Company Appeal No. 03 of 2022 · The High Court
Case Details
1 IN THE HIGH COURT OF JHARKHAND AT RANCHI Company Appeal No. 03 of 2022 WITH Company Appeal No.02 of 2022 ---- M/s. Cotton World, (A Partnership Firm), having its Registered Office at B-34, KSSIDC, Industrial Estate, Yelahanka New Town, Bangalore 560064, through its partner Mr. B.N. Monnappa, son of B.K. Nachappa, residing at 128, 3rd Main, 1st Block, RMV 2nd Stage, Bangalore 560094, PO & PS Yelahanka, District Bangalore, Karnataka. … Appellant Versus 1. The Official Liquidator, Mangal Tower, 4th Floor, Old Hazaribagh Road, Near Kanta Toli Chowk, Ranchi 834001. 2. BSIDC, through its Managing Director, Indira Bhawan, Jawaharlal Nehru Marg, PO & PS Patna, District Patna, Bihar. 3. Employees Provident Fund Office, through its Regional Manager, Bhagirathi Complex, Karam Toli Road, Near Circuit House, Karamtoli, District Ranchi. 4. Bank of India, through its Chief Manager, PO GPO, PS Hindpiri, District Ranchi. 5. M/s. Apical Exim Pvt. Ltd. (A Company registered under the Companies Act, 1956) through its Director, Office at Krishna Building 9th Floor, Suit # 904, 905, 204 A.J.C. Bose Road, PO PS Bhowanipore, Kolkata 700017 (West Bengal).
Legal Reasoning
6. Shri Sidihi Vinyak Minerals Pvt. Ltd. (A Company registered under the Companies Act, 1956) through its Director, Office at Kapeliya Dhaoda, Panchgachhiya (CT), Nattn, PO PS Kanyapur, Asansol, Bardhaman, West Bengal. 7. Kumardhubi Karamchari Congress (Workmen) through its representative Mr. Arup Chatterjee, MLA, Nirsha Roya Colliery, Near Shiv Mandir, PIL Colony, PO PS & District Dhanbad. 8. Kumardhubi Metal Casting & Engineering Ltd. a limited liability company, duly incorporated under the Companies Act, having Office at Kumar Dhubi, PO PS Kumar Dhubi, District Dhanbad. … Respondents ---- 2 CORAM : SRI SANJAYA KUMAR MISHRA, C.J. SRI ANANDA SEN, J. ---- For the Appellants: Mr. Aman Nandrajog, Advocate Mr. Gaurav Arora, Advocate Mr. Ashutosh Anand, Advocate For the Respondent No.1: Mr. H.K. Mehta, Advocate For the Respondent No.2 : (BSIDC) For the Respondent No.3 : (EPFO) For the Respondent No.4 : (BOI) For the Respondent No.7 : (The Workmen) ---- Mrs. Manjusri Patra, Advocate Mrs. Richa Sanchita, Advocate Ms. Riya Narayan, Advocate Mr. Anil Kumar Singh, Advocate Mr. Abdul Allam, Sr. Advocate Mr. A.K. Sahay, Advocate Mrs. M.M. Pal, Sr. Advocate Ms. Mahua Palit, Advocate 06/ 15.05.2023 Upon hearing the learned counsel for the parties, this Court passed the following, (Per Ananda Sen, J.)
Decision
O R D E R 1. By filing these Company Appeals, the appellant in Company Appeal No.3 of 2022 has challenged the judgment and order dated 14.10.2022 passed by learned Single Judge in Company Petition No.2 of 1996(R), whereby the bids of respondents Nos.5 and 6 were accepted by the learned Single Judge as valid, with respect to sale of assets of liquidating company M/s. Kumardhubi Metal Casting and Engineering Ltd. AND in Company Appeal No.2 of 2022, the appellant has challenged the order dated 21.10.2022 passed by learned Single Judge in Company Petition No.2 of 1996(R), whereby the interlocutory application being I.A. No.9906 of 2022 filed by the appellant seeking permission to participate in the auction with respect to sale of assets of liquidating Company M/s. Kumardhubi Metal Casting and Engineering Ltd., has been dismissed. 2. Since both these appeals involve common questions, both these appeals are being disposed by this common order. 3. Kumardhubi Metal Casting and Engineering Ltd. was a company incorporated under the Companies Act. The same was liquidated and was ordered to be wound up in Company Petition No.2 of 1996(R). The assets of the said Company was valued vide order dated 18.12.2020 and the value of the total assets was assessed to be Rs.110,50,00,000/-. Learned Single Judge, vide order dated 18.12.2020 directed to sell the assets of the Company 3 by way of auction. Notice of auction sale was published with a reserve price of Rs.110,50,00,000/-, scheduling the action to be held before the High Court on 29.01.2021. As for reasons, one or the other, the auction did not materialize and ultimately vide order dated 2nd September, 2022, learned Single Judge directed to issue fresh auction notice. As per the conditions, the last date for purchase of bid document was 19th September, 2022. Earnest money to the tune of Rs.22.50 crore was to be submitted at the time of submission of the bid. The bid document with the required earnest money along with the bid in a sealed cover was due to be submitted by 10th October, 2022 by 04.00 p.m. before the learned Registrar General, High Court of Jharkhand. Intending bidders were supposed to inspect the assets of the Company at the factory site from 22nd September, 2022 till 24th September, 2022. The bid was to be opened in the Court on 14th October, 2022. 4. On 14.10.2022, in the presence of the bidders and in presence of learned counsel for the Official Liquidator and secured creditors, bids, which were in the sealed cover, were opened in Court. The bids were from one M/s. Apical Exim Pvt. Ltd. and Sidihi Vinyak Minerals Pvt. Ltd. Be it noted that this appellant did not furnish any bid before the Registrar General, but submitted the same only after the bids of others were opened. The Court directed the Official Liquidator to submit his report, on the bids of the two bidders. The report suggested that the bids, which were submitted by the bidders were in order and the earnest money stands deposited in the account of the Official Liquidator. On 21.10.2022, the bidding process was done in open Court in presence of the authorized representatives of both the bidders, i.e., M/s. Apical Exit Pvt. Ltd. and Sidihi Vinyak Minerals Pvt. Ltd. and also in presence of the respective counsel of the parties. During the bidding process, the bidders raised their bid amount and ultimately, Apical Exim Pvt. Ltd. gave the highest offer of Rs.112.50 crore. The Court accepted the said bid and confirmed the auction sale in favour of the bidder Apical Exim Pvt. Ltd. The present appellant, only on 21.10.2022, filed an interlocutory application being I.A. No.9906 of 2022, praying therein that they should be allowed to intervene as the deponent of the applicant Mr. Sanjay Kumar is an individual, who has entered into MOU with the appellant, a partnership firm. He submitted that Sanjay Kumar purchased the bid document within the stipulated time, but deposited 22.50 crore vide RTGS only on 20.10.2022 (after the bids of others were opened) in the account of the Official Liquidator and had submitted his bid in a sealed cover before this Court. He prayed that he should be allowed to 4 participate in the bidding process. He stated that though the other two bidders had deposited the bid amount at an earlier date, but, admittedly they also deposited the amount, after the due date, i.e., 10.10.2022, fixed by the Court. Thus, he prayed that the intervener should also be allowed to participate in the auction process. 5. Learned Single Judge, vide order dated 14.10.2022 opened the bid of M/s Apical Exim Pvt. Ltd. and M/s. Sidihi Vinyak Minerals Pvt. Ltd. in presence of counsel for official liquidator and others and thereafter handed over the documents to official liquidator to verify the documents and to prepare a chart and submit a report in respect of terms and conditions enumerated therein. As learned Single Judge on 14.10.2022 accepted the bid of M/s. Apical Exit Pvt. Ltd. and M/s. Sidihi Vinyak Minerals Pvt. Ltd., this appellant also challenged the said order whereby the bid of those two bidders were accepted and were opened in the Court. Similarly, the order dated 21.10.2022 has also been challenged by this appellant by which learned Single Judge has dismissed the interlocutory application being I.A. No.9906 of 2022 and refused to allow the appellant to participate in the bidding process. 6. Learned counsel appearing on behalf of the appellant submitted that admittedly there was a time frame fixed by learned Single Judge to deposit the bid document along with the earnest money, thus, learned Single Judge should not have accepted the bid of M/s. Apical Exim Pvt. Ltd. and M/s. Sidihi Vinyak Minerals Pvt. Ltd. nor could have proceeded for open bidding thereafter in Court. It is their case that their interlocutory application should have been allowed as they had also submitted their bid, though in Court when the open bidding was taking place. As per them since in a sealed cover the appellant has quoted a price, which, as per them, was higher than the price quoted by other two bidders, in the interest of the Company and the creditors, learned Court should have accepted the bid of this appellant. In support of his contention, learned counsel for the appellant relied upon judgments of the Hon’ble Supreme Court in the case of Divya Manufacturing Company (P) Ltd. Tripupati Woolen Mills Shramik Sangharsha Samity & Another versus Union Bank of India and Others Official Liquidator and Others reported in (2000) 6 SCC 69 and in the case of Union Bank of India versus Official Liquidator H.C. of Calcutta and Others reported in (2000) 5 SCC 274. By referring to the aforesaid judgments, learned counsel for the appellant submitted that where a higher price is offered, in the interest of the Company and the creditors, sale should be set aside. The inconvenience caused to the 5 highest bidder in that case cannot be a ground to set aside the sale. When the price is grossly inadequate, the same can be set aside and even confirmed sale in favour of the highest bidder can be cancelled. On the aforesaid background, appellant prayed that the entire sale, which was confirmed be scrapped and the appellant be given a chance and a fresh bidding process be initiated. 7. Learned counsel appearing on behalf of the respondents jointly submits that with a malafide intention and only to stall the entire process of sale, appellant has approached this Court. Admittedly, appellant had filed his bid in sealed cover, that too much after the bid of the other bidders were opened by the Court in the proceeding. Once the bid price of the other bidders were thrown open and has come within the knowledge of the world at large, no other person should be allowed to enter in the fray with a fresh price. It is their case that the entire sanctity of the bidding process will be demolished if the prayer of the appellant is accepted. 8. Learned counsel appearing on behalf of the workmen submitted that the liquidation process is of the year 1996 and the poor workmen are not being paid their legitimate dues because of the prolonged litigation and now if the prayer of the appellant is accepted by this Court, then the same will delay the entire process and will add to the misery of the workmen. 9. After hearing the parties, we find that the facts are admitted in this case. In the year 1999, there was an order to wound M/s. Kumardhubi Metal Casting and Engineering Ltd.. Vide order dated 18.12.2020, learned Single Judge directed the assets of the company to be auction sold. On 29.01.2020 auction sale notice was published with a reserve price of Rs. 110,50,00,000/-. Auction was scheduled to be held but ultimately the auction could not take place, thus, on 02.09.2022, learned Court directed to issue fresh auction notice. The timeline of the said auction was fixed by the Court, which is as follows: - 19th September 2022 22nd September to 24th September 2022 10th October, 2022 14th October, 2022 Last date of purchase of bid document Inspection of the properties. 22.50 crore Earnest Money of the bid alongwith submission of in sealed cover to be documents deposited before the Registrar General by 04.00 p.m. Opening of the bid document 10. Thus, from the aforesaid timeline, it is clear that the bid document was to be opened in the Court on 14th October, 2022, whereas the required 6 earnest money in sealed cover along with bid document was to be deposited by 10th October, 2022. It is an admitted case that after 10th October, but before 12th October, 2022, M/s. Apical Exim Pvt. Ltd. deposited the bid document along with the earnest money and M/s. Sidihi Vinyak Minerals Pvt. Ltd. deposited the bid document along with the earnest money before 14.10.2022. It is pertinent to mention here that admittedly both these respondents deposited the money after 10th October, 2022, but before opening of the bid in open Court, i.e., on 14.10.2022. It is an admitted case of the appellant that they had neither deposited the bid document nor deposited the earnest money even on the date, or even at the time of opening of the bid document in Court, i.e., on 14.10.2022. On 14.10.2022, the price bids, i.e., bid documents of the two respondents were opened and the price was known to one and all. After knowing the price of these two bidders, only on 21.10.2022, this appellant filed an interlocutory application along with earnest money and their price bid and prayed before the Court to open the same and allow the appellant to participate in the bidding process. When this appellant did not even deposited their bid document alongwith the earnest money at least on or before 14.10.2022, learned Single Judge, correctly, rejected their application to intervene. The bidding process should be transparent and there should be level playing field for all. Once the bid document is opened in Court and the price of the respective bidders has been made known to all, a prospective party, who did not even participate in the entire process, should not be allowed to enter the bidding arena. 11. Further, this Court is of the opinion that the appellant has got no locus standi to file the interlocutory application, praying therein to accept his bid. It is an admitted case that the respondents M/s. Apical Exim Pvt. Ltd. and M/s. Sidihi Vinyak Minerals Pvt. Ltd. had purchased the bid document and deposited the earnest money along with their bid in a sealed cover on or before 13.10.2022. The bid document was opened on 14.10.2022. It is an admitted case that the appellant did not participate in the bid nor filed any application before the Court, whereby the bid documents of other two were opened on 14.10.2022. If at all the appellant was aggrieved by opening of the bid document on 14.10.2022 on the ground that they deposited the earnest money after 10.10.2022 (the due date) and before 14.10.2022, he could have done so, but he did not do so, rather he kept waiting. Even after 14.10.2022 till 20.10.2022, appellant did not file any application challenging the opening of bid on 14.10.2022. Only on 21.10.2022, having knowledge of the price quoted 7 by the other two bidders, the appellant filed an application and deposited the earnest money along with his bid. As he had not participated in the auction proceeding nor he made offer before the opening of the bid of others nor did he file any application prior to 21.10.2022, the appellant becomes a third party unrelated with the entire process. It is pertinent to mention here that vide order dated 21.10.2022, sale was confirmed in favour of M/s. Apical Exim Pvt. Ltd. Thus, it is clear that the appellant has not approached the Court (learned Single Judge) with clean hands as his admitted case is that he had already obtained the bid document, but did not submit the same within time. This suggests that he was well aware of the auction and was following the entire proceeding and after knowing the price bid of others, he filed the interlocutory application at a much belated stage, thus, he has not approached this Court with clean hands. His intention was not clean and serious. 12. The Hon’ble Supreme Court in a very recent judgment in the case of K. Kumara Gupta versus Sri Markendaya and Sri Omkareswara Swamy Temple and Others reported in (2022) 5 SCC 710 at paragraph 14 has held that when the sale is confirmed and the sale deed is executed, unless and until there was any material irregularity or illegality in holding public auction and/or auction sale was vitiated by any fraud or collusion, it is not open to set aside the auction or sale in favour of the highest bidder on the basis of some representations made by third parties, who did not even participate in the auction proceedings and did not make any offer. In paragraph 17 of the said judgment, the Hon’ble Supreme Court has held that if a public auction is held and highest bid is received and the property is sold in public auction in favour of the highest bidder, such sale cannot be set aside on the basis of some offer made by third parties subsequently, that too when they did not participate in the auction proceedings and made any offer and/or the offer is made only for the sake of making it and without any serious intention. 13. In the instant case, there is no allegation of fraud. The only ground taken by the appellant is that since the other bidders had deposited the earnest money and the bid document after the due date but before the opening of the bid, which is an irregularity, the appellant should have also been allowed to participate. According to us, the same cannot be a material irregularity to nullify the entire auction as, admittedly, the EMD and the bid document were deposited by the respondents prior to opening of the bid, which is on 14.10.2022. If the appellant would have filed their bid on 14.10.2022 also before the Court, the situation would have been otherwise, 8 which is not the case here. This cannot be said to be a material irregularity. Since the appellant did not participate in the bidding process, had not filed his bid before opening of the bid document of others and only approached after the bids of others were opened, he has got no locus standi to challenge the entire proceeding. Further, the auction has to reach to a logical end. The process cannot be a never ending one. If one other player tries to enter the arena, whenever they wish and this Court starts to entertain them, then the auction process will be a never ending process. This cannot be allowed. 14. Considering what has been held above, we are of the opinion that the appellant has got no locus standi to challenge the auction process as they did not even participate in the auction process nor did they approach the Court with clean hands. Thus, we find no merit in these two appeals. Both these appeals are, accordingly, dismissed. There shall be no orders as to costs. Urgent certified copies of this order shall be issued as per the Rules. (Sanjaya Kumar Mishra, C.J.) (Ananda Sen, J.) Kumar/Cp-02 A.F.R.