Supreme Court of India
FCS SOFTWARE SOLUTIONS LTD.versusLA MEDICAL DEVICES LTD. & ORS.
- Citation
- 2008 INSC 787
- Decided
- 9 July 2008
- Disposal
- Case Partly allowed
- Bench
- C K THAKKER
Holding
The Court held that the Company Judge’s order for a fresh auction was lawful due to material defects in the original tender notice, but awarded Rs 30 lakh to the appellant as solatium for the loss incurred.
Summary
The appellant, FCS Software Solutions Ltd., won the highest bid of Rs 1.47 crore for the immovable and movable assets of the liquidated company but the Official Liquidator failed to hand over possession despite the appellant’s full payment. The Official Liquidator later claimed a higher offer of Rs 1.55 crore and obtained a stay, prompting the Company Judge to order a fresh auction with a reserve price of Rs 2.10 crore. In the re‑sale, respondent No. 3 offered Rs 3.5 crore, which was accepted, and the appellant declined to increase its bid. The High Court upheld the Company Judge’s order, and the Supreme Court examined whether the fresh auction was lawful given deficiencies in the original tender notice. The Court held that the original notice lacked valuation, reserve price, and inventory details, justifying a fresh auction, and found no illegality in the Company Judge’s approach. Nevertheless, to mitigate the appellant’s loss, the Court directed respondent No. 3 to pay Rs 30 lakh as solatium. The appeal was partly allowed.
Issues considered
- The validity of the original tender notice and whether its deficiencies warranted a fresh auction.
- Whether the Company Judge’s order for re‑sale was illegal or ultra vires.
- Whether the appellant is entitled to possession and relief despite the higher subsequent bid.
- Whether the respondent who won the fresh auction should compensate the appellant.
Legislation cited
Subjects
company lawliquidationauctiontender noticereserve pricefresh auctionsolatiumofficial liquidatorsale of propertyCompany Court
Judgment
[2008] 10 S.C.R. 479
\
.... .,,
FCS SOFTWARE SOLUTIONS LTD. A
v.
LA MEDICAL DEVICES LTD. & ORS.
(Civil Appeal No. 4271 of 2008)
A,
JULY 9, 2008
B
[C.K. THAKKER AND D.K. JAIN, JJ.]
Company law:
Liquidation - Sale of properties of liquidated company
- Tender notice - Bid of appellant of Rs. 1. 47 crores was high- c
est and accepted - Meanwhile bids received of higher amounts
- On application by other bidders, Company Judge ordered
re-sale of properties fixing reserve price at Rs. 2. 10 crores -
Opportunity given to appellant to raise its bid - Appellant ada-
• mant in getting property for Rs. 1.47 crores - Acceptance of D
bid of respondent no. 3 for Rs. 3. 5 crores - Challenge against
- Held: The earlier tender notice did not state valuation of
movable and immovable property, the reserve price was not
fixed therein, and inventory of plant and machinery was not
made available - On consideration of these facts, Company E
Judge ordered fresh auction - There is no illegality in the said
order - The approach of the Company Judge in such cases
is to get highest price so as to satisfy maximum claims against
the Company in liquidation - However since appellant had
" deposited the amount immediately when his offer was ac- F
cepted, in the interest of justice, respondent No. 3 is directed
to pay Rs.30 lacs to the appellant which would serve as a
solatium.
Respondent No.1-company went into liquidation and
proceedings were initiated for sale of its properties. Pur- G
suant thereto, notice was issued by Company Court in-
viting tenders. Twelve bids were received out of which
bid of the appellant for Rs.1.47 crores was the highest.
Appellant wrote a letter to the Official Liquidator request-
479 H
~
~
480 SUPREME COURT REPORTS [2008) 10 S.C.R.
~
f
A ing him to issue letter of acceptance of the offer of the
appellant and give possession of the Unit for commence-
ment of production. However,. no reply was received.
Thereafter appellant wrote a letter to the Company JL:Jdge
complaining that though it was the duty of the Official Liq-
B uidator to accept the highest offer submitted by the ap- t
pellant, no action had been taken by the Official Liquida-
tor and there was delay in the process of finalization of
acceptance of bid. On February 15, 2005, the Official Liq- ~
uidator accepted the bid of the appellant for Rs. 1.47
c crores and also instructed the appellant t() deposit 25%
of the bid amount within fifteen days. The appellant, de-
posited the said amount on the same day, i.e. February
15, 2005.
