2005 (4) TMI 303 - HC - Companies Law

Issues Involved:
1. Confirmation of Sale
2. Inter Se Bidding
3. Adequacy of Price
4. Re-auction and Setting Aside Confirmed Sales
5. Legal Precedents and Court's Powers

Issue-wise Detailed Analysis:

1. Confirmation of Sale:
The company was ordered to be wound up, and the official liquidator was appointed to take over and sell the assets. The official liquidator issued advertisements for selling the assets in two lots. Initial bids were received and a higher bid was accepted by the official liquidator subject to court confirmation. Surinder Kumar emerged as the highest bidder with Rs. 1.05 crores, and the sale was confirmed in his favor. However, subsequent higher bids led to further inter se bidding, where Surinder Kumar again emerged as the highest bidder with Rs. 1.31 crores. The court confirmed the sale in his favor on an "as is where is, whatever is" basis.

2. Inter Se Bidding:
Inter se bidding was conducted multiple times. Initially, Surinder Kumar, M/s. S. R. Buildcon, and Gulzar Singh participated, with Surinder Kumar emerging as the highest bidder. Later, M/s. Mittal and Garg Enterprises offered a higher bid, leading to another round of inter se bidding where Surinder Kumar again emerged as the highest bidder. The process was repeated when M/s. S. R. Buildcon further hiked the bid to Rs. 1.50 crores.

3. Adequacy of Price:
The valuation reports indicated a higher value for the assets compared to the bids received. The court considered whether the highest bid was adequate and whether a re-auction could fetch a price closer to the valuation. The court noted that the purpose of court auctions is to obtain the maximum price for the benefit of the company's creditors and workmen.

4. Re-auction and Setting Aside Confirmed Sales:
The court examined whether it had the power to set aside a confirmed sale based on inadequacy of price or other factors. It referred to various judgments, concluding that even a confirmed sale could be set aside if a substantially higher bid was received. The court emphasized the duty to ensure the best possible price for the assets, considering the interests of unsecured creditors, secured creditors, and workmen. The court decided to recall the orders confirming the sale and directed the official liquidator to undertake re-auctioning of the assets.

5. Legal Precedents and Court's Powers:
The court referred to several Supreme Court judgments, including Divya Manufacturing Co. (P.) Ltd. v. Union Bank of India, Union Bank of India v. Official Liquidator, and Allahabad Bank v. Bengal Paper Mills Co. Ltd., which established that a confirmed sale could be set aside if a higher bid was received. The court also considered its own judgment in Punjab Wireless Systems Ltd. (In Liquidation) v. Indian Overseas Bank, which affirmed the court's power to set aside confirmed sales to ensure the best price for the company's assets.

Conclusion:
The court concluded that the highest bid of Rs. 1.50 crores deserved consideration and decided to recall the previous orders confirming the sale to Surinder Kumar. The official liquidator was directed to re-auction the assets, with expenses borne by the secured creditors. The deposits made by the parties were to be refunded expeditiously. The court emphasized the importance of obtaining the maximum price for the benefit of the company's creditors and workmen, and the necessity of maintaining the integrity and openness of court auctions.

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