IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.6061-6063 OF 2008 (Arising out of SLP(C) Nos.15617-15619 of 2007)

M/S PRESTIGE GARDEN ESTATES PVT.LTD. ...APPELLANT (S)

VERSUS

STATE OF KARNATAKA & ORS. ...RESPONDENT(S)

O R D E R

Leave granted.

On 2nd August,  2002 BIFR  recommended winding up of  a Company known as

NGEF to the High Court.  On receiving that recommendation the High Court registered

Company Petition No. 154 of 2002 for the purpose of winding up.  On 3rd August, 2004, order

of  winding up came to  be  passed.   Thereafter, the  High Court approved the terms and

conditions for sale of the assets of the Company by public auction.

On 3rd November, 2005 Official Liquidator (OL) published a Public Notice inviting

offers.  In the meantime, two Company Applications were moved by the State of Karnataka

(majority share holders) seeking stay on sale of assets by public auction.  They suggested a

revival scheme.  They also sought permission for sale of land to KSRTC, BMRC and BMTC

by relocating the Company's factory elsewhere.  This suggestion was made as part of revival

of  

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the Company.  In the meantime, during the interregnum the Official Liquidator vetted the

bids received for purchasing the assets of the Company pursuant to the directions of the High

Court.

On 14th December, 2005, pending the revival scheme, the Company Court passed

an order on the report of  the Official Liquidator stating that the bids  can be  processed

subject to the decision on the confirmation of the bids for purchase of assets of the Company.

On the same day, Company Applications moved by the State of Karnataka were taken up and

the sale proceedings were kept in abeyance.  Opportunity was given to State of Karnataka to

place the revival scheme before the Court.  Pending consideration of the said scheme the sale

was kept  in abeyance.   On 22nd December,  2005  the  High Court  passed  Orders on  two

applications  made by  the  State  of  Karnataka cancelling the  sale  by  auction in order to

consider the revival scheme.  It may be mentioned that M/s Prestige Garden Estates Pvt. Ltd.,

the appellant herein, was the highest bidder for the assets of the Company. In the meantime,

M/s Prestige Garden Estates Pvt.  Ltd.  challenged the order of the Karnataka High Court

putting the sale proceedings in abeyance pending consideration of the revival of the scheme.

That  appeal  was,  however,  withdrawn with  liberty to  seek impleadment in  the  pending

Company Application.  Thereafter the appellant filed  the Company Applications which were

all dismissed by the Company Court by an Order dated September 13, 2006, inter alia, on the

ground that the  appellant - M/s Prestige  Garden  Estates  Pvt. Ltd. had  

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failed to establish the legal right to file such application.  At this stage, it may be mentioned

that M/s Prestige Garden Estates Pvt. Ltd. also sought confirmation of sale by auction on the

ground that they were the highest bidder who had offered the price of Rs.1,599/- crores for

total area of land of 143.488 acres as on November, 2005.

On 21st November,  2006  two  Company Applications  were  moved  by  State  of

Karnataka seeking permission to file the revival scheme under Section 391 of the Companies

Act.  They also prayed for stay of winding up proceedings.  By the impugned judgment dated

March 30, 2007, the Division Bench of the High Court held that since the Company Judge

was not satisfied about the feasibility of a revival plan, as no revival plan was placed before

him and since the sale proceedings were not alleged to be irregular or invalid, the order of

cancellation  of  sale  notification  and  termination of  proceedings  under Order dated  22nd

December, 2005 was not correct.  On the question of locus, the Court observed that summary

termination of sale proceedings were arbitrary.  On the question of acceptance of the bid of

M/s Prestige Garden Estates Pvt. Ltd. and its confirmation the Court, however, held that due

to efflux of time the same did not merit consideration and since the bids were not accepted by

the Company Court, it was always open to call for fresh bids on the footing that there  is a

wide  variance with  the current  market price in  

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comparison to the price offered in the auction held in November, 2005.  Aggrieved by the said

decision this Court is moved by way of Civil Appeal

During the pendency of the Special Leave Petitions we directed, vide Order dated

15.4.2008 the Central Government, to hear and decide the draft revival scheme submitted by

the State of Karnataka.

We quote  hereinbelow our Order dated 18th February, 2008 as also our Order

dated 15th April, 2008 in extenso:

Order dated 18  th   February, 2008:   

“In this matter, the Government of India has called upon the State

Government to appear before it with regard to the proposed draft scheme

submitted by the State.   We direct the Government of India to hear and

decide the matter in accordance with law within six weeks.  Union of India is

directed  to  file  its  status  report  containing  its  decision.   The  question

whether Government of India should hear all other stake holders or not may

also be considered by the Government.

In this matter, we seek assistance of  Mr. Gopal Subramanium,

learned Additional Solicitor General, as Amicus as the matter is of utmost

public importance in which large stakes are involved.

Stand over for eight weeks.”

Order dated 15  th   April, 2008:   

“............................

.............................

