-Report by Moksh Kapoor
The appellant’s contention was set aside by the Supreme Court in the case of RAJIV KUMAR JINDAL AND OTHERS VERSUS BCI STAFF COLONY RESIDENTIAL WELFARE ASSOCIATION AND OTHER. Decided on 27-04-2023.
BCI was deemed a sick company, and assets of BCI were disposed of in accordance with the directions of the Board for Industrial and Financial Reconstruction. (BIFR) commenced the procedure of inviting sealed cover proposals for the sale of assets of the captioned unit under Section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the “Act 1985”) through IDBI – the Operating Agency. In a public notice dated May 24, 2004, offers were invited for various blocks, with the interested parties being asked to deposit earnest money of Rs.6 lakhs for Block IV and submit their tenders in a sealed cover within 30 days of the date of the 3 advertisements, and for further information, the interested parties may contact Mr. P.M. Nair, DGM, IDBI, Mumbai, the office of the BIFR’s Assets Sale Committee, and the agency reserved the right to accept or reject any bid without assigning any reason. In accordance with Section 21(c) of the Act, 1985, the Operating Agency was required to evaluate the realisable value of the property from the approved valuer and then notify the reserve price in the auction notice, which was not done, and the solitary bid submitted by the appellants in Civil Appeal No. 10128 of 2011 of Rs.2,84,00,000/- on 22nd June 2004 was accepted by the authority. The appellants were directed to provide a bank guarantee for a bid value of Rs.2,84,00,000/- for a term of one year by August 27, 2004, and to deposit payment in instalments. The appellants were hesitant to provide the bank guarantee of Rs.2,84,00,000/ from the start, but they allegedly showed their willingness to pay the value of the assets in accordance with the bid within six months. However, the appellants did not submit a bank guarantee of Rs.2,84,00,000/- or deposit a penny after the ASC approved the proposal by communication dated August 12, 2004. Because the appellants (in this case) are unwilling to follow the ASC rules, the Bench declined to accept the proposal.
The advertisement was published by the IDBI (Operating Agency), but the ASC guidelines were not attached, and the parties were not informed. They are required to furnish a bank guarantee as security for the bid amount, and requiring the appellants to act on the guidelines and furnish a bank guarantee at the stage of bid acceptance was not justified, as determined by the AAIFR in its order dated 1st April 2005, and which has not been properly appreciated by the High Court. Appellants paid the entire sale consideration on June 3rd and 7th, 2005, in accordance with the tripartite Memorandum of Understanding. The High Court made a manifest error in failing to consider that once the auction sale is confirmed, objections to the said auction can only be entertained if there are material irregularities and fraud appellants had scrupulously adhered to the conditions of the ASC and were ready to pay the entire saleconsideration, and until September 2004, the appellants were never informed that a bank guarantee equal to the bid sum would be required. The appellants herein made over the bid sum of Rs.2,84,00,000/- on 3rd and 7th June 2005, immediately after their appeal was approved by the AAIFR, and hence there was no breach of any terms and circumstances of the sale of assets.
The appellants submitted an offer of Rs.3 crores, which was more than their bid in Civil Appeal No.10128 of 2011, and they were successfully residing for a sufficiently long time over the property in question put up for auction, at the very least they seek the Court’s indulgence that their offer 2 (2018) 8 SCC 243 10 be accepted and the authorities be directed to execute the sale certificate in their favour the employees of the company in liquidation have not participated in the proceedings but their dues are still outstanding and could not have been made over in the absence of funds available. Upholding the Division Bench of the High Court’s decision, the BIFR or the Official Liquidator may be summoned to launch a new bidding procedure to maximise the value of the property that may provide some comfort to the staff whose dues have been outstanding for a long time and they have a superior claim over the company’s financial creditors in a liquidation.
Undisputedly, the appellants (auction bidder) have not paid the selling consideration in accordance with clause (h) of the rules, nor have they provided the bank guarantee within 15 days of the acceptance of the offer bid in accordance with the guidelines’ clause (i). When the case was heard by the BIFR, the Bench noted that the appellants, M/s Rajiv Kumar Jindal and others, were the lone bidder for Block IV of the Rajpura Unit and had not followed the ASC criteria. Taking both facts into account; (i) the appellant being the lone bidder; and (ii) ASC guidelines not being followed, the appellants’ bid was not confirmed, However, when the appellants filed an appeal, the AAIFR ignored the fact that the ASC’s standards were not followed and the appellant was wrongfully convicted, The single bidder, because there was no competition bidding, which is usually important to ensure that the property’s worth is maximised. The Tripartite MOU was executed with no substance because the procedure initiated by the Operating Agency in the first instance was defective from the start, and prior to the initiation of the 20 auction proceedings, neither the value of the property was assessed through the approved valuer nor the reserve price was notified in the auction notice dated May 24, 2004, The appellants’ money paid in Civil Appeal No. 10128 of 2011 shall be refunded in accordance with the impugned High Court ruling dated February 5th, 2010. Simultaneously, the official liquidator may use all reasonable means to obtain the highest possible value for the property in order to achieve the purpose of public auction.
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