2004 (1) TMI 370 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the High Court to grant permission for the sale of assets.
2. Validity of the contract between NGEF and M/s. Chandra Developers Pvt. Ltd.
3. Adequacy of the sale price.
4. Approval by the Government.
5. Rights of secured creditors.

Issue-wise Detailed Analysis:

1. Jurisdiction of the High Court to Grant Permission for the Sale of Assets:
The learned Company Judge held that the application before the High Court was maintainable, as the BIFR had forwarded the recommendation for winding up of NGEF and directed the parties to seek further directions from the High Court. The High Court, therefore, had jurisdiction to consider the application for permission to sell the assets. The judgment referenced the decision in *BPL Ltd. v. IMTT Systems (Kar.) Ltd.*, which clarified that once an order of winding up is made by the High Court, the control and jurisdiction over the company, its affairs, and assets pass to the High Court, and BIFR ceases to have any power.

2. Validity of the Contract Between NGEF and M/s. Chandra Developers Pvt. Ltd.:
The contract's validity was contested on the grounds that the acceptance of the tender was subject to government approval, which was not obtained. The learned Company Judge found that the tender process was completed, and the bid was accepted by the Board of Directors. The learned counsel for M/s. Chandra Developers Pvt. Ltd. argued that the sale was conducted through a public auction, and the Board had approved the sale. The High Court upheld the contract's validity, stating that the BIFR had directed the parties to approach the High Court for necessary directions, and the High Court had granted permission to sell.

3. Adequacy of the Sale Price:
The adequacy of the sale price was not specifically canvassed before the learned Company Judge. The High Court noted that the property had been valued by Tata Consultancy at the appropriate time, and the bid was accepted after a global tender process. The High Court held that the adequacy of the consideration could not be challenged at this stage, especially when the bid acceptance had not been contested earlier.

4. Approval by the Government:
The argument that the sale required government approval was rejected. The High Court found that the BIFR had recommended winding up and directed the parties to seek directions from the High Court. The government had not questioned the Board's approval of the sale at the relevant time. The High Court concluded that the approval of the government was not necessary in the given circumstances, and the learned Company Judge's permission for the sale was justified.

5. Rights of Secured Creditors:
The secured creditor, State Bank of Mysore, argued that they were unaware of the sale and that their vested rights would be affected. The High Court held that secured creditors have priority and can realize their security without court intervention. However, in this case, no application had been made by the secured creditors either before the BIFR or the learned Company Judge. The High Court found that the secured creditors' rights were not prejudiced by the sale, and the permission granted by the learned Company Judge was valid. The High Court also referenced the decision in *M.K. Ranganathan v. Government of Madras*, which stated that secured creditors could stand outside the winding-up proceedings and realize their security.

Conclusion:
The High Court dismissed the appeals, finding no error or illegality in the detailed order passed by the learned Company Judge. The permission granted for the sale of NGEF's assets was upheld, and the arguments regarding the need for government approval and the adequacy of the sale price were rejected. The rights of secured creditors were acknowledged, but their arguments were not found to be sufficient to interfere with the learned Company Judge's order. The appeals were dismissed with no order as to costs.