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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION NOS. 34782-34783 OF 2012

MANOJ I NAIK & ASSOCIATES Petitioner(s)

VERSUS

OFFICIAL LIQUIDATOR Respondent(s)

J U D G M E N T

DIPAK MISRA, J.

The factual exposition that is capable of being

encapsulated in a real small compass, has, with some

passage of time and turn of events, grown into a colossal

structure having the effect potentiality to amaze and

perplex any prudent man. The chronology of events

pyramids a gradual financial structure, making it limpid

how on certain occasions properties are sold for a song in

so called sales made in the proceedings under the

provisions of the Companies Act, 1956 (for brevity ‘the

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Act’) and how with some intervention the said competitors

metamorphose themselves into different incarnations, and

the roses on the table turn into pearls and diamonds in

the private closets. To put it succinctly, the price fixed at

Rs.6.25 crores for 291 plots has fetched, by the

intervention of this Court, Rs.70 crores for 113 plots. It is

not change of heart, but the price reality that gets

manifest. Not for nothing it has been said, “money can

solve the problems concerned with money”. The large

amount of money, we are inclined to think, would solve

the problems of the company in question.

2. The short narration. A company, namely, M/s

Vitta Mazda Ltd. went into liquidation and on 21.02.2002,

the High Court of Gujarat directed the Official Liquidator

to put up the properties of the company in liquidation

(except those for which applications are pending before

the said Court for regularisation of transactions) to

auction for sale. Thereafter many an order was passed.

On 18.12.2004, the learned Company Judge, by taking

into consideration many aspects, declined to accept the

report of the Official Liquidator for acceptance of the offer

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made before the sale Committee. An appeal was preferred

being O.J. Appeal No. 81 of 2004, wherein the Division

Bench of the High Court on 30.08.2011 passed the

following order:

“1. The present appeal arises against the order

dated 18.12.2004 passed by the learned Company

Judge in OLR No. 100 of 2003, whereby the

learned Company Judge has not accepted the

report of the OL for acceptance of the offer made

before the Sale Committee.

3.It is an admitted position that the appellant

was one of the offerers, who submitted the

highest offer before the Sale Committee and when

the report was made by the OL for approving the

offer accepted by the Sale Committee subject to

approval of the company Court, the learned

Company Judge found that it would not be a case

for acceptance of the offer and, therefore, rejected

the report submitted by the OL.

5. Apart from the above, even if the matter is to

be considered for the test of exercise of the

judicial discretion exercised by the learned

Company Judge, it appears that the learned

Company Judge, at paragraph 5, recorded that

the valuation made by the Bank of Baroda of the

property is much more than the offer submitted

by the appellant. If the said aspect is further

considered, it appears that the offer of the

appellant was Rs. 1.03 crore, whereas it is a part

of the record of the Sale Committee's proceedings

that as per Bank of Baroda, the valuation of the

property was Rs. 6.25 crore. It has been stated

that there was also another report, which was

shown to the Court.

6.Be that as it may, even if it is considered that

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the offer of the bank of Baroda was of Rs. 6.25

crore as per the valuation report available and the

highest offer was of Rs. 1.03 crore coming on

record and under these circumstances, if the

learned Company Judge found it proper not to

accept the offer by confirming the sale, such an

exercise cannot be said to be erroneous. On the

contrary, the exercise would be in the larger

interest of the corpus of the company.

7.Additionally the learned Company Judge, in

the impugned order, has also recorded the fact

that the total chunk of property comprises of

various plots of different characteristics namely;

that on some plots, there were encroachments, for

some plots, there were litigations and some plots

were clear. Therefore, the learned Company

Judge found that if the properties are sold as it is,

comprising of all the plots simultaneously, it may

create complications and, therefore, the learned

Company Judge directed the OL to prepare a list

of the plots, which were not occupied by anyone

and in respect of which, there was no dispute or

litigation and thereafter to undertake the process

to sell and dispose of the plots at a later stage. In

view of the above, if the property is segregated

into various compartments of clear property,

property with clog and/or property with

encroachment, while disposing of the immovable

properties, it would be rather in the interest of the

company, since the clear property is bound to

fetch higher price in comparison to the other two

properties namely; with clog in the title and/or

with encroachment or otherwise.”

