2009 (1) TMI 481 - HC - Companies Law

Winding up - Custody of company s property - auction sale - Held that - It cannot be lost sight of that the bid is sufficiently high to not only meet all the claims of the secured creditors, but to leave a substantial balance of almost the equal amount. The workers, in our considered view, can make no grievance when each and every of their claim is being honoured. Their endeavour to have some scheme with the third-party proved unsuccessful. They can hardly raise a grievance. Learned Company Judge has made the best endeavour to get an appropriate price at the relevant stage of time and vested rights have been created in favour of the auction purchaser over a period of time subsequent to the deposit of the amount, possession being handed over and the property even alleged to have been further dealt with. The clock cannot be set back because one of the parties offers an additional 20 per cent of the amount now. If such a process is followed, there can never be any end to a transaction of this nature where assets have to be sold. Thus the endeavour by the appellant is to clearly drag on the litigation on one pretext or the other. We find the appeals without any merit.

Issues:
1. Application for revival of a company under sections 529A and 546 of the Companies Act, 1956.
2. Procedural infirmities in the bid process for the assets of a company.
3. Dispute over the factory premises of the company.
4. Validity of the bidding process and auction sale.
5. Allegations of impropriety and procedural irregularity in the conduct of auction.
6. Creation of vested rights in favor of the auction purchaser.
7. Allegations of dragging on litigation.

Analysis:

1. The judgment involves an application for the revival of a company under sections 529A and 546 of the Companies Act, 1956. The Employees Union filed an application for the revival of the company, which had been directed to be wound up. Despite efforts to revive the company, various bids and procedural issues arose, leading to a prolonged legal process.

2. The judgment addresses procedural infirmities in the bid process for the company's assets. Multiple bidders, including M/s. Omkam Finvest Pvt. Ltd. and M/s. Krishna Cell Links Pvt. Ltd., raised concerns about the bidding process, alleging irregularities that affected their ability to participate effectively in the bid.

3. A significant part of the dispute revolves around the factory premises of the company located in Kolkata. The judgment details the claims received from various creditors, including workers, secured creditors, and unsecured creditors. The valuation of the property and the subsequent bidding process for the factory premises are central to the legal proceedings.

4. The validity of the bidding process and auction sale is extensively discussed in the judgment. The court evaluates the conduct of the auction, the participation of bidders, and the final bid amount accepted for the purchase of the factory premises. The judgment emphasizes the importance of obtaining the best price for the company's assets.

5. Allegations of impropriety and procedural irregularity in the conduct of the auction are addressed in the judgment. The court examines the actions of the bidders, the Official Liquidator, and the Company Judge to ensure transparency and fairness in the bidding process. The judgment highlights the need for a proper conduct of auctions under the Companies Act.

6. The judgment discusses the creation of vested rights in favor of the auction purchaser over time. It emphasizes the importance of finality in the sale of assets to prevent prolonged litigation and ensure the efficient resolution of company matters. The court upholds the rights of the successful auction purchaