1993 (9) TMI 293 - SC - Companies Law

Custody of company s property - Sale to be subject to confirmation by court - Held that - If the amount was not already deposited in any interest earning deposit or securities, the learned company judge or the official liquidator is free to deposit the amount, till the auction is finalised. In the event of the appellant not becoming the highest bidder, the equities in respect of his deposit regarding interest may be worked out and adjusted by the learned company judge.

Summary

Issues:
1. Validity of the concluded sale and subsequent re-auction.
2. Discretion of the court in conducting auctions.
3. Upset price fixation and bidder participation.
4. Terms and conditions of the sale set by the court.
5. Execution and registration of the sale deed pending appeal.
6. Handling of the deposited amount in case of unsuccessful bidding.

Analysis:
The Supreme Court addressed the issue of the validity of a concluded sale and subsequent re-auction in the winding-up proceedings of India Electric Works Ltd. Initially, the court directed the sale of a plot through open auction, which resulted in the appellant becoming the highest bidder at Rs. 1.10 crores. However, on appeal by the respondent, the Division Bench directed a fresh auction. The appellant argued that the repeated interference with auctions could deter prospective bidders and affect the competitive bid process. The respondent offered to pay Rs. 1.25 crores, indicating the property's potential to fetch a higher price.

Regarding the discretion of the court in conducting auctions, the Supreme Court emphasized the importance of maintaining openness and preventing underbidding or fraud. The court highlighted the need for meaningful intervention to ensure fair prices and prevent the formation of syndicates. The court set the upset price at Rs. 1.50 crores for the fresh auction, considering the offers made by the parties and the property's market value.

The terms and conditions of the sale, as set by the court, allowed for modifications and alterations deemed fit by the court. The court also retained the authority to set aside the sale in favor of the purchaser even after confirmation, for the benefit of creditors, contributories, and public interest. The Division Bench's order specified that any conveyance executed would abide by the appeal's result, indicating the conditional nature of the sale deed's execution and registration pending appeal.

In handling the deposited amount of Rs. 1.10 crores by the appellant, the court directed that the amount could remain deposited without further additions to meet the upset price. If the appellant did not emerge as the highest bidder, the court would address the equities regarding the interest earned on the deposit. The appeal was disposed of with each party bearing their own costs in the court proceedings.