The Official Liquidator conveyed the appellant by his
D letter dated April 4, 2005 that an order was passed by the •
Company Judge in favour of the appellant and asked the
appellant to deposit the rest of the amount immediately.
The appellant deposited the remaining amount on April
12, 2005. By a communication dated April 21, 2005, the
E Official Liquidator informed the appellant that possession
of the property would be handed over to the appellant on
May 6, 2005.
On May 6, 2005, though the officers of the appellant
wa'ited at the site for getting possession of the property,
F neither the Official Liquidator nor his representative fl
turned up to hand over possession of the property. The
appellant-Company, hence, sent a telegraphic notice to
the Official Liquidator and requested him to immediately
comply with the order of the Company Judge. Instead of
G complying with the order of the Court and handing over
possession of the property, the Official Liquidator sent a __..:---'--
letter purported to have been written on May 5, 2005, stat-
ing that possession would not be given to the appellant
'on May 06, 2005 as higher bid of Rs.1.55 crores was re-
H ceived and order for handing over possession to the ap-
(
FCS SOFTWARE SOLUTIONS LTD. v. LA MEDICAL 481
..... DEVICES LTD. & ORS .
\
pellant had been stayed by the Court. The appellant found A
that it was at the instance of the Official Liquidator him-
self that Company Application before the Company Judge
was moved for staying the delivery of possession of prop-
erty to the appellant.
The appellant filed Company Application stating that B
it had paid full amount, sale was confirmed and in spite of
the order by the Company Judge, possession had not
been handed over to the appellant. A prayer was made to
direct Official Liquidator to hand over possession of prop-
erty to the appellant. Meanwhile other offers were also c
received by Official Liquidator including an offer of Rs.2.10
crores. Keeping in view all the facts, the Company Judge,
by his order dated February 16, 2006 directed re-sale of
property by issuing fresh advertisement fixing the reserve
~
~
price at Rs.2.10 crores. Pursuant thereto, advertisement D
.
It
was issued. Official Liquidator received offers. The high-
est offer made by respondent No. 3 for Rs.3.5 crores was
accepted. The appellant filed appeal which was dismissed
by the High Court. Hence the present appeal.
Partly allowing the appeal, the Court E
HELD: 1. No case has been made out by the appel-
lant against the order passed by the High Court. Though
in November, 2004, the bid of the appellant was highest
),
and was accepted by the Official Liquidator, but certain F
facts which were necessary to be brought to the notice
of intending purchasers were not set out in the procla-
mation of sale nor were disclosed at the time of sale no-
tice. They related to valuation of movable and immovable
properties, fixation of reserve price, non-inventory of -plant
G
and machinery, etc. The attention of the Company Judge
was invited by other bidders by filing Company Applica-
tions. The Company Judge considered the objections and
having prima facie satisfied, ordered fresh auction. There
was no illegality in the said approach. When fresh bids
H
,___
1--
482 SUPREME COURT REPORTS [2008] 10 S.C.R. .-
A were received, it was found that the highest offer was of re-
spondent No. 3-Society which was of Rs.3.5 crores. The
Company Judge extended an opportunity to the appellant
to raise its bid. Apparently the appellant was adamant to get
the property for Rs.1.47 crores on the ground that the said
B offer was highest and all the proceedings taken by the
Official Liquidator and Company Judge thereafter were
totally illegal and unlawful. The respondents are right in
stating that in such cases, the approach of the Company
Judge should be to get highest price so as to satisfy maxi-
C mum claims against the Company in liquidation. The proce-
dure followed by the Company Judge, therefore, cannot be
said to be illegal. [Pai·a 21] [490-E,F,G & H; 491-A & B] \
'
,-
Gajraj Jain v. State of Bihar & Ors., (2004) 7 SCC 151 -
relied on.
