NAVALKHA AND SONS Vs. RAMANUJULU NAIDU

JUDGEMENT

(1.) These are five appeals O. S. Nos 2 to 6 of 1965, all arising out of different orders made in connection with the sale of the propetty in Company Petition No. 1 of 1960. In the winding up proceeding of the Hyderabad Vegetable Products Company Limited, the Official Liquidator sought permission under S.457 ot the Companies Act read with Rules 272 and 273 of the Company (Court) Rules for the sale of immovable and movable properties and actionable claims of the Company and requested the Court to direct sale through Commissioners to be appointed by the Court as pec the terms and conditions submitted by him.

(2.) One Slrajuddin Baba Khan, a shareholder of the Company also made an application (C.A. No. 93 of 1964) to the similar effect requesting the Court to effect sale of the assets of the Company as one unit in the interests of the shareholders and creditors through commissioners appointed by the Court after giving wide publicity and subject to the confirmation by the Court. Our learned brother, P. Jaganmohan Reddy, J. approved of ihs terms and conditions of sale submiteed by the Official Liquidator and by his order dated 17-4-64 appointed three Commissioners for selling the properties as one unit, in accordance with the said terms and conditions. He directed the Official Liquidator to pay these Commissioners a sum of Rs. 200/-for initial expenses. At the same time, he authorised the Commissioners to incur further expenses to the maximum extent of Rs.1000/. This limit, however, was raised to Rs 3000/-on the application of the Commissioners filed on the 8th July, 1964 wherein they stated that such expenses were inevitable as they proposed to advertise the proclamation of sale etc. twice in each of the five leading dailies, namely, (1) The Statesman, (2) The Times of India, (3) The Hindu, (4) The Indian Express and (5) The Hindustan Times to ensure wide publicity and get them printed and distributed besides among the probable purchasers. The terms and conditions of sale which were exhaustive need not be set out here at length. The Commissioners thereunder were to invite offers, the last date originally fixed being 8-8-64 which was extended eventually to 30-11-1964 by the Court's orders. Every offer had to be accompanied by a deposit of Rs. 50,000/- in cash or Rs. 25,000 on cash and the balance of Rs.25,000/-in Government Securities or National Savings Certificates or Ten year Treasury Savings Certificates with the commissioneers towards earnest money. The offar shall be deemed to have been made with full knowledge of all encumbrances, rights, flaws and defers. The Commissioners were not bound to accept the higher or any offer and were at liberty to reject any offer without assigning any reason. immediately after the offer was accepted by the commissioners, the offerer had to deposit 15% of the offer amount as initial deposit and the balance of the amount together with the amount required for non-judicial stamp for conveyance had to be paid within 15 days from the date of acceptance. It was expressly provided that in case of default, the earnest money, the intitsal deposit and any other amount paid by the offerer shall become a forfeit to the estate of the Company and the property shall be sold at the risk of the defaulting offerer without any notice to him and he shall be liable for all losses and expenses occasioned thereby and shall have no claim to the property or any part of the sum for which it may be subsequently sold. Acceptance of the offer by the Commissioners was subject to the condition of confirmation by the High Court and the olicrer was entitled to take delivery of possession of the properties only after such confirmation. It was made abundantly clear in clause 16 that in all matters touching the sale of the property, the decision of the Commissioners shall be final and shall be binding subject to the control of the High Court These, in snort, are the essential terms and conditions of sale with winch we are concerned. As would appear from the affidavit of the Commissioners, they prepared and got published the proclamation of sale, the terms and conditions or sale and the schedule of the properties of the Company in four leading dailies only, viz., the Hindu, the Southern group of the papers, The Indian Express, the Statesman and the Hindustan Times. They did not publish in the Times ot India which they said they would do in application dated 8th July, 1964. Nor did they advertise twice in all the said newspapers, Of course, in two of them there were two insertions. But in the remaining papers, there was only one insertion. In addition to the said advertisement, the commissioners got printed 300 copies and posted them to various Industrial Concerns likeiy to tender offers for purchase or the properties of the company. The last date fixed for reecipt ot offers was 8-9-1964. Not even a single offer was received by that time. Of course, some of the leading concerns asked for supply of some information in clarification of the terms and conditions of the sale mean while. The time for receipt of oilers was then extended at the instance of the Commissioners by the court till the end of November 1964. The Navalkha & Sons happened to be the sole offerers. Their offer was for a sum of Rs 7,91,001/ which was made up ot Rs. 2, 50,000/- for the immovable property and Rs 5,41,001/-for the machinery. They made no offer for actionable claims. They made a deposit oi Rs. 50,000/-in the shape of demand draft drawn on the State Bank of Hyderabad. The accompanying letter sent by them, however, stipulated certain conditions which were inconsistent with some of the notified sanctioned terms and conditions of sale. As against the terms and conditions of sale, they stated that it is an essential condition of their offer that the court should allow them to put their watchman immediately after the acceptance of their offer by the Commissioners. The further condition laid down by them was that the High Court should confirm the oifer hin a fortnight after its acceptance by the commissioners. The offer was acced by the Commissioners on 2-12-1964. The offerer was called upon by or un letter dated 2-12-1964 to deposit 15% of the amount of the offer as initial de immediately as per clause 7 of the terms and conditions of sale and the balance together with the amount required for non-judicial stamp for conveyance within 15 days from the date of the acceptance. Navalkha & Sons did make their initial deposit.

