K. Ramaswamy, J.— Special leave granted.
2. In the winding-up proceedings of India Electric Works Ltd. one of its assets, namely, an open land situated in Delhi was offered for sale by sealed tenders. The appellant and Mr Shantilal Malik, 22 Defence Colony Market, New Delhi and others submitted their tenders. At an open auction held on 31-7-1992 from an offer of Rs 2,00,000, Mr Malik became the highest bidder for Rs 37,00,000. He was directed to deposit 25 per cent of the bid amount within two weeks and the remainder within 60 days. The learned Company Judge, Calcutta High Court posted the case to 14-8-1992 for further action. On 14-8-1992 the appellant offered a sum of Rs 38,00,000. The Company Judge after consideration allowed the petition of the appellant and directed to deposit 10 per cent of the bid by 17-8-1992 and balance 15 per cent to make up 25 per cent by 24-8-1992 and adjourned the case to 1-9-1992. Shantilal Malik, the second respondent also was given an opportunity to increase his offer. Feeling aggrieved against this order Shantilal Malik filed an appeal before the Division Bench. The Division Bench by the impugned judgment dated 15-9-1992 set aside the order of the Company Judge and directed to confirm the sale to Shantilal Malik at Rs 37,00,000 as against which the present appeal has been filed. When the appellant offered Rs 45,00,000, by order dated 29-10-1992 this Court directed the appellant to deposit the said sum of Rs 45,00,000 after taking into account the sum already deposited in the Company Court within a period of three weeks from that date. Pursuant thereto the appellant deposited the amount.
3. The Division Bench set aside the order on the ground that
“after acceptance of the offer by the Company Judge, the sale should have been treated as closed and it would not have been proper for the Court to consider any other offer under subsequent date even if such subsequent offer was higher. The earlier offer already accepted by the Court could not be rejected upon some higher offer made later on; if this course is accepted then there will be no finality in any matter and in such event every now and then the offer already accepted may be upset by being rejected in view of some higher offer.
… If an offer is accepted then such offer cannot be later on rejected unless there are some strong grounds, namely, that the price offered is inadequate or that some action of fraud is involved. In the present case before us none of such elements was there before the trial court calling for rejection”.
Admittedly the sale is subject to acceptance by the Court and as per Condition 11 even a confirmed sale is liable to be set aside.
4. In Navalkha & Sons v. Ramanya Das (1969) 3 SCC 537, (1970) 3 SCR 1 at p. 5 this Court held that the court is the custodian of the interests of the company and its creditors and the sanction of the court required under the Companies Act has to be exercised with judicial discretion regard being had to the interests of the company and its creditors as well. Where the acceptance of the offer by the Commissioner is subject to confirmation of the court, the offeror does not, by mere acceptance, get any vested right in the property so that he may take automatic confirmation of this offer. The condition of confirmation by the court operates as a safeguard against the property being sold at inadequate price whether or not it is a consequence of any irregularity or fraud in the conduct of the sale. In every case it is the duty of the court to satisfy itself that having regard to the market value of the property the price offered is reasonable. Unless the court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion. In that case the Court upheld the order of the Company Court reopening the concluded sale and reauction was upheld. In Kayjay Industries (P) Ltd. v. Asnew Drums (P) Ltd. (1974) 2 SCC 213 in a court sale under Order 21 Rule 90 when it was set aside, this Court held that a court sale is a forced sale and, notwithstanding the competitive element of a public auction, the best price is not often forthcoming. The Judge must make a certain margin for this factor. A valuer's report, good as a basis, is not as good as an actual offer and variation within limits between such an estimate, however careful, and real bids by seasoned businessmen before the auctioner are quite on the cards. A businessman makes uncanny calculations before striking a bargain and that circumstance must enter the judicial verdict before deciding whether a better price could be had by a postponement of the sale. In Radhey Shyam v. Shyam Behari Singh (1970) 2 SCC 405, AIR 1971 SC 2337 this Court considering the scope of Order 21 Rule 90 CPC held that in order to set aside an auction-sale what has to be established is that there was not only inadequacy of the price but that inadequacy was caused by reason of the material irregularity or fraud.
5. The purpose of an open auction is to get the most remunerative price and it is the duty of the court to keep openness of the auction so that the intending bidders would be free to participate and offer higher value. If that path is cut down or closed the possibility of fraud or to secure inadequate price or underbidding would loom large. The court would, therefore, have to exercise its discretion wisely and with circumspection and keeping in view the facts and circumstances in each case. One of the terms of the offer in this case is that even confirmation of the sale is liable to be set aside by the High Court as per clause 11 of the conditions of offer. The sale conducted was subject to confirmation. Therefore, mere acceptance of the offer of Mr Shantilal Malik does not constitute any finality of the auction nor can be automatically confirmed. The appellant offered higher price even now at Rs 45,00,000. Keeping in view the interest of the Company and the creditors and the workmen to whom the sale proceeds would be applied, the learned Company Judge was right in exercising her discretion to reopen the auction and directing Mr Shantilal Malik as well to make higher offer than what was offered by the appellant. In every case it is not necessary that there should be fraud in conducting the sale, though on its proof the sale gets vitiated and it is one of the grounds to set aside the auction-sale. Therefore, the discretion exercised by the learned Single Judge cannot be said to be unwarranted. Under the circumstances we are satisfied that the Division Bench of the Calcutta High Court committed manifest illegality in interfering with the order of the learned Single Judge. The appeal is allowed. The order of the Division Bench is set aside. The observation of the learned Single Judge are also expunged. The offer of the appellant of Rs 45,00,000 shall be the minimal. It is open to the second respondent, Mr Shantilal Malik to participate in the auction and the learned Single Judge is directed to conduct the auction in the open court between the parties and the highest offer may be accepted as per law and action be taken thereon as per law. The appeal is accordingly allowed but in the circumstances parties are directed to bear their own costs.