D
Mis Navalkha & Sons v. Sri Ramanya Das & Ors.(1969)
3 SCC 337; Kayjay lndustries(P) Ltd. v. Mis Asnew Drums (P) I
·;r;
Ltd. & Ors., (1974) 2 SCC 213; Union Bank of India v. Official
Liquidator, High Court of Calcutta & Ors., (2000) 5 SCC 274;
Divya Manufacturing Company (P) Ltd. v. Union Bank of India
E & Ors., (2000) 6 SCC 69; LJCA (P) Ltd. (1) v. Official Liquida-
tor, (1996) 85 Comp Cas 788 SC; L/CA (P) Ltd. (2) v. Official
Liquidator (1996) 5 Comp Cas 792 (SC) - referred to.
2. The submission of the respondent No. 3 was also
F well-founded that when its highest bid of Rs.3.5 crores
was accepted, opportunity was afforded to the appellant.
It, however, did not avail such opportunity. The respon-
dent No. 3 was also right in referring to subsequent events
that after the fresh auction, sale deed was executed, pos-
G session was handed over to respondent No.3, it had in-
curred expenses. If at this stage, the sale is set aside, se-
rious prejudice would be caused to respondent No. 3-
Society. At the same time, however, from the facts it is
--
clear that the appellant's bid was accepted in November,
H 2004. Immediately, it had deposited 25% amount. The ap-
FCS SOFTWARE SOLUTIONS LTD. v. LA MEDICAL 483
DEVICES LTD. & ORS. [C.K. THAKKER, J.]
- )
pellant also deposited remaining amount of 75% on April A
12/13, 2005. It would, therefore, be appropriate. if respon-
dent No. 3 is directed to pay an amount of Rs.30 lacs to
. the appellant which would serve the ends of justice. Pay-
ment of Rs.30 lacs would serve as a solatium to the pur-
chaser for his trouble and disappointment for the loss of B
that which is perhaps a good bargain. [Paras 35, 36] [494-
B,C,D,E & F]
Chundi Charan v. Bankey Behary (1899) ILR 26 C~I
449 (FB) - affirmed.
c
CIVILAPPELLATE JURISDICTION : Civil Appeal No. 4217
of 2008
From the Judgment and Order dated 15.10.2007 of the
High Court of Punjab and Haryana at Chandigar in Company
.. Appeal No. 10 of 2006 D
Dr. A.M. Singhvi, S.K. Dubey, Sunil Sharma and K.V.
Mohan for the Appellant.
Ranjit Kumar, Rajendra Singhvi, Madhur Dadlani, Maitreyi
Singhvi, Brij Bhusan, Arun Kathpalia, Rakesh Kumar and Shipra E
Ghose for the Respondents.
The Judgment of the Court was delivered by
C.K. THAKKER, J. 1. Leave granted.
i
.. 2. The present appeal is filed by the appellant against an order F
passed by the Division Bench of the High Court of Punjab & Haryana
on October 15, 2007 in Company Appeal No. 10 of 2006. By the
said order, the Division Bench of the High Court dismissed the ap-
peal filed by the appellant-herein and confirmed the order. passed
by the Company Judge on February 16, 2006 in Company Applica- G
tion No. 178of2005 in Company Petition No. 42of1999.
3. Few facts of the case are that La Medical Devices Ltd.-
respondent NO. 1 went into liquidation. Official Liquidator was
appointed by the Court who is joined as Respondent No. 1 in
H
484 SUPREME COURT REPORTS [2008] 10 S.C.R.
A the present proceedings. In view of the liquidation of the Com-
pany an~ dues to be paid by it, proceedings were initiated for
sale of property of the Company. Sale notice was issued by the
Company Court on October 19, 2004 which was published in
various newspapers inviting sealed tenders for the sale of prop-
s erty of the Company situated at NOIDA (U.P.). Twelve bids were }- I
received which were opened on November 16, 2004. The bid
of the appellant for Rs.1.4 7 crores for immovable as well as
movable property was the highest. One of the creditors, namely,
Pradeshiya Industrial and Investment Corporation of U.P. Ltd.
c (PICUP) granted 'no objection' to the sale-price. Since the ap-
pellant was the highest bidder, it wrote a letter to the Official
Liquidator on December 19, 2004 followed by a reminder dated
January 20, 2005 requesting him to expedite the process and
issue letter of acceptance of the offer of the appellant so that
possession of the Unit can be given to the appellant and the
0 ._
,..
