2005 (2) TMI 543 - HC - Companies Law

Summary

Issues Involved:
1. Compliance with conditions imposed by the Company Court on the A.P. State Financial Corporation.
2. Validity of the sale of the respondent-company's assets.
3. Jurisdiction and obligations of the Company Court and Official Liquidator.
4. Consequences of violating conditions imposed by the Company Court.

Detailed Analysis:

1. Compliance with Conditions Imposed by the Company Court on the A.P. State Financial Corporation:
The Corporation filed Company Application No. 336 of 2003 seeking permission for the sale of immovable properties of the respondent-company. The application was rejected due to non-compliance with condition No. 2, which mandated filing a valuer's report before the sale. The Corporation did not place the valuation report before the Court, leading to the invalidation of the sale.

2. Validity of the Sale of the Respondent-Company's Assets:
The sale was invalidated because the Corporation did not comply with the mandatory condition of filing the valuer's report. The learned company judge held that the sale conducted without placing the valuation report before the Court was vitiated. This decision was based on the principle that the conditions imposed by the Company Court are binding and require strict compliance.

3. Jurisdiction and Obligations of the Company Court and Official Liquidator:
The Company Court has custody and control of the assets of the company in liquidation. It ensures that the best possible price is realized for the assets. The Official Liquidator represents the interests of the workmen, secured and unsecured creditors, shareholders, and others interested in the company's affairs. The Supreme Court in International Coach Builders Ltd. v. Karnataka State Financial Corpn. emphasized that SFCs cannot unilaterally act to realize mortgaged properties without the consent of the Official Liquidator.

4. Consequences of Violating Conditions Imposed by the Company Court:
The Court held that while conditions are mandatory, the violation does not automatically invalidate the sale. The Company Court has discretion to decide whether to invalidate the sale based on the circumstances. In this case, the learned judge exercised discretion to withhold permission for confirming the sale due to the potential for realizing a higher value for the assets.

Conclusion:
The appeals were dismissed, affirming the decision of the learned company judge. The Court clarified that violation of conditions by a creditor does not necessarily lead to the invalidity of the sale. The Company Court has the discretion to address the transgression appropriately. The assistance and professional commitment of the counsel for the appellant-Corporation were acknowledged.