LexVALJI KHIMJI AND COMPANY versus OFFICIAL LIQUIDATOR OF HINDUSTAN NITRO PRODUCT (GUJARAT) LTD. AND ORS
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[2008] 12 S~C.R. 1 VALJI KHIMJI AND COMPANY v. OFFICIAL LIQUIDATOR OF HINDUSTAN NITRO PRODUCT (GUJARAT) LTD. AND ORS. (Civil Appeal No. 4992 of 2008) AUGUST 12, 2008 [ALTAMAS KABIR AND MARKANDEY KAT JU, JJ.] A B Company Jaw: Auction sale of assets of liquidated com- pany - After advertisement in well known newspapers having c wide circulation - Highest bid accepted and sale confirmed :..... Subsequent fresh offer by two companies at higher price - Recalling of order of confirmation of sale by High Court - Correctness of - Held: Not correct as there was nothing to show that there was fraud or collusion in auction - sale - Once D sale is confirmed, certain rights accrued in favour of auction - purchaser which could not be extinguished except in excep- tional case such as fraud. Words and Phrases: 'scrap' - Meaning of An Official Liquidator was appointed in respect of E Company•in-liquidation. The assets of the company were proposed to be auctioned. The Official liquidator submit- ted the valuation report whereby the assets were valued at Rs.2.55 crores. The property was thereafter put to auc- tion on 25.3.2003 after advertising it in various well known F newspaper having wide circulation. Highest bid of appel- lant of Rs.3.51 crores was accepted and sale was con- firmed on 30.7.2003. Court passed certain directions re- garding deposit of the purchase price which was duly complied with by the appellant. G In October, 2003, respondent No.8 offered to buy the assets in question for Rs.3.75 crores. Again in August 2004, respondent no.9 made an offer of Rs.5 crores for ':f 1 H 2 SUPREME COURT REPORTS [2008] 12 S.C.R. A the said assets. This offer was made more than one year +- tc after the confirmation of the sale in favour of the appel- lant. The prospective purchasers filed applications for recalling the order dated 30.7.2003 by which the sale was confirmed in favour of the appellant. B The Single Judge of High Court set aside the confir- mation of sale on the ground that while doing valuation of the assets, the potential of the company was over- looked and that the assets in question were wrongly given out to be scrap and thus a proper bid was not obtained. c Appellant filed appeal which was dismissed by Division Bench of High Court. Hence the present appeal. Allowing the appeal, the Court HELD: 1.1. The. auction sale was done after adequate D publicity in well-known newspapers. Even after the auc- tion, the sale was confirmed by the High Court only on + 30.7 .2003, and any objection to the sale could have been filed prior to that date. However, entertaining objections after the sale is confirmed should not ordinarily be allowed, E except on very limited grounds like fraud. If it is held that every confirmed sale can be set aside, the result ~s that no auction sale will ever be complete because always some- body can come after the auction or its confirmation offer- ing a higher amount. [Paras 11, 31] [6, G-H; 7, A; 10,G] F 1.2. It could have been a different matter if the auc- -uon had been held without adequate publicity in well- >-- known newspapers having wide circulation, but where the auction sale was done after wide publicity, then set- ting aside the sale after its confirmation will create huge G problems. When an auction sale is advertised in well- known newspapers having wide circulation, all eligible persons can come and bid for the same, and they are themselves to be blamed if they do n.ot come forward to bid at the time of the auction. They cannot ordinarily later H on be allowed after the bidding (or confirmation) is over VALJI KHIMJI & COMPANY v. OFFI. LIQUIDATOR OF 3 HINDUSTAN NITRO PRO. (GUJARAT) LTD. & ORS. to offer a higher price. If the price offered after the auction A is over which is only a little over the auction price, that cannot by itself suggest that any fraud has been done. [Paras 32, 33] [10,H; 11,A-B,D] 2.1. There is nothing to show that the assets in ques- 8 tion which were auction-sold were ever given out to be ___;_ scrap. They were not mentioned as scrap in the adver- ' tisement or sale notice, nor was there any material to show that the valuer valued them treating them to be scrap. The word 'scrap' would ordinarily mean something which can- not be used for the same purpose for which it was being c earlier used even after repairing or renovating the same. There is nothing to show that the items proposed to be
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