property could be made ready for commencement of produc-
I
tion. It is the case of the appellant that there was no reply by the '
I
Official Liquidator to the appellant. The appellant, therefore,
wrote a letter to the Company Judge on January 27, 2005, com- l
plaining that though it was the duty of the Official Liquidator to
E accept the highest offer submitted by the appellant, no action
had been taken by the Official Liquidator and there was delay
in the process of finalization of acceptance of bid. The appel-
lant also complained about the. threat administered by the Offi-
cial Liquidator. According to the appellarlt, ttiereafte'.r On Febru-
F ary 15, 2005, the Official Liquidator accept~d the bid of the
1
appellant for Rs. 1.47 crores for immovable property. The ap-
pellant on its own had forgone its claim of leased machinery.
The Official Liquidator also instructed the appellant to deposit
25% of the bid amount for immovable property within fifteen
G days. The appellant, however, deposited the said amount on
the same day, i.e ..February 15, 2005. According to the appel-
lant, the Company Judge having found the auction in accordance
with law and for adequate price and there being no other objec-
tion, confirmed the auction sale in favour of the appellant-Com-
H pany on March 24, 2005. The Company Judge also directed
FCS SOFTWARE SOLUTIONS LTD. v. LA MEDICAL 485
DEVICES LTD. & ORS. [C.K. THAKKER, J.]
the Official Liquidator to hand over possession of the Unit by A
executing sale deed in favour of the appellant after receiving full
and final payment within one month. The Official Liquidator con-
veyed the appellant vide his letter dated April 4, 2005 that an
order was passed by the Company Judge in favour of the ap-
pellant. The appellant was also asked to deposit the rest of the B
amount immediately. On receiving the letter dated April 4, 2005
from the Official Liquidator, the appellant deposited the remain-
ing amount on April 12, 2005. The appellant thereby became
entitled to receive possession and execution of sale deed in
respect of immovable property of the Company. By a comm uni- c,
cation dated April 21, 2005, the Official Liquidator informed the
appellant that possession of the property would be handed over
to the appellant on May 6, 2005 at 11.30 a.m.
4. According to the appellant, thereafter the Official Liqui-
dator did not act legally and in accordance with law. On May 6, D
2005, though the officers of the appellant waited at the site for
getting possession of the property, neither the Official Liquida-
tor nor his representative turned up to hand over possession of
the property to the appellant. The appellant-Company, hence,
sent a telegraphic notice to the Official Liquidator and requested E
him to immediately comply with the order of the Company Judge
confirming sale and handing over possession to the appellant.
Instead of complying with the order of the Court and handing
over possession of the property, the Official Liquidator sent a
letter purported to have been written on May 5, 2005, stating F
therein that possession would not be given to the appellant on
May 06, 2005 as higher bid of Rs.1.55 crores had been re-
ceived and order for handing over possession to the appellant
had been stayed by the Hon'ble Court. The appellant made en-
quiries and it was found that it was at the instance of the Official G
Liquidator himself that Company Application No. 178 of 2005
before the Company Judge was moved and he created obstruc-
tion in delivery of possession of property to the appellant on the
alleged ground that he had received higher offer. The appellant
stated that other two persons also offered more amount. The
H
'I'
I
486 SUPREME COURT REPORTS [2008] 10 S.C.R. I
~
~
(
A appellant, in the circumstances, filed Company Application NO.
407 of 2005 under Rule 9 of the Company Court Rules, 1959 "
read with Section 151 of the Code of Civil Procedure, 1908
stating therein that it had paid full amount. sale was confirmed
and in spite of the order by the Company Judge, possession
}
B had not been handed over to the appellant. A prayer was made ~
to direct Official Liquidator to hand over possession of property
to the appellant. Meanwhile other offers were also received by
"'
Official Liquidator. One Satish Choudhary offered an amount of
Rs.2.1 O crores. Keeping in view all the facts, the learned Com-
c pany Judge, vide his order dated February 16, 2006 directed
re-sale of property by issuing fresh advertisement in the news-
papers mentioned in the order. It was also observed that the
reserve price would be fixed at Rs.2.10 crores. Tenders should
reach in the office of Official Liquidator latest on March 22, 2006,
and would be opened in Court at 1.45 p.m. on March 23, 2006
D
and inter-se bidding would be permitted at that time.
