Judgment:
A.M. Khanwilkar, J.
1. By this order I propose to dispose of the Application preferred by the Auction Purchaser as well as the Official Liquidator's Report dated 24th March, 2009 together.
2. Briefly stated, pursuant to the direction issued by the Company Judge, the movable and immovable assets of the Company in liquidation were put up for auction. On the basis of inventory and valuation report submitted by Yardi Prabhu Consultants Pvt. Ltd. dated 1st March, 2008, reserved price of the assets put for sale was fixed at Rs. 15 crores. The valuer had given break-up of fair market value of the movable assets as Rs. 24,85,000/-. He assessed realizable sale value of the movable assets at Rs. 22,36,000/- and distress sale value thereof as Rs. 19,88,000/-. Insofar as the immovable property is concerned, the valuer assessed fair market value thereof at around Rs. 14,69,00,000/-. The movable assets included plant, machinery, furniture and fixtures, whereas immovable assets consisted of land and building lying and situated at Plot No. B-1, M.I.D.C. Ambad, Mumbai-Agra Road, Nasik, admeasuring 27880 sq. mtrs. However, the Company Judge ordered sale of movable and immovable properties of the Company in liquidation as one lot and fixed the Reserved Price thereof at Rs. 15 Crores and EMD amount at 25% being Rs. 3,75,00,000/-.
3. Before we proceed further, it would be apposite to advert to the description of the condition of the movable assets on the date of inspection and valuation made by the valuers in their report before the auction. It is stated that 'all the machineries are out of order and in static condition as on the date of the visit'. Against column 'whether the Machinery is to be scrapped. Major repairs and replacement value', it is stated that 'all the machineries are in rusted and dusted condition and many are to be scrapped'. It is further mentioned that 'it is difficult to ascertain the residual life of the machineries, as no invoices are produced to know the date of purchase and performance warranty given by the suppliers'. It is also mentioned that 'the replacement cost of the machines can not be ascertained in the present case, as the details of all machines are not available. Perhaps keeping in mind the description or the condition of machineries, the Company Judge thought it appropriate to put up both the movable and immovable assets for sale as one lot. Accordingly, publication of sale notice was ordered, pursuant to which the Auction Purchaser participated in the bid. The sale notice clearly mentioned that the terms and conditions of the sale of immovable and movable assets alongwith valuer's inventory can be obtained from the office of the Official Liquidator, High Court, Mumbai on any working day during office hours on payment. The terms and conditions of sale clearly provided that the stated assets were to be sold on 'As is Where is and Whatever there is basis'. Amongst other, clause-20 of the terms and conditions of the sale clearly provides that the properties are being sold on 'As is Where is and Whatever there is basis' and the purchaser shall not be entitled to raise any objection as to quality, quantity, misdescription, area, boundary or title, as the same are believed to be and shall be taken as correct and if any error or misstatement or omission if discovered in the particulars of the assets, the same shall not annul the sale nor shall be entitled to any compensation from the Official Liquidator. Inspite of such condition, the Auction Purchaser participated in the bid process and gave his composite offer with full knowledge about the condition of the movable assets lying at the site. Valuation given by the Auction Purchaser being the highest offer in the sum of Rs. 17.05 Crores and in excess of the Reserved Price (i.e. Rs. 15 Crores), this Court confirmed the sale in favour of the Applicant/Auction Purchaser on October 3, 2008 on usual terms and conditions.
