Holding

The Supreme Court affirmed the High Court's power to modify the sale terms and dismissed the appeal, fixing a revised instalment schedule to be completed by 1996.

Summary

Neptune Paper Mills Ltd was wound up and its assets were sold as a going concern to Buxa Holdings Ltd. The sale notice allowed the balance price to be paid in instalments to be fixed by the court. The purchaser was awarded an instalment schedule that the secured creditors (Industrial Finance Corporation and others) claimed was too liberal and prejudicial to their interests. The High Court modified the instalment terms, imposing a tighter schedule and a bank guarantee, which the creditors challenged before the Supreme Court. The Supreme Court held that the High Court had authority to modify the sale terms and that such modification was proper in view of the purchaser's investment and the workers' re‑employment. Accordingly, the Court dismissed the appeal and ordered a revised instalment plan to be completed by the end of 1996.

Issues considered

Whether the High Court has jurisdiction to modify the terms of sale, including instalment schedule, of assets of a company in liquidation.
Whether the sale terms as fixed by the High Court are fair and proper towards the secured creditors.
Whether the Supreme Court can intervene to alter the instalment schedule or set aside the sale.
Whether the purchaser can be compelled to pay the entire balance consideration or interest immediately.
Whether the sale should be set aside and a fresh sale conducted.

Legislation cited

Companies Act, 1956s. 446, s. 457(1)(e)

Subjects

sale of assets of company in liquidationinstalment paymentsecured creditorswinding upcourt's power to modify sale termsbalance considerationbank guaranteeinterest on instalmentsdefault clausere‑employment of workers

Judgment

INDUSTRIAL FINANCE CORPORATION AND ORS. A
v.
y OFFICIAL LIQUIDATOR, HIGH COURT, CALCUTTA AND
ANR. ETC. ETC.

FEBRUARY 16, 1993
B
(K JAYACHANDRA REDDY AND B.P. JEEVAN REDDY, JJ.).

Compa11ies Ac~ 1956: Section 457(l)(e)-Sale of assets of a Company
-.I
in liquidation by Company Cou~Terms of Sale Notice-What is the proce-
dure to be adopted. c
-
--
Neptune Paper Mills (N.P.M.) was directed to be woun_d·up by the
Company Court on August 4, 1987. The Official Liquidator took posses·
sion of the assets of the company under the orders .or the Court. N.P.M.
had borrowed huge amounts from several financial institutions including
'y Industrial Finance Corporation of India, I.C.J.C.I., W.!1.1.D.C. and b
I.D.B.I. on security of its assets. In view of the default committed by it in·
repayment, the financial institutions (F.ls.) recalled their loans in April,
1988 with the result all the loans in their loans in April, 1988 with the
result all the loans in their entirety became due at once. On August 8, 1988
the F.Is. were granted leave to file a suit under Section 446 of the Com· E
panies Act. A suit was filed by them in September 1990 in the Calcutta
y
High Court wherein a direction was given to the official liquidator to
function as a receiver too.

_ In January 1990, the company court directed the sale of the assets
of the company in liquidation. Before making the said order the court had F
obtained a valuation of the said assets. The valuation was at Rs. 4 crores.
Sale notices were published from time to time in response to which certain
offers were received, the highest of them being Rs. 6.90 crores. For one or
the other reason, no offer was accepted and sale notice was published
again.
G
The sale notice would state that (I) the said company in liquidation
\\'ill be sold as a going concern on "as is \\'here is and whatever there is
.>- basis", (2) the hids \\'ill start fr~}m 6.90 cri>res, (3) the succe~sful bidder
must deposit-10% of his bid at the time of the sale, (4) the balance amount
of th~ snle pril·e 1na.v be paid by instalments as would be fixed IJy the H
10(>3
1064 SUPREME COURT REPORTS [1993] 1 S.C.R.

A Hon'ble Court, Calcutta i.e., deferred payment o( instalments will be
considered and (5) and purchaser shall have to enter into an agreement
and understanding with the employees union on the same lines as has
I.een entered into previously by one of the bidders. In pursuance of the
said sale notice, certain offers were received including the one by Buxa. Its
offer was in a sum of Rs. 6 crores sub_ject to certain terms and conditions
B stipulated therein. In short, it proposed to pay the said amount in instal·
ments @ Rs. 45 lakhs per annum with a moratorium of one year immedi·
ately following the confirmation of sale.

