Sale : Sc Judgement -Pravin Gada and anr Vs Central Bank of India and others

BY ADVOCATEMMMOHAN ⋅ DECEMBER 3, 2012

“(i) A Debts Recovery Tribunal acting under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 would be entitled to order the sale and to sell the properties of the debtor, even if a company-in-liquidation, through its Recovery Officer but only after notice to the Official Liquidator or the Liquidator appointed by the Company Court and after hearing him. xxx xxx xxx (iv) In a case where proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the creditor concerned is to approach the Company Court for appropriate directions regarding the realisation of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets of the company-in-liquidation.” 

Another important facet deserves to be mentioned. Before the Division Bench, the workers union had also challenged the decision of the DRAT. The High Court, while dealing with their submission, has recorded as follows:- “During the course of the hearing of these proceedings, the Court has been informed that an effort has been made by the First and Second Respondents to settle the outstanding dues of the workers through an out of Court settlement. Counsel appearing on behalf of the workmen submitted that the workmen would abide by the result of the Petitions which have been filed by the secured creditors and it is only in the event that the Petitions filed by the Banks are dismissed that the workers would be inclined to enter into an out of Court settlement with the First and Second Respondents. 

Counsel for the First and Second Respondents stated that his clients would be able to resolve the dispute with the workmen only if the Petitions filed by the secured creditors challenging the sale in favour of his clients fail. 

Counsel appearing on behalf of the First and Second Respondents submitted that while the First and Second Respondents are ready and willing to negotiate with the workmen, they are no in a position to do so until the litigation which has been instituted by the secured creditors attains finality.”

The aforesaid submission has its own significance in law. 

We may hasten to clarify that we have confirmed the sale as this Court has undertaken the exercise to have an auction conducted through the competent authority of DRT by adopting a fair, competitive and transparent procedure but that does not mean that the conclusion arrived at by the High Court in that regard is erroneous. 

Thus, while confirming the sale subject to the conditions imposed hereinbefore, we are disposed to think that keeping in view the interest of the workmen and their rights, the High Court should deal with the rights of the workmen regard being had to the submissions advanced by the first and second respondents before it in an apposite manner and, if required, monitor the same. 

As concession was given before a particular Division Bench, we would request the learned Chief Justice to place the matter before the same Bench and if it is not possible, at least before the learned presiding Judge. 

We have felt so as such a submission was put forth before the Division Bench which had categorically recorded the same and it is not desirable that there should be any kind of deviation with regard to the statement made. 

Presently to the Interlocutory Applications which have been filed for impleadment and withdrawal of the amounts that have been deposited as earnest money. 

Regard being had to the facts and circumstances of the case, all impleadment applications are allowed and the bidders who have deposited the money are allowed to withdraw the same. 

The appeals are accordingly disposed of leaving the parties to bear their respective costs.

N THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 8658-8660 OF 2012
(Arising out of S.L.P. (Civil) Nos. 30894-30896 of 2011)
Pravin Gada and another … Appellants

Versus
Central Bank of India and others … Respondents

J U D G M E N T

Dipak Misra, J.

Leave granted.

2. The present appeals by special leave have been preferred questioning
the defensibility of the order dated 20th September, 2011 passed by
the Division Bench of the High Court of Judicature at Bombay in Writ
Petition Nos. 2689 of 2011, 7488 of 2011 and 7489 of 2011 whereby the
High Court has quashed the order dated 3rd March, 2011 passed by the
Debt Recovery Appellate Tribunal (for short ‘the DRAT’) wherein the
DRAT had set aside the order of the Debt Recovery Tribunal (for short
‘the DRT’) and restored the confirmation of sale conducted by way of
public auction in favour of the respondents, who are the appellants
herein.