5. In pursuance of the above direction, advertisement was
issued. Official Liquidator received offers. The highest offer was
by Nice Society-respondent No. 3 herein for Rs.3.5 crores and
E in the circumstances, bid of respondent No. 3 was accepted.
The appellant in the meanwhile challenged the order of the Com-
pany Judge and, as absented earlier, the appeal was dismissed
by the Division Bench. It is this order which is challenged in the
present appeal.
F 6. Notice was issued by this Court on February 23, 2007·. "
Affidavits and further affidavits were filed thereafter. Consider-
ing the nature of litigation, the Office was directed to place the
matter for final hearing on a non-miscellaneous day and that is
how the matter has been placed before us.
G
7. We have heard the learned counsel for the parties.
8. The learned counsel for the appellant contended that
the Company Judge as well as the Division Bench of the High t-
Colf rt were wholly wrong in setting aside the auction sale in
H favour of the appellant. It was submitted that pursuant to sale
FCS SOFTWARE SOLUTIONS LTD. v. LA MEDICAL 487
DEVICES LTD. & ORS. [C.K. THAKKER, J.]
notice, tenders were invited, twelve persons offered their bids. A
The bid of the appellant was highest. In consonance with law,
therefore, the said bid was accepted and the appellant depos-
ited amount of 25% as required by law. It also paid the remain-
ing amount of 75%. Sale was confirmed in favour of the appel-
lant and direction was issued by the Company Judge to the B
Official Liquidator to hand over possession of the property to
the appellant. The Official Liquidator, however, with mala fide
intention and oblique motive, refused to do so.
9. According to the counsel, once the bid was accepted
and sale was confirmed, it could not be set aside except on the C
grounds of fraud, material irregularity, etc. It is not even the case
of the Official Liquidator, submitted the counsel, that there was
fraud or material irregularity in sale and hence, sale could not
have been set aside. It was urged that the only ground put for-
ward by the Official Liquidator was that he had received a higher ·o
offer of Rs.1.55 crores from another person. The said offer was
received after about seven months. The difference in price was
5.44%.
10. According to the counsel, judicial notice can be taken E
that price of real estate increases day by day and increase of
5% after seven months could not justify the Court in setting aside
auction sale which was conducted in consonance with law. On
that ground alone, therefore, both the orders are liable to be set
aside by ordering handing over possession of property to the
appellant. F
11. It was also submitted that mala fide action on the part
of the Official Liquidator was apparent and from the records
and proceedings, it was clearly established. On May 6, 2005,
the officers of the appellant remained present at the site to ac-
G
cept possession, but the Official Liquidator did not come. A let-
ter, said to have been written on May 5, 2005 was received by
the appellant belatedly wherein the only ground given by the
Official Liquidator was that he had received a higher bid of Rs.
1.55 crores and the Company Judge had issued stay order. H
488 SUPREME COURT REPORTS [2008] 10 S.C.R.
A The so-called order passed by the Company Judge was also
not sent along with the letter.
(
.
-
12. It was alleged that the Official Liquidator did not hand
over possession since the appellant did not oblige him by sue-
cum bing to his demands. It was asserted that against the said }
B Official Liquidator, the Central Bureau of Investigation (CBI) had
instituted proceedings alleging corruption and he was also ar- 1--
rested in that connection.
13. Regarding bid of respondent No.3-Society for Rs.3.5
c crores, it was submitted that it is well settled that auction sales
cannot be set aside on the ground that higher offers are re-
ceived from other bidders after confirmation of sale. If this is
allowed and sales are set aside, there is no end to it. In ab-
sence of illegalities or material irregularities, credibility of court
sales cannot be doubted nor such sales be set aside. If price is
D
the only consideration, today the property is worth Rs.5.5 crores.
In that case, sale in favour of respondent No.3 should also be
set aside and fresh auction must be ordered.
14. It was stated that the appellant was a bona fide pur-
E chaser. It was not even the allegation of the Official Liquidator
or any other bidder that highest bid of the appellant for Rs.1.47
crores was in any way improper, insufficient or inadequate. The
appellant, hence, cannot be deprived of the fruits to which it
was otherwise entitled to. On all these grounds it was submit-
F ted that the order passed by the courts below deserve to be set
aside.
