1995 (1) TMI 291 - HC - Companies Law

Summary

Issues Involved:
1. Refusal to exercise power under rule 9 of the Companies (Court) Rules, 1959.
2. Confirmation of the sale of 6,100 equity shares of Kalinga Sevenska Limited.
3. Fairness and legality of the sale process.
4. Maintainability of the appeal by a bidder.

Issue-Wise Detailed Analysis:

1. Refusal to Exercise Power under Rule 9 of the Companies (Court) Rules, 1959:
The appeals were directed against the refusal of the learned company judge to exercise power under rule 9 of the Companies (Court) Rules, 1959, to set aside the order confirming the sale of 6,100 equity shares. The appellants contended that the sale was not conducted in a fair manner, and the learned company judge failed to exercise judicial discretion properly.

2. Confirmation of the Sale of 6,100 Equity Shares of Kalinga Sevenska Limited:
The sale process involved multiple bidders, with the highest initial offer being Rs. 114 per share by Nilasaila Nayak. However, as Nayak failed to deposit the consideration, the second highest bidder, A.P. Singh, was considered, but he too failed to comply. Subsequently, Sricharan Das, who was the sixth highest bidder, offered to purchase the shares at Rs. 114 per share, which was accepted by the learned company judge on May 30, 1989, and confirmed on July 17, 1989.

3. Fairness and Legality of the Sale Process:
The appellants argued that the sale process was unfair and arbitrary. The third highest bidder, Kedar Rout, and the fourth highest bidder, Pradipta Mohanty, were not given an opportunity to negotiate or match the offer made by Sricharan Das. The court observed that the official liquidator and the learned company judge failed to consider the possibility that higher bids could have been obtained if the appellants were given a chance to negotiate. The court emphasized that the sale should have been conducted in a manner that ensured the best price for the company and its creditors.

4. Maintainability of the Appeal by a Bidder:
The respondent challenged the maintainability of the appeal, relying on a decision that suggested a bidder cannot appeal an order in a winding-up proceeding. However, the court disagreed, stating that under section 483 of the Companies Act, 1956, any order or decision in the matter of winding up is appealable. The court held that the interests of the company and its creditors are paramount, and an appeal against an order of confirmation of sale is maintainable if it serves those interests.

Conclusion:
The court set aside the impugned order, allowing the appeals. It directed the official liquidator to enter into negotiations with Sricharan Das and the two appellants and to put the result before the learned company judge for appropriate orders. The court emphasized that the sale process should be fair and ensure the best price for the company and its creditors.