3. Shorn of unnecessary details, the facts which are essential to be
stated for disposal of these appeals are that a company by the name of
Jay Electric Wire Corporation Ltd. had a factory at Mysore situate on
land admeasuring approximately 4.4 acres comprised in plots 44 and 47
in Serial Nos. 55 and 69 in the Industrial Area of village Habal and
Serial No. 33 of Metagally, Hobla Kasba. The said company, which
closed down in February, 1995, had about 149 workers. As dispute
arose between the workmen and the management because of termination,
the matter was referred to the Industrial Tribunal at Mysore after the
reference made under Section 10 of the Industrial Disputes Act, 1947
and the said tribunal, vide award dated 5th January, 2001, directed
the employer to pay back wages to the workmen with effect from 6th
February, 1995 and to continue payment during the subsistence of the
relationship of employer and employee between the parties.

4. As the facts are further unfurled, on 18th December, 2006, a recovery
certificate was issued by the Deputy Labour Commissioner at Bangalore
for recovery of a sum of Rs.4.44 crores towards the dues of the
workmen under the award passed by the Industrial Tribunal. A
proceeding was initiated before the Company Judge of the High Court of
Bombay in 1996 forming the subject-matter of Company Petition No. 336
of 1996. Subsequently, on a reference made by the BIFR under Section
20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985,
the company court held that it was just and equitable for the company
to be wound up. The official liquidator was appointed as provisional
liquidator by order dated 6th October, 2005 to take charge of the
books, assets and business of the company and to exercise necessary
powers under the Companies Act, 1956. On 15th October, 2008, the said
order was made absolute. The official liquidator was commanded to
proceed in the matter in accordance with law to deal with the assets
of the company in liquidation.

5. It is pertinent to state here that in the year 1999, the ICICI Bank
had instituted a suit before the High Court in its original side for
recovery of its dues against the company. The learned single Judge,
vide order dated 8th July, 1999, appointed a Receiver who was granted
liberty to sell the assets by public auction or by private treaty and
to apply the net sale proceeds as between the ICICI Bank and the
Central Bank of India which was impleaded as the second defendant to
the suit in satisfaction of the respective charges on the immoveable
property. The suit eventually stood transferred to the DRT and the
DRT, by order dated 26th August, 2003, allowed the application filed
by the ICICI Bank Ltd. for a sum of Rs.1.12 crores together with
future interest at 12% per annum. It was further directed that on
failure on the part of the borrower to repay the amount within six
months, the immoveable property would be sold and the net sale
proceeds would be paid to the applicant bank and the Central Bank of
India in proportion to their respective charges.

6. In June, 2004, a public notice was issued for sale of the moveable and
immoveable properties of the borrower and notice for the proposed sale
was published in the newspapers. Though the movables of the borrower
came to be sold, yet no proper offer was received for the sale of
immoveable property. In a meeting dated 24th July, 2006, it was noted
that two offers were received, one amounting to Rs.1.10 crores and the
other Rs.80 lacs. The Central Bank of India stated that the offer was
not acceptable to it. At that stage, the Standard Chartered Bank
appeared before the Receiver stating that the ICICI Bank had assigned
its debts to it. The meeting convened by the Receiver was adjourned
to 9th August, 2006 and eventually, on 21st August, 2006, bidding took
place inter se the two bidders who submitted their offers when the
first and second respondents enhanced their bid to Rs.2.50 crores.
The meeting was adjourned to 5th September, 2006 and the successful
bidder was directed to enhance the amount representing 25% of the
offer by 28th August, 2006. In the said meeting, the representative
of the Central Bank of India was not present. On 29th September,
2006, a letter was addressed by the Receiver to the advocates of the
two banks enclosing the report seeking the confirmation of sale. He
also required the banks to send expression of interest in the property
from two parties. On receipt of the letter, the Chief Manager of
the Central Bank of India visited the office of the Receiver on 17th
October, 2006 and informed about the expression of interest of two
other bidders who were willing to pay higher price.