4. Thereafter, the Applicant/Auction Purchaser deposited the amount of Rs. 4,26,25,000/- as earnest money. The Auction Purchaser was required to pay the balance consideration of Rs. 12,78,50,000/- within 30 days from the confirmation of sale i.e. on or before 2nd November, 2008. However, the Applicant/Auction Purchaser could not make the payment, for which reason took out Company Application praying for extension of time to pay the balance consideration. The reason cited in the said application was a candid admission of the fact of inability to pay the amount due to adverse market condition. The said request was considered by this Court on 21st November, 2008. This Court showed indulgence to the Applicant/Auction Purchaser and extended time to deposit the balance consideration on condition that the Applicant/Auction Purchaser shall pay interest at the rate of 14% per annum. The Court further ordered that upon payment of principal amount alongwith interest specified in the order within extended time(six weeks from 2nd November, 2009), the Official Liquidator shall execute conveyance in favour of the Applicant in accordance with the terms and conditions of the sale. However, in case of default, the Official Liquidator shall give effect to the terms and conditions of the sale including forfeiting EMD amount already deposited by the Applicant/Auction Purchaser and process the matter for resale of the property. Pursuant to the order dated 21st November, 2008, the Applicant/Auction Purchaser deposited amount of Rs. 4,30,00,000/- on 12th December, 2008 being part of the balance consideration. The Applicant/Auction Purchaser was obliged to pay the balance consideration on or before 15th December, 2008. It is the case of the Applicant that it had made arrangement for the balance consideration to be deposited before 15th December, 2008. But on 15th December, 2008, the Applicant/Auction Purchaser was shocked and surprised to learn from the newspaper published in Nasik on that day which reported massive theft in the factory premises of the Company(in liquidation). The news report suggested that various parts of the machineries, cables etc. were stolen. Further, the Police have registered theft case vide FIR No. 660 of 2008 on 14th December, 2008 and arrested some persons in connection with the said case. According to the Applicant/Auction Purchaser, it transpired that on account of theft, the plant and machineries were badly damaged and beyond repair. It is the stand of the Applicant/Auction Purchaser that because of damage so caused to the plant and machineries, the Applicant/Auction Purchaser apprehends that it would be difficult to start the factory after getting possession in the changed circumstances. Further, it would also cause unwarranted loss and hardship. It is the case of the Applicant/Auction Purchaser that on account of supervening circumstances arising after confirmation of sale and before delivery of property in question, it may not be now possible to the Official Liquidator to deliver the property to the Applicant as per the expressed promise given in the sale notice and the terms and conditions of sale on 'As is Where is and Whatever there is basis' on the date of confirmation of sale, which was the foundation for negotiation. In other words, it will be no longer possible to practically fulfill expressed terms and conditions of the sale as the machineries and other movable properties have become unusable. It is on this premiss, the Applicant/Auction Purchaser has approached this Court by way of present Application on 16th March, 2009 praying for the following reliefs.
(a) This Hon'ble Court be pleased to cancel the confirmation of the sale in favour of the Applicants vide order dated 3.1.2008;
(b) This Hon'ble be pleased to direct the Official Liquidator, High Court, Bombay to forthwith refund the Earnest Money Deposit of Rs. 4,26,25,000/- and further deposit of Rs. 4,30,00,000/- deposited by the Applicants and to forgo any claim of interest;
(c) for ad-interim reliefs in terms of prayer (a) to (b) above;
(d) for costs of this Application; and
(e) for such other and further directions as this Hon'ble Court may deem fit necessary and expedient.
5. On the other hand, the Official Liquidator has submitted report dated 24th March, 2009, which mentions that representation was received from the Applicant/Auction Purchaser dated 15th December, 2008 sent by Shri Afroz A. Siddique, advocate, interalia stating that they were to deposit balance amount of Rs. 8,49,00,000/- on 15th December, 2008 but due to theft taken place in respect of property purchased by the Auction Purchaser they have not deposited the balance consideration, as they wanted to assess the loss of theft and hence requested for a joint inspection. Initially, Official Liquidator informed the said Advocate by letter dated 18th December, 2008 expressing inability to accept request so made. However, a meeting was fixed in the office of the Official Liquidator