3. When the matter was listed on various dates, it

was thought it appropriate that there should be a proper

auction and, accordingly, the following order came to be

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passed on 02.07.2014:-

“This Court, while issuing notice on 02.11.2012

had passed the following order:

"Learned senior counsel appearing for

the petitioner submits that the petitioner

is willing to match the offer of Rs.6.25

crores made by the Bank of Baroda.

Submission recorded."

Thereafter, the matter has been adjourned

and certain applications have been filed for

impleadment, which are allowed.

Mr. Ahmadi, learned senior counsel

appearing for the applicant M/s. SNDT

Enterprises in IA 6-7/2013 has

submitted that the applicant therein is prepared

to pay Rs.25 crores for the property that

was sought to be auctioned.

Not intending to lag behind, Mrs. Meenakshi

Arora, learned senior counsel appearing for

M/s. Star and Associates in IA No. 10-

11/2013 submitted that the applicant herein is

prepared to pay Rs.30 crores.

Mr. Pradhuman Gohil, learned counsel

appearing for Mr. Ranjitsinhji N. Parmar in IA 8-

9/2013 equalises the offer given by Mr. Ahmadi,

i.e. Rs. 25 crores.

Mr. Sharan, learned senior counsel appearing

for the petitioner has expressed the skepticism to

the offers made by the applicants. It is his

submission that if they intend to show their bona

fides, they should deposit at least Rs.10 crores

before this Court as the petitioner is also inclined

to deposit Rs.10 crores.

In view of the aforesaid submission, we direct

that the applicants, whose names have been

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mentioned hereinabove as well as the petitioner

shall deposit a sum of Rs. 10 crores each by way

of bank draft drawn in favour of the Secretary

General of this Court within three weeks from

today. Needless to say that this amount may be

treated as off-set price and thereafter this Court

may think of going through the bidding process,

if required. Let it be stated the offer is made

keeping in view the auction notice. Nothing more,

nothing less. After the deposit of the amount,

the same shall be kept in a nationalised

bank in a short-term interest bearing

account.

List on 11.08.2014.”

4. After the said order was passed, certain deposits

were made by 3 firms/companies. Regard being had to

the said situation, on 19.08.2014, after referring to the

earlier orders, the following order came to be passed :-

“We have been apprised by the Registry that

deposits which were directed by this Court have

already been made and, therefore, all the parties

have complied with the order. In view of the

aforesaid position, we direct the Official Liquidator

to proceed with the fresh auction. The factum of

auction shall be advertised in local Newspapers

one in English and another in vernacular

language. That apart there should be an

advertisement in any daily National Newspaper

having adequate circulation in the country,

regard being had to the issue involved in such a

matter. The upset price shall be fixed at Rs. 10

crores. The advertisement shall be issued within

a period of two weeks from today. The bidding

process shall be completed within four weeks

therefrom. As far as M/s Star and Associates is

concerned, if they offer a bid less than Rs.30 cores

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that bid shall not be accepted but their claim of

amount shall be considered subject to further

orders of this Court. Similarly, as far as Mr.

Ranjitsinh Parmar is concerned, his bid for less

than Rs.25 crores shall not be considered but he

would be entitled to claim refund of the amount

subject to further orders of cost.

The Managing Director of M/s. SNDT

Enterprises on whom cost of Rs.5 lakhs was

imposed shall remain personally present on the

next date of hearing if the cost, as directed, is not

deposited before the Registry of this Court. In case

the deposit is made, an affidavit shall be filed and

he need not appear in person. Needless to

emphasise that in the event of non-deposition, he

shall personally appear and this Court may

consider passing appropriate orders in that

regard.

We may add that anyone who intends to bid, he

has to deposit a sum of Rs.10 crores as earnest

money so that he can claim parity with the three

contenders who are before this Court. Barring

what we have stated, the other conditions in the

initial notice for auction shall remain the same. As

the three bidders have deposited Rs.10 crores,

they need not to deposit earnest money, as the

deposition of that amount before this

Court tantamounts to deposition of earnest

money.

The place of auction will be at Ahmedabad.

There will be stay of further proceedings

before any Court relating to the property involved

in this case.

