1996 (7) TMI 474 - HC - Companies Law

Issues Involved:
1. Application for setting aside the sale confirmed on 21-7-1995.
2. Alleged irregularities by the official liquidator in conducting the sale.
3. Adequacy of the sale price in comparison to the valuation.
4. Notification and involvement of secured creditors, particularly Allahabad Bank, in the sale process.

Detailed Analysis:

1. Application for Setting Aside the Sale Confirmed on 21-7-1995:
The application sought to set aside the sale confirmed by the court on 21-7-1995, where the assets of the company (in liquidation) were sold to Naffar Chandra Jute Mills for Rs. 65 lakhs. The court reviewed the sequence of events leading to the sale, including the orders for valuation, advertisement, and the eventual sale confirmation.

2. Alleged Irregularities by the Official Liquidator:
The petitioner alleged that the official liquidator failed to perform his statutory duties and violated court orders by not securing the views of the secured creditors, particularly Allahabad Bank, before making fresh advertisements and fixing a new sale date. The court noted that the official liquidator had sent notices and held meetings with secured creditors, but Allahabad Bank did not attend the meeting on 30-5-1995 despite receiving notice. The court found no material irregularity that would warrant setting aside the sale.

3. Adequacy of the Sale Price in Comparison to the Valuation:
The court examined whether the sale price of Rs. 65 lakhs was adequate compared to the valuation of Rs. 3,30,63,451. The court noted that despite repeated advertisements and opportunities, no higher offers were received. The court cited precedents, including Kayjay Industries (P.) Ltd. v. Asnew Drums (P.) Ltd. and Navalkha & Sons v. Ramanya Das, emphasizing that mere inadequacy of price is not sufficient to set aside a sale unless there is a nexus between the undervalue and alleged irregularity or fraud.

4. Notification and Involvement of Secured Creditors:
The petitioner contended that Allahabad Bank was not properly notified about the sale proceedings and advertisements. The court found that the official liquidator had sent notices and held meetings, and the advertisements were published in leading newspapers, which served as notice to all creditors. The court concluded that the secured creditors, including Allahabad Bank, had ample opportunity to participate and raise objections but failed to bring any higher offers.

Conclusion:
The court dismissed the application to set aside the sale, stating that there was no material irregularity affecting the sale, and the price fetched was the highest possible under the circumstances. The court emphasized that repeated opportunities were given to the secured creditors to bring higher offers, but none were received. The application was dismissed with no order as to costs, and all interim orders were vacated. The official liquidator was allowed to retain his costs from the funds in his hands.

Final Orders:
1. Application dismissed.
2. No order as to costs.
3. All interim orders vacated.
4. Official Liquidator to retain costs from the funds in his hands.
5. Connected application also dismissed.
6. All parties to act on a signed copy of the operative part of the judgment.

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