Judgment:
S.K. Mohanty, J.
1. These two Letters Patent Appeals are directed against a composite order passed by learned company Judge in Misc. Cases Nos. 74 of 1989 and 27 of 1990 refusing to exercise power under Rule 9 of the Companies (Court) Rules, 1959 and set aside order dated 17-7-89 passed by him in Company Act Case No. 2 of 1975 confirming sale of 6,100 equity shares of Rs. 100/- each of M/s. Kalinga Sevenska Limited in favour of one Sricharan Das (respondent No. 1 in both the appeals).
2. For proper appreciation, the relevant fascts as admitted at the hearing may be stated in brief. Kalinga Industries Limited, a company incorporated under the Companies Act, 1956, came under liquidation in 1976. One of the assets of the company was 6,100 equity shares having face value of Rs. 100/- each of M/s. Kalinga Sevenska Limited. Through public advertisement, sealed tenders were invited for sale of the aforesaid shares. The sealed tenders were opened on 27-7-88. Highest offer was by Nilasaila Nayak at Rs. 114/-per share followed by A. P. Singh at Rs. 111/-, Kedar Rout (appellant in A.H.O. No. 82 of 1993) at Rs. 101/-, Pradipta Mohanty (appellant in A.H.O. No. 84 of 1993) at Rs. 85/- and Sricharan Das at Rs. 57.19 per share. Kedar Rout had offered to purchase 5,000 equity shares. At the first instance, the offer of Nilasaila Nayak, the highest bidder was accepted by the learned Company Judge on 1-8-88, but as he failed to deposit the consideration within the stipulated period, the learned Company Judge by his order dated 16-9-88 directed acceptance of the offer of the second highest bidder A. P. Singh. After receiving the order of acceptance, A. P. Singh died and the learned Company Judge by order dated 7-2-89 permitted his son to deposit the entire value of all the shares by a specified date. The son failed to comply. Meanwhile on 6-2-89 Sricharan Das (the 6th highest bidder) had filed an. application before the Official Liquidator mentioning therein that he has come to understand that the second highest bidder has offered to purchase the shares at Rs. 111 /- per share and he offered to purchase the shares at Rs. 114/- per share, which was the price offered by the highest bidder. Mentioning the fact that the second highest bidder did not comply and deposit the price and that Sricharan Das offered to purchase at Rs. 114/-per share, the file was put up before the learned Company Judge who on 30-5-89 passed the following order:
'Since the legal heir of the second highest bidder did not deposit the amount, offer of Sricharan Das may be accepted. He may be accordingly informed.'
Thereafter, Sricharan Das deposited the sale price and the learned Company Judge by order dated 17-7-89 confirmed the sale in his favour.
3. On 28-7-89 Pradipta Mohanty, the fourth highest bidder filed Misc. Case No. 62 of 1989 praying for setting aside the order of acceptance of offer of a person below him. On 7-8-89, the learned company Judge while justifying acceptance of the offer of Sricharan Das rejected the Misc. Case on the ground that Sricharan has deposited the entire value at the above rate (Rs. 114/-) and after due verification the sale was confirmed on 17-7-89. Thus there is no question of setting aside the order of acceptance of the offer of Sricharan Das at this stage'. Thereafter on 10-8-89, Pradipta Mohanty filed Misc. case No. 74 of 1989 praying for setting aside the order confirming the sale on the ground that his offer being higher than that of Sricharan, it was incumbent upon the Official Liquidator to negotiate with him and others to ensure receipt of best price.
4. On 5-3-1990, the third highest bidder Nadar Rout filed Misc. Case No. 27 of 1990 attacking the order of confirmation as arbitrary and bad in law and praying for setting aside the order on the main ground that the officer of first and second bidders having failed to materialise the shares should have been offered to him and at least he should have been invited to negotiation and afforded an opportunity to purchase the shares.