On th• date of sale before the learned company Judge only two
C parties remained in the field. They were asked to raise their bids. Buxa
raised its offer to Rs. 8 crores, the higher of the two. The learned Judge
accepted its offer subject to the condition that the balance consideration
(after deducting 10% earnest money which was to be deposited immedi·
ately) shall be paid in instalments prescribed by him. It was directed that
D f0r the first two years following the sale, Rs. 60 lakhs shall be paid each
year. Tiiereafler, half-yearly instalments of Rs. 30 lakhs shall be paid until
the entire earnest money is paid off. No interest was stipulated. It was
privided that on default of payment in any one instalment • yearly or
half-yearly • the official liquidator shall forthwith take possession of the
assets and the earnest money paid shall stand forfeited.
E
Complaining that the terms settled by the learned Company Judge
were too liberal to the purchaser and pre-judicial to the interest of the
F.Is., an app1'3l was preferred by them before the Division Bench. The
Division Bench finding that It would be inappropriate to set aside the sal•,
p effected modifications in the terms of sale thereby providing some more
safeguards to protect the interest of the F.ls. Aggrieved by the order of the
Division Bench, F.Is. approached this court by way of a Special Leave
Petition (S.L.P. 14929/90). This Court, taking the view that the allegations
made on behalf of F.Is. can be dealt with by the High Court if it is moved
again declined to interfere with the order of the High Court. But with a
G view to secure the interest of the Financial institutions it passed an order
on 19.11.90 that until the High Court makes its order the purchaser shall
be taken to be the receiver and shall be accountable as a receiver.

Accordingly the financial institutions filed an application before the
H Division Bench requesting it to reconsider its order with a prayer that the
FINANCE CORPN. v. LIQUIDATOR 1065

sale in favour or Buxa be set aside or in the alternative Buxa be directed A
to deposit the entire balance consideration or R•. 7.2 crores at once. They
'{ further submitted that they have a charge for Rs. 8 crores on the assets or
the company in liquidation and that granting a period or 10 years for
paying the balance consideration in instalments and not taking adequte
security from Buxa for proper payment or balance consideration, was
B
prejudicial of their interest.

The Division Bench disposed of the said application by its order
~ dated 20-2-1992, holding that (1) the F.Is. (Secured creditors) by their acts
and conduct have come within the winding up and, therefore, the.assertion
of their right as secured creditors outside winding up proceedings cannot c
- be accepted or sustained at that stage. (2) the purchaser Buxa has taken
possession or the assets sold, has re-employed the workmen after entering
into an understanding with them and has also invested substantial
amounts in recommencing the production in the factory. (3) In the above
circumstances, the F.Is. cannot insist upon repayment or the entire money
"Ir due to them under the deeds or hypothecation executed by the company in
D
liquidation. However, it passed directions curtailing the time for rn:~king:
payment and providing for payment of interest by the purchaser.

In these appeals by special leave it was contended for the -:\ppellants
that (a) the procedure followed by the High Court for selling the assets or E
y the company in liquidation is not fair and proper and that it has caused
grave prejudice to the interest of financial institutions, (b) By granting

-· liberal instalments, the "present price" of the assets sold is no more than
Rs. 4 crores, whereas the total amount due to the financial institutions is
more than R•. 1~ crores, (c) either the sale should be set aside and a fresh F
sale be held or the instalments prescribed should be drastically reduced
coupled with a provis!on for reasonable interest on the balance considera-
. ,.(_ ti on.

On the other band the purchaser/Respondent submitted that it is
not open to this court at this stage to effect any modification in the terms G
or the sale; that though with a view to save its investment which it had
already made by the date of the judgment of the Division Bench, it agreed
to certain further modifications being made by the Division Bench; it is
not now agreeable to any further modification since in such a case it would
not he possible for it to run the industry or to pay the consideration and H
1066 SuPREME COURT REPORTS (1993) 1 S.C.R.

A that as the purchaser has invested huge sums of money and has re-
employed almost all the workers; it is not in a position to bear any further
financial burden.

