1997 (3) TMI 554 - HC - Companies Law

Summary

Issues Involved:
1. Permission to sell properties of companies in liquidation.
2. Entitlement of secured creditors to sell properties.
3. Appointment and composition of the sale committee.
4. Representation of the Textile Labour Association (TLA) in the sale committee.
5. Distribution of sale proceeds among secured creditors and workers.

Detailed Analysis:

1. Permission to Sell Properties of Companies in Liquidation:
The official liquidator filed applications seeking the court's permission to sell properties of companies that had gone into liquidation, such as Amruta Mills Ltd., Nutan Mills Ltd., Omex Instores Ltd., and New Gujarat Synthetics Mills Ltd. The court considered applications from secured creditors like IFCI and IRBI, who also sought to sell these properties to recover their dues. The court decided to handle all these matters together due to common questions of fact and law.

2. Entitlement of Secured Creditors to Sell Properties:
The secured creditors, IFCI and IRBI, filed miscellaneous applications under sections 30 of the Industrial Finance Corporation of India Act, 1948, and section 40 of the Industrial Reconstruction Bank of India Act, 1984, respectively. They claimed entitlement to sell the properties of the companies in liquidation. The court noted that while secured creditors could proceed to liquidate their securities independently, they could not claim any preference over other creditors after the companies had gone into liquidation. The court emphasized that the sale of properties should be carried out under the provisions of the Code of Civil Procedure, 1908.

3. Appointment and Composition of the Sale Committee:
The court addressed the appointment of a sale committee to oversee the sale of the properties. Rule 273 of the Companies (Court) Rules, 1959, permits the court to direct sales through an agent or auctioneer, which can include a sale committee. The court highlighted that the sale committee ensures the maximum possible price for the properties and protects the interests of all stakeholders, including secured creditors and workers. The court decided to appoint sale committees comprising the official liquidator, representatives of secured creditors, and the TLA representative.

4. Representation of the Textile Labour Association (TLA) in the Sale Committee:
Secured creditors objected to the inclusion of the TLA representative in the sale committee, arguing that the official liquidator already represents the workers' interests. However, the court ruled that the TLA representative should be included in the sale committee. The court reasoned that the official liquidator's role under section 529 of the Companies Act is to represent workers' charges in independent proceedings, not in liquidation sales. Therefore, the TLA's representation in the sale committee is justified to protect workers' interests.

5. Distribution of Sale Proceeds Among Secured Creditors and Workers:
The court directed that the sale proceeds should be distributed among all secured creditors and workers. The secured creditors were required to produce material evidence of their dues against the debtor companies. The court emphasized that the properties should be sold in the interest of all parties, considering the long-standing liquidation status of the companies.

Conclusion:
The court ordered the sale of properties through sale committees, including the official liquidator, representatives of secured creditors, and the TLA representative. The court appointed the representative of the primary applicant (IFCI or IRBI) as the chairman of the respective sale committees. The sale advertisements were to be issued in the chairman's name to fetch better prices. The court rejected the official liquidator's applications in favor of the secured creditors' applications but mandated that the sale proceeds be distributed among all secured creditors and workers. The court's decisions aimed to ensure fair and transparent sales while protecting the interests of all stakeholders involved.