5. In the counter filed by Sricharan Das in Misc. Case No. 27 of 1990, it is stated that the offer of Kxdar Rout being in respect of only 5,000 shares, he was disqualified, and as such, not entitled to be invited to negotiation and the matter having attained finality cannot be reopened. In his counter in Misc. Case No. 74 of 1989 Sricharan Das stated that in view of the rejection of the prayer of Pradipta Mohanty in Misc. Case No, 62 of 1989 on 7-8-89, the subsequent. Misc. Case was not maintainable. He claimed to have understood that leave of the Court was obtained for effecting sale by negotiation and he having suo motu applied to the Official Liquidator to purchase all the shares at Rs. 114/ - per share which was the highest offer in the sealed tenders, the same was considered and accepted with leave of the learned Company Judge on 30-5-89 followed by confirmation on 17-7-89. Meanwhile he has already sold 5,895 shares to different buyers on 25-8-89 and the transferees having acquired right in respect of such shares, the matter cannot be reopened.
6. Rule 272 of the aforesaid Rules directs that every sale of property belonging to a company shall be subject to confirmation by the Court. Rule 273 directs that all sales shall be made by public auction or by inviting sealed tenders or in such manner as the Judge may direct. Thus the two rules only provide the mode of sale and prescribe the lime when right to the property shall vest in the purchaser. On their plain reading, it is apparent that unless the Judge has prescribed any other mode, every sale of property belonging to the company shall be by public auction or by inviting sealed tenders and right to the property shall vest only after confirmation by the Court. Thus, once mode of sale is fixed, the Official Liquidator may conduct the sale and thereafter the matter is to be placed before the Court for confirmation, obviously to prevent the property being sold at inadequate price. Before confirming, the Court is to exercise its sound judicial discretion as the custodian of the interests of the company and its creditors, and satisfy himself that the price fixed in the sale is the best that could be expected, as stated in Navalkha and Sons v. Ramanya Das, AIR 1970 SC 2037.
7. A company Judge has dual functions, one on the administrative side and the other on the judicial side. All orders passed by him in the administrative file are, however, not necessarily administrative orders. The nature of the order is to be looked into to find whether the order is administrative or judicial. Then law vests jurisdiction on the Company Judge in the matter of confirmation of sale, the order passed by him in this regard must be deemed to be a judicial order, even if it has been passed in the administrative file. That is because the Company Judge is to satisfy himself that the sale has been held in a fair manner and has not occasioned loss to the company and its creditors as stated in Shankarlal Aggarwala v. Shanwarlal Poddar, AIR 1965 SC 507. Therefore, if it can be shown either from the judicial record or the administrative file that confirmation of sale by the learned Company Judge did not receive his proper attention and went wrong in principle, then it cannot be said that there was real exercise of judicial discretion and the sale must be set aside.
8. Keeping the above position of law in mind, the facts of the case leading to confirmation of sale in favour of Sricharan Das may now be examined. In this case, the learned company Judge specifically directed in his order dated 27-11-86 in the judicial record that sale of the aforesaid equity shares be advertised for receipt of offers in sealed covers by intending purchasers by a certain date. Thus the learned Company Judge not only fixed the mode of sale but also specified the date for receipt of the offers in sealed covers. Orders dated 30-5-89 and 17-7-89 accepting the sale and confirming the same have, however, been passed in the administrative file and not in the judicial record. Order No. 143 dated 7-8-85 is the first order in the judicial record indicating these facts. Herein it is stated that it was considered proper to sell away the equity shares by negotiation and the application of Sricharan Das who offered to purchase the shares at Rs. 114/-per share was accepted on 30-5-89 and after he deposited the entire value at the above rate and after due verification, the sale was confirmed on 17-7-89.