15. On behalf of the Official Liquidator, an affidavit is filed.
It may, however, be stated that the present incumbent is differ-
ent than the one who was in of the office at the relevant time.
G The deponent denied the allegations levelled by the appellant
but stated that in view of the higher offer received by the then -l
Official Liquidator and stay granted by the Company Judge,
possession was not handed over to the appellant and the said
action could not be said to be illegal or contrary to law. It was
H stated that as per the order of the Company Judge, fresh ten-
FCS SOFTWARE SOLUTIONS LTD. v. LA MEDICAL 489
, DEVICES LTD. & ORS. [C.K. THAKKER, J.]
ders were invited and in the said process, respondent No. 3- A
Society offered Rs.3.5 cores which was accepted and no inter-
ference is called for.
16. A counter affidavit is also filed by respondent No. 3
stating that the appellant had not approached the Court with
true and full facts. Sale notice which was issued on October 19,
8
2004 was incomplete and invalid. It did not state valuation of
movable and immovable properties. Reserve price was also
not fixed. No inventory of plant and machinery was made. There
was no full description of movable properties. Necessary ma-
terial was not made available at the site nor in the office of the C
Official Liquidator. In view of those irregularities, the property
could not fetch fair price. When all the above defects were
brought to the notice of the Company Judge, the Company
1r Judge was satisfied that the process undertaken was not proper
and hence fresh bids were invited. D
17. It was also submitted that no formal order of confirma-
tion in favour of the appellant was at any time made by the Court.
But even if it is assumed for the sake of argument that the order
of the Company Judge issuing direction to the Official Liquida-
tor to hand over possession to the appellant can be said to be E
an order of confirmation, it would not take away the power of
the Company Judge to invite fresh tenders if sale was not held
in accordance with law. Moreover, if auction sale was confirmed
·~ by the Court on March 24, 2005, the appellant was bound to
pay the remaining amount of 75% before 151h day of confirma- F
tion. Admittedly, the appellant failed to pay the remaining amount
within the stipulated period. It, therefore, cannot claim any ben-
efit on the basis of such auction sale.
18. The counsel urged that even otherwise this Court has G
held in several cases that the Court has power to set aside even
confirmed sale if it is satisfied that the property would have
fetched higher price. The approach of the Court in such matters
is to ensure that the property must fetch maximum price which
would benefit the Company in clearing its dues and liabilities
H
490 SUPREME COURT REPORTS [2008] 10 S.C.R.
f
A towards its creditors, contributors and workers. In the final analy-
sis, the auction sale in favour of respondent No. 3 for an amount
of Rs.3.5 crores which was substantiaUy higher than the bid of
the appellant for Rs .1 .4 7 crores may not be interfered with.
19. It was further stated that when respondent No. 3 made
8 an offer of Rs.3.5 cores, the Court, in fairness, extended oppor-
tunity to the appellant if it wanted to participate in the proceed-
ings and willing to offer higher price. The appellant, however,
refused to take part as also refused to pay anything more than
what was offered earlier. It is, therefore, not open to the appel-
C lant to complain and insist to get ownership rights and posses-
sion of property for Rs.1.4 7 cores.
20. It was stated that respondent No. 3 has paid full amount,
got sale deed executed in its favour and had spent substantial
amount thereafter and on that ground also, the Court may not
0
exercise discretionary and equitable jurisdiction under Article
136 of the Constitution.
21. Having heard the learned counsel for the parties, in
our opinion, no case has been made out by the appellant against
E the order passed by the High Court. From the facts stated above,
it is clear that in November, 2004, the bid of the appellant was
highest and was accepted by the Official Liquidator. But it is
also clear that certain facts which were necessary to be brought
to the notice of intending purchasers were not set out in the
F pmclamation of sale nor were disclosed at the time of sale no-
~ice. They related to valuation of movable and immovable prop-
. erties, fixation of reserve price, non-inventory of plant and ma-
chinery, etc. The attention of the Company Judge was invited
by other bidders by filing Company Applications. The Company
G Judge considered the objections and having prima facie satis-
fied, ordered fresh auction. We find no illegality in the said ap-
proach. When fresh bids were received, it was found that the
highest offer was of respondent No. 3-Society which was of
Rs.3.5 crores. The Company Judge extended an opportunity
to the appellant to raise its bid. It, however, appears that the
H
FCS SOFTWARE SOLUTIONS LTD. v. LA MEDICAL 491
-~ DEVICES LTD. & ORS. [C.K. THAKKER, J.]