on 22nd December, 2008 when the Auction Purchaser, concerned Security Agency and Secured Creditor pondered over the further steps to be taken after the theft in the factory premises. In that meeting, it was decided to take a joint inspection of the factory premises at Ambad, Nasik on 29th December, 2008. Accordingly, joint inspection was taken on the stated date and time. The joint inspection report clearly reveals that on entering the building it was noticed that several windows of the factory buildings with glass stand were broken and entire factory was found ransacked and all machineries and other valued items have been taken away. The report records that during inspection it was observed that theft has not taken place in a single day but over a period of time as is evident from scattered material over the floor, broken glasses etc. It appears to be an organised act and there was total failure of the security guards deployed at the said site in safeguarding the assets of the Company(in liquidation). To assess the loss and damage on account of such theft, the valuer who had submitted valuation report on the earlier occasion which was the basis for sale of the assets was called upon to submit his valuation report. Accordingly, the said valuer has submitted his report on 21st January, 2009. In his assessment the realizable value of the machineries now located in the factory premises as per the opinion and inspection furnished as on the date of inspection i.e. 29th December, 2008 would be around Rs. 13,66,000/-. This valuation was based on selling price method. Whereas, the distress sale value would be around Rs. 10,93,000/-. Insofar as the movable assets of the Company (in liquidation) which was in the custody of police authority, the same have been valued at realizable value of Rs. 2,63,000/- and distress sale value at Rs. 2,29,000/-. In other words, realizable value of the assets lying at the factory as also in the custody of police authority together would be around Rs. 16,29,000/- and distress sale value thereof would be around Rs. 13,22,000/-. During the course of hearing, a comparative chart was produced. The same is prepared on the basis of contents of the subsequent valuation report and compared with the first valuation report. It is noticed that about seven items of the aggregate value (as in the first valuation report) of Rs. 1,16,500/- are missing from the site. The chart also gives comparative status of the original value as given in the first valuation report and the valuation now done after joint inspection after theft. The difference in value after theft is also highlighted in the said chart. The other comparative chart submitted is regarding valuation of seized movable items lying at the police station (12 items). In other words, the Official Liquidator concedes the position that there was theft in the factory premises after confirmation of sale in favour of the Applicant/Auction Purchaser and on account of which seven movable items have been found missing and movable items lying on the site and in the custody of the police station taken together are found in damaged condition in contrast to the condition on the date of confirmation of sale. In this backdrop, the Official Liquidator has invited following directions from this Court in his report dated 24th March, 2009.
(a) In view of paras 13 to 18 above, whether this Hon'ble Court would be pleased to determine the loss and damage caused due to the theft after perusing the original valuation report and also the aforesaid two valuation reports dated 27.01.09 & 26.02.09 and direct purchaser M/s. Wasan Realtors Pvt. Ltd. to pay such balance payment as may be determined with interest @ 14% w.e.f. 2.11.08 to 14.12.08 as per order dated 21.11.08 in Company Application (Lodg.) No. 1183/08.
(b) Whether this Hon'ble Court would be pleased to direct the security agency i.e. M/s. Reliable Industrial Services to pay the loss of the assets due to the theft, as may be determined by this Hon'ble Court, to the Official Liquidator within such time as may be fixed since it appears that the theft was taken place due to the sheer negligence of security agency as recorded in the minutes prepared at the time of joint inspection on 29.12.08 as per Exhibit 'S'.
(c) Whether this Hon'ble Court would be pleased to permit Official Liquidator to handover possession of Lot No. I i.e. the movable & immovable assets lying and situated at factory premises Ambad, Nasik to the purchaser M/s. Wasan Realtors Pvt. Ltd. after receiving the full and final payment of sale consideration with interest, as may be determined by this Hon'ble Court.
(d) Whether this Hon'ble Court may direct the Police authorities, Nasik to release the seized goods/machineries lying in their custody, as per the valuation report dated 26.02.09 to M/s. Wasan Realtors Pvt. Ltd. as and when they are informed by Official Liquidator to do so;
(e) Any other and further orders/directions as may be deemed fit and proper.
