O L Of Aryoday Spg. And Wvg. Mills Co. Ltd. Versus Vs The Manger, State Bank Of India & Ors.

Mauna M. Bhatt, J

Heard Mr.Dhawan M Jayswal for applicant no.1 - Official Liquidator, learned advocate Mr.D.S. Vasavada for respondent No.2, learned advocate Mr.Pathik M Acharya for respondent No.3 and learned advocate Mr.Prabhakar Upadhya for respondent No.4. None appeared for respondent No.1 though Notice was served by direct service.

Heard learned Senior Counsel Mr.Devang Nanavati with learned advocate Mr.Saurabh M Patel for the applicant of Company Application No.44 of 2024.

1. The Official Liquidator filed Official Liquidator’s Report No.42 of 2024 seeking following orders and directions from this Hon’ble Court:--

(A) In view of facts stated here-in-above, this Hon’ble Court may be pleased to consider the bid received for Lot No. (III) from M/s. Arham Developers of Rs.70,27,52,700/- as per e-auction conducted by M/ s. RailTel Corporation of India Ltd., as per terms and conditions of sale and/or such other and further terms and conditions as may be considered appropriate by this Hon’ble Court in the matter.

(B) This Hon’ble Court may be pleased to permit the Official Liquidator to make payment of bill of `2,36,387/-, to M/s.Global Network Advertising., Advertising Agency, as per advertisement agency’s bill dated 26.06.2024 at Annexure – “B” to this report being the advertisement expenses from the Common Pool Account maintained by the Office of the Official Liquidator subject to recovery from the Sale Consideration on priority basis being Liquidation Expenses.

(C) As stated in para (9) here-in-above, this Hon'ble Court may be pleased to direct successful bidder to pay cost of `30,000/- + applicable GST to e-auction agency, if the sale is confirmed in their favour, otherwise Official Liquidator may be permitted to pay an amount of `10,000/- + applicable GST to e-auction agency if the auction fails and sale is not confirmed in favour of successful bidder from the Common Pool Account maintained by the Official Liquidator.

(D) Such other and further orders and directions as may be considered just and appropriate may also be passed.”

2. During pendency of the aforesaid report, M/s. Devbhoomi Agrifresh Private Limited, intervener bidder, preferred COMA No.44 of 2024, wherein, applicant seeks following reliefs:

“This Hon'ble Court may be pleased to permit present Applicant to participate and allow to bid for the properties into the custody of official liquidator of ARYODAY SPG. & WVG. MILLS COMPANY LTD (In liquidation) as describe in sale proclamation and public notice issued by official liquidator on 20.06.2024 pursuant to this Hon'ble court’s order dated 14.06.2024.

This Hon'ble Court may be pleased to order for manual auction by conducting inter-se biding for fetching highest price of the properties into the custody of official liquidator of ARYODAYA SPG. & WVG. MILLS COMPANY LTD (In liquidation) as describe in sale proclamation and public notice issued by official liquidator on 20.06.2024 pursuant to this Hon'ble court’s order dated 14.06.2024 and further this Hon'ble court be pleased to permit the present Applicant to participate in the inter-se bidding.

That this Hon’ble Court be pleased to pass such further and other orders as the nature and circumstances of the case may require;”

3. This Court vide its order dated 14.06.2024 passed in Official Liquidators Report No.29 of 2024 had permitted Respondent No. 1 to sell the property of ARYODAY SPG AND WEVG. MILLS LTD (in liquidation) and in compliance to the said order, sale proclamation was published on 26.06.2024. Thereafter, accordingly E-auction was conducted on 15.07.2024 wherein two bidders deposited EMD (Earnest Money Deposit) amount of Rs. 7,00,00,000/- as per terms and condition of sale and participated in e-auction proceedings wherein present respondent no. 3 immerged as the highest bidder & respondent No.4 immerged as the second highest bidder respectively. Pursuant to conclusion of said E-auction, R/Official Liquidators Report No. 42 of 2024 has been filed by official liquidator wherein, it has been prayed to consider present respondent no.3- M/s. Arham Devlopers as the highest bidder with highest offer of Rs. 70,27,52,700/- against the upset price of Rs. 69,87,52,700/-. During pendency of the R/OLR/42/2024, M/s. Devbhoomi Agrifresh Private Limited, intervener bidder, preferred COMA No.44 of 2024, wherein, showing willingness to offer higher amount than Rs. 70,27,52,700/- which was offered by respondent no.3.

