1990 (3) TMI 246 - HC - Companies Law

Summary

Issues Involved:
1. Winding up of Hanuman Cotton Mills Ltd.
2. Appointment of a valuer for asset valuation.
3. Sale of assets through public auction and sealed tenders.
4. Adequacy of advertisement and reserve price.
5. Confirmation of sale and objections by secured creditors.
6. Agreement with workmen's unions.
7. Subsequent higher offers and their impact on confirmed sales.
8. Judicial discretion in confirming or setting aside sales.
9. Appeal against the confirmation of sale.

Detailed Analysis:

1. Winding up of Hanuman Cotton Mills Ltd.
By an order passed on August 3, 1988, Hanuman Cotton Mills Ltd. was wound up, and the official liquidator was directed to take possession of the assets of the company, which included the plant, machinery, land, and building of the manufacturing unit situated at Fuleshwar, Howrah.

2. Appointment of a Valuer for Asset Valuation
On October 6, 1988, the official liquidator sought a direction from the court for the appointment of a valuer to value the assets. A valuer was appointed on December 22, 1988, and the report submitted on April 12, 1989, valued the assets at a little above rupees one crore.

3. Sale of Assets Through Public Auction and Sealed Tenders
The court issued directions on April 21, 1989, for the sale of the assets of the company (in liquidation) by public auction and by inviting sealed tenders. The reserve price was fixed at rupees one crore. The advertisement for the sale was published in newspapers, and the offers were to be opened on June 2, 1989. However, the offers received were below the reserve price, leading to a fresh sale date being fixed for July 8, 1989, with subsequent advertisements.

4. Adequacy of Advertisement and Reserve Price
The reserve price was later raised to Rs. 1,15,00,000 at the instance of Indian Bank, one of the secured creditors. Advertisements were published in multiple newspapers across India, and 21 parties collected copies of the terms and conditions of sale. The sale was to be conducted on "as is where is and whatever there is" basis and subject to confirmation by the court.

5. Confirmation of Sale and Objections by Secured Creditors
On September 26, 1989, the court accepted the appellant's offer of Rs. 1,15,00,000 and confirmed the sale in his favor, subject to further orders. However, objections were raised by Indian Bank regarding the sale of assets as a going concern. The court kept the confirmation in abeyance and returned the earnest money to the appellant.

6. Agreement with Workmen's Unions
The workmen of the company had filed an application to run the manufacturing unit by forming a workmen's co-operative society. An agreement was entered into between the workmen and the appellant on May 31, 1989, and subsequently modified on September 22, 1989, outlining terms for reopening the mill and employment conditions.

7. Subsequent Higher Offers and Their Impact on Confirmed Sales
On February 6, 1990, fresh offers were made, and the highest offer of Rs. 1,85,00,000 by the first respondent was accepted and confirmed by the court. The appellant's subsequent higher offer of Rs. 2,10,00,000 made on February 7, 1990, was rejected by the court, which emphasized the finality of the sale once confirmed.

8. Judicial Discretion in Confirming or Setting Aside Sales
The court exercised its discretion to confirm the sale in favor of the first respondent, considering the adequacy of the price and the absence of any irregularity or fraud. The court's discretion was guided by the principles laid down in Navalkha and Sons v. Ramanuja Das and Roshan and Co.'s case, emphasizing that the sale should fetch an adequate price and subsequent higher offers alone do not justify setting aside a confirmed sale.

9. Appeal Against the Confirmation of Sale
The appellant's appeal against the confirmation of sale was heard, and the court reiterated that the exercise of discretion by the trial court was neither unreasonable nor capricious. The appeal was dismissed, and the court upheld the confirmation of the sale in favor of the first respondent, emphasizing the finality and integrity of court-ordered sales.

Conclusion:
The court confirmed the sale of the assets of Hanuman Cotton Mills Ltd. to the first respondent for Rs. 1,85,00,000, rejecting the appellant's subsequent higher offer. The court emphasized the adequacy of the sale price, the absence of irregularity or fraud, and the importance of finality in court-ordered sales. The appeal was dismissed, and the orders under appeal were upheld.