2005 (3) TMI 479 - SC - Companies Law

Auction sale - appointment of custodian - Held that - Appeal dismissed. A public notice for holding auction of the property in the present case was issued by the Custodian on the 10th day of March, 2005 and last date appointed for receiving the bids is 31st March 2005. A copy of the public notice was produced for the perusal of the Court. Thus it is deem not proper, in the facts and circumstances of the present case, to interfere midway and alter the course of the sale proceedings which are already nearing the accomplishment shortly. Needless to say, before the bids are finalized and the Court accepts any bid, the appellants herein would have the opportunity of hearing and, if the Court feels convinced that the property has not fetched the best or the expected reasonable price then the Court is not powerless to reject all the bids and order auction afresh, subject to such directions as it may choose to make as to the manner of holding and conducting the sale and the person who would do it under the directions of the Court.

Summary

Issues:
1. Appointment of Custodian to conduct sale proceedings instead of High Court Receiver.
2. Adversarial role of Custodian in the proceedings.
3. Compliance with procedures for sale of immovable assets by Custodian.
4. Determination of reserve price and protection of interests in the sale process.
5. Decision not to interfere with the impugned order of the Special Court.
6. Procedures followed by Custodian for valuation and auction of immovable assets.
7. Public notice for auction issued by Custodian and the timing of interference in sale proceedings.
8. Opportunity for appellants to be heard and the power of the Court to reject bids if necessary.

Analysis:
1. The appeal challenged the Special Court's order appointing the Custodian to conduct the sale of properties instead of the High Court Receiver due to delays. The Court found that the Custodian's role was justified as per the Act's provisions, and the sale was progressing under the Custodian's supervision with regular progress reports to the Court.

2. The appellants argued that the Custodian's role was adversarial, but the Court noted that the Custodian's function was to follow the Special Court's directions and ensure the protection of all parties' interests to secure the best price for the property being sold.

3. The procedures followed by the Custodian for the sale of immovable assets were detailed, including valuation, advertising, bidding, and final approval by the Special Court. The process ensured transparency and opportunities for bidders to enhance their bids before the Court's consideration.

4. The appellants raised concerns about the determination of the reserve price and compliance with sale procedures. However, the Court found that the Custodian's actions were in line with legal requirements and aimed at maximizing the property's sale value.

5. The Court referred to a previous decision highlighting the Custodian's role in handling properties as directed by the Special Court. It decided not to interfere with the Special Court's interlocutory order, emphasizing that it did not prejudice any party's rights.

6. The Custodian's procedures mirrored those followed by the Official Receiver of the Bombay High Court for auctioning immovable assets, ensuring a fair and competitive bidding process under the Special Court's oversight.

7. The Court declined to intervene in the ongoing sale proceedings, considering the advanced stage of the auction process and the proximity to its completion, as indicated by the public notice issued by the Custodian.

8. The judgment affirmed that the appellants would have a chance to be heard before finalizing the bids, and the Court retained the authority to reject bids if the property did not fetch a satisfactory price, allowing for a fresh auction if necessary.

In conclusion, the appeal was dismissed, and the stay order was vacated, affirming the Special Court's decision regarding the sale proceedings conducted by the Custodian for the recovery of dues from the properties.