appellant was adamant to get the property for Rs.1.4 7 crores A
on the ground that the said offer was highest and all the pro-
ceedings taken by the Official Liquidator and Company Judge
thereafter were totally illegal and unlawful. In our opinion, the
respondents are right that in such cases, the approach of the
"""T_., Company Judge should be to get highest price so as to satisfy B
maximum claims against the Company in liquidation. The pro-
cedure followed by the Company Judge, therefore, cannot be
said to be illegal.
22. It may be observed at this stage that even before the
Division Bench, such opportunity was afforded to the appellant c
to raise its bid but it was not availed of by the appellant.
23. The Division Bench, in the impugned order, noted;
~ "Even during the course of proceedings in this appeal, we
had specifically asked the learned counsel for the appellant D
as to whether the appellant was willing to go for inter-se
bidding to which he flatly declined".
24. In this connection, we may refer to some of the deci-
sions of this Court to which our attention has been invited.
E
25. In Mis Navalkha & Sons v. Sri Ramanya Oas & Ors.,
1969 (3) SCC 337, it was held by this Court that the principles
which should govern confirmation of sale are well-settled. Where
the acceptance of the offer by the Commission is subject to
confirmation of the Court, mere acceptance of offer by the Com- F
mission would not confer vested right to the property in favour
of the bidder. Condition of confirmation by Court operates as a
safeguard against the property being sold at an inadequate
price, whether or not it is a consequence of any irregularity or
fraud in the conduct of the sale. It is the duty of the Court to
G
satisfy itself about the proper valuation. But once the Court
~ comes to the conclusion that the price offered is adequate, no
subsequent higher offer can constitute a valid ground for refus-
ing confirmation of the sale or offer already received.
26. In Kayjay Industries (P) Ltd. v. Mis Asnew Drums (P) H
492 SUPREME COURT REPORTS [2008] 10 S.C.R.
.... :
A Ltd. & Ors., (1974) 2 SCC 213, this Court held that it is the duty
of the Court to accept the highest bid and the Court is not bound
to go on adjourning the sale on the basis of valuation report.
Referring to and relying on Navalkha, the Court stated that in
public sales, the authority must protect interest of the parties
B . keeping in view the fact that a Court sale is a forced sale and,
notwithstanding the competitive element of public auction, the
best price is not often forthcoming.
27. In Union Bank of India v. Official Liquidator, High Court
of Calcutta & Ors., (2000) 5 SCC 274, this Court observed that
C in auction sale of the property of the Company which is ordered
to be wound up, the Company Court acts as a custodian for the
interest of the Company and its creditors. It is the duty of the
Company Court to satisfy itself as to reasonableness of price
by disclosing valuation report to secured creditors of the Com-
o pany and other interested persons. It was further held that the
Court should exercise judicial discretion to ensure that sale of
property should fetch adequate price. For deciding what would
be reasonable price, valuation report of an expert is essential.
The Company Judge himself must apply his mind to the valua-
E tion report. The Court observed that the High Court did not in-
terfere with the auction sale on the ground of sympathy for the
workers which was not proper. The auction sale was, therefore,
set aside by this Court and Official Liquidator was directed to
re-sell the property after obtaining fresh valuation ·report and
F after furnishing copy of such report to secured creditors.
28. In Divya Manufacturing Company (P) Ltd. v. Union
Bank of India & Ors., (2000) 6 SCC 69, this Court held that
even confirmed sale can be set aside. In that case,· highest bid
by a party was accepted by the Court and the sale was con-
G firmed, but before possession was delivered to the auction pur-
chaser and execution of sale deed, other parties offered much
higher price. The High Court required the subsequent bidders
to deposit an amount of 25% which was done. Considering the
facts in their entirety, the High Court set aside the confirmation
H of past highest bid. The said action was challenged in this Court.
•
FCS SOFTWARE SOLUTIONS LTD. v. LA MEDICAL 493
DEVICES LTD. & ORS. [C.K. THAKKER, J.]
