2002 (12) TMI 492 - HC - Companies Law

Issues Involved:
1. Validity of the sale of the company's assets by the 2nd respondent to the 1st respondent.
2. Compliance with the mandatory provisions of section 537 of the Companies Act.
3. Locus standi of the appellant to challenge the sale.
4. Confirmation of the sale by the learned Company Judge despite the sale being declared void.
5. Right of the appellant to be impleaded in the company application.

Detailed Analysis:

1. Validity of the Sale:
The company, M/s. Ramalingeswara Agro Processor (P.) Ltd., was ordered to be wound up based on BIFR's recommendations. The 2nd respondent, a creditor, sold the company's assets to the 1st respondent for Rs. 42,00,000. A director of the company challenged the sale, citing non-compliance with the Supreme Court's decision in *Mahesh Chandra v. State of U.P.*, resulting in a writ petition (WP No. 24234/98) being filed. The court directed the 2nd respondent to follow the procedure laid down in *Mahesh Chandra*.

2. Compliance with Section 537 of the Companies Act:
The Official Liquidator filed CA No. 53/99, arguing that the sale violated section 537 of the Companies Act, which mandates obtaining the court's leave before conducting a sale during the winding-up process. The Division Bench in WA No. 126/99 and CA No. 53/99 declared the sale void due to non-compliance with section 537, emphasizing that the sale was conducted without the court's leave, making it null and void.

3. Locus Standi of the Appellant:
The appellant, who was not initially a party to the company application, challenged the sale. The learned counsel for the appellant argued that the appellant had a better offer of Rs. 65,00,000 and had deposited Rs. 30,00,000. The learned senior counsel for the respondents contended that the appellant had no locus standi as the rights regarding the sale were already adjudicated in WP No. 29268/98, which was dismissed. The court, however, recognized the appellant's right to participate in the proceedings, noting that in winding-up cases, even workers and employees have locus standi.

4. Confirmation of the Sale by the Learned Company Judge:
Despite the Division Bench declaring the sale void, the learned Company Judge confirmed the sale in CA No. 475/2001, citing the 1st respondent's payment of the entire sale consideration and the transparent procedure followed by the statutory body. This confirmation was challenged by the appellant, arguing that the sale could not be validated against the specific provisions of section 537.

5. Right of the Appellant to be Impleaded:
The appellant was not represented before the Company Court when the order under appeal was passed. The court noted that the appellant had the right to participate in the proceedings, as indicated by the Division Bench's order, which left the final adjudication to the Company Court. The court directed the appellant to take steps to get himself impleaded in CA No. 53/99 for a fresh adjudication.

Separate Judgments by Judges:
- Justice S.R. Nayak: Dissented, holding that the appeal was not maintainable as the appellant was not a party to the company application. He suggested that the appellant could seek review by getting himself impleaded in the company application.
- Justice L. Narasimha Reddy: Held that the appeal was maintainable, emphasizing the appellant's right to participate in the proceedings and the need for a fresh adjudication by the Company Court.
- Justice Ramesh Madhav Bapat: Agreed with Justice L. Narasimha Reddy, allowing the appeal and directing the appellant to get himself impleaded in CA No. 53/99 for a fresh adjudication.

Conclusion:
The appeal was allowed, and the order of the learned Company Judge was set aside. The case was remitted to the Company Court for fresh adjudication, with the appellant directed to get himself impleaded in CA No. 53/99. The Company Court was instructed to dispose of the application along with the CAs filed therein, considering the findings already recorded by the Division Bench.

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