2004 (3) TMI 420 - HC - Companies Law

Issues Involved:
1. Review of the order confirming the sale of immovable properties by the Official Liquidator.
2. Comparison of valuations obtained by the Liquidator and the Sub-Registrar.
3. Allegation of material irregularity in the auction process.
4. Adequacy of the price fetched at the auction.
5. Bona fides of the appellant bank.
6. Re-auction of the properties.
7. Compliance with the court's previous order by the Official Liquidator.

Issue-wise Detailed Analysis:

1. Review of the Order Confirming the Sale of Immovable Properties by the Official Liquidator:
The appellant, a scheduled bank, challenged the order passed by a Single Judge on 12th February 2004, which rejected their application for review of an earlier order dated 22nd August 2003. This earlier order confirmed the sale of three lots of immovable properties belonging to a company in liquidation. The bank's application for review was based on the contention that the auction was finalized based on an incorrect valuation by the Liquidator.

2. Comparison of Valuations Obtained by the Liquidator and the Sub-Registrar:
The appellant argued that the valuations obtained by the Liquidator were not according to the value mentioned in the Government of Maharashtra's ready reckoner. The Sub-Registrar's report, obtained later, showed significantly higher valuations for the properties. For instance, Lot No. III (Manager's Bungalow) was valued at Rs. 8,64,000 by the Sub-Registrar, compared to Rs. 4,31,000 by the Liquidator's valuer. Similarly, Lot No. IV (Sub-lot No. 3) and Lot No. IV (Sub-lot No. 5) had substantial differences in valuations.

3. Allegation of Material Irregularity in the Auction Process:
The appellant claimed that there was a material irregularity in the auction process as the properties were sold without first obtaining the prevailing rates from the Sub-Registrar, as directed by an earlier court order. This irregularity led to the properties being sold at a much lower price than their actual market value.

4. Adequacy of the Price Fetched at the Auction:
The court noted that the bids accepted for the properties were somewhat comparable to the valuations provided by the Sub-Registrar. However, the appellant bank argued that the properties were sold at grossly inadequate prices. The Supreme Court's judgment in Divya Mfg. Co. (P.) Ltd. v. Union Bank of India was cited, emphasizing the court's duty to ensure that the price fetched at the auction is adequate, even in the absence of fraud or irregularity.

5. Bona Fides of the Appellant Bank:
The court considered the bona fides of the appellant bank, which had a substantial outstanding claim against the company in liquidation. The bank's willingness to deposit higher amounts for the properties indicated its bona fides. The court found that the bank's application for review was justified and bona fide.

6. Re-auction of the Properties:
The court allowed the appeal and set aside the order dated 12th February 2004. It directed the Liquidator to re-auction the properties after obtaining the correct market price from the Sub-Registrar. The auction was to be held at the Head Office of the Sangli Bank in Sangli, with all expenses borne by the appellant bank.

7. Compliance with the Court's Previous Order by the Official Liquidator:
The court expressed displeasure with the Official Liquidator for not complying with the earlier order to obtain valuations from the Sub-Registrar. The Liquidator was directed to make a report to the Company Judge explaining the non-compliance and identifying those responsible.

Conclusion:
The appeal was allowed, and the earlier order confirming the sale was set aside. The properties were to be re-auctioned following proper procedures to ensure the correct market price was obtained, protecting the interests of the company, its creditors, and its employees.

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