7. As is evincible from the Judgment of the High Court, certain meetings
took place and the bank had difficulty in contacting the advocate. On
27th October, 2006, when both the bidders arrived at the office of the
Receiver, they were informed that the sale had been confirmed in the
morning. On 30th October, 2006, an application was filed by the
Central Bank of India for setting aside the sale. Many a procedural
irregularity was alleged including the one that it had no intimation
of the proceeding until it received the letter dated 29th September,
2006 of the Receiver stating that the property had been sold for a sum
of Rs.2.50 crores and the sale had been confirmed on 27th October,
2006. It was contended by the Central Bank of India that in the
absence of intimation, it had been unable to remain present when the
bidding took place on 21st August, 2006. A prayer for fresh auction
and to consider the offers submitted by the two bidders who had
expressed interest in the purchase of the property was made. It is
apt to mention here that the official liquidator had filed report on
1st December, 2006 before the DRT stating that an application had been
received from the workers contending that the sale which had been
confirmed in favour of the first and second respondents, the
appellants herein, was at a price which was neither fair nor
reasonable. A submission was put forth that no notice was sent to the
liquidator through the Registrar despite the mandate of law.

8. As is reflected from the proceedings of the fora below and the order
passed by the High Court, the Recovery Officer, vide order dated 5th
December, 2006, had set aside the confirmation of the sale holding
that it was obligatory to ensure that a higher price was fetched for
the property and the assets of the company in liquidation, if the sale
price offered by an auction purchaser was inadequate. He ultimately
set aside the sale and directed for conduct of a fresh auction in the
presence of secured creditors, the Receiver and the official
liquidator after notice. In pursuance of the said order, on 5th
December, 2006, a sale was conducted without making a fresh
notification. The Recovery Officer noted that the original auction
purchasers did not participate in the fresh bidding process, but the
two bids were received by the Recovery Officer and the highest bid
amounting to Rs.6.45 crores was offered by one Umrah Developers.
Regard being had to the said position, the Recovery Officer directed
the bid of Umrah Developers to be accepted and the successful bidder
was directed to pay the purchase consideration. The said Umrah
Developers deposited the full consideration of Rs.6.45 crores on 10th
November 2006 and 11th December, 2006. Taking note of the same, the
Recovery Officer declared them as the successful bidder.

9. Being grieved by the aforesaid order, the first and second respondents
therein preferred an appeal before the DRT which set aside the sale.
Taking note of the facts in entirety, it opined that there was
something wrong on the part of the valuer inasmuch as the offer of
Rs.6.45 crores was received when the bids were conducted only amongst
a few persons and not in the public realm and that was good enough
indicative of the fact that the property could fetch a higher value.
The DRT further opined that it would have been proper to issue a
public notice and invite fresh offers. Being of this view, it
directed, while retaining the offers which were received until 5th
December, 2006, that the Recovery Officer should publish a public
notice to determine as to whether offers higher than the bid of
Rs.6.45 crores of Umrah Developers could be realized and if no further
offers were received, the Recovery Officer was directed to accept the
highest bid after inter se bidding between the earlier bidders.

10. Being dissatisfied with the aforesaid, an appeal was preferred by the
first respondent before the DRAT which granted stay on 26th February,
2007 as a consequence of which the entire process of holding a fresh
auction came to a standstill. At this juncture, an application was
filed by Umrah Developers to permit it to withdraw the amount which it
had deposited. The application was rejected by the DRT which
compelled the company to file an application before the tribunal to
withdraw the amount and the company was allowed to withdraw 90% of the
bid amount leaving the balance, i.e., Rs.64.5 lacs in deposit before
the Recovery Officer. Eventually, the DRAT dismissed the appeal by
order dated 2nd July, 2008 mainly on the foundation that offer of
Rs.6.45 crores was higher than the offer of Rs.2.50 crores furnished
by the first and second respondents. The said order came to be
challenged before the writ court and during the pendency of the writ
proceedings, an application was filed by Umrah Developers for refund
of the balance sum which was allowed. The writ petition preferred by
the first and second respondents was disposed of on 11th August, 2010
in terms of the agreed minutes. As per the agreed order, the matter
stood remanded to DRAT for a fresh decision.