6. According to the Counsel for the Applicant/Auction Purchaser, the confirmation of sale of lot No. 1 in terms of Order dated 3rd January, 2008 should be set aside in toto and the amount deposited by the Applicant towards earnest money and further deposit should be refunded to the Applicant. The thrust of the argument is that the Applicant/Auction Purchaser had participated in the bid on the basis of representation made in the sale notice and the terms and conditions of sale as well as first valuation report. The Applicant gave their offer with a hope that after the sale is confirmed in their favour, they would restart the factory after taking possession thereof. However, on account of changed situation, it may not be possible to do so. As a result, Applicant/Auction Purchaser would suffer unwarranted loss and hardship. Moreover, the Official Liquidator was not in a position to fulfill his promise of delivery of movable and immovable assets on 'As is Where is and Whatever there is basis' as on the date of confirmation of sale. In this background, the Applicant/Auction Purchaser cannot be forced or compelled to complete the sale and take something which had never been bid for. To buttress this submission, reliance is placed on the decision of the Gujarat High Court in the case of O.L. of Mermaid Chemicals Pvt. Ltd. v. Canara Bank and Anr. 2005 CLC 837. Even in that case after confirmation of sale, theft had taken place which resulted in loss and damage to the assets of the Company (in liquidation). The Court found that the theft was the result of collusive act. On that finding, the confirmation of sale was set aside and the assets in question were ordered to be put up for resale. Counsel for the Applicant/Auction Purchaser has also relied on the decision of the Apex Court in the case of Valji Khimji and Co. v. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. and Ors. Reported in : (2008) 9 Supreme Court Cases 299. In that decision, the Apex Court has observed that merely because the assets were not in running condition does not mean that the same were scrap. This decision has been pressed into service to counter the argument of the Official Liquidator which is founded on the observation of the valuer in the first report. That report describes the condition of the machinery as out of order and in static condition. Besides, the said report states that all the machineries are in rusted and dusted condition and many are to be scrapped.
7. Be that as it may, the question is whether there is any express provision empowering the Company Judge to cancel or to set aside confirmation of sale. The power can be ascribed to Rule 9 of the Companies (Court) Rules, 1959, which envisages that nothing in the Rules shall be deemed to limit or otherwise affect the inherent powers of the Court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court. While exercising inherent powers, this Court will have to bear in mind the principles of Ex debito Justitiae to do complete justice to the parties. While doing so, it may not be out of place to apply the analogy of circumstances, in which, sale can be cancelled at the instance of the Auction Purchaser as provided in Order 21 of the Code of Civil Procedure. Indeed, the only situation carved out by the legislature can be traced to Rule 89, 90 and 91, as is observed by the Apex Court in the case of Ganpat Singh (dead) by L.Rs. v. Kailash Shankar and Ors. : AIR 1987 SC 1443 (See para-14). Besides the said provisions, it may be useful to keep in mind the parameters provided in Rules 77, 78 and in particular, Rule 90(2) of Order 21 of C.P.C. Rule 77(2) stipulates that on payment of the purchase-money, the sale shall become absolute. In the present case, the purchase money has not been fully paid. Thus, it is possible to contend that the sale has still not become absolute notwithstanding the order of the confirmation of sale. Nevertheless, so long as the confirmation of sale operates, the Auction Purchaser would be bound by the terms and conditions of sale. Rule 78 of Order 21 provides that irregularity in publishing or conducting the sale of 'movable property' shall not vitiate the sale but the person sustaining any injury by reason of such irregularity at the hand of any other person may institute a suit against him for compensation or for the recovery of the specific property. We may also keep in mind the principle stated in Sub-rule 2 of Rule 90 of Order 21 which provides that no sale shall be set aside on the ground of irregularity or fraud in publishing or conducting it unless, upon the facts proved, the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud. I am conscious of the fact that Rule 90 deals with irregularity or fraud in publishing or conducting sale. In the present case, the grievance is regarding supervening circumstances after the confirmation of sale and not with regard to the publishing or conducting of sale, as such. Nevertheless, the principle underlying Rules 77, 78 as also Rule 90 referred hitherto can be borne in mind while answering the claim of the rival parties. In other words, the Court will have to consider whether on account of changed situation, the Applicant/Auction Purchaser has sustained 'substantial injury' or that the loss is so substantial that it would vitiate the process of sale. Moreover, is it a case where the loss or damage so caused cannot be compensated at all. In the present case, no doubt the sale is a composite sale of movable as well as immovable assets. However, it cannot be overlooked that valuation of movable and immovable assets was done seperately; but for the purpose of sale, the same were sold as one lot. Ordinarily, in case of composite sale of movable and immovable assets it may be impractical for the Court to sever the sale consideration, so as to apportion against the value of movable and immovable property. In the present case, however, it may not be difficult to decipher the ratio of the value of movable and immovable assets in the proportion of the original value computed in the first valuer's report. In any case, as aforesaid, the issue will have to be addressed keeping in mind the fact that the sale of 'immovable property' was predominant, though a composite sale. Inasmuch as, the fair market value of immovable property in the first valuation report was assessed at Rs. 14.69 Crores. Whereas, that of movable assets was assessed only to the extent of Rs. 24.84 Lakhs. If the property to be sold was only movable property and after the confirmation of sale was to be damaged, causing substantial injury and loss, even then the question of setting aside the sale would not arise if the value of the loss so caused could be computed and the party concerned compensated in that behalf. Such mechanism is provided in Rule 78 of Order 21 of CPC. In other words, it may not be necessary to straightaway set aside the order of confirmation of sale on account of damage or loss caused to the movable assets due to supervening circumstances of theft. Insofar as the immovable property is concerned, it is nobody's case that the same has become unusable or completely damaged due to the supervening circumstances of theft.
