2005 (1) TMI 398 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the appeal by the managing director of a company under liquidation.
2. Consideration of objections regarding the valuation report.
3. Adequacy of the auction sale price.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal:
The primary issue raised was whether the appeal filed by the managing director of M/s. Sushila Pulp and Papers Ltd. was maintainable after the company had been ordered to be wound up. According to sections 445(3) and 457(1)(a) of the Companies Act, 1956, once a winding-up order is passed, the company can only be represented by the Official Liquidator. The directors and officers cease to act on behalf of the company. The Supreme Court's judgment in Great Indian Motor Works Ltd. v. Their Employees AIR 1959 SC 1186 was cited, which held that only the liquidator, with the court's sanction, can institute legal proceedings on behalf of the company. Therefore, the appeal filed by the managing director was deemed incompetent.

2. Consideration of Objections Regarding the Valuation Report:
The managing director had objected to the valuation report dated January 25, 2002, claiming it undervalued the plant and machinery. Subsequently, a fresh valuation was obtained, which reported a lower value due to further deterioration. The objections filed on July 22, 2002, were addressed by obtaining this second valuation. The court found no further objections from the managing director or any material indicating a higher valuation. The objections were effectively considered and addressed by the liquidator through the fresh valuation report dated April 7, 2003.

3. Adequacy of the Auction Sale Price:
The auction held on December 17, 2003, resulted in the highest bid of Rs. 20 lakhs by M/s. S.S. Metals, which was higher than the net realizable value of Rs. 17 lakhs as per the second valuation report. The court confirmed this sale, noting that no objections were raised during the auction process and no higher bids were presented. The Supreme Court in Kayjay Industries (P.) Ltd. v. Asnew Drums (P.) Ltd. AIR 1974 SC 1331 emphasized that the court must make a realistic appraisal of the factors and if satisfied with the bid, conclude the sale. The secured creditor, PICUP, also consented to the sale price, indicating its adequacy. The court concluded that the price accepted was fair and there was no material to suggest otherwise.

Conclusion:
The appeal was dismissed on the grounds of non-maintainability by the managing director and the adequacy of the auction sale price. The objections regarding the valuation had been duly considered, and the final sale price was deemed fair and reasonable. The court's decision to confirm the auction sale was upheld.