11. As is demonstrable, on remand, the DRAT, by its order dated 15th
October, 2010, allowed the appeal and directed restoration of the
confirmation of sale in favour of the first and second respondents.
The said order of the DRAT was assailed by the workers’ union and the
High Court remitted the matter to the DRAT for fresh consideration.
The DRAT, considering the facts in entirety, allowed the appeal vide
order dated 3rd March, 2011 and restored the confirmation of sale.
The said order came to be assailed by the secured creditors and the
workmen’s union on the ground that the confirmation suffered from
material irregularities. The High Court noticed that the DRAT had
opined that the power of the official liquidator was restricted to
participate at the stage of disbursement of the dues of the workmen
but not in conducting of the sale. It did not agree with the said
finding on the basis of the proposition of law laid down in Rajasthan
Financial Corpn. and Anr. V. Official Liquidator & Anr.[1]. While
noting that aspect, the High Court proceeded to address the
fundamental question whether the procedure that was followed in the
sale of the property was fair and proper or whether there was any
fraud and material irregularity. It adverted to the facts in a
chronological manner and came to hold that the manner in which the
sale proceedings had been conducted was neither fair nor transparent
as a consequence of which the possible price that could be realized
had become an unfortunate casuality. It took note of the offer made
by Umrah Developers after a month of confirmation of sale and opined
that the proper price had not been realized. The finding of the DRT
that the Central Bank of India had remained absent could not be a
justification to sustain the manner in which the sale had been
conducted as it was manifestly contrary to the basic concept of
fairness and transparency. The Court referred to number of
authorities to highlight the conception that in every case, the duty
of the court is to satisfy itself that the price offered is reasonable
and the said satisfaction is to be based on the bedrock of the
prevalent market value. Expressing the aforesaid view, the High Court
allowed the writ petition, set aside the order of the DRAT dated 3rd
March, 2011 and proceeded to direct as follows: -

“We direct that the Recovery Officer attached to the DRT to
issue a public advertisement which shall be published in at
least two newspapers, one in English and another in Kannada
having circulation in Mysore, inviting bids for the sale of the
property. The terms and conditions governing the sale shall be
laid down by the Recovery Officer of the DRT, and a fresh
valuation shall be carried out on the basis of which the reserve
price of the property shall be fixed. We record the statement
made on behalf of the Central Bank and the Standard Chartered
Bank by their counsel that both the Banks shall cooperate with
the Recovery Officer and shall meet all the expenses of the
sale, including towards newspaper advertisements. On the
request of the two banks, we further clarify that if the Banks
are ready and willing to meet the expenses for the issuance of a
publication in any additional newspapers, that shall also be
permitted by the Recovery Officer at the expenses which have
been agreed to be borne by the Banks. We direct the Recovery
Officer to expedite the process of sale and to hold a meeting
for fixing the terms and conditions within a period of three
weeks from today. The sale process should be completed within a
period of three months from the date on which an authenticated
copy of this order is placed before the Recovery Officer.”

12. The said order has been assailed by the first and second respondents
before this Court, the successful bidders who had deposited Rs.2.50
crores in pursuance of the order passed by the DRT.

13. At this juncture, it is worthy to note that this Court on 27th March,
2012, after taking note of the High Court’s direction, had passed the
following order: -

“This Court while issuing notice on 25th November, 2011, had
directed status quo to be maintained by the parties. When the
matter was heard for some time it was submitted by Mr. C.A.
Sundaram, learned senior counsel for the petitioner that the
High Court has grossly erred in directing the sale of the
property by inviting bids despite the factum that public auction
was not successful and eventually the sale was effected by the
direction of the DRT and ultimately the offer of Rs.2.5 crores
was accepted from the petitioners herein. The learned senior
counsel has urged many other contentions which need not be
referred to in prasenti having regard to the nature of
directions which we are going to pass today.