9. Now it is necessary to go slightly deeper into the facts. The offers of Sricharan Das and Kedar Rout were dated 5-3-88 and that of Pradipta Mohanty was dated 4-1-88. Admittedly, Kedar, Pradipta and Sricharan were the third, fourth and 6th highest bidders respectively. Sricharan raised his offer to Rs. 114/- per share in his application dated 6-2-89. Before accepting his subsequent offer, none of the two appellants Kedar and Pradipta were either noticed or heard even intimated about subsequent offer of Sricharan. In fact, in the office note of the Official Liquidator and Registrar (Judicial), suggesting acceptance of the offer of Sricharan, there is even no mention about Kedar Rout and Pradipta Mohanty. There is similar omission in the order dated 30-5-89 passed by the learned company Judge. It is significant to note that although in his sealed tender Sricharan had offered the price of Rs. 57.19 per share, after lapse of one year he offered to pay Rs. 114/- per share. If he doubled his offer after one year, there is every reason to think that the bidders above him might have similarly offered higher price, if given the opportunity after one and half years when the sale was confirmed. If offers according to the sealed tenders would have ultimately been accepted, then Kedar Rout could not make a legitimate grievance because of the fact that he had offered to purchase only 5,000 equity shares although the advertisement was for 6,100 shares. But since it was not so, and Sricharan Das lower in the list of tenders gave another offer after lapse of one year, in all fairness negotiation should also have been with Kedar Rout to find out from him if he was willing to purchase the entire 6,100 shares and if so, then at what price. Since the subsequent offer of Sricharan was processed in the administrative file, Kedar Rout was in dark. In the premises, the order of acceptance was not only unfair to Kedar Rout, but also unfair to the company and its creditors since in the facts of the case, possibility of Kedar Rout offering a price higher than Rs. 114/-could not be completely ruled out.
10. So far as appellant Pradipta is concerned, it is seen that his offer was Rs. 85/-per share, whereas that of Sricharan Das was Rs. 57.19 per share, It is also quite likely that if he had been given the opportunity before acceptance of the subsequent offer of Sricharan Das, be might have offered a price above Rs. 114/- and in that view of the matter, confirmation of sale in favour of Sricharan has also been unfair both to the higher bidder Pradipta Mohanty as well as to the company and its creditors.
11. In the impugned order it is observed that earlier Misc. Case No. 62 of 1989 preferred by Pradipta Mohanty having been rejected by order dated 7-8-89, the question of entertaining a fresh application against the order of confirmation of sale does not arise. There is nothing on record to show that prior to filing of Misc. Case No. 62 of 1989, Pradipta was aware or made known about acceptance of the sale in favour of Sricharan Das on 30-5-89 or about confirmation of sale in his favour by the Court on 17-7-89. In his application he had merely stated to have learnt from some source, which he believed to be true, that a person who had offered much lower price, had applied to purchase and the same has been accepted. It may be noted here that acceptance of the offer of Sricharan Das and order of confirmation of sale in his favour were made in the administrative file in absence of Pradipta Mohanty although his offer was higher and in such facts on some vague information Pradipta had started Misc. Case No. 62 of 1989 praying for setting aside the order accepting the offer of the person whose bid was lower. Apparently Pradipta came to know about acceptance and confirmation from order dated 7-8-89 passed in the judicial record rejecting his Misc. Case and soon thereafter he preferred Misc. Case No. 74 of 1989 on 10-8-89 for setting aside the confirmation of sale. In this view of the matter, we are unable to agree with the view expressed by the learned company Judge while rejecting Misc. Case No. 74 of 1989 that question of entertaining a fresh application against the order of confirmation of sale did not arise.