8. To get over this position, Counsel for the Auction Purchaser vehementally submitted that the Auction Purchaser had participated in the bid with the hope that they would restart the factory. This, in my view, is a tall claim. For, the Applicant/Auction Purchaser company is a Reality company, obviously dealing in properties. There is nothing on record to substantiate the position that running of factory or the business which was conducted by the Company (in liquidation) is within the permissible scope of activities provided in the Articles of Association of the Applicant Company. I have no hesitation in taking the view that the Applicant is using the supervening circumstances as the ploy to resile from the transaction, as it is not in a position to honour its commitments for reasons best known to it. The record substantiates the fact that the Applicant Company was unable to pay the balance sale consideration within the specified time due to financial problems and more particularly because of unfavourable market condition for dealing with the property. In any case, it is on account of the Applicant Company, the date of delivery of possession stood extended as the balance consideration remained unpaid. Indeed, the Applicant Company may not be directly responsible for the supervening circumstances of theft, but the delay in payment paved way to the said situation. For, on account of nonpayment of balance consideration, delivery of possession of the property was postponed. I am therefore, in no way impressed by the argument of the Applicant/Auction Purchaser that they would suffer unwarranted loss and hardship on account of damage caused to the movable assets of the Company.
9. Be that as it may, the question of setting aside the confirmation of sale in the fact situation of the present case does not arise. The decision of the Gujarat High Court pressed into service will be of no avail. No doubt even in that case, after the date of confirmation of sale, theft took place. As a result of which the property was damaged. However, in that case the lot sold was only of movable property. With utmost respect to the view expressed by the Gujarat High Court, I am of the opinion that cancellation of sale of movable assets due to supervening circumstances is not the only option known to law. It would depend on facts of each case. As aforesaid in the present case, the sale was predominantly one of immovable assets. It is not the case of Applicant that the value of the immovable assets is in any way depleted due to theft. Indeed, there was theft of movable assets after the date of confirmation of sale, keeping in mind the mechanism provided in Rule 78 of Order 21 of CPC, the Auction Purchaser can be compensated for the loss or damage caused to the property. Counsel for the Official Liquidator justly pressed into service exposition of the Calcutta High Court in the case of Allahabad Bank v. Assistant Collector of Customs reported in : 1994(71) E.L.T. 40 (Cal). In that case, it was held that delivery of 41 packets of varying weights of C.R. Coil weighing 169.180 Metric Tonnes in aggregate was to be made as per the advertisement in the newspapers, but the special officer only offered to sell 177 M.T. of C.R. Coils. The Court proceeded to give proportionate deduction from the total sum in relation to the short delivery of items and adjusted the equities between the parties but did not cancel the sale. Reliance is also placed on another decision of Calcutta High Court reported in : A.I.R. (39) 1952 Calcutta 291 in the case of Manmatha Nath Mukherjee v. Jiaul Huq and Ors. In that case, the Court has observed that generally a sale should be set aside or confirmed in its entirety but this proposition is subject to certain qualifications, as for instance, the bar of limitation, res judicata etc. It has adverted to earlier decision of the same High Court in Amulya Krishna's case reported in 41 C.W.N. 224, which is directly on the point. In that decision, the Court had dismissed the Application for setting aside the entire sale and instead confirmed the sale as regards the share and interest of the Judgment Debtors whose application for such relief were rejected on the earlier occasion. In substance, it is held that there was ample authority that it is permissible to set aside the sale in part. Reliance has also been placed on the decision of the Travancore-Cochin High Court reported in A.I.R. 1952 TC 81 in the case of Lakshmikutty Amma and Ors v. Cheruchikutty and Anr. The Court held that besides establishing irregularities it must also be established to the satisfaction of the Court that the applicant has sustained substantial injury by reason of the irregularity or fraud. Even this Judgment takes the view that setting aside part of the sale, even if the same was sold as one lot is possible. The fact that the party alleging fraud and irregularity is obliged to prove factum of substantial injury caused is also restated by the Apex Court in the case of Jaswantlal Natvarlal Thakkar v. Sushilaben Manilal Dangarwala reported in : AIR 1991 S.C. 770. What is substantial loss can be discerned from the dictionary meaning given in Oxford Dictionary. It postulates-having substance, actually existing, not illusory, of real importance or value, of considerable amount; of solid material or structure, not flimsy, stout.