Modifying the order and dismissing the appeal, the Court,

B
HELD: 1. Though there is no standard or uniform pattern to he
followed with respect to the terms of the sale notice Issued by the Court,
it would be appropriate for the court to adopt such procedure as would ~
avoid a situation where the court is put to the task of negotiating the
terms of sale with the parties. That would also give room for avoidable
c criticism and comment. It would have been better if the sale notice itself
had prescribed the number of instalments which would be granted to the
purchaser, besides other terms and conditions and then invited offers on
that basis. Alternately, the court could have invited the offers subject to
such conditions as the offerers may presc1·ibe and then have them
evaluated by a qualified person and select the most appropriate one. ·u -..('
D
none of them are fo11nd acceptable and if the court thought it appropriate,
it could also allow the bidders to· submit revised offers and then have them
evaluated. These are. not the only two methods. But it has to be em-
phasised that any method devised should be such as to obviate the neces-
sity or occasion for the court to negotiate the terms and conditions of sale
E with the party or parties. The sale notice in this caS< merely stated that ~
the balance consideration may be paid in instalments as would be fixed by .
the court. The number and duration orinstalments and other allied terms
like bank guarantee, nature and terms of default clause, payment. of .•
interest on instalments were all left to be determined by the Court. In this
F . case the bid of Rs. 6 crores was got enhanced to Rs. 8 crores, with lesser
number of instalment~ than offered by the purchaser all as a result of
persuasive efforts by the Company Judge. But it has given room for the )..
argument that had it been known before hand that so many instalments
would be granted without stipulation of interest, several higher offers
could have fieeo received. [1073G-H, 1074A-D]
G
2. The contention that the Supreme Court has no power at this stage
to modi(y the number of instalments is untenable. Nor there is any basis. ,..._
for Buxa to take up the stand that either the existing terms should he
affirmed by this court or it should be allowed to walk out of the deal
H altogether along with its 1nvestment. This it cannot do for the following
r
,

FINANCE CORPN. v. LIQUIDATOR 1067

reasons; Firstly, the sale notice itself stated that "the. balance amount of A
,,/' the sale price may be paid by instalments as would be fixed by the Hon'ble
' Com1, Calcutta i.e., deferred payment of instalments will be considered".
What the High Court of Calcutta could do, can equally be done by this
Court sitting in appeal. Secondly, the purchaser has repeatedly submitted
before the Calcutta High Court that it is prepared to abide by such
B
conditions as may be imposed by the Court. [1074E·F]

_) 3. Having considered and taken into account all the relevant facts
and circumstances of the case including the interest of the- financial
institutions, the interest of the workers who have since been re-employed
by the purchaser and the fact that the purchaser has already invested C
- substantial an1ount to r~vive the con1pany, the following modification \Vas
made in the number of instalments in which the balance consideration has
to be paid: [1075F·G]

'y The total balance consideration of Rs. 5.80 crores, remaining due
after pa~1nent of Rs. 52 lakhs due in the year 1992 shall be paid in full by D
the end of the year 1996 in equal bi-monthly instalments. The instalments
shall be payable by the last day of February, April, June, August, October
and Decen1ber in each year. Each instalment excepting the last instalment
shall be in a sum of Rs. 24, 16,000. The last instalment shall be in such
'-'(sum as to make up the total short fall payable on that date i.e. Rs. E
20,16,000. [1077CJ .

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 636-37 of
1993

From the Judgment and Order dated 20.2.1992 of the Calculla High F
Court in Appeal No. 493 of 1990.
..(_
Harish Salve and lndranil Ghosh f0r the Appellants.

P. Chidamharam, M.L. Lahoty, Ms. S. Khazanchi, K.C. Gchani and
P.~. Jha for the Respondents, G

The .Judgment of the Court was delivered by

B.P. JEEVAN REDDY. J. Heard the counsel for the parties. Leave
!(ranted in both the S.L.Ps. We shall first deal with the appeal arising from
S.L.P.( l) No. 5377/92 J-1
1068 SUPREME COURT REPORTS [1993] 1 S.C.R.