12. On a reference to the administrative file, we feel that the learned company Judge while passing orders of acceptance and confirmation of the sale, overlooked the important facts that the matters relating to acceptance and confirmation were being considered after about one and half years of submission of the tenders, that the price quoted by Sricharan Das in his tender was only Rs. 57.19 per share, that he was the sixth highest bidder, that the third and the fourth highest bidders had respectively offered Rs. 101/- and Rs. 85/- per share, that they might choose after lapse of one and half years to purchase at rates more than Rs. 114/- per share, that the appellants had no notice about the application of Sricharan Das offering Rs. 114/- per share and that if the Official Liquidator would have negotiated with the appellants also, there was chance of contest between the appellants and Sricharan Das, in which process much higher price might have been obtained to the benefit of the company under liquidation and its creditors. In purview, the Official Liquidator did not act in a fair and prudent manner keeping in mind the interest of the company and its creditors. Consequently we are of the view that the orders accepting and confirming the sale are the outcome of non-application of mind and the learned Company Judge went wrong in principle in doing so. In our opinion therefore the order of confirmation should have been set aside for ends of justice in exercise of power under Rule 9 of the aforesaid Rules. If Sricharan Das after confirmation of sale his favour has sold some of the shares to outsiders, this fact cannot stand on the way of setting aside the confirmation. The sale having not been held by the Official Liquidator in a fair manner, keeping in view the interest of the company and its creditors, the purchasers from Sricharan Das may have to suffer if in the fresh sale to be conducted by the Official Liquidator through negotiation Sricharan Das fails to be the highest bidder, they having purchased the shares from a person owning them through purchase in a sale which was not conducted in a fair manner.
13. Mr. Lal for respondent No. I attacked the maintainability of the appeal at, the instance of a bidder relying on the decision in J. N. Bowri v. Official Liquidator, AIR 1960 Assam 190. In this case, the winding up proceeding was started at the instance of a creditor and in the proceeding captain immovable properties were advertised for sale. There were two offers, 'J' first offered a sum of Rs. 80,000/- which he later increased to Rs. 94,251/-. The other bidder 'H' gave offer of Rs. 91.000/- which they later increased to Rs. 1,03,001/-. This later offer of 'H' was accepted by the Court and the fact of acceptance was intimated to 'H'. Two days thereafter 'J' filed an application for reconsideration of the matter and for an order that the property may be sold to 'J' for a sum of Rs. 1,05,000/-. The application was heard and the Court ordered that it saw no reason to modify its order accepting the offer of 'H'. Against this order appeal was carried to the High Court. It was held that the appeal was incompetent on the ground that 'J' was not a parly to the winding up proceeding. With respect, we are unable to agree with the view taken in the aforesaid decision for the following reasons. Under section 483 of the Companies Act, 1956 'any order made, or decision given, in the matter of winding up of a company by the Court' is appealable. Thus Section 483 does not limit the right of appeal merely against an order but also confers that right against a decision. It is significant to note that the Act provides for specific appeals against various orders and the provisions for such appeals are to be found in various sections. But. Section 483 is general in its nature and while attaching particular importance to the winding up of the company, it makes orders, made in the course of the winding up, subject to appeal. Interest of the company and its creditors is of paramount consideration in a winding up proceeding. Therefore, any order or decision which has a bearing on the interest of the company and its creditors is, in purview, appealable. Consequently, an order confirming a sale of some assets of the company is appealable. That being so, we fail to see any reason as to why an appeal against order of confirmation at the instance of a bidder cannot be maintained, if it serves the interest pf the company and its creditors, particularly when the appellants took part in the auction arising out of thewinding up proceeding. For taking such a view, support can be had from the decision of the Apex Court in Navalkha and Sons v. Ramanya Das, AIR 1970 SC 2037 (supra). In that case after confirmation of sale by the Court in favour of 'N', 'P' applied to the Court offering higher amount but the Court rejected his request and against the order of rejection, appeal was carried to the Andhra Pradesh High Court and the same being allowed, 'N' carried the matter in Civil Appeal to the Appex Cpurt which was dismissed with the observation that acceptance of the bid of 'N' was not a sound exercise of discretion. The case at hand is on a stronger footing because the appellants were not only bidders but their offers were higher than the offer of respondent No 1.
14. In the light of the discussions in the foregoing paragraphs, the impugned order is set aside and appeals are allowed. In the peculiar facts of the case, the appellants shall bear their own costs of these appeals. The Official Liquidator shall now enter into a negotiation with Sricharan Das and the two appellants and shall put up the result of negotiation before the learned Company Judge for appropriate orders according to law.
D.P. Mohapatra, J.
15. I agree.