4. Applicant of COMA No. 44 of 2024 filed undertaking dated 23/09/2024 on oath showing willingness to offer 75,00,00000/- for the subject property put under auction and to deposit 20% i.e. Rs. 15,00,00,000/- of the said offered amount within two weeks from the date of the undertaking. Considering the undertaking of the applicant, coordinate bench of the High Court had passed order dated 23/09/2024 issuing notice returnable and directing the applicant to deposit said amount, accordingly amount of Rs. 15,00,00,000/- was transferred to official liquidators account on 04.10.2024 by the applicant. After the said amount has been deposited by the applicant herein, respondent no.3 has filed his affidavit in reply objecting to the present application on the sole ground that, applicant cannot be given first preference against another lawful bidder just because applicant is agreeing to pay higher amount than maximum bid fetched in E-auction held pursuant to order passed by this court and unless the auction is vitiated by fraud or there exists a justifiable reason or suspect that a fair offer has not been put-forth in the auction proceedings then only this court can interfere in concluded auction proceedings.

5. Learned Advocate Mr. Pathik Acharya appearing for respondent no.3. The Ld. Advocate had raised objection so far as permitting the newly added bidder from participating in the auction proceedings. The Ld. Advocate in his support has relied upon judgment passed by Hon’ble Supreme Court of India in Eva Agro feeds Pvt Ltd V/S Punjab National Bank & Others reported in (2023) 10 SCC 189 in support of their objections and more particularly has emphasized on the observation of Hon’ble Supreme Court in paragraph 77 whereby reliance is place upon Judgment of Supreme Court in K. Kumara Gupta V. Shri Markendaya and Omkareshwara Swamy Temple & others reported in (2022)5 SCC 710 wherein it has been held that, unless and until it was found that there was any material irregularity or illegality in holding the public auction or the auction sale was vitiated by the 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 a third party who did not even participate in the auction proceedings. Relying upon said judgments passed by Hon’ble Supreme Court, Mr Acharya submitted that, in the present case applicant has not participated in the E-auction proceedings conducted as per the schedule fixed by this Court neither has pleaded or averred in the application regarding illegality, fraud or collusion, therefore present application be rejected and offer made by the applicant may not be excepted even though applicant has offered higher amount than respondent no.4 and has deposited 15,00,00,000/- which is more than double the amount deposited by the respondent no.4 as EMD. Further, Ld Advocate Mr Acharya also relied upon Judgment passed by the Division Bench of Hon’ble High Court of Allahabad in Flavuro Foods Pvt Ltd V/s official liquidator and another reported in (2024)2 ALL LJ 401 wherein, relying upon Hon’ble Supreme Court’s judgment passed in Eva Agro Feeds Pvt Ltd reported in (2023) 10 SCC 189 & judgment reported in (2022)5 SCC 710, Division Bench of High Court of Allahabad has set aside order of Ld Company Judge directing to hold fresh auction by not accepting highest bid of the appellant therein even though no one had endeavoured to offer higher price than the offer of the highest bidder.

6. In counter to the objections of the respondent no.3, Ld. Senior Counsel Mr Devang Nanavati with Ld Advocate Mr Saurabh M Patel appearing for the applicant of COMA No. 44 of 2024 has drawn this courts attention to section 457 (1) (c) of Companies Act 1956 read with Rule 272 of the Company Court Rules, 1972 which enshrines upon powers of official liquidator to be exercised with sanction of the Company Court and has further submitted that, as per section 457 (1) (c) official liquidator can sell the property of the company in liquidation by public auction or private contract, with power transfer the whole thereof to any person or body corporate or to sell the same in parcels with sanction of the Company court and whereas, said sale or transfer would subject to confirmation of the Court as per Rule 272. Therefore, Ld Senior Counsel Mr Devang Nanavati would submit that considering the entire scheme of the Companies Act 1956 and more particularly Part VII of the Act which constitutes of section 425 to section 560 which regulates winding up and liquidation process of the companies, sole intention of the legislation is to liquidate the assets of companies in liquidation and fetch maximum amount out of the sale of properties to clear the debt creditors, therefore, section 457 (1)(c) read with Rule 272 has given discretionary powers to the Court for accepting highest bid or offer even from the third party who had not participated in the auction proceedings prior to confirmation of sale if the court feels that, third party has substantially raised offer compared to the highest bid of the person participating in the auction. In context to the said provisions and referring discretionary powers of this Court, Ld Senior Counsel Mr Devang Nanavati went on to submit that all three Judgments relied by the Ld Advocate of respondent No.03 are not applicable to the present set of facts because, firstly, judgment relied by the respondent no.4 reported in (2023)10 SCC 189 is arising from the order passed under Insolvency and Bankruptcy Code, 2016 wherein highest bidder had received e-auction certificate endorsing him as highest bidder, thereafter within 24 hrs of receiving said certificate by way of an email, official liquidator had cancelled e-auction and only after the intervention of the National Company Law Tribunal, liquidator had accepted balance sale consideration amount within time specified in e-auction notice and thereafter said confirmation order was challenged before Appellate Tribunal and there from to the Hon’ble Supreme Court of India therefore, Ld Senior counsel would contend that, considering the present facts of the case, sale has not been confirmed by accepting highest offer of the respondent no.4 as OLR/42/2024 has been filed by the OL for confirming the sale was pending when present application was field and applicant had shown willingness to offer Rs. 75,00,00,000/- by depositing Rs.15,00,00,000/- on 04.10.2024. Secondly, respondent no.4 has offered Rs.40,00,000/- higher than the upset price i.e. Rs.69,87,52,700/- and respondent no.4 has offered Rs. 35,00,000/- higher the said upset price whereas, applicant has offered Rs. 5,12,47,300/- higher than upset price, So, considering the better deal offered by the applicant which is in the larger interest of the secured creditors including workmen, applicant be permitted to bid for the subject property. Thirdly, in the present case this Court or the official liquidator has not decided to go for fresh round of auction instead, applicant is seeking inter-se bidding to higher price than what is offered by the respondent no.3.

