This order shall not preclude(Sarat) from taking steps for recovery of its handling and other service charges in accordance with law, if so advised.Pursuant thereto, the Special Officer got public notice published in the daily newspapers `The Hindu and `Andhra Jyoti for sale of 10000 MT of coke fixing reserved/base price of Rs. 13000 per MT. Four offers were received along with 10% of earnest money. All these four bids were submitted by the Special Officer with his report to the High Court on April 3, 2017. Offer of respondent No.5 herein at Rs. 14000 per MT was the highest.4. Before the High Court could consider these offers, one M/s. Suyati Impex Pvt. Ltd. intervened and requested the High Court that it should be permitted to bid. The Court vide order dated April 24, 2017 permitted him to participate and deposit the earnest money by April 28, 2017 by extending the time of submission of bids upto April 30, 2017. However, said Suyati Impex Pvt. Ltd. failed to give earnest money. In these circumstances, report was given by the Special Officer that M/s. Suyati Impex Pvt. Ltd. did not participate in the bidding process. In the aforesaid backdrop, bid of respondent No. 5 remained the highest bid. However, the appellant opposed the acceptance of the said bid with the contention that one Siona Enterprise had appeared before the Court in the meantime and offered price of Rs. 14500 per MT inclusive of taxes, custom duty, Value Added Tax, port charges etc. Objection to the bid made by respondent No. 5 was also raised on the ground that the paid amount of Rs. 14000 per MT was, in fact, less than the reserve price inasmuch as the aforesaid amount offered by respondent No. 5 was inclusive of all taxes etc. and once those taxes are reduced from the said amount, it was much less than Rs. 13000 per MT which was the reserved price.5. The High Court refused to consider the bid of Siona Enterprise on the ground that it was made after a lapse of 20 days from the last date of submitting the bids thereby seeking to reopen the entire process, which was not permissible. Insofar as objection of the appellant in respect of bid of respondent No. 5 is concerned, as per the High Court, it is the Special Officer who was to pay the statutory duties and taxes etc. On this ground rejecting this objection of the appellant as well, the High Court has given its imprimatur to the bid of respondent No. 5.

Court's reasoning:
10. Prima facie, we find that the submission of Mr. Sinha is correct. On May 29, 2017, when the matter was taken up for arguments on application filed by Respondent no. 5 for vacation of the stay, order was passed on May 25, 2017 and this Court was not inclined to vacate the stay, counsel for Respondent no. 5 had stated that he wanted to withdraw from the auction and this was recorded in the order. Thereafter, the learned counsel for Respondent no. 5 mentioned the matter at the end of the list but at that time Mr. Sinha, learned senior counsel for the appellant was not present.In this order which was passed in the presence of counsel for Respondent no. 5, it is specifically clarified that the Respondent no. 5 had been permitted to withdraw from the auction and also to withdraw the amount which he had initially deposited with his bid. Generally, one has to go by the record and as per the order sheet reproduced above it is noted that Respondent no. 5 had been permitted to withdraw from the auction as well.12. Notwithstanding the above, we have examined the matter on merits as well and are of the opinion that the order of the High Court warrants to be interdicted. The valuation report has fixed the value at Rs. 13000 per MT as the price of the Met Coke which is exclusive of other charges and taxes etc. Therefore, the High Court is not correct in its observations that the amount was inclusive of other charges and taxes. May be some confusion is created by the public notice that was published for inviting bids as it does not categorically state as to whether the reserve price of Rs. 13000/per MT was exclusive of or inclusive of the taxes. Fact remains that when as per the valuation report, the reserve price is fixed at Rs. 13000/per MT without taxes etc., the offer of Rs. 14000/per MT, after excluding the taxes would be well below Rs. 13000/. Therefore, it would be impermissible to accept the offer of Respondent no. 5 which turned out to be in the sum of Rs. 8895.15 paisa per MT.14. It is clear that value of Met Coke is much higher (which gets substantiated by the valuation report as well) and may be for this reason Siona Enterprises came forward with much higher offer, i.e., Rs. 14,500/per MT exclusive of taxes. Though, High Court was right in rejecting that offer on technical grounds, this fact is emphasised to point out that the goods in question are capable of receiving much higher price. It would, therefore, be in the overall interest of the parties to have fresh auction.