ELSON COTTON MILLS LTD Vs. STATE

JUDGEMENT

(1.) Sale of the assets of the company (in liquidation) is getting curious turn in these proceedings. When the assets were put to auction earlier, on 29th May, 2003, the highest bid was of M/s JCB India Ltd.(hereinafter referred to as the first auction purchaser) in the sum of Rs.7 crores which was accepted. The first auction purchaser even paid the entire consideration. However, possession of the assets was not taken for certain reasons and before this could happen some applications came to be filed for setting aside that sale and offering higher amount. These applications were opposed by the first auction purchaser. After hearing the matter at length, a detailed order dated 9th December, 2004 was passed setting aside the sale and allowing inter se bidding to two bidders, namely, M/s Tank Bund Properties Pvt. Ltd. and M/s. GSP International. In the fresh bidding process, M/s Tank Bund Properties Pvt. Ltd. raised its bid to Rs. 12.55 crores as against the bid of Rs. 12.40 crores of M/s GSP International. The bid of M/s Tank Bund Properties Pvt Ltd. (hereinafter referred to as ' the second purchaser') being the highes was accepted on 9th December, 2004. Before ink of the order dated 9th December, 2004 could be dried up, the first auction purchaser filed CA No. 1590/2004. This was filed on 16th December, 2004, i.e. within one week of acceptance of bid of the second auction purchaser offering Rs.12.60 crores for the assets sold to the second auction purchaser. The second auction purchaser by this time had deposited 25 per cent of the bid amount. However, on 16th December, 2004, learned counsel for the first auction purchaser submitted that he did not have any instructions on 9th December, 2004 when the bid of the first auction purchaser earlier was cancelled. It is stated in the application that application of the second auction purchaser was allowed and fresh bidding took place on the same day and, therefore, the first auction purchaser could not decide as to whether to participate in the fresh bidding process or to challenge the order. After deliberations, he decided to give better offer and, therefore, to start with the first auction purchaser was offering an amount of Rs. 13 crores.

(2.) Notice of this application was accepted by the second auction purchaser as well as learned counsel for the Official Liquidator, ICICI Bank and IDBI (secured creditors) on 17th December, 2004 and they were asked to file their replies. The second auction purchaser has filed the reply opposing the prayer made in the application. In the meantime, two more" parties have come forward. M/s ARS Enterprises Pvt.Ltd. has filed CA No.478/2005 offering Rs.50 lacs more than the last bid. Karan Export Pvt.Ltd. has filed CA No.479/ 2005 offering Rs.13.11 crores . M/s GSP International has deposited Rs.2 crores as the earnest money to show its bona fides.

(3.) Aforesaid narration would reveal that bid of the second auction purchaser was accepted at Rs.12.55 crores. Immediately thereafter, the first auction purchaser has shown its inclination to buy the property at higher rate and has offered Rs.13 crores. Two more bidders have come offering higher price. It would, thus, be clear that the property can fetch much more price than the amount at which the bid of the second auction purchaser is accepted. The reason given by the first auction purchaser in not participating the bidding process on 9th December, 2004 appears to be bona fide. That apart, in such a case the bid of the second auction purchaser should be set aside for the reasons stated by me in order dated 9th December, 2004 which would apply with greater force this time. Interestingly, it was at the instance of the second auction purchaser that the bid of the first auction purchaser was cancelled/set aside earlier although application for that purpose was filed more than one year after acceptance of the first bid and the first auction purchaser had even paid the entire consideration. This time application is filed within one week of the acceptance of the second bid and the second auction purchaser has paid only 25 per cent of the bid amount. Moreover, it does not lie in the mouth of the second auction purchaser to oppose the cancellation of bid in its favour when at its instance the first bid was cancelled.