It is worth noting that Mr. Jaideep Gupta, learned senior
counsel appearing for the Central Bank of India has filed a
chart of the amount due from the original buyer, namely, Jay
Electric Wire Corporation. We think it apposite to reproduce
the chart in toto:

“1. Central Bank of India (Respondent No. 1):

As per the Recovery Certificate dated 6.11.2003
issued by the DRT an amount of Rs.10.99 cores is due and
payable which as on 31.3.2012 @ 12% per annum at quarterly
rests amounts to Rs.42.41 crores.

2. Standard Chartered Bank (respondent No. 2) :

As on 26.8.2003 an amount of Rs.1.12 crores is
outstanding along with interest @ 12% per annum.

3. Workmen through Official Liquidator (respondent
No. 4) :

As per the recovery certificate issued by the Deputy
Labour Commissioner on 18.12.2006 an amount of Rs.4.44
crores is due and payable as computed until 1999.”

It is submitted by Mr. Gupta that in fitness of things and
regard being had to the concept of obtaining of the Highest
Price in Court sale, having of auction is the warrant and,
therefore, auction should be directed to be held. The learned
senior counsel further submitted that the property is likely to
fetch much more amount than that has been deposited by the
petitioners.

Mr. Sundaram, learned senior counsel would contend that
the sale had been given effect to in the year 2006 on acceptance
of Rs.2.5 cores and with the efflux of time if there has been a
price rise solely on the said base a public auction should not
be directed.

Be it noted that at one point of time, a third party had
deposited Rs.6 crores to purchase the property but later on he
withdrew as the matter was litigated in the Court.

Having heard learned counsel for the parties and regard
being had to the totality of the circumstances, we issue the
following directions:

(i) The property in question be put to auction by issuing a
public advertisement in at least two newspapers one in English
and another in Kannada language having wide circulation in the
city of Mysore inviting bids for the sale of the property.

(ii) It shall be mentioned in the advertisement that the
reserve price is Rs.3 crores and the same shall be deposited
before the Recovery Officer of the DRT to enable one to
participate in the bid.

(iii) Any one who would not deposit the amount would not be
permitted to participate in the auction as speculative bids are
to be totally avoided.

(iv) The newspaper publication shall be made within a period of
two weeks stipulating that the deposit is a condition precedent
for participation in the auction which shall be made before the
DRT within a week from the date of publication of the
advertisement in the newspapers.

(v) The auction shall be held within a period of two weeks
from the issuance of the advertisement which shall state the
specified time and place for the auction.

(vi) The petitioners without prejudice to the contentions to be
raised and dealt with in these Special Leave Petitions shall
participate in the bid without the deposit as they have
purchased the property in the year 2006.

(vii) The bid shall not be finalized and the bid sheet shall be
produced before this Court in a sealed cover.

We reiterate at the cost of repetition that the above
arrangements are subject to the result of the final adjudication
in these Special Leave Petitions.

List the matter after five weeks.”

14. After the said order came to be passed, I.A. Nos. 4-6 of 2012 were
preferred wherein the following order was passed:

“These applications were preferred by the Bank stating
that going by the present valuation the property will fetch
nearly Rs.10 crores whereas the order stipulates Reserve Price
only Rs.3 crores. Hence, the Bank has sought modification of
the upset price fixed by the Court.

Learned counsel for the Bank also submitted that as per
the Debt Recovery Tribunal Act the time stipulated for auction
is thirty days whereas the order directs to conduct the auction
within two weeks. To this extent the respondent seeks
modification of that direction also.

Learned counsel on the either side submitted that the
auction should go on without any delay.

Considering the facts and circumstances of the case we are
inclined to dispose of these applications directing the Recovery
Officer to go on with the auction within the time limit
stipulated in the bid. The question as to whether the upset
price has been correctly fixed or not will depend upon the bid
amount offered by the bidders in the auction.”

