The Hindu : Business : Court orders reauction of Standard Motor assets

Online edition of India's National Newspaper
Tuesday, Jul 12, 2005

Business

Business

Court orders reauction of Standard Motor assets

Special Correspondent

"All parties not given equal opportunity to raise their bids"

CHENNAI: Setting aside a Rs. 140-crore tender process concluded in favour of a Coimbatore-based company, the Madras High Court has ordered the reauction of the movable and immovable properties of Standard Motor Products of India Ltd.

The property under liquidation includes 57.84 acres of land on the GST Road, a large number of standing trees, buildings and plant and machinery.

A Division Bench comprising Justice P. Sathasivam and Justice A.R. Ramalingam passed the order on Monday on a batch of appeals challenging a single judge order dated November 24, 2004, awarding the tender in favour of one T. S. R. Khannaiyann. The Bench said a reauction was necessitated as not all the ten bidding parties were given equal opportunity to increase their bid; and the successful bidder could not, for various reasons, comply with the payment schedule laid down by the court.

The company was ordered to be wound up on October 4, 1996, and a sum of Rs. 63 crore was fixed as upset price. During the tender process involving ten participants, the Hyderabad-based Nuziveedu Seeds Limited quoted Rs. 135 crore, while Mr. Khannaiyann's bid was Rs. 134 crore. When the company court asked the two to increase the bid, Mr. Khannaiyann raised it to Rs. 140 crore, while counsel for Nuziveedu Seeds submitted that he could not contact his client.

Payment schedule

Accepting the offer of Mr. Khannaiyann, the company Judge had stipulated a payment schedule which would commence on December 8, 2004 and end on February 10. Questioning the order, Nuziveedu Seeds filed the present appeal. Another appeal was from the employees' union which sought Rs. 6.3 crore towards wage arrears. A third appeal was from one Krishnamoorthi, who claimed that he was ready to pay Rs. 141 crore for the property, and added that he was not called upon to increase the bid.

Writing the judgment for the Bench, Mr. Justice Sathasivam said: "It is desirable to afford adequate opportunity to all the intending bidders to secure a good price for the property."

The successful bidder did not pay the first instalment of ten per cent of the balance bid amount before December 8 as stipulated by the company court, he said, adding, "the court entertained an appeal and granted stay of the company court order 23 days after the cut-off date for payment of first instalment."

Pointing out that Mr. Khannaiyann instructed his bank to stop payment of Rs. 13.37 crore after issuing a cheque, which resulted in the Official Liquidator being asked to pay a sum of Rs. 2.67 lakhs towards "cheque returned charges," the Judges said his another cheque for Rs. 2.67 lakhs too returned owing to insufficiency of funds in the account.

Referring to Mr. Krishnamoorthi's readiness to pay Rs. 141 crore and Nuziveedu Seed's offer of Rs. 140 crore on the spot, the Bench said, "it makes it clear that all the bidders were not given adequate opportunity before the company court to increase their offer." Only two persons got the chance, and there too the successful bidder did not fulfil the conditions stipulated by the court, it added.

Fresh global tenders

The Bench directed the Liquidator to call for fresh global tenders through leading newspapers. On confirmation by the company court, the first priority shall be the wage arrears of workers, it said, adding that the EMD paid by Mr. Khannaiyann should be returned after deducting Rs. 2.67 lakhs.

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