The Madhya Pradesh High Court, Indore Bench, has held that once a public auction is validly conducted in accordance with law, a subsequent offer made by a third party who did not participate in the auction process has no legal significance, even if the offer amount is higher.
In this case, the Official Liquidator had conducted an e-auction on January 29, 2025, pursuant to the directions of the Supreme Court in Rajiv Kumar Jindal v. BCI Staff Colony Residential Welfare Association, 2023 SCC OnLine 507, where it was directed that the property be sold to fetch optimum value. The reserve price was fixed at ₹29 crore, and M/s Kalindi Associates emerged as the highest bidder with a bid of ₹31 crore. Despite the successful completion of the auction, the Official Liquidator did not report the result to the Court immediately and, instead, sought time for re-auction on March 12, 2025.
On the very next day, a third party, M/s Maa Sharda Oil, deposited ₹2.90 crore in the account of the Official Liquidator along with security deposit of Rs.2.10 crores and, nearly two weeks later, submitted an offer of ₹35 crore, despite not having participated in the auction. The Asset Sale Committee considered this unsolicited offer and directed the Official Liquidator to ask Kalindi Associates to match or exceed the higher bid. Aggrieved, Kalindi Associates approached the Court, challenging the validity of the third-party offer.
The Court found that the conduct of the Official Liquidator was highly irregular and contrary to law. It emphasised that the sanctity of a concluded auction cannot be undermined by entertaining post-auction bids, as doing so would erode confidence in the judicial sale process and discourage genuine bidders.
The Court noted that the Supreme Court, in the same company’s matter (Rajiv Kumar Jindal, 2023 SCC OnLine SC 507), had categorically held that post-auction offers by non-participants are of no legal consequence.
Referring to precedents including Valji Khimji v. Official Liquidator, (2008) 9 SCC 299, K. Kumara Gupta v. Sri Markendaya and Sri Omkareswara Swamy Temple, (2022) 5 SCC 710, and Eva Agro Feeds Pvt. Ltd. v. Punjab National Bank, (2023) 10 SCC 189, the Court reiterated that once an auction is validly held and the highest bid is found to be fair and reasonable, later offers, however lucrative, cannot justify reopening the process.
Consequently, the offer by third party was held to be unauthorised, invalid and tainted by collusion. At the same time, the Court observed that the rejection of the third-party offer did not mean automatic confirmation of the sale to the Kalindi Associates. Referring to the valuer’s report, which assessed the fair value at ₹36.31 crore, the Court held that ₹35 crore would represent an adequate and reasonable price.
The Official Liquidator was, therefore, directed to inquire from M/s Kalindi Associates whether it was willing to purchase the property for ₹35 crore, and to report the outcome to the Court. The Court stated that only after such inquiry and upon deposit of the said amount could the sale be confirmed; otherwise, it would consider further directions to secure the best possible value for the company in liquidation.
Appearances
Shri H.Y. Mehta, learned counsel for the petitioner.
Shri Shashank Garg, learned Senior Advocate assisted by Shri Rahul Maheshwari learned counsel for the intervener/ M/s Kalindi Associates.