As can be seen from the above quoted order, we  

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had directed Government of India to hear and decide the matter regarding

the draft scheme submitted by the State of Karnataka within six weeks.  It

appears that the Central Government has vide Order dated 31st March, 2008

has  taken the  view that  the  scheme has  to  come only  through Official

Liquidator and  not through the State, particularly in view of the winding up

of the Company.

Since  this  Court  has  decided  to  monitor,  we are directing the

Central  Government  to  hear  and  decide  the  proposed  draft  scheme

submitted  by  the  State  of  Karnataka within  six  weeks  from  today  in

accordance  with  our  earlier  Order  dated  18.2.2008.   The  Central

Government is directed to submit compliance report in that regard within

the time bound programme.

List the matter after six weeks on Monday.”     

Ultimately the scheme of revival stood rejected by Government of India vide its

Order dated 20th June, 2008.

The short point involved in this case, as it stands today is, whether the property

needs to be notified once again for public auction?  In our view, the highest bid which came to

be made in November, 2005, was of course, made by M/s Prestige Garden Estates Pvt. Ltd.

which offered an amount of Rs.1,599 crores for the total area of 143.488 acres.  However,

since then an area of 23.736 acres (approximately) is being acquired for the benefit of public

purpose out of 143.488 acres leaving a balance of 119.752 acres (approximately).   

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In the matter of valuation the basic norm which the Court has to look for is the best

realizable price.  In the present case, as narrated hereinabove, before the sale confirmation,

the State of Karnataka suggested the revival scheme.  That revival scheme came to be rejected

on the ground that in the guise of revival the Company assets of the Company (in liquidation)

were sought to be disposed of.  As stated above, the revival scheme stood rejected on 20th

June, 2008.  In the meantime, what is being pointed out by the learned Amicus Curiae to the

Court is, that between November, 2005 and 31st March, 2008 prices of lands in Bangalore

have escalated.  On the other hand, it is  being argued on behalf of  M/s Prestige Garden

Estates  Pvt.  Ltd.  that since they were the highest  bidders  who had offered the  price of

Rs.1,599 crores in November, 2005 for an area of 143.488 acres even if auction has to be held

once again, the first offer should be given to the appellant herein.  We find no merits in this

argument for two reasons.  Firstly, there was no sale confirmation in favour of M/s Prestige

Garden Estates Pvt. Ltd. Secondly, for reasons for which M/s Prestige Garden Estates Pvt.

Ltd. cannot be faulted, time was consumed on account of the revival scheme being submitted

by the State of Karntaka.  It is that scheme which is indeed not accepted by Government of

India but in the process almost three years have gone by and, in our view, since the land to be

auctioned is a valuable asset of the Company in liquidation, the best  possible realizable price

is the only bench mark which needs  

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to be looked into and accordingly we are of the view that the Official Liquidator will submit

his report to the Company Court after  scrutinizing  valuation  made by  the two  valuers,

namely,  

Ms. Farhein Shah, Cushman & Wakefield India Pvt. Ltd., B-6/5, Safdarjung Enclave, New

Delhi-110 029, and ITCOT Consultancy and Services Ltd.  On receipt of the Report of the

Official Liquidator in the sealed cover, the Company Court will fix the reserve price which

shall  remain in  a  sealed  cover.   The  Company Court  will  also  approve the  terms and

conditions of public auction and according to such approval, the Official Liquidator will issue

public notice in the prominent newspapers in English, Kannada and Hindi.  After receiving

offers  from various  bidders,  the  Official  Liquidator  will  compare those  offers  with  the

reserved bid.  Those offers which fall below the reserved bid shall be rejected.  Those offers

which fall above the reserved bid shall be evaluated by the Official Liquidator who will then

submit his report to the Company Court and the Company Court will accordingly decide the

name of the highest bidder.  These are the basic steps which are required to be taken in this

case so that the best realizable value could be achieved.  We may clarify once again that best

available realizable value will be the basis of the valuation as on 31.3.2008.

Since, M/s Prestige Garden Estates Pvt. Ltd. had deposited an amount of Rs.186

crores with the Official Liquidator in November, 2005, the  Official  Liquidator  shall  return

the said

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amount to the appellant - M/s Prestige Garden Estates Pvt. Ltd. together  with  interest,  if

any.  In  this  connection, we  are  

informed  by  the  Official  Liquidator  that  he  had  deposited  the  said  amount  with  a

Nationalized  Bank.   It is not clear as to whether  

the amount was put in saving account or in F.D.R.  Be that as it may, interest  accumulated

on  the said  amount of  Rs.186 crores, if any, shall also be refunded to M/s Prestige Garden

Estates Pvt. Ltd. within a period of four weeks.

Before us, learned counsel appearing for the State of Karnataka states, on behalf of

the State Government, that the subject land would be put to auction.

We appreciate  the  valuable  assistance  rendered  to  this  Court  by  Shri  Gopal

Subramanium, learned Additional Solicitor General as Amicus.

The appeals are disposed of accordingly.

....................J. [ S.H. KAPADIA ]

New Delhi, ....................J September 25, 2008 [ B. SUDERSHAN REDDY ]