The Registry shall keep the deposited amount

in F.D.Rs. in a nationalised bank in a short-term

interest bearing account.”

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5. In the meantime, certain unwarranted, unhappy

and uncalled for situation took place. The Official

Liquidator filed a report before the learned Company

Judge seeking permission to exclude certain plots from

the original list and, accordingly, the learned Company

Judge granted the extension of time. In our considered

opinion, when the mater was subjudice before this Court,

the learned Company Judge should not have dealt with

the same regard being had to the fundamental concept of

judicial discipline. Be that as it may, the Official

Liquidator issued an advertisement in respect of 291 plots

wherein it was clearly mentioned that the sale had been

confirmed by the learned Company Judge in respect of 87

plots and the said confirmations were the subject matter

of appeals before the Division Bench which were

subjudice. Similarly, it was also mentioned that the order

of status quo was operational in respect of 10 plots and

the said order of status quo had been passed by a

coordinate Bench of this Court. It was also postulated

therein that certain plots had been encroached upon and

certain plots were subject matter of registered sale deeds,

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though no application had been filed before the Court for

validation. In course of hearing of these petitions, we have

been apprised that applications for validation are pending

before the learned Company Judge.

6. On a perusal of the advertisement, it is clear as

crystal that 113 plots admeasuring 91,960.70 sq. mtrs.

forming a part of Annexure- A/I of the Corrigendum was

absolutely free and available for auction.

7. At this juncture, it is pertinent to mention that

the bids which were offered in respect of the plots that

were put to auction were opened before us. M/s Manoj I

Naik & Associates, the appellant herein, has offered

Rs. ten crores eleven thousand; Mr. Laxmi Narayan Garg

has made an offer of Rs. 10 crores; M/s Star & Associates

has offered Rs. 31 crores. It is submitted by Mr. A. Saran,

learned senior counsel for the appellant, that the Official

Liquidator had no authority to issue a Corrigendum or to

place a clarificatory note in respect of the plots. That

apart, submits Mr. Saran, the Official Liquidator has

committed grave illegality and, in a way, contempt of the

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Court by approaching the High Court and stating that this

Court had made certain oral observations which was really

not correct, for everything was unequivocally stated in the

order. Ordinarily, we would have proceeded to address the

submissions made with emphasis by Mr. A. Saran, but as

advised at present, we are refraining from doing so, for

what has happened in the course of hearing.

8. Here the sad sad story begins. Mr. Tushar Mehta,

learned Additional Solicitor General, while defending the

stand of the Official Liquidator, though made certain

efforts to justify his action, yet ultimately realised that it

was a sisyphean endeavour because the action may be

genuine but should not have been undertaken. Mr.

Tushar Mehta learned Additional Solicitor General, and

Mr. Gaurav Agrawal, learned counsel, appearing for the

Official Liquidator, while expressing regret about the steps

taken by the Official Liquidator who has also rendered

unconditional apology, submitted that the prices of the

land have gone up and there is a valuation report by the

Gujarat Industrial and Technical Consultancy

Organisation Ltd (GITCO) which has estimated the price at

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Rs. 66,15,22,000/- in respect of total freehold land

available for sale, that is, 113 plots.

9. The said valuation report compelled us to think in

a different way and impelled us to recapitulate certain

authorities of this Court. In Ram and Shyam Company

Vs. State of Haryana

1

, the Court observed thus:

“12....Owner of private property may deal

with it in any manner he likes without causing

injury to any one else. But the socialist or if

that word is jarring to some, the community or

further the public property has to be dealt with

for public purpose and in public interest. The

marked difference lies in this that while the

owner of private property may have a number of

considerations which may permit him to dispose

of his property for a song. On the other hand,

disposal of public property partakes the

character of a trust in that in its disposal there

should be nothing hanky panky and that it

must be done at the best price so that larger

revenue coming into the coffers of the State

administration would serve public purpose viz.

the availability of larger funds. This is subject

to one important limitation that socialist

property may be disposed at a price lower than

the market price or even for a token price to

achieve some defined constitutionally recognized

public purpose, one such being to achieve the

goals set out in Part IV of the Constitution. But

where disposal is for augmentation of revenue

and nothing else, the State is under an

obligation to secure the best market price

available in a market economy. An owner of

1

(1985) 3 SCC 267

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private property need not auction it nor is he

bound to dispose it of at a current market price.

