Case: Narendrakumar Nakhat Vs. M/s Nandi Hasbi Textile Mills &amp; Others

2. The appellant is challenging in these appeals the order dated 8.10.1996 passed by the High Court in Company Application No. 542/96 made in Company Petition No. 25/85 and also the order dated 21.2.1997 passed in Company Application No. 826/96. The appellant in Company Application 542/96 had prayed for refund of Rs. 5 lakhs (being the earnest money deposit) and Rs. 59 lakhs (being 25% of the bid amount/sale consideration) along with accrued interest on the ground that his bid having been cancelled by the High Court, he was entitled to get back those amounts. The High Court directed the official Liquidator to refund Rs. 50 lakhs and with respect to the remaining amount rejected that application on 8.10.1996. The Syndicate Bank had filed Company Application No. 743/96 with a prayer to award compensation to it and not to refund the said amounts till then. It was also rejected on the same day. The bank has not challenged that order probably because the whole amount was not ordered to be refunded. The appellant then filed a review petition (Company Application No. 826/96) but it was rejected on 21.2.1997.3. The High Court rejected the claim for refund of the earnest money on the ground that at that stage it was not proper to grant it as that might affect the right of the official Liquidator to forfeit that amount in case it is held that he has suffered some loss as a result of the conduct of the appellant. As regards the claim of the Syndicate Bank for damages the High Court merely stated that "in view of the order made in Company Application No. 542 of 1996, this application stands rejected." In the order passed on Company Application No. 542 of 1996 there is no discussion regarding the Banks claim for damages or regarding the claim of damages by the General Body of Liquidators on account of the dilatory tactics adopted by the appellant in the proceedings for confirmation of sale. The only observation made in that order is "the question whether the amounts due by the applicant by reason ofof his part of the contract in any manner arises and the damages payable by him could be appropriately adjudicated at a later stage."

Court's reasoning:
We also find that the final order passed by the High Court is not quite consistent with its own observations quoted above. As observed by us earlier the High Court has not stated why the balance amount minus the earnest money deposit should not be refunded to the appellant. The banks application for awarding compensation was rejected. Probably it was premature in view of the fact that the appellants application for refund of the balance amount was already rejected. Even if we proceed on the basis that the appellant had indulged in dilatory tactics during the proceedings for confirmation of sale and had thereby wasted almost one year it cannot be said with certainty at this stage that he will be liable to pay compensation for the alleged loss caused to the General Body of Creditors. The bank is a secured creditor and there is nothing to show that it had made the application for and on behalf of the General Body of Creditors. Their entitlement to damages and the extent of loss suffered by them, even if they are held entitled to claim damages on that count, is yet to be decided. In such circumstances, the court having not confirmed the sale and cancelled the bid of the appellant, ought not to have rejected the claim of the appellant except in respect of the earnest money deposit of Rs. 5 lakhs. The High Court was, therefore, not right in holding the refund of the remaining amount of Rs. 9 lakhs along with the interest accrued thereon at the instance of the Syndicate Bank. If the bank is of the view that it has suffered any loss as a result of wrongful act of the appellant it will be open to it to adopt an appropriate remedy for claiming damages.