Even legal sale can be set aside if price inadequate: HC

Observing that a sale of a property could be set aside if the confirmation of the sale is at a ‘grossly inadequate’ price, the Bombay High Court recently dismissed a plea moved by Everest Fincap private limited. The HC has also imposed costs of Rs 1 lakh on the firm.

A division bench of Justice Bhushan Gavai and Justice Riyaz Chagla heard a writ petition filed by Everest Fincap, challenging the August 2008 orders of the Debt Recovery Appellate Tribunal (DRAT), Mumbai, which had set aside the orders of the Debt Recovery Tribunal (DRT).

The DRT had passed the order in the favour of Everest Fincap, after an official liquidator was appointed, who sold the property to the firm. The property was sold after the firm made a final settlement and valued the 28,437.29 square meters mill land at the rate of Rs. 39.95 crore.

Subsequently, the directors/guarantors brought to the notice of DRT (before the same judge/presiding officer) that certain facts of the case were suppressed.

The DRT’s orders were then challenged before the DRAT, which quashed it on the ground that material facts were not brought on record. The DRAT also considered the fact that some parties were ready to get the subject property sold at Rs 70 crore approximately.

Having aggrieved by the orders of the DRAT, the Everest Fincap approached the Bombay HC through senior counsel P Chidambaram, claiming that all its payments were made within the four walls of law.

However, the judges relied upon the ruling of the Supreme Court, wherein the apex court had held ‘even if there is no irregularity, fraud in the conduct of the sale, if it is found that the confirmation of the sale is at a grossly inadequate price, then the sale can be set aside.’