2000 (9) TMI 931 - SC - Companies Law

Whether after an order passed in execution proceedings for the sale of plant, machinery and movable lying at the factory, can the same Court later pass an order for sale of the factory of the company as a going concern ? Held that - After considering submission of the learned counsel for the parties, we are granting this indulgence, by permitting the sale of the company as a going concern with certain conditions only. The Official Liquidator for this purpose shall advertise the sale of the company in liquidation-judgment-debtor as a going concern as ordered by the High Court. Such publication shall indicate that the reserve price, shall be the amount equal to the total decree including interest which has accrued upto 31-12-1999 in favour of the appellant-bank, and shall also has to pay the balance interest which accrues, till full payment is made. The publication shall also indicate that purchaser has also to pay the liabilities of other claimants in the proceeding for the liquidation of the company.

Issues involved:
1. Whether a court can pass an order for the sale of a factory as a 'going concern' after an order for the sale of plant, machinery, and movable assets?
2. Whether selling the factory as a 'going concern' nullifies the execution of the decree?
3. Whether the sale of assets should be limited to the security of the bank or include the entire company?
4. What factors should be considered in determining the method of sale to maximize price and satisfy creditors?
5. Whether compassionate considerations for workers justify selling the company as a 'going concern' despite being non-functional for an extended period?

Detailed Analysis:

1. The appellant, a bank, raised concerns about the court's order for the sale of a factory as a 'going concern' after an initial order for the sale of specific assets. The appellant argued that selling the entire company would nullify the execution process, emphasizing the need to first satisfy the security held by the bank.

2. The appellant contended that the company in liquidation had been non-functional for over a decade, making revival as a 'going concern' impractical and financially burdensome for potential buyers. The appellant sought separate sales of plant, machinery, and movable assets to maximize returns and cover liabilities effectively.

3. The court considered the interests of the bank as the sole secured creditor and the total decree amount to determine the most suitable method of sale for maximizing creditor satisfaction. The court highlighted the importance of assessing a company's potential for revival or liquidation based on its operational status and financial health.

4. Citing precedent, the appellant relied on a case where sympathies for workers led to an unjustified sale of a closed company. The court emphasized the need for credible evidence to support decisions regarding the sale of a company as a 'going concern.'

5. Despite the company's prolonged non-functionality and failed attempts at revival, the court acknowledged the workers' interests and allowed for a final attempt to sell the company as a 'going concern' under strict conditions. The court set a reserve price equal to the total decree amount and imposed obligations on the purchaser to settle all liabilities.

6. The court granted a specific timeframe for concluding the sale, with a provision to revert to selling individual assets if the 'going concern' sale was not successful. The modified orders directed the Official Liquidator to proceed with the sale accordingly to satisfy creditors' interests effectively.

7. In conclusion, the court balanced the interests of the bank, workers, and other creditors by allowing a limited opportunity for the sale of the company as a 'going concern' while ensuring creditor satisfaction and legal compliance in the liquidation process.

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