15. After the said interlocutory applications were disposed of, the
auction took place but this Court was not satisfied since certain aspects
were highlighted that caused impediments in obtaining proper offers. This
Court in IA 7-9 of 2012, after hearing the learned counsel for the parties
and referring to its earlier orders, proceeded to pass the following order:
-

“5. In the present application it has been asseverated that in
compliance with the order dated 5.7.2012, the Recovery Officer of Debt
Recovery Tribunal-I, Mumbai, ordered for publication of the notice in
two newspapers which was published on 20.7.2012 calling upon
interested parties to give their offer within seven days from the date
of publication as directed by this Court vide order dated 27.3.2012.
Pursuant to the publication carried in English and Kannada newspapers
no other offer whatsoever was received by the Recovery Officer and
till 7th only the offer of the petitioners, namely, Praveen Gada and
Amarnath Singhla, was received.

6. When the matter was taken up, order dated 30.8.2012 passed in R.
P. No. 419 of 2003 was brought to our notice. The said order reads as
under: -

“As per directions of the Hon’ble Supreme Court vide its
orders dated 27.3.2012 & 5.7.2012, advertisement was published
fixing reserve price at Rs. 3.00 Crores.

Only one bid of Shri Pravin Gada & Amarnath Singhla has
been received on 07.08.2012 as per public notice. His bid was
opened at the scheduled date & time of the auction. He has
given offer of Rs. 3 crores. As his participation in auction
was without deposit as directed in above orders, there was no
question of his depositing EMD.

Relevant columns of Bid Sheet were accordingly filled in
and the signature of the bidder has been obtained. As per the
directions, the said bid sheet be submitted to the Hon’ble
Supreme Court.

Apart from above, 3 offers in closed envelope were received
today, but those are not opened & considered in view of the
directions of the Hon’ble Supreme Court as per aforesaid orders.

On the date of auction the above 3 closed envelops
containing offers have been received. This being new situation
arisen at the time of auction, in my opinion it would be
appropriate to bring this fact to the kind notice of the Hon’ble
Supreme Court. Hence these 3 closed envelops be also submitted
to the Hon’ble Supreme Court.

As per directions of the Hon’ble Supreme Court, the Bid
Sheet at Exh. 154 be submitted to the Hon’ble Supreme in a
sealed cover.”

7. The bid sheets were opened before us and we find that an offer
amounting to Rs. 3,30,00,000/- by Kumar Enterprises, Rs. 3,30,00,000/-
by Riddishiddhi Bullions Ltd. and Rs. 3,30,00,000/- by Krishna
Texturisers Pvt. Ltd. were deposited by way of bank drafts on
29.08.2012 and 30.8.2012 respectively.

8. It is submitted by Mr. Sundaram, learned senior counsel for the
petitioners, that as the said offers were not in accord, the same
should not be considered and the petitioners should be treated as the
highest bidder in the auction. Mr. Rohtagi and Mr. Gupta, learned
senior counsel for the Central Bank of India, per contra, submitted
that the price of the property as on today is worth more than Rs. 10
crores and the reason for the offerees not coming is that the
petitioners are in possession and they have put up a board indicating
their name and status. It is urged by them that it is one thing to
say that the auction is conducted by virtue of the order passed by
this Court and the whole thing is subject to the pendency of the lis
but it is another thing to see at the entrance that the board is fixed
and the people are not allowed to survey the nature and character of
the assets. The photographs of the board that have been put up are
filed in Court and we have perused the same. Be it noted, the putting
up of the said photographs is not disputed.

9. Regard being had to the facts and circumstances, we are of the
considered opinion that there should be a re-auction and we are
inclined to modify the conditions incorporated in the earlier order.
Keeping in view the totality of circumstances, we issue the following
directions :-

(i) The property in question be put to auction by issuing a
public advertisement within two weeks in at least two
newspapers, one in English and another in Kannada language,
having wide circulation in the city of Mysore inviting bids for
the sale of the property.

(ii) It shall be mentioned in the advertisement that the
reserved price is Rs. 5 crores and the same shall be deposited
by way of bank drafts drawn on a nationalized bank before the
Recovery Officer of the DRT to enable one to participate in the
bid. The advertisement shall stipulate that the deposit of the
reserved price fixed by this Court is a condition precedent for
participation in the auction.

