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IN THE HIGH COURT OF BOMBAY
(NAGPUR BENCH)
Dharmadhikari B.P., J.
Narendra Dada Agro Ind.
O.L.R. No. 46 of 2003 with O.L.R. No. 10 of 2003 in Company Petition No.13 of 2002, decided on 9-1-2006.
Forfeiture of Earnest Money - Company Liquidation - Andhra Pradesh Paper Mills Ltd. v. State of Maharashtra, Delhi Development Authority v. Grahsthapana Co-operative Housing Society Ltd., Hasmukhlal v. Municipal Corporation, Narendra Kumar v. M/s. Nandi Hasbi Textile Mills Ltd. - The court discussed the terms and conditions of the sale, the validity of forfeiture, and the legal principles governing the forfeiture of earnest money. The judgment emphasized the importance of the terms and conditions agreed upon by the parties and the significance of payment or acceptance of earnest money in such contracts. It concluded that the Official Liquidator was entitled to forfeit and retain the earnest money deposits of the bidders.
Fact of the Case:
M/s Narendra Dada Agro Industries Ltd. was ordered to be wound up by the Court, and the official Liquidator sought permission to advertise the company property for sale. Multiple bids were received, and negotiations were held, but some bidders withdrew their offers and requested a refund of earnest money. The Court had to decide whether the earnest deposits of the bidders should be forfeited.
Finding of the Court:
The Court found that the terms and conditions of the sale, including clauses related to earnest money and forfeiture, were crucial in determining the rights of the bidders. It concluded that the Official Liquidator was entitled to forfeit and retain the earnest money deposits of the bidders.
Issues: The main issue was whether the earnest deposits of the bidders should be forfeited, considering their withdrawal from the auction process and the terms and conditions agreed upon.
Ratio Decidendi: The judgment emphasized the importance of the terms and conditions agreed upon by the parties and the significance of payment or acceptance of earnest money in such contracts. It concluded that the Official Liquidator was entitled to forfeit and retain the earnest money deposits of the bidders.
Final Decision: The Court allowed the prayer for the forfeiture of earnest money deposits and disposed of the proceedings accordingly. It also ordered the bidders to pay costs to the Official Liquidator.
Property. Earnest Money.
a) Land & Building. Rs. 1 lakh.
b) Plant & Machinery. Rs. 5 lakhs.
c) Stocks. Rs. 50,000/.
d) Composite Offer. Rs. 6,50,000/.
2. The above advertisements also indicated that the Company can be sold as "going concern" and bids can be submitted even for such purchase. On 23-6-2003, tenders were opened in presence of bidders, secured, creditors. Out of total 9 offers received, 3 were interested in purchasing the Company as "going concern". In the inter se bidding held, following offers were received: PARTIES OFFER
Bhaskar Exxols Ltd. Rs. 4,87,00,000/.
Sankh Impex. Rs. 4,85,00,000/.
Mahendra Kumar & Co. Rs. 1,17,00,000/.
3. As Mahendra Kumar & Company were lowest and unwilling to go further in inter se bidding, the Official Liquidator returned their Earnest money. It is alleged that Sankh, Impex had put certain conditions which were not accepted by the Official Liquidator and hence, it Withdrew its offer to purchase as "going concern". According to Bhaskar Exxols Ltd., the sale notice was dated 13-6-2003 and it had quoted Rs. 3,11,00,000/- as its composite offer and it deposited Rs. 6,50,000/as earnest money. On 23-6-2003, it provisionally increased its offer to Rs. 4,87,00,000/- as the Official Liquidator could not disclose details about liability status of the company in liquidation. It is alleged that, therefore, it and the other bidders did not sign the bid sheet and the proceedings dated 23-6-2003 remained inconclusive. The Official Liquidator held further meeting on 266-2003, but it was attended only by the Secured Creditors and none of the bidders were present. It appears that the Official Liquidator had received fresh offers and he decided to obtain appropriate orders from this Court to entertain the fresh offers and to hold meeting on 30-6-2003. It is stated that said permission was granted on 27-6-2003 and the meeting was held accordingly on 30-6-2003. No bidder was present and hence, there could not be any decision about selling the company as "going concern", On 30-6-2003, only secured Creditors were present and it was decided to move High Court with proposal that - in case of Bhaskar Exxols Ltd., if sale is confirmed and they do not turn up to deposit balance amount, their Earnest Money should be forfeited, while in case of - M/s Sankh Impex Ltd., the offer being second highest offer, said bid should be accepted. Accordingly, on 3-7-2003, OLR 46/2003 came to be filed seeking various reliefs, as mentioned therein including relief in the alternative to re-advertise.
4. On 4-7-2003, this Court passed orders in OLR 46/2003 and directed further negotiations to be held to dispose of the Company as "going concern". Accordingly, after due notice, meeting was conducted on 16-7-2003, but again none of the bidders participated in it. On 4-8-2003, the Official Liquidator filed pursis mentioning that Bhaskar Exxols Ltd. has, on 2-7-2003 and M/s Sankh Impex has, on 29-7-2003, written letters mentioning that they were not interested in purchasing the property and claimed refund of Earnest Money. In this background, on 12-9-2003, this Court directed the Official Liquidator to issue notice to these two bidders
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