1994 (6) TMI 185 - HC - Companies Law

Issues Involved:
1. Validity of the sale conducted by Haryana Financial Corporation.
2. Requirement of court permission for the sale under section 537 of the Companies Act.
3. Allegations of fraud by Haryana Financial Corporation and the auction purchaser.
4. Limitation period for challenging the sale.
5. Locus standi of the ex-director to challenge the sale.

Detailed Analysis:

1. Validity of the Sale Conducted by Haryana Financial Corporation:
The sale of the properties was challenged on the grounds that it was not given wide publicity and was not held through a court auctioneer as directed by the court. The court found that the auction was conducted after giving wide publicity through advertisements in leading newspapers, which was not contested by the official liquidator. Although the sale was not conducted through a court auctioneer, the court deemed this a mere irregularity rather than a void action. The Corporation, having taken possession of the properties under section 29(1) of the State Financial Corporations Act, 1951, became the owner and conducted the sale as any private owner would. The court concluded that unless material prejudice was shown, the sale could not be set aside solely on this ground. Furthermore, the court emphasized that steps to set aside such a sale must be taken within the prescribed period of limitation, which was not done in this case.

2. Requirement of Court Permission for the Sale Under Section 537 of the Companies Act:
The Corporation had filed an application under section 446 of the Companies Act to obtain leave of the court for the sale of the properties. Although leave was not required under this section but under section 537, the court held that the sanction granted would be deemed to have been granted under the correct section. The court stated that the mere mention of a wrong section in the application did not invalidate the sale proceedings.

3. Allegations of Fraud by Haryana Financial Corporation and the Auction Purchaser:
The official liquidator alleged that the Corporation played a fraud with the court in connivance with the auction purchaser. This was based on the Corporation issuing notices to the auction purchaser to deliver possession of the property back to the liquidator and subsequently conceding in a writ petition to quash these notices. The court found no merit in these allegations, stating that the company was not a necessary party in the writ petition as the auction purchaser was impugning the Corporation's action. The court concluded that the subsequent actions of the Corporation did not vitiate the sale proceedings.

4. Limitation Period for Challenging the Sale:
The auction purchaser raised the objection of limitation, arguing that the petitions were filed beyond the prescribed period. The court agreed, noting that the sale was conducted on 24-7-1989, and the present petition was filed on 12-5-1993, well beyond the three-year limitation period prescribed under the residuary article 137 of the Limitation Act. The court emphasized that actions to set aside the sale must be taken within the statutory time limit, and failure to do so barred the relief sought.

5. Locus Standi of the Ex-Director to Challenge the Sale:
The court dismissed the petition filed by the ex-director on the ground that he had no locus standi to challenge the sale after the company went into liquidation. The official liquidator represents the company in such matters, not the ex-directors. Consequently, the court found that the ex-director's petition deserved to be dismissed.

Conclusion:
Both petitions were dismissed, with the court upholding the validity of the sale conducted by the Haryana Financial Corporation, finding no fraud, and ruling that the petitions were barred by limitation. The ex-director's petition was also dismissed for lack of locus standi.

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