2008 (7) TMI 579 - HC - Companies Law

Winding up - Custody of company s properties - fresh auction in open court and consider the respective offers of the parties - Held that - There is no infirmity or illegality in the impugned order passed by the Company Judge directing for a fresh auction in the open court, particularly when various parties appeared before the Company Judge and expressed their willingness to offer better price with much more upfront payment.

Issues Involved:
1. Whether the learned company judge is justified in directing a fresh auction in open court on the grounds of inadequate consideration.
2. Whether the negotiation between the appellant and IDCOL reached finality.
3. The role and powers of the court in the winding-up process and auction of a company's assets.

Issue-wise Detailed Analysis:

1. Justification for Fresh Auction:
The primary issue was whether the company judge was justified in ordering a fresh auction due to inadequate consideration. The court emphasized that in the absence of a concluded sale, no right accrues to a negotiating purchaser. The court is the custodian of the interests of the company, its creditors, and workmen, and must ensure that the maximum price is fetched for the company's assets. It was noted that the company judge's decision to hold a fresh auction was based on the fact that higher bids and better upfront payments were offered by other parties, which justified the need for a fresh auction to ensure the assets were sold at an adequate price.

2. Finality of Negotiation:
The appellant argued that the company judge should not have ordered a fresh auction without considering their affidavit and contention. However, it was established that the negotiations between the appellant and IDCOL had not reached finality. The court noted that other parties had come forward with better offers, and the sale was not confirmed with the appellant. The orders dated 15-9-2006 and 10-11-2006 indicated ongoing negotiations and the absence of a concluded sale.

3. Court's Role and Powers:
The court highlighted its role as the custodian of the interests of the company under winding up, its creditors, and workmen. The court must ensure that the assets are sold at a reasonable and adequate price. The inherent powers of the court, as per Rules 9, 272, and 273 of the Companies (Court) Rules, 1959, allow it to set aside sales if the price is inadequate. The court referred to several judgments, including Union Bank of India v. Official Liquidator and Navalkha & Sons v. Ramanuja Das, to emphasize that the court can set aside even a confirmed sale if it finds the price inadequate. The court must ensure that the best possible price is realized for the assets of the company in liquidation.

Conclusion:
The court concluded that there was no infirmity or illegality in the company judge's order directing a fresh auction. The decision was made to ensure that the maximum price was fetched for the company's assets, considering the higher bids and better upfront payments offered by other parties. The appeal was dismissed without costs.

Separate Judgments:
Dr. B.S. Chauhan, CJ. concurred with the judgment, agreeing with the analysis and conclusions drawn.

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