10. A priori, I have no hesitation in taking the view that the entire sale need not be set aside even if the claim of the Applicant/Auction Purchaser that due to theft serious damage has been caused to the 'movable assets' of the Company(in liquidation) were to be accepted as it is. The next question is, is it possible to quantify the probable loss or damage caused to the movable assets. We have already adverted to the first valuation report which gives graphic description of the condition of the movable assets when the same were offered for sale. Even if the Applicant may be justified in contending that the condition that the machineries were rusted and dusted may not be equated with the scrap, but it has clearly overlooked the observation in the first valuation report that many machineries were required to be scrapped. Moreover, the quantum of loss of movable property has already been evaluated in the second valuer's report. The Auction Purchaser cannot be permitted to question the correctness of the first valuation report because he participated in the auction process on that basis. On comparison with the contents of the first report with the second valuation report, it is possible to identify the missing items as well as the items which are damaged on account of theft. As aforesaid, the comparative charts prepared on the basis of two valuation reports handed in by the Counsel appearing for the Official Liquidator clearly indicate the quantum of loss or damage caused to the movable assets of the Company(in liquidation) after the date of confirmation of sale. The Applicant/Auction Purchaser has not contested the contents of the subsequent valuation report by filing any affidavit before this Court. The argument of the Auction Purchaser was however, very specific. He would contend that the confirmation of sale be set aside in toto and was not interested in continuing with the transaction due to changed situation and he cannot be forced to take the assets in damaged condition, even if the Court were to accept the Official Liquidator's suggestion of providing adjustment of the loss or damage caused to the said property from the sale consideration.
11. For the reasons already mentioned it is not possible to accede to the argument of the Applicant/Auction Purchaser. Instead, I may proceed to consider the request of the Official Liquidator to determine the loss and damage caused due to theft. Going by the second valuation report in contrast to the first valuation report, it is noticed that about 7 items are found completely missing. The value thereof has been provided in first valuation report as Rs. 1,16,500/-. The movable items which are lying on the factory premises but have been damaged, have already been assessed by the valuer in the second report. The difference in value after theft of the said items have been worked out to Rs. 11,71,350/-. The valuer has also valued the movable items in custody of police station and has assessed realizable value thereof at Rs. 2,63,000/- and distressed sale value at Rs. 2,29,000/-. In the first valuation report, the realizable sale value of the movable assets at the relevant time was assessed at Rs. 22,36,000/- and distress sale value at Rs. 19,88,000/-. As against this, valuation of the movable property after theft-realizable sale value thereof has been assessed at aggregate Rs. 16,29,000/- (at factory Rs. 13,66,000 + at Police station Rs. 2,63,000/-); whereas distress sale value of the movable assets after theft has been assessed at aggregate Rs. 13,22,000/- (at factory Rs. 10,93,000/- + at police station Rs. 2,29,000/-). In other words, the estimated loss has been specified by the valuer at Rs. 6,66,000/-(Rs.19,88,000/- original distress sale value - Rs. 13,22,000/-distress sale value after theft).