7. Ld Senior Counsel Mr Devang Nanavati appearing for the applicant has relied upon following judgments passed by Supreme Court:

(i) Divya Manufacturing Company (P) Ltd Vs Union Bank of Inda & Ors (2000) 6 SCC 69

(ii) Shradhha Aromatics Pvt Ltd Vs. official liquidator of Global Arya Industries Ltd & Others (2011) 6 SCC 207

(iii) Manoj I Naik and Associates Vs. Official Liquidator (2015) 3 SCC 112.

(iv) Rajiv Kumar Jindal and others Vs. BCI Staff Colony Residential Welfare Association (2023) SCC OnLine 507

8. Mr.Nanavati, Ld Senior Counsel, appearing for the applicant, relying upon aforesaid judgments highlighted that, on the first instance no right in rem has been created in favour of respondent no.3 pertaining to asset put to auction just because respondent no.3 has participated in the E-auction proceeding in time because Hon’ble Supreme Court has consistently held that, (1) it is the discretion of the High Court under provisions of Companies Act 1956 to accept highest bid in the interest of the secured creditors, (2) Prior to confirmation of sale, Court can accept substantial highest bid from the person (intervenor) who has not participated in the E-auction proceedings even though when no fraud or collusion could be inferred or alleged, (3) Court has to take into consideration paramount interest of the creditors while accepting highest bid from any party as it must fetch the maximum price which takes care of statutory dues, dues of the workmen and secured creditors.

9. Mr. Jayswal, Ld Advocate for the official liquidator has drawn attention of this court to para 10 of OLR/42/2024 whererby he submits that, that the Official Liquidator in the past has made various attempts for sale of assets of the company in liquidation, however, the sale was not successful as no offers were received. The details of sale carried out in past in compliance of the order passed by this Hon’ble Court is as under:--

Therefore, considering the said facts it would be in the interest of creditors and more particularly workmen to accept & fetch the maximum price out of the subject land as offered by the applicant. Further, Mr. Jayswal submits that, even as per the Clause 10 of the terms and condition of the tender Form, offers received will be placed before this Court and it would be at the discretion of this Court to accept the highest offer and confirm the sale.

10. Ld Advocate Mr. Prabhakar Upadhya appearing for respondent no.4 M/s Bhagyalaxmi Corporation has adopted arguments advance by the Ld Advocate of respondent no.3.

11. Mr. D S Vasavda for respondent no.2 Textile Labour Association has submitted the in view of section 457 (1) (c) of the Act 1956 read with Rule 272 of Company Court Rules, this Court has discretion to accept highest offer considering the larger interest of the workers and other creditors, so, applicants offer be accepted by allowing his application as he has already deposited Rs. 15,00,000,00/- as deposit and offered to pay whatever other bidders offer.

