$~1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 30.04.2024
+ CO.APP. 11/2024
ABR EMERALD LLP ..... Appellant
Through: Mr Anuj P. Agarwala, Mr Aayush
Agarwala and Ms Bhumika Sharma,
Advocates.
versus
THE OFFICIAL LIQUIDATOR & ANR. ..... Respondents
Through: Mr Gourab Banerji, Senior Advocate
with Mr Rishabh Jain, Ms Raka
Chatterjee, Mr Rakesh Talukdar and
Mr V. Supreeth, Advocates for R-2.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
GIRISH KATHPALIA
HON’BLE MR. JUSTICE
VIBHU BAKHRU, J. (ORAL)
1. The appellant has filed the present appeal impugning an order dated
29.02.2024 passed by the learned Company Court
rejecting the appellant’s
application being CO.APPL. 253/2024. The appellant had filed the said
application, inter alia, praying that the e-auction process in respect of Plot
No.51, Phase -II, Industrial Area, Andheri East, Mumbai-400093 (hereafter
the subject property) be set aside.
2. The subject property belongs to Golden Gate Industries Ltd. (formerly
known as JVG Industries Limited), which is under liquidation.
3. The subject property was valued by an accredited valuer, M/s M Tech
Services LLP. The fair market value of the subject property was assessed at
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88,90,00,000/- (Rupees Eighty Eight Crores Ninety Lacs only); the
₹
realisable value was assessed at 80,01,00,000/- (Rupees Eighty Crores and
₹
One lac only); and the distress value was assessed at 71,12,00,000 (Rupees
₹
Seventy One Crores Twelve Lacs only). The valuation report was
considered by the learned Company Court on 12.10.2023 and directions
were issued to the Official Liquidator (hereafter OL) to prepare a draft sale
notice.
4. The OL moved an application (CO. APPL 829/2023) seeking
permission to take steps for sale of the subject property, which was
considered by the learned Company Court on 30.11.2023. The draft sale
notice prepared by the OL pursuant to the order dated 12.10.2023, was
considered and approved by the learned Company Court. The learned
Company Court directed that the subject property be sold by auction to be
conducted by M/s Railtel Corporation of India Limited (hereafter Railtel).
The reserve price was fixed at the fair market value as assessed by the valuer
88,90,00,000/- (Rupees Eighty Eight Crores Ninety Lacs only). The
– ₹
learned Company Court directed that steps be taken within a period of two
weeks to publish the notices (as approved) in:
(i) the Loksatta (Marathi);
(ii) Hindustan Times, Mumbai edition (English);
(iii) Hindustan Times, Delhi edition (English); and
(iv) Navbharat Times, Delhi (Hindi).
5. There is no dispute that the notices for sale of the subject property
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were duly published.
6. The order dated 30.11.2023 allowing the auction was challenged
before this Court in Company Appeal No.29/2023 by the ex-directors of the
Golden Gate Industries Ltd. the company in liquidation inter alia on the
– –
ground that all the debts of the company in liquidation were paid and there
was no requirement to auction the subject property. In the said proceedings,
the Court permitted e-auction to proceed but interdicted the confirmation of
the sale in favour of the auction purchaser. The said appeal is pending
consideration.
7. The last date for submission of the Earnest Money Deposit (EMD)
was fixed as 06.01.2024. The e-auction of the subject property was
conducted by Railtel on 09.01.2024. A singular bid was received for an
-, which is the assessed as the fair market value
amount of ₹88,90,00,000/
and was fixed as the reserve price of the subject property.
8. The appellant did not participate in the e-auction. It claims that it was
very much interested in purchasing the subject property but became aware of
the e-auction some time in February, 2024. In the aforesaid context, the
appellant filed an application which was rejected by the learned Company
–
Court by the impugned order challenging the auction process. The
–
appellant sought that the subject property be sold to it as it was willing to
offer a higher price by 5%.
9. The learned Single Judge rejected the said application on the ground
that the appellant’s application was vague and did not specify the amount
offered. The appellant had not deposited the Earnest Money, which was
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required for any person to participate in the auction process. The learned
Single Judge also noted that the re-opening of auctions results in enormous
delays in disposal of petitions and since there was no error in the procedure
adopted for auction of the subject property, the appellant’s application for
re-opening the auction could not be entertained.
10. The appellant has appealed the said decision in this appeal. The
present appeal was listed before this Court on 09.04.2024. Mr Rai, the
learned senior counsel, who appeared for the appellant on 09.04.2024,
submitted that he had instructions to further increase the offer for
appellant’s
the subject property to Crores.
₹97
11. Considering that the appellant had neither deposited the Earnest
Money, nor participated in the e-auction but sought interdiction of the
auction process, this Court directed the appellant to deposit the offered
amount with the Registry of this Court before its appeal could be heard on
merits. This was also taking into account that the auction purchaser had
already deposited 25% of the amount offered -) in
(₹88,90,00,000/
compliance with the terms and conditions of the auction and had also
offered to pay the balance amount within a period of two working days.
12. It is also material to note that the appellant has not deposited the
amount offered with the Registry of this Court. Mr Agarwala, the learned
counsel appearing for the appellant submits that the appellant has preferred a
Special Leave Petition before the Supreme Court against the order of this
Court dated 09.04.2024 and therefore, the hearing in the present appeal be
deferred. We are not persuaded to accept the said contention. However,
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notwithstanding that the appellant has not deposited the amount offered by
it, this Court has considered the appeal on merits as well.
13. The only ground urged before this Court to assail the auction process
is that the appellant has offered a higher price. It is contended on behalf of
the appellant that it is the duty of the OL as well as the Company Court to
ensure that maximum value is realised for the property of the company in
liquidation. Thus, it was necessary for the Company Court to have
application notwithstanding that the appellant had
considered the appellant’s
not participated in the auction process.
14. Mr Gourab Banerji, learned senior counsel appearing for the auction
purchaser (respondent no.2) referred to the decision of the Supreme Court in
Navalkha and Sons v. Sri Ramanya Das and Ors.: (1969) 3 SCC 537 and
on the strength of the said decision contended that an offer for higher price
was not a ground to reopen the auction process.
15. As noted at the outset, there is no cavil that the auction notices were
duly published in the leading newspapers as directed by the learned
Company Court. There is no ground to fault the assessment of the fair
market value of the subject property, as well. Merely because the appellant
had offered a marginally higher price (by 5% before the learned Single
Judge and approximately 10% before this Court) does not indicate any flaw
in the valuation of the subject property.
16. In Navalkha and Sons v. Sri Ramanya Das and Ors.(supra) the
Supreme Court had observed as under:
In A. Subbaraya Mudaliar v. K. Sundarajan [AIR 1951 Mad
“…
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986] it was pointed out that the condition of confirmation by the
Court being a safeguard against the property being said at an
inadequate price, it will be not only proper but necessary that the
Court in exercising the discretion which it undoubtedly has of
accepting or refusing the highest bid at the auction held in
pursuance of its orders, should see that the price fetched at the
auction is an adequate price even though there is no suggestion of
irregularity or fraud. It is well to bear in mind the other principle
which is equally well-settled namely that once the Court comes to
the conclusion that the price offered is adequate, no subsequent
higher offer can constitute a valid ground for refusing confirmation
of the sale or offer already received. (See the decision of the
Madras High Court in Roshan & Co. case).
”
[ emphasis added]
17. It is also relevant to refer to the decision of the Supreme Court in
Vedica Procon Private Ltd. v. Balleshwar Greens Private Ltd. and Ors.:
(2015) 10 SCC 94. In the said case the Supreme Court had referred to earlier
decisions including Navalkha and Sons v. Sri Ramanya Das and Ors.:
(supra), and had held as under:
47. A survey of the abovementioned judgments relied upon by the
“
first respondent does not indicate that this Court has ever laid down
a principle that whenever a higher offer is received in respect of the
sale of the property of a company in liquidation, the Court would be
justified in reopening the concluded proceedings. The earliest
judgment relied upon by the first respondent in Navalkha &
Sons [Navalkha & Sons v. Ramanya Das, (1969) 3 SCC 537] laid
down the legal position very clearly that a subsequent higher offer
is no valid ground for refusing confirmation of a sale or offer
already made. Unfortunately, in Divya Mfg. Co. [Divya Mfg. Co.
(P) Ltd. v. Union Bank of India (2000) 6 SCC 69] this Court
departed from the principle laid down in Navalkha &
Sons [Navalkha & Sons v. Ramanya Das, (1969) 3 SCC 537] . We
have already explained what exactly is the departure and how such
a departure was not justified.”
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18. If the auction process is interfered with solely for the reason that a
person who has not participated in the auction process has offered a higher
price, it would discourage bonafide purchasers from participating in the
bidding process. They could always await the final outcome and decide to
make their offer thereafter. This would be debilitating to the integrity of the
auction process and thus, cannot be accepted.
19. The offer made by the appellant is not significantly higher so as to
lead to a conclusion that the price offered by the auction purchaser
(respondent no.2) is a wholly inadequate price. It also does not lead to the
conclusion that the auction process has not resulted in securing an adequate
offer.
20. We agree with the decision of the learned Single Judge that it is
necessary to maintain the integrity of the auction process. Once it is found
that there is no infirmity or flaw in conducting the auction and an offer for
adequate price is received, the process must be carried to its intended
conclusion. The successful bidder has complied with all the conditions
including making the requisite deposits within the time stipulated and,
cannot be deprived of his bargain merely because another bidder has
subsequently made a higher offer.
21. In the present case, the auction notice was widely published in
national dailies including those having wide circulation in Mumbai where
–
the principal office of the appellant is located therefore, it is not possible
–
for this Court to accept that the appellant was unaware of the auction
notices. Whilst, the appellant is correct that the dominant object is to recover
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the best price for the properties of the company in liquidation, we are unable
to accept that the auction process can be brought to naught at the instance of
another buyer who had not participated in the auction, but is subsequently
willing to offer a marginally higher price.
22. The appeal is unmerited and accordingly, dismissed.
VIBHU BAKHRU, J
GIRISH KATHPALIA, J
APRIL 30, 2024
RK
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