(iii) It shall be clearly stated in the advertisement that the
property would be available for inspection in presence of the
Registrar of Civil Court or any equivalent officer nominated by
the Principal District and Session Judge, Mysore, and it is so
done to avoid the grievance from any quarter that the property
was not available for proper verification. The inspection by
any interested party shall be done within one week from the date
of advertisement between 11.00 a.m. to 3.00 p.m.

(iv) During the entire period of inspection the concerned
officer deputed by the learned Principle District and Sessions
Judge, Mysore shall see to it that the board that has been fixed
is removed from the site so that there can be inspection of the
plot without any kind of pre-conceived notion by the perspective
bidders.

(v) The aforesaid reserved price shall be deposited before the
Recovery Officer of the DRT within ten days from the date of the
advertisement. Any one who would not deposit the reserved price
within the time limit, his bid shall not be considered

(vi) The auction shall be held within a period of two weeks
from the date of issuance of the advertisement which shall state
the specified time and place for the auction.

(vii) The petitioners without prejudice to the contentions to be
raised and dealt with in these Special Leave Petitions shall
participate in the auction without the deposit as they have
purchased the property in the year 2006.

(viii) The offerees who have already given the bids shall
deposit the balance amount to meet the reserved price before the
Recovery Officer of the DRT failing which they shall be
ineligible to participate in the bid.

(ix) After the submission of the bids there shall be a public
auction amongst the eligible offerees to get the maximum price.

(x) The auction shall not be finalized and the bid sheet shall
be produced before this Court in a sealed cover for issuance of
further directions, if required.

10. We repeat at the cost of repetition that the above arrangements
are subject to the result of the final adjudication to the Special
Leave Petitions.

11. A copy of the order passed today be sent by fax, email and speed-
post to the Principal District Judge, Mysore by the Registry of this
Court.

12. List the matters on 1.11.2012.”

16. After the aforesaid order was passed, the auction was conducted and
the highest offer in the auction that was tendered was Rs. 5.04 crores.
Learned counsel appearing for the said highest bidder filed an application
for impleadment and impressed upon this Court for acceptance of the bid.
Be it noted, there were other offers amounting to Rs. 3.30 crores and
slightly more, but there has been no grievance with regard to the proper
publication of the notice for holding of auction. We have so stated as the
High Court had set aside the sale essentially on the ground that the sale
process was not fair and transparent. This Court had passed two orders on
different occasions to see that the sale is conducted in a fair and
transparent manner. We had also imposed conditions so that speculative
bids do not come into the sphere of auction. Despite the best of efforts,
as we have seen, the maximum price the property has fetched is Rs.5.04
crores. It is submitted by Mr. Sundaram and Mr. Choudhary, learned senior
counsel, that a sum of Rs. 2.50 crores was deposited by the present
appellants in October 2006 and in the meantime, six years have elapsed. It
is urged by them that the said amount was kept with the bank and the bank
must have dealt with the money as a prudent financial commercial venture
and thereby must have earned interest at least at the rate of 15% per
annum. Calculated on that basis, it is contended, the interest component
by now would have come to rupees 2 crores 25 lacs and thereby the total sum
would come to rupees 4 crores 75 lacs. It is also urged by them that the
possession was taken over by them long back and they have already invested
substantial amount. As is noticeable, the highest offer in the auction
has come up to rupees 5.04 crores at such a distance of time. Regard
being had to the totality of the circumstances, we are disposed to think
that the sale should be confirmed subject to the appellants depositing a
further sum of Rs. 50 lacs before the DRAT within a period of three months
from today and we order accordingly.