12. There are two ways in which the Applicant/Auction Purchaser can be compensated. The first proposal made by the Official Liquidator is to allow adjustment from the sale consideration to the extent of amount of loss computed by the valuer in the second valuation report as referred to hereinabove. That can compensate the Applicant to the extent of probable loss of movable assets due to theft. In that case, it may not be necessary to cancel the confirmation of sale either in whole or in part. However, this suggestion is not acceptable to the Applicant/Auction Purchaser, who wants the confirmation of sale to be cancelled in toto. The second option suggested by the Official Liquidator is to reduce the value of the movable assets from the sale consideration of Rs. 17.05 Crores. That is possible by keeping in mind the original fair market value assessed by the valuer at Rs. 24,88,000/- and giving proportionate increase on account of the bid amount of Rs. 17.05 Crores as against the Reserved Price of Rs. 15 Crores, which comes to 14.134%. In other words, it would be assumed that the bid amount towards movable assets was Rs. 28,36,229.90 and deduct that amount from the sale consideration of Rs. 17.05 Crores and make Auction Purchaser to pay the balance consideration. It is further suggested by the Official Liquidator that the movable assets can then be resold and the loss suffered can be recovered from the Security Agency. This proposal is made by the Official Liquidator on the premiss that the Court has power to set aside the confirmation of sale only in part in respect of the movable assets to adjust equities between the parties. With regard to the suggestion of the Official Liquidator to recover the loss to be suffered after resale from the Security Agency, the Security Agency relies on its affidavit filed in this Court to contest the charge of inaction or collusion and has disputed its responsibility to make the good the loss suffered on account of the theft. However, I will not burden this Judgment with the said aspect and leave that question to be considered at the appropriate stage a little later by giving liberty to the Official Liquidator to move further report seeking necessary directions in that behalf after the issue qua the Auction Purchaser is finally settled.
13. As aforesaid, the Auction Purchaser is not inclined to accept any offer given by the Official Liquidator. According to him, the sale will have to be set aside as a whole. Ordinarily it would not be possible to sever sale consideration. However, I find merit in the suggestion given by the Official Liquidator that in the facts of the present case it may be possible to apportion the quotient towards movable and immovable on the assumption which is just and reasonable. If either offer was to be accepted by the Auction Purchaser, the loss caused on account of the theft can not only be computed but it is possible to compensate the Auction Purchaser for such loss. Notably, the second option offered by the Official Liquidator in no way would cause any prejudice to the Auction Purchaser. However, it is for the Auction Purchaser to opt for any of these mechanism within a reasonable time, failing which the Official Liquidator will have to proceed on the assumption that the Auction Purchaser is unwilling to fulfill its obligation of paying balance consideration and taking delivery of the assets. In which case, will have to proceed with resale of the entire property forthwith by invoking the terms and conditions of the sale. In the event, the Auction Purchaser exercises his option within a reasonable time, say, four weeks from today, the Official Liquidator would compute the actual balance amount of consideration payable by the Auction Purchaser and submit further report for appropriate direction. In that case, the Auction Purchaser would be liable to pay interest on the outstanding amount in terms of order dated 21st November, 2008.
14. While parting I may place on record that a disturbing trend is setting in. In that, after the sale is confirmed by the Court and before the Auction Purchaser proceeds to take over possession of the property after making payment of sale consideration, in the intervening period the movable assets are siphoned off or stolen extensively. Very recently, similar situation had occurred in case of sale of property of Garware Nylons Ltd.(in liquidation), but in that case the Auction Purchasers who happen to be workers of that Company are claiming compensation for the loss and damage caused. It is easy for the Official Liquidator and the Security Agency on duty to blame each other. That however, cannot be countenanced. The accountability has to be fixed and the perpetrators proceeded against to logical end. Copy of this order be forwarded to the Secretary, Ministry of Company Affairs, Union of India, New Delhi for information and necessary action.
15. Accordingly, the Application preferred by the Auction Purchaser is rejected; whereas directions are issued in terms of prayer Clauses (a) and (c) of the report on the above terms. Insofar as directions in terms of prayer Clause (b) of the Official Liquidator's report, the same is left open with liberty to the Official Liquidator to submit further report for the same direction. Insofar as, the relief in terms of prayer Clause (d) of the Official Liquidator's report, the Official Liquidator is authorised to move appropriate application before the criminal court for release of the seized goods, so that the same can be made over to the Auction Purchaser or resold, as the case may be.
16. Ordered accordingly.