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LMJ International Ltd. v. Dankuni Steels Limited

Civil Appeal · 2017 INSC 1231Decided 14 Dec 2017
Civil Appeal No. 20902 of 2017
Justice A.K. Sikri · Justice Ashok Bhushan

Background

In litigation between LMJ International and Dankuni Steels and others over title to 10,000 metric tonnes of imported Metallurgical Coke, the Calcutta High Court had directed a court-appointed Special Officer to sell the coke by public auction and hold the proceeds pending the outcome of the underlying suit. Four bids were received, and the High Court accepted the highest bid (from Respondent No. 5) after rejecting LMJ's objections. LMJ appealed, arguing the accepted bid was actually below the fixed reserve price once taxes and charges were properly accounted for, and that the highest bidder had in fact tried to withdraw from the auction earlier.

Decision Breakdown

The Supreme Court found that the reserve price of Rs. 13,000/MT fixed by the valuers was exclusive of taxes and port charges, but the High Court had wrongly treated the winning bid of Rs. 14,000/MT as if it already included those charges. Once taxes, customs duty and port charges (roughly Rs. 5,100/MT) were deducted, the real value of the accepted bid fell to about Rs. 8,895/MT, well below the reserve price, making its acceptance legally impermissible. The Court also noted the winning bidder's counsel had earlier stated in open court that his client wished to withdraw from the auction altogether. The appeal was allowed, the High Court's order was set aside, and the Special Officer was directed to obtain a fresh valuation and conduct a fresh auction with the public notice clearly stating whether the reserve price is inclusive or exclusive of taxes.

Lesson Learnt

In any court-supervised auction, the terms of the public notice must clearly state whether the quoted price includes or excludes taxes and duties: ambiguity on this point can make an apparently "highest" bid actually fall below the real reserve price, entitling an aggrieved party to insist that the entire auction be redone.

Official source (sci.gov.in)View Judgment (PDF)

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