Factors such as personal attachment, or affinity,

kinship, empathy, religious sentiment or limiting

the choice to whom he may be willing to sell,

may permit him to sell the property at a song

and without demur. A welfare State as the

owner of the public property has no such

freedom while disposing of the public property.

A welfare State exists for the largest good of the

largest number more so when it proclaims to be

a socialist State dedicated to eradication of

poverty. All its attempt must be to obtain the

best available price while disposing of its

property because the greater the revenue, the

welfare activities will get a fillip and shot in the

arm. Financial constraint may weaken the

tempo of activities. Such an approach serves

the larger public purpose of expanding welfare

activities primarily for which the Constitution

envisages the setting up of a welfare State.”

10. In the aforesaid case, the Court held auction in

Court in respect of some quarries relating to minor

minerals. The appellant therein who initially had given an

offer of Rs.5.5 lakhs, eventually offered Rs.25 lakhs.

Taking note of the state of affairs, the Court observed:

“6. Shock and surprise was visible on the

face of each one in the Court. Shock was

induced by the fact that public property was

squandered away for a song by persons in power

who hold the position of trust. Surprise was

that how judicial intervention can serve larger

public interest. One would require multi-layered

blind-fold to reject the appeal of the appellant on

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any tenuous ground so that the respondent may

enjoy and aggrandize his unjust enrichment.

On this point we say no more.”

11. In Committee of Management of

Pachaiyappa’s Trust Vs. Official Trustee of Madras

and Another

2

, the Court placing reliance on paragraph 12

in Ram & Shyam Company (supra) and Para 27 in

Chenchu Rami Reddy V. Govt. of A.P .

3

, opined thus:

“28.The aforesaid observations in the

context of public property and property

belonging to religious and charitable

endowments and institutions would equally

apply to trust property as in the present case.”

12. In Meerut Development Authority V.

Association of Management Studies and Another

4

,

after referring to number of decisions including Ram and

Shyam Co. (supra), the Court reproduced a passage from

Wayde’s treatise on Administrative Law

5

, which is as

follows:

“The powers of public authorities are therefore

essentially different from those of private

2

(1994) 1 SCC 475

3

(1986) 3 SCC 391

4

(2009) 6 SCC 171

5

Administrative Law, 9

th

Edn., H.W.R. Wade & C.F. Forsyth

Page 14 14

persons. A man making his will may, subject to

any rights of his dependants, dispose of his

property just as he may wish. He may act out of

malice or a spirit of revenge, but in law this does

not affect his exercise of his power. In the same

way a private person has an absolute power to

allow whom he likes to use his land, to release a

debtor, or, where the law permits, to evict a

tenant, regardless of his motives. This is

unfettered discretion. But a public authority

may do none of these things unless it acts

reasonably and in good faith and upon lawful

and relevant grounds of public interest. So a

city council acted unlawfully when it refused

unreasonably to get a locally rugby football club

use the city’s sports ground, though a private

owner could of course have refused with

impunity. Nor may a local authority arbitrarily

release debtors, and if it evicts tenants, even

though in accordance with a contract, it must

act reasonably and ‘within the limits of fair

dealing’. The whole conception of unfettered

discretion is inappropriate to a public authority,

which possesses powers solely in order that it

may use them for the public good.”

13. At this juncture, we are obliged to state that in

the case at hand, we are dealing with properties owned by

a Company under liquidation and there has been price

fixation by the Company Court. GITCO has estimated the

valuation in praesenti. It is not in dispute, as per the

orders passed by the Company Court as well as the

Division Bench in Company Appeal and as understood by

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this Court, 291 plots were to be put to auction and for the

total number of plots the prices were offered by the

bidders who had shown interest before this Court to bid

and this Court had fixed the reserve price at Rs.10 crores.

Counsel for the parties on 02.07.2014 had gone to the

extent of saying that they were prepared to offer Rs.25-30

crores in the auction and we have already mentioned

offers have come in the sealed cover.

