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CASE NO.: Appeal (civil)  8358 of 2004

PETITIONER: Cifco Properties Pvt. Ltd. & Ors.

RESPONDENT: The Custodian & Ors.

DATE OF JUDGMENT: 31/03/2005

BENCH: CJI R.C. Lahoti, G.P. Mathur & P.K. Balasubramanyan

JUDGMENT: J U D M E N T

R.C. Lahoti,  CJI  

       This appeal is directed against an order of interlocutory  nature passed by the Special Court constituted under the  provisions of the Special Courts (Trial of Offences Relating To  Transactions in Securities) Act, 1992 (hereinafter ’the Act’, for  short).

       Sale of certain properties is being held.  The appellants do  not dispute the liability of the properties to be sold for the  recovery of dues. The Special Court initially directed the High  Court Receiver to hold the sale of the properties. It appears that  the High Court Receiver was not able to hold the sale  proceedings expeditiously and to the satisfaction of the Special  Court and the Court formed an opinion that this was because the  High Court Receiver was over-burdened with work. The Court  directed further proceedings of sale to be conducted by the  Custodian appointed under the Act as requisite infrastructure for  functioning as Receiver was available with the Custodian.   Accordingly, the Court directed the Custodian to act as Receiver  and hold and conduct the sale obviously under the directions of  the Court. The Court also directed the progress report to be filed  by the Custodian before the Court every four weeks.   

       The singular submission made by Dr. Rajiv Dhawan, the  learned senior counsel for the appellants, is that the Custodian  plays more or less an adversarial role in the proceedings before  the Special Court and, therefore, it would not be just and fair to  permit the sale proceedings being conducted by the Custodian.   It was urged that the proceedings should be held by the High  Court Receiver only and he could be directed to conduct the sale  proceedings expeditiously. The prayer made on behalf of the  appellants has been opposed on behalf of the Custodian- respondent No. 1. It was submitted that ordinarily the Custodian  holds and conducts the sale of immovable properties as directed   by the Special Court and an interference with the impugned  order, which is very reasonable and does not cause any  prejudice to anyone, is uncalled for.

       The learned senior counsel for the appellants invited the  attention of the Court to Gajadhar Prasad & Ors.  v.  Babu  Bhakta Ratan & Ors., (1973) 2 SCC 629, and submitted that  various precautions in holding and conducting the sale to be  observed by any court consistently with the observations made  by this Court in the cited decision are not being observed and,

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therefore, the property may not fetch the best price.  In  particular, it was submitted that the reserve price has not been  determined by the Special Court as it ought to have been.    

       Having heard the learned counsel for the appellants and  respondent No. 1, we are satisfied that an interference with the  impugned order passed by the Special Court, which is purely  interlocutory and does not decide any rights of any party, is  uncalled for. Our attention is invited to the decision of this Court  in Canbank Financial Services Ltd.   v.  Custodian & Ors.,   (2004) 8 SCC 355 (para 69), wherein this Court has pointed out  that one of the main functions to be performed by the Custodian  is to deal with properties in the manner as directed by the  Special Court.  The learned counsel for respondent No. 1 pointed  that every precaution is taken to protect the interest of the  person whose property is being sold, as also of all the other  parties concerned so as to fetch the maximum price of the  property subjected to sale.

       The learned counsel for respondent No. 1 also pointed out  that the Custodian follows the same procedure for the sale of  immovable assets as followed by the Official Receiver of Bombay  High Court in holding auction of the immovable assets of notified  persons. It was pointed out that the Custodian at first gets the  valuation of the immovable asserts to be sold. The valuation is  done by the valuer appointed either by the Special Court or on  the directions of the Special Court. The Valuation Reports are  submitted by the valuer to the Special Court in a sealed cover.   After this, the Custodian releases advertisement in prominent  newspapers in the city/town where the immovable property is  located. The last date and time for receiving the bids is fixed.   The Committee to open the bids is formed by the Custodian.   The Committee meets on the appointed time and date where  bidders are also expected to be present. All the bids are opened  before the bidders and their signatures are obtained. The bid  amount of different bidders is announced to the bidders. Then all  the bidders are given opportunity to enhance the bid amount, if  they so desire. The enhanced bids of all the bidders are compiled  and their signatures are taken. All the bids along with the  enhanced bids are then submitted to the Presiding Judge of the  Special Court where the date is fixed for the consideration of the  report of the Custodian on the bids received. The date fixed for  consideration of the report in the Special Court is communicated  to all the bidders indicating that they can enhance their bid  before the Special Court, if they so desire.  The bidders who are  interested,  appear before the Hon’ble Special Court and can  enhance their bid.  Based on the final bid received before the  Hon’ble Special Court, the Hon’ble Judge may consider passing  an Order confirming the sale of the immovable property in  favour of a particular bidder.  It is seen that the highest bid has  been considered by the Special Court if it matches or is higher  than the Valuation amount of the immovable property. Hence,  the bidders at first give their bid in a sealed cover to the  Custodian.  Then bidders have the option to enhance their bid  amount before the Committee formed by the Custodian. Then  again these bidders can enhance their bid amount before the  Special Court.

       During the course of hearing it was brought to our notice  that a public notice for holding auction of the property in the  present case was issued by the Custodian on the 10th day of  March, 2005 and the last date appointed for receiving the bids is  31st March, 2005.  A copy of the public notice was produced for  the perusal of the Court.  We do not deem it proper, in the facts  and circumstances of the present case, to interfere midway and

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alter the course of the sale proceedings which are already  nearing the accomplishment shortly.

       Needless to say, before the bids are finalized and the Court  accepts any bid, the appellants herein would have the  opportunity of hearing and, if the Court feels convinced that the  property has not fetched the best or the expected reasonable  price then the Court is not powerless to reject all the bids and  order auction afresh, subject to such directions as it may choose  to make as to the manner of holding and conducting the sale  and the person who would do it under the directions of the  Court.

       That being the position of law, the appeal is dismissed.   The interim order of stay passed on March 29, 2005 stands  vacated.