12. In view of the aforesaid submissions and Judgments relied by respective parties, this court is of the view that, as per section 457 (1) (c) of the Companies Act 1956 read with Rule 272 of Company Court Rules, this Court has discretionary powers to accept the highest bid and confirm the sale in favour of the highest bidder keeping the paramount interest of the secured creditors. Noticing the fact that, on earlier occasion, very subject property was put to auction for five times but none of the auctions were successful and could never fetch any amount to match up with the debts and dues of the creditors and more particularly the dues of the workmen whose generations have changed waiting for the glimpse of their hard earned money due to be recovered liquidating the assets of the company in liquidation. Under such circumstances, when for the sixth time, subject property has been put to auction, whereby, 14 tender forms were sold pursuant sale proclamation published on 26.06.2024 and out of which 4 offers were received from intending purchasers and out of said four purchasers, present respondent no. 3 & 4 have deposited EMD amount of Rs 7,00,00,000/- each with the Official Liquidator and respondent no. 3 was immerged as the highest bidder with offer of Rs. 70,27,52,700/- against upset price of Rs. 69,87,52,700/- and respondent no. 4 was the second highest bidder with the offer of Rs. 70,22,52,700/-, there is always possibilities of getting more higher bid by asking the participants to bid inter se and raise their offers as per clause 10 of terms and conditions of tender form or by permitting a genuine intervenor/bidder who has approached this Court after E-auction proceedings are concluded to fetch maximum price in the interest of secured creditors. In the present case, after OLR/42/2024 was filed by the liquidator for confirmation of sale in favour of the respondent no.4, present applicant filed intervention application intending to bid more than what highest bidder has offered and by way of undertaking applicant offered to pay Rs. 75,00,000,00/- and deposit 20% of said offered amount i.e. Rs. 15,00,000,00/- and accordingly applicant deposited said amount, so, when there was no doubt about applicant’s intent, it was upto the discretion of this Court to permit applicant to participate in interse bidding and therefore respondent no.4 as averred in its paragraph 5 of affidavit in reply, cannot insist this court in not accepting the higher bid of the applicant which is Rs. 5,12,47,300/- higher than upset price compared to Rs. 40,00,000/- higher than the upset price offered by respondent no.4 and Rs. 35,00,000/-higher the upset price offered by respondent no.5 in absence of allegations pertaining to fraud or collusion could be inferred. Even otherwise respondent no 4 & 5 being only the bidder have no Right in Rem over the subject property so as too object against acceptance of much highest offer than they are offering.

13. Ld Advocate Mr. Acharya for respondent no.3 has heavily relied upon judgment passed by Hon’ble Supreme Court of India in Eva Agro feeds Pvt Ltd V/S Punjab National Bank & Others reported in (2023) 10 SCC 189 but in the said case, entire sale amount has been accepted by the official liquidator after the intervention of the National Company law Tribunal and thereafter under the provisions of the Insolvency & Bankruptcy Code,2016 one the secured creditor preferred Appeal before Appellate Tribunal and from there matter had reached till Supreme Court wherein Appellate Tribunals order had been set aside and during all the litigations pending before respective forums there was never a case of the any late comer bidding higher than the offer of the highest bidder, instead issues involved in the appeal before Supreme Court was whether the impugned order of the Appellate Tribunal, inter alia, giving liberty to initiate fresh process of auction liable to be set aside and whether liquidator could have cancelled the e-auction without giving any reasons? And whether mere expectation of the liquidator that still higher price may be obtained can be no good ground to cancel an otherwise valid auction and go for another round of auction? Distinguishing & perusing the facts of the present case from that of the above case, it transpires that, firstly, this Court had not confirmed the Sale in favour of the respondent no.4 i.e. M/s Arham Devlopers and case before Supreme Court, entire sale amount had been accepted, secondly, applicant of COMA No.44 of 2024 has given much higher offer than the what respondent no. 3 & 4 has given and in case before Supreme Court there was no party who had given higher bid than highest bidder, thirdly, in present case auction has not been cancelled, in case before Supreme Court auction had been cancelled without giving reasons, fourthly, discretionary powers of Company Court and respondent no.1 official liquidator enshrined in section 457 of Companies Act, 1956 read with provisions of Company Court Rules cannot be equated with powers of Liquidator as stated in section 35 of Insolvency & Bankruptcy Code, 2016 because as per section 547 (1)(c) of Act 1956 liquidator with sanction of the Company Court sell and transfer assets of the company by way of auction or private contract but in the Insolvency & Bankruptcy Code, as per section 35 (f), liquidator can sell the property subject to section 52 which allows secured creditors to relinquish security interest or realise its secured interest and in Act 1956 there is no such powers given to secured creditors, only the Company Court and liquidator has to keep paramount interest of creditors while liquidating assets of the company. In view of the forgoing reasons said Judgment passed by the Hon’ble Supreme Court in case of Eva Agro feeds Pvt Ltd is not applicable to the present case.