(3.) The commissioners then made an application on 3-12-1964 to the Court for confirmation of the sale referring to the various clauses contained in the offer which are not consistent with the terms and conditions of sale. On 11-12-1964 when the matter came up before the Court, time, for payment of balance amount was sought to be extended. As the Government wanted time, the time for payment was extended by two weeks from 17-12-1964, which was the due date for payment of balance amount and also of non-judi cial stamp. Mr. A.K.Babu Khan, a major share-holder and creditor filed a counter saying that the price tendered was too low, the offer therefore should not be accepted, and requested the court that fresh offers should be invited after giving adequate publicity. It would appear that in the application dated 29-8-1963 the Government which was one of the major secured creditors had shown the value of the immovable property and machinery as Rs. 13,40,000/ But on 24-12-1964, it was represented on behaif of the Government that the Government had no objection to the aceeptance of the offer. At that time, another person came on the scene with an offer of Rs. 8, 15,000/- saying that he could not submit his offer in time because he came to know of the sale only two days prior to that date and that was due to the fact that there was no adequate publicity. TO show his bonafides, he gave a demand draft to the commissioners for a sum of Rs. 1,00,015/- On 24-32-1964, the court came to the conclusion that the property did not fetch its proper price and there is possibility of higher bids. Instead of directing fresh auction after due publicity or calling for fresh sealed offers in accordance with the approved terms and conditions of sale, the learned Judge thought it proper to arrange for an open bid in the court itself on that very day as between Nevalkha & Sons and Gopaldas Darak, the applicant. Before starting the bid, the learned Judge gave time to M/s. Navalkha & Sons to think over and say whether they were willing to the course decided upon and to participate in the auction bids. Navalkha & Sons consented to the course and voluntarily took part in the bid and became the highest bidders at Rs. 8, 82.009/-. The learned Judge accepted the said bid as the final bid and concluded the sale in favour of Navalkha & Sons directing them to pay the balance of the money together with the amount required for non-judicial stamp on or before 31st January 1965 making it clear that in case of default, the deposit already made would be a forfeit to the estate. Navalkha & Sons accordingly paid the total balance amount together with the amount required for non-judicial stamp on 30-1-1965. But on the same day, pe rhaps before the deposit was actually made, one Padam Chand Agrawal of Agra came with an application (C.A. No. 44 of 1965)offering Rs. 10,00,000/- He complained that publicity of the sale of the property through the Commissioners was not adequately made. He said that the newspapers in which the notices were published did not have much circulation in Northern India, that the notices did not mention that the site on which the building stands is also put for sale, that the extent of the site also was not mentioned, that in short, neither the advertisement was full nor the publicity adequate, and that since he came to know very late and just saw the premises, he Was prepared to enhance the offer to Rs. 10,00,000/-and was also willing to participate in open bid if the court so decides with Rs. 10,00,000/- as initial bid and would pay the entire amount within two weeks from the date of acceptance of the offer, Our learned brother did not accede to this request and by his order dated 19-2-1965 held that since the bid of Navalkha & Sons was already accepted on 24-12-64 and the sale stood confirmed as the entire amount due was paid within the extended period, they, as a result must be, deemed to have acquired an indefeasible interest. The learned judge further remarked that the offer of the petitioner was not accompanied by the necessary deposit or even a draft and that on that basis also there is no justification for reopening the matter which was concluded on 24-12-1964. Aggrieved by this order, Padam, Chand Agrawal filed appeal No, 4 of 1965. One Ramanujadas, a contributory also chose to prefer appeal (Appeal No. 3 of 1965) against the order of the confirmation. According to him; the publicity given by the Commissioners was too inadequate to attract proper price for the property, that the first offer given by Navalkha & Sons was too low, that the Court therefore had rightly refused to confirm acceptance of the offer. His grievance however, was that the learned Judge, having come to the conclusion that there can be higher bids, should have held the auction only after due publicity; but it was not done so and the course followed by the court could not and did not achieve the object of getting adequate price for the property, which is further clear from the offer of Padam Chand in Company Application No. 4 of 1965. The learned Judge therefore should not have confirmed the final bid of Navalkha & Sons which was done even, before payment of the entire sale price and also without giving favourable consideration to the application of Padam Chand Agrawal and at any rate, should have either invited fresh tenders or held public auction after adequate publicity.