17. At this juncture, it is necessary to address whether the finding of
the High Court as regards the role of the official liquidator is correct or
not. In Rajasthan Financial Corpn. (supra), while dealing with the role
of official liquidator, a three-Judge Bench referred to the pronouncements
in A. P. State Financial Corporatin v. Official Liquidator[2] and
International Coach Builders v. State of Karnataka[3] and, in the ultimate
eventuate, summed its conclusions. The relevant conclusions are reproduced
below: -
“(i) A Debts Recovery Tribunal acting under the Recovery of
Debts Due to Banks and Financial Institutions Act, 1993 would be
entitled to order the sale and to sell the properties of the
debtor, even if a company-in-liquidation, through its Recovery
Officer but only after notice to the Official Liquidator or the
Liquidator appointed by the Company Court and after hearing him.
xxx xxx xxx
(iv) In a case where proceedings under the Recovery of Debts
Due to Banks and Financial Institutions Act, 1993 or the SFC Act
are not set in motion, the creditor concerned is to approach the
Company Court for appropriate directions regarding the
realisation of its securities consistent with the relevant
provisions of the Companies Act regarding distribution of the
assets of the company-in-liquidation.”

18. On a perusal of the record, it transpires that the official
liquidator had appeared before the recovery officer on number of dates.
However, the DRT had returned a finding that he has a restricted role which
has been found fault with by the High Court. In our opinion, the High
Court is absolutely correct in its analysis and we concur with the same,
but, a pregnant one, the fact remains that the High Court had set aside the
sale on the foundation that a fair and transparent procedure had not been
adopted. Having given due respect to the same, this court had passed
orders on earlier occasions which we have reproduced hereinabove to get the
auction conducted in a fair and transparent manner and recorded our
conclusion. Therefore, the confirmation of sale as has been directed by us
shall be treated to have attained finality.

19. Another important facet deserves to be mentioned. Before the
Division Bench, the workers union had also challenged the decision of the
DRAT. The High Court, while dealing with their submission, has recorded as
follows:-

“During the course of the hearing of these proceedings, the
Court has been informed that an effort has been made by the
First and Second Respondents to settle the outstanding dues of
the workers through an out of Court settlement. Counsel
appearing on behalf of the workmen submitted that the workmen
would abide by the result of the Petitions which have been filed
by the secured creditors and it is only in the event that the
Petitions filed by the Banks are dismissed that the workers
would be inclined to enter into an out of Court settlement with
the First and Second Respondents. Counsel for the First and
Second Respondents stated that his clients would be able to
resolve the dispute with the workmen only if the Petitions filed
by the secured creditors challenging the sale in favour of his
clients fail. Counsel appearing on behalf of the First and
Second Respondents submitted that while the First and Second
Respondents are ready and willing to negotiate with the workmen,
they are no in a position to do so until the litigation which
has been instituted by the secured creditors attains finality.”

20. The aforesaid submission has its own significance in law. We may
hasten to clarify that we have confirmed the sale as this Court has
undertaken the exercise to have an auction conducted through the competent
authority of DRT by adopting a fair, competitive and transparent procedure
but that does not mean that the conclusion arrived at by the High Court in
that regard is erroneous. Thus, while confirming the sale subject to the
conditions imposed hereinbefore, we are disposed to think that keeping in
view the interest of the workmen and their rights, the High Court should
deal with the rights of the workmen regard being had to the submissions
advanced by the first and second respondents before it in an apposite
manner and, if required, monitor the same. As concession was given before
a particular Division Bench, we would request the learned Chief Justice to
place the matter before the same Bench and if it is not possible, at least
before the learned presiding Judge. We have felt so as such a submission
was put forth before the Division Bench which had categorically recorded
the same and it is not desirable that there should be any kind of deviation
with regard to the statement made.

21. Presently to the Interlocutory Applications which have been filed for
impleadment and withdrawal of the amounts that have been deposited as
earnest money. Regard being had to the facts and circumstances of the
case, all impleadment applications are allowed and the bidders who have
deposited the money are allowed to withdraw the same.

22. The appeals are accordingly disposed of leaving the parties to bear
their respective costs.
……………………………..J.
[K. S. Radhakrishnan]

……………………………….J.
[Dipak Misra]

New Delhi;
December 03, 2012.
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[1] AIR 2006 SC 755
[2] (2000) 7 SCC 291

[3] (2003) 10 SCC 482

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