A The appeal i~ directed against the order dated 4.3.1992 passed by a
Division Bench of the Calcutta High Court modifying its earlier order of .,..
November 13, 1990. The controversy in this appeal pertains to the terms
of sale of the assets of a Company in liquidation. A few facts are necessary
to be stated to appreciate the controversy.

B Neptune Paper Mills (N.P.M.) was directed to be wound-up by the
Company Court on August 4, 1987. The Official Liquidator took possession
of the assets of the company under the orders of the Court. N.P.M. had
~
borrowed huge amounts from several financial institutions including In-
dustrial Finance Corporation of India, I.C.I.C.I., W.B.I.D.C. and l.D.B.I.
c on security of its assets. In view of the default committed by it in repayment,
the financial institutions (F.ls.) recalled their loans in April, 1988 with the
result all the loans in their entirety became due at once. On August 8, 1988
the F.Is. were granted leave to file a suit under Section 446 of the Com-
-
panies Act. A suit was filed by them in September, 1990 in the Calcutta

D
H;gh Court wherein a direction was given to the official liquidator to
funclion as a receiver too. "'
In January 1990, the company court directed the sale of the assets of
the company in liquidation. Before making the said order the court had
obtained a valuation of the said assets. The valuation was at Rs. 4 crores.
Sale notices were published from time to time in response to which certain
F ~·
•.>ffers were received, the highest of them being Rs. 6.90 crores. For one or

-
the other reason, no offer was accepted and sale notice published again. It
wuul<l he oppropriate at this stage to notice the terms of the sale notice,
which led to the sale in favour of the respondent, Bwm Holdings Limited
- since re-named as Kanai Agrotech Limited - (hereinafter referred to as
F "Buxa"). The Sale notice published in the newspaper "The Hindu" dated
10th April, 1990 reads as follows: ),.
"PUBLIC NOTICES

Sale Notice Sale Notice Sale Notice
G
In the matter of

Neptune Paper Mills Ltd (in Liquidation)
,..,
That in terms of the order of the Hon'ble High Court,
H Calcutta dated .l.4.90, take notice the sale of the above-
7-~

FINANCE CORPN. v. LIQUIDATOR [JEEVAN REDDY, J.] 1069

named company as going concern and 11 as is where is and A
-..( whatever there is basis" will be held at 2.00 pm on 17.4.90
in the open Court of the Hon'ble Company Judge, High
Court, Calcutta. The bids of such sale will be started from
6.90 crores. The successful bidders must deposit 10% of
his/their bids in the Court at the time of sale. The balance
B
amount of the sale price may be paid by instalments as
would be fixed by the Hon'ble Court, Calcutta i.e., deferred
_.) payments of instalments will be considered. The Purchaser
shall have to enter into an agreement and or memorandum
of understanding with the employees' union in the same
c
- line with which has already been entered into with one of
the bidders in court.

The bidder may have inspection of the assets of the com-
pany on applications to Official Liquidator before the sale
of date. Terms and condition along with the list of assets
will be available at the office of the undersigned during the D
office hours.

Official Laiquidator High Court Calcutta

Dated the 10th April, 1990."
y E
The significant thing to notice is that the sale notice did not '. 1•eeify
the number of instalments nor did it specify the period within wh. ch the
entire consideration was to be remitted. All that it stated was tha< (!) the
said company in liquidation will be sold as a going concern on "as is where
is and whatever there is basis", (2) the bids will start from 6.90 crorcs, (3) F
the successful bidder must deposit 10% of his bid at the time of the sale,
,.£_ (4) the balance amount of the sale price may be paid by instalments as
would fixed by the Hon'ble Court, Calcutta i.e., deferred payment of
instalments will be considered and (5) the purchaser shall have to enter
into an agreement and understanding with the employees' union on the
same lines as has been entered into previously by one of the bidders. In G
pursuance of the said sale notice, certain offers \Vere received including
•:
the one by Buxa. Its offer was in a sum of Rs.6 crores subject to certain
>- terms and conditions stipulated therein. In short, it proposed to pay the
said amount in instalment @ Rs.45 lakhs per annum with a moratoriu1n of
one year in1n1cdiately folJo,ving the confirmation of sale. When the matter H
1070 SUPREME COURT REPORTS [1993] 1 S.C.R.