14. Ordinarily, what we would have done is

absolutely another matter. There can be no speck of

doubt that the properties of a company under liquidation

when sold, there has to be a proper auction, a fair one. It

must fetch the maximum price. It takes care of statutory

dues, dues of the workmen and the creditors. It has its

own public character. In any case, it cannot be allowed to

be sold for a song. The estimated price given by GITCO is

more than Rs.66 crores for 113 plots, which are free.

Therefore, we thought it seemly to ask the learned counsel

appearing for the parties, if they are agreeable for open

auction by giving their offers before this Court.

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15. Mr. A. Saran, learned senior counsel, Mr. Braj

Kishore Mishra, learned counsel, Mr. Vivek Singh, learned

counsel and Mr. Amar Dave, learned counsel, conceded to

the said suggestion. In the High Court initially Rs.6.25

crores had been offered, and we had fixed the reserve price

at Rs. 10 crores and, to test the bona fide of the bidders,

we had directed them to deposit Rs. 10 crores each before

the Registry of this Court which has been done. Now the

initial thought, graduated to a shock. When auction

commenced, Mr. Braj Kishore Mishra, learned counsel,

along with Mr. Vivek Trivedi, learned counsel, after

obtaining instructions from Mr. S.D. Verma, a partner of

M/s Star & Associates, informed the Court that they are

willing to offer Rs. 31 crores for 113 plots which are free.

Determined not to lag behind, Mr. A. Saran, being

instructed by Mr. Amit Kumar, learned counsel, on behalf

of the petitioner, ultimately raised the figure upto Rs.65

crores. Be it stated, we had requested the bidders to hike

their price by Rs.5 crores so that the auction becomes real

and not unnecessarily time-consuming. Mr. A. Saran,

learned senior counsel, Mr. Braj Kishore Mishra, learned

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counsel, Mr. Vivek Singh, learned counsel and Mr. Amar

Dave, learned counsel, co-operated. Eventually, Mr. Braj

Kishore Mishra, learned counsel, appearing for M/s Star

& Associates enhanced the price to Rs. 70 crores. Mr. A.

Saran, Mr. Vivek Singh and Mr. Amar Dave did not think,

as instructed by their respective clients, to bid further.

Thus, we find that the report submitted by GITCO appears

to be correct. That is a redeeming feature to pardon the

Official Liquidator and we do so.

16. In view of the aforesaid, we direct M/s. Star and

Associates to deposit a sum of Rs.20 crores by the end of

November, 2014 and another Rs.40 crores by March 15,

2015 before the Registry of this Court. The amount shall

be deposited in an interest bearing fixed deposit in a UCO

Bank, Supreme Court Compound, New Delhi. After Rs.60

crores are deposited, Rs. 10 crores that have been

deposited by the company before the Registry shall be

added and handed over by way of a banker’s cheque to the

Official Liquidator along with interest. Needless to

emphasise, if any of the directions is not complied with or

for any reason, extension is sought, Rs. 10 crores that has

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been deposited before this Court along with interest shall

stand forfeited and go to the account of the company.

This aspect is also conceded to by Mr. Braj Kishore Mishra

and Mr. Vivek Trivedi.

17. As far as deposits made by the petitioner and Mr.

Ranjitsinh Parmar before this Court are concerned, the

deposits shall be refunded along with interest within two

weeks hence. The amount deposited by Mr. Laxmi

Narayan Garg with the Official Liquidator shall also be

refunded within a week from today. Any earnest money

that has been deposited with the Official Liquidator shall

also be refunded to the concerned company/person.

18. At this juncture, it is appropriate to mention that

the rest of the plots in respect of which there is an order of

status quo by this Court or which are subjudice before the

appellate court on the company side before the High

Court, needless to say, shall be dealt with at the

subsequent date.

19. At this juncture, we are obligated to clarify that

interlocutory applications which have been filed before

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this Court can be filed before the High Court and the

orders passed by the High Court shall be filed before this

Court in these special leave petitions so that they can be

appositely dealt with. The order of stay granted earlier,

that is, directing stay of further proceedings before any

Court relating to the property involved in this case, is

modified to the extent indicated above.

20. Let the matter be listed for further hearing on

March 24, 2015.

........................J.

(DIPAK MISRA)

........................................J.

(ROHINTON FALI NARIMAN)

................................J.

(UDAY UMESH LALIT)

NEW DELHI;

OCTOBER 28, 2014