• 29. This Court held that in an appropriate case, even con- A
firmed sale can be set aside. The Court in this connection, re-
lied upon earlier two decisions in L/CA (P) Ltd. (1) v. Official
Liquidator, (1996) 85 Comp Cas 788 (SC) and LICA (P) Ltd.
(2) v. Official Liquidator, (1996) 85 Comp Cas 792 (SC).
-<.
30. The learned counsel for the appellant is r:io doubt right B
- . in submitting that in Divya, there was a specific condition (Clause
11) which empowered the Court to set aside confirmed sale "in
the interest of creditors, contributors and all concerned and/or
public interests".
c
31. But the Court put the matter on principle and stated;
"It is the duty of the Court to see that the price fetched at
the auction is an adequate price even though there is no
suggestion of irregularity or fraud".
D
(emphasis supplied)
32. It proceeded to observe;
"Confirmation of the sale by a Court at grossly inadequate
price, whether or not it is a consequence of any irregularity
E
or fraud in the conduct of sale, could be set aside on the
ground that it was not just and proper exercise of judicial
discretion. In such cases, a meaningful intervention by the
Court may prevent, to some extent, underbidding at the
time of auction through Court".
' F
(emphasis supplied)
33. In Gajraj Jain v. State of Bihar & Ors., (2004) 7 SCC
151, this Court reiterated that in absence of valuation report
and reserve price, the auction sale becomes only a pretence. If
there is no proper mechanism and if the intending purchasers G
are not able to know details of the assets or itemised valuation,
auction sale cannot be said to be in accordance with law. If
publicity and maximum participation is to be attained, all bid-
ders must know the details of the assets and the valuation thereof.
H
494 SUPREME COURT REPORTS [2008] 10 S.C.R.
f
A 34. In the present case, it was alleged that there were sev-
eral irregularities in the first auction. The tender notice did not
state valuation of movable and immovable property; reserve
price was not fixed, inventory of plant and machinery was not
made available, etc. If on consideration of these facts, the Com-
B pany Judge ordered fresh auction, in our considered opinion,
no complaint can be made against such action.
35. In our opinion, the submission of the learned counsel
for respondent NO. 3 is also well-founded that when its highest
bid of Rs.3.5 crores was accepted, opportunity was afforded to
C the appellant. It, however, did not avail such opportunity. The
counsel is also right in referring to subsequent events that after
the fresh auction, sale deed was executed, possession was
handed .over to respondent No.3, it had incurred expenses. If at
this stage, the sale is set aside, serious prejudice will be caused
D to respondent No. 3-Society.
36. At the same time, however, from the facts it is clear
that the appellant's bid was accepted in November, 2004. Im-
mediately, it had deposited 25% amount. The appellant also
deposited remaining amount of 75% on April 12/13, 2005. It
E would, therefore, be appropriate if we direct respondent No. 3
to pay an amount of Rs.30 lacs to the appellant which in our
opinion would serve the ends of justice. Paym~nt of Rs.30 lacs
will serve as a "solatium to the purchaser for his trouble and
disappointment for the loss of that which is perhaps a good T
F bargain". [Vide Chundi Charan v. Bankey Behary, (1899) ILR
26 Cal 449 (FB)].
37. Before parting, we may clarify that serious allegations
have been levelled by the appellant against the then Official Liq:.
G uidator. It was also stated that Central Bureau of Investigation
(CBI) has instituted criminal proceedings alleging corruption
against the Official Liquidator and he was arrested. We are dis-
posing of the present appeal as in our opinion, the order passed
by the Company Jude and confirmed by the Division Bench of
the High Court are in consonance with law. But we may not be
H
FCS SOFTWARE SOLUTIONS LTD. v. LA MEDICAL 495
DEVICES LTD. & ORS. [C.K. THAKKER, J.]
understood to have expressed any opinion on the allegations A
levelled by the appellant against the Official Liquidator. As and
when the matter comes up for consideration before an appro-
priate Court/Authority, it will be decided on its own merits irre-
spective of the disposal of this appeal by us.
' 38. For the foregoing reason, the appeal is partly allowed 8
to the extent indicated above.
D.G. Appeal partly allowed.
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