A was taken up by the learned Company Judge on 17th September, 1990, only
two parties remained in the field. They were asked to raise their bids. BUJ<a
raised its offer to Rs. 8 crores, the higher of the two. The learned Judge
accepted its offer subject to the condition that the balance consideration
(after deduction 10% earnest money which wes to be deposited immedi-
ately) shall be paid in instalments prescribed by him. The learned Judge
B directed that for the first two years following the sale, Rs. 60 lakhs shall be
paid each year. Thereafter, half-yearly instalments of Rs.30 lakhs shall be
paid until the entire earnest money is paid off. No interest was stipulated.
It was provided that on default of payment in any one instalment - yearly
or half-yearly - the official liquidator shall forthwith take possession of the
c assets and the earnest money paid shall stand forfeited. Certain other
conditions were also stipulated but it is not necessary to notice them for
the purpose of this appeal.
-
Complaining that the terms settled by the learned Company Judge
D were too liberal to the purchaser and prejudicial to the interest of the F.Is.,
an appeal was preferred by them before the Division Bench. On a con-
sideration of relevant circumstances, the Division Bench came to the
opinion that it would not be appropriate for it to set aside the sale, and
that no useful purpose will be served by postponing the sale of the assets
any further. At the same time, it was of the opinion that some more
E safeguards should be provided to protect the interest of the F.Is: Accord-
·ingly, it effoc!ed the following modifications in the terms of sale: (i) The
balance consideration namely Rs.7 crores 20 lakhs (the earnest money of
Rs. 80 lakhs w::s already deposited) shall be paid in the following manner:
for the first two years. the instalments payable each year shall be Rs. 60
F lakhs: I hereafter half-yearly instalments in a sum of Rs. 40 lakhs each shall
be paid till the col ire consideration is paid off. The first instalment shall
be paid by 10th June, 1993 and the last instalment by 30th June, 2000 A.D.
(ii) In case of default m payment of any one instalment, the official
liquidator shall be entitled to take possession of the assets sold. In such an
eventuality the entire earnest money and other instalments paid till then
G shall stand forfeited. (iii) Buxa shall provide a revolving bank guarantee in
favour of the official liquidator for a sum of Rs. 60 lakhs till all the
instalments are paid. The bank guarantee shall be furnished within three
weeks from the date of the order and shall be kept alive till the entire
consideration is paid off. It is not necessary to notice the other terms and
H conditions. Thi< order was made on November 13, 1990.
y
I

FINANCE CORPN. v. UQUIDATOR [JEEVAN !~EDDY, J.J 1071

Aggrieved by the order of the Division Bench, F.ls. approached this A
Court by way of a Special Leave Petiton (S.L.P. 14929/90), which was
disposed of <Jn 19.11.1990 under the following order :
"" "Taken on Board on being mentioned. We have heard Mr.
Gopal Subramanium for the petitioner and counsel for the
B
respondents. We are of the view that some of the allega-
tions which Mr. Subramanium makes can be appropriately
dealt with by the High Court in the case the Hirh Court i'
~ moved again but at present we do not think i1 wcd.i:; 1 1(·
advisable to interfere with the order of the High Court. W•
gather today is fixed as the date of which the possession u• c
- property would be transfered from the official liquidator
to the purchaser. To secure the interest of the Financial
institutions the petitioner we are of the view that until the
High Court makes its order the purchaser shall be taken
'y to be the receiver and shall be accountable to be a receiver."
D
Accordingly the financial institutions filed an application before the
Division Bench requesting it to reconsider its order. In this application, the
F.Is. prayed that the order dated 13th November, 1990 be recalled, the sale
in favour of Buxa be set aside or in the alternative Buxa be directed to
y deposit the entire balance consideration of Rs. 7.2 crores at once. It was E
submitted by the F.ls. that the company in liquidation has been directed
to be sold by the company court free from all encumbrances that the
financial institutions have a charge for Rs 8 crores on the assets of the
company in liquidation and the granting a period of 10 years for paying the
balance consideration in intalments is highly prejudicial to the interest of F
the F. Is. Not taking adequate security from the Buxa for proper payment
of balance consideration, it was submitted, was also prejudicial to their
~
interest. At the time of arguments, however, their counsel did not press the
request for setting aside the sale. His main submission was that Buxa be
directed to pay the entire balance consideration immediately and that till
the payment is made, it should be directed to furnish a bank guarantee G
besides interest @15% per annum. Alternately, it was submitted that the
,.._ number of instalments granted be reduced sharply with a provision for
interest thereon. The Division Bench disposed of the said application by
its order dated 20.2.1992. It held that ( 1) the F.ls. (secured creditors) by
their acts and conduct have con1e within the winding up an<l, therefor-.:, Lhc H
1072 SUPREME COURT REPORTS (1993] 1 S.C R.

A assertion of their right as secured creditors outside winding up proceedings
cannot be accepted or sustained at that stage. (2) The purchaser Buxa has
taken possession of the assets sold, has re-employed the workmen after
entering into an understanding with them and has also invested substantial
amounts in recommencing the production in the factory. (3) In the above
circumstances, the F.Is. cannot insist upon repayment of the entire money
B
due to them under the deeds of hypothecation executed by the company
in liquidation. (4) The only question that survives for consideration is
whether the time for making the payment should be curtailed and whether
some interest should be directed to be paid by the purchaser. The applica- \.-.
tion was disposed of with the following directions:
c
(a) The purchaser (Buxa) shall pay in the year 1992 a sum of Rs. 80
lakhs in six bi-monthly instalments payable on the last day of February,
April, June, August, October and December.
-
(b) In the year 1993, the sum payable shall be Rs. 85 lakhs. In 1994,
D it shall be Rs. 90 lakhs and in 1995, Rs. 95 lakhs. In the year 1996 and '<f
thereafter, the annual amount payable shall be Rs. one crore till the entire
consideration is paid off.

(c) The revolving ·bank guarantee shall be equal to the amount
payable in each of the said years.
E
(d) Along with the last instalment, the purchaser shall pay a lumpsum
of Rs. 25 lakhs as and by way of interest.

(e) The purchaser shall not encumber, alienate or transfer assets
purchased by him so long as the entire consideration is not paid. This does
-
F not, however, prevent it from raising monies by hypothecation, mortage or
by creating charge on the said assets.

(f) In default of payment in any two of the bi-monthly instalments,
the Official Liquidator shall take possession of the assets sold and all the
G amounts paid till then shall stand forfeited.

A few other directions were made which, not being relevant herein,
need not be noticed.

In this appeal it is contended by Sri Salve, learned counsel for the
H appellants that the procedure followed by the High Cour! for selling the
FINANCE CORPN v. LIQUIDATOR [JEEVAN REDDY. J.] 1073

assets of the company in liquidation is not fair and proper and that its has A
caused grave prejudice to the interest of financial institutions. He sub-
mitted that by granting such liberal instalments, the "present price" of the
assets sold is no more than Rs. 4 crores, whereas the total amount due to
the financial institutions is more than Rs. 12 crores. He suhmittcd thM
either the sale should be set aside ·and a fresh sale be held or the i11.-td:
ments prescribed should be drastically reduced coupled with a provision
for reasonable interest on the balance consideration. On the other hand,
Sri P. Chidambaram, learned counsel for the purchaser submitted that it
is not open to this court at this stage to effect any modification in the terms
of the sale. The purchaser in any event is not agreeable to any further
modification. If this court proposes to effect any modification in the terms C
... of sale, the purchaser should be left free to withdraw his offer and to walk
out. The learned counsel submitted that Buxa's offer of Rs. 6 crores, which
was ultimaely raised to Rs. 8 crores, was subject to the condtitions con-
tained in its offer. True it is that Buxa accepted the terms and conditions
stipulated by the Company Judge which were different from those stipu- D
lated by it. But this was by its consent. As a matter of fact, with a view to
save its investment which it had already made by the date of the judgment
of the Division Bench, it even agreed to certain further modifications being
made by the Division Bench on both the occasions. The purchaser is not
now agreeable to any further modification since in such a case it would not
be possible for it to run the industry or to pay the consideration. He E
submitted that the purchaser has invested huge sums of money and has
re-employed almost all the workers and that it is not in a position to bear
any further financial burden.

{11) Before we deal with the contentions urged by the learned F
counsel, we feel constrained to make certain observations \vith respect to
the terms of the sale notice issued by the court. While we agree that there
is no standard or uniform pattern to be followed in such matters, it would
be appropriate for the court to adopt such procedure as would avoid a
situation where the courts is put to the task of negotiating the terms of sale
with the parties. That would not be consistent \vith the dignity of the court. G
It would also give room for avoidable criticism and commynt. It would have
been better if the sale notice itself had prescribed the number of instal-
ments which would be granted to the purchaser, besides other terms and
conditions and then invited offers on that basis. Alternately, the court could
have im·itcd the offers subject to such conditions as the offerers may H
1074 SUPREME COURT REPORTS [1993] 1 S.C.R.

A prescribe and then have them evaluated by a qualified person and select
the most appropriate one. If none of them are found acceptable and if the
court thought it appropriate, it could also allow the bidders to submit ·)'
revised offers and then have them evaluated. We are not saying that these
are the only two methods. There may be others. Our object is only to
emphasise that any method devised should be such as to obviate the
B necessity or occasion for the court to negotiate the terms and conditions
of sale with the party or parties. The sale notice in this case merely stated
that the balance consideration may be paid in instalments as would be fixed
by the court. The number and duration of instalments and other allied ~
terms like bank guarantee, nature and terms of default clause, payment of
c interest on instalments were all left to be determined by the court. It is true
that in this case the bid of Rs. 6 crores was got enhanced to Rs. 8 crores,
with lesser number of instalments that offered by the purchaser - all as a
result of persuasive efforts by the Company Judge. Even so, it has given
room for the argument that had it been known beforehand that so many
D instalments would be granted without stipulation of interest, several higher "'(
offers could have been receive<!.

We are not prepared to agree with Mr. Chaidambaram, learned
counsel for Buxa that this court has no power at this stage to modify the
number of instalments. Nor do we see any basis for Buxa to take up the
E stand that either the existing terms should be affirmed by this court or it
should be allowed to walk out of the deal altogether along with its invest-
ment. This it cannot do for more than one reason. Firstly, the sale notice
itself stated that "the balance amount of the sale price may be paid by
instalments as would be fixed by the Hon'ble court, Calcutta i.e., deferred
F payment of instalments will be considered". What the High Court of
Calcutta could do, can equally be done by this court sitting in appeal.
Secondly, the purchaser had repeatedly submitted before the Calcutta High
Court that it is prepared to abide by such conditions as may be imposed
by the Court. We may refer to the stand taken by the counsel for the
purchaser before the Division Bench as recorded in its order dated 13th
G Nove~ber, 1990. It reads thus: "Mr. Mukherjee, learned Advocate appear-
ing on behalf of the purchaser has submitted that the sale in this case was
sale of assets of the Mill as a going concern and not merely sale as scrap.
The Court had power to grant such instalments whether it was specifically
provided in the terms and conditions as advertised or not. In this connec-
H tion he has drawn our attention to clause (10) of the Terms. He has
FINANCE CORPN. v. LIQUIDATOR [JEEVAN REDDY, J.] 1075

.;/ubmitted in the present case the court had granted such instalments for A
•,,uch period and on such terms after considering all the facts .. (para 7) .. He
has submitted that in any event if this court is not inclined to approve the
confirmation of the sale on the terms and conditions as prescribed by the
Trial Court, it may allow such confirmation in favour of his clients to
remain but provide for some modification and/or addition to such terms
B
and conditions if this court think it fit and proper. In this context, he has
submitted that so far as the instalments are concerned, the quantum may
be increased so that all the instalments are paid by the year 2000 A.O.
instead of 2002 A.O. as directed by the impugned order. 5o far as the
guarantee is concerned, he has submitted that the court can provide for
similar guarantee as provided for in other cases for sale by court in case C
of default. He also submitted that it may be provided that the charge of
the secured creditors be shifted to the sale proceeds and that the sale,
which was free from encumbrances, should be subject to this that his clients
should approach the financial institutions for further financial held (para
8) .... " Even before the second Division Bench which passed the impugned D
order, the purchaser did not take up the stand that the court has no power
lo modify the terms and conditions of sale. All that its counsel submitted
was that having regard to the facts and circumstances of the case, the
instalments should not be reduced. The impugned order records the con-
tention of the purchaser's counsel in the following words: "It is submited
by Mr. Mukherjee, learned counsel for the purchaser that having regard to E
the commitments of the company and the fact that former employees have
been re-employed and the company has to consistently run on a profitable

-· basis, it would not be possible to reduce the instalments any further."

Having considered and taken into account all the relevant facts and
circumstances of the case including the interest of the financial institutions, F
the interest of the workers who have since been re-employed by the
purchaser and the fact that the purchaser has already invested substantial
amount to revive the company, we are of the opinion that certain modifica-
tions should be made in the number of instalments in which the balance
consideration shall be paid. But before we do so, we must refer to a G
particular fact which discloses the unfair conduct of the purchaser (Bw<a).
According to the impugned order the purchaser had to pay a sum of Rs.
80 lakhs in the year 1992 in bi-monthly instalments. It paid only a total sum
of Rs. 28 lakhs. The excuse now put forward for non-payment of the
H
1076 SUPREME COURT REPORTS [1993] 1 S.C.R.

A balance of 52 lakhs is the order of 'status quo' passed by this court- Having
entertained the S.L.P. filed by the financial institutions, this court (K.
Jayachandra Reddy and late R.C. Patnaik, JJ.) passed the following order
on 14.5.1992:

"Heard both the parties.
B
Status quo to be maintained.

The second respondent in SLP(C) 5377/92 shall not en- ~
cumber, alienate or transfer the assets of the company in
liquidation pnrchased by him. Respondent No.2, shall,
c however, maintain accounts and, as and when required,
produce the same before the Court. -
Post the matter before an appropriate Bench on 21.7.1992.

Meanwhile, if the parties alone chose to file affidavits, they
D
may file.

As the matter before us is at an interlocutory stage, it need
not be treated as part heard."

E It is evident from a reading of the order that the order to maintain
status quo did net and could never have meant stay of instalments payable )-•
by the purchaser in accordance with the impugned order. To say so would

F
amount to placing a totally unreasonable and unwarranted interpretation
upon the said order. It would be unfair above all. The purchaser has been
put in possession of the assets purchased by him and no fetter whatsoever
--
was ever placed by the said order upon his possession or enjoyment of the
property purchased by him. The idea behind the order was that the
purchaser should not transfer, alienate or encumber assets purchased an<1
that he should maintain the accounts and produce them before the court.
The order directing that status quo to be maintained has to be understood
G in the said context. We must say that after some debate, Mr. Chidambaram
agreed fairly that his client's interpretation of the said order was wrong,
that he regreats,his default and that he is prepared to pay the said amount
_...,
of Rs. 52 lakhs along with such interest as may be. prescribed by this Court.
It is directed that the purchaser shall pay the said amount of Rs. 52 lakhs
H due for the year 1992 in terms of the impugned order along with an amount
FINANCE CORPN. v. LIQUIDATOR [JEEVAN REDDY, J.] 1077

of Rs. 6 lakhs representing the interest on the said amount, consolidated, A
i.e., a total of Rs. 58 lakhs on or before 5th March, 1993. This payment
shall be in addition to such other amounts as may be payable in accordance
with the impugned order as modified by us herein.

Now coming to the modification of the terms imposed in the order
under appeal, the only modification we wish to make is in the number of B
instalments. After the payment of the aforesaid Rs. 52 lakhs due in the
year 1992, the total balance consideration will be Rs. 5.80 crores. This
amount shall be paid in full by the end of the year 1996 in equal bi-rnonthly
instalments. The instalments shall be payable by the last day of February,
April, June, August, October and December in each year. This means that c
each instalment, excepting the last instalment, shall be in a sum of
Rs.24,16,000. The last instalment shall be in such sum as to make up the
total shortfall payable on that date i.e., Rs. 20,16,000. There shall be no
other modification in the terms and conditions prescribed in the order
under appeal including those relating to default and interest. Having
regard to the facts and circumstances of the case, there shall be no order D
as to costs.

For the reasons given above, the appeal arising from S.L.P. (C) No.
6736/92 filed by the purchaser is dismissed. No costs.

G.N.R. Appeal dismissed.