14. As per judgment passed by Hon’ble Supreme Court in case of Rajiv Kumar Jindal and others Vs. BCI Staff Colony Residential Welfare Association passed in Civl Apeeal No.10128 of 2011 reported in (2023) SCC OnLine 507, Supreme Court has held that, “the purpose of auction (open or close format) is to get the most remunerative price and to give intending bidders to participate and fetch higher realizable value of the property. If that, path is cut down or closed, the possibility of fraud or to secure inadequate price or under bidding would large. In the given circumstances it is the duty of the Court to exercise its discretion wisely and with circumspection and keeping in the facts and circumstances in each case.” Therefore, considering present facts and circumstances of this case, it is required to allow applicant to bid as applicant has offered much higher amount than respondent no. 3 & 4 and most importantly, interest of the workmen and secured creditors is to be kept in mind while trying to fetch highest price to match up with their dues. Thus, other judgments relied by the respondent no.3 are also not applicable as facts and circumstances of those cases are completely different compared to present case even and accordingly objection raised by the respondent no.3 is not tenable and required to be rejected at thresh hold considering the larger interest of the creditors.

15. On 16/10/2024, after hearing all the Ld Advocates for respective parties on objections raised by the respondent no. 3, inter-se bidding was held between applicant and respondent no. 3 & 4, whereby, respondent no.4 i.e. M/s Bhagyalaxmi Corporation had offered highest bid of Rs 81,00,000,00/- (81 Crores) and against it applicant i.e. Devbhomi Agrifresh Pvt Ltd had offered highest bid of Rs. 82,00,000,00/- (82 Crores) whereas Ld Advocate of respondent no.3 i.e. M/s Arham Developers had sought time of two days to seek instructions as to whether respondent no.3 wants to increase his bid than offer of applicant, so, matter was adjourned to 18.10.2024. Thereafter, 18.10.2024, Ld Advocate Mr Acharya for respondent no 3 submitted that respondent no.3 does not want to participate in further inter-se bidding and instead requested for refund of his EMD amount of Rs. 7,00,000,00/- . therefore, in view of subsequent development, present respondent no.4 i.e. M/s Bhagyalaxmi Corporation stands as second highest bidder with offer of Rs 81,00,000,00/- and present applicant i.e. Devbhomi Agrifresh Pvt Ltd is declared as first highest bidder with offer price of Rs. 82,00,000,00/- and accordingly sale is confirmed in favour of applicant i.e. Devbhomi Agrifresh Pvt Ltd with highest offer price of Rs. 82,00,000,00/-as per Terms and Condition of Sale issued by the Official Liquidator.

16. In view of said subsequent development, official liquidator is directed to refund EMD of Rs. 7,00,000,00/- to respondent no.4 i.e. M/s Arham Developers in accordance with terms and conditions of the tender form and further, EMD of the respondent no.5 i.e. M/s Bhagyalaxmi Corporation shall be retained by the official liquidator as per clause 35 of the terms and conditions of tender form.

17. In view of aforesaid observations & directions application filed by the applicant i.e. Devbhomi Agrifresh Pvt Ltd is allowed and stands disposed off.

R/OFFICIAL LIQUIDATORS REPORT NO. 42 OF 2024

18. Considering aforesaid order passed in cognate matter COMA/44/2024 wherein Devbhomi Agrifresh Pvt Ltd with highest offer price of Rs. 82,00,000,00/- has been declared as the highest bidder and accordingly sale has been confirmed in favour of Devbhomi Agrifresh Pvt Ltd, therefore, prayer clause (A) of para 11 of OLR/42/2024 is not required to considered. Whereas, prayer clause (B) of para 11 of OLR/42/2024 is required to be allowed and accordingly official liquidator is permitted to make payment of bill of Rs. 2,36,387/- to M/s. Global Network Advertising, advertising agency as per bill annexed at Annexure-B to report from the common pool account and also prayer clause (C) of para 11 of OLR/42/2024 is allowed by directing the successful bidder i.e. Devbhomi Agrifresh Pvt Ltd, applicant of COMA/44/2024 to pay cost of Rs. 30,000/- plus applicable GST to e-auction agency i.e. RailTel Corporation of India through official liquidator.

19. With the said observation and direction, the present Official Liquidators Report is allowed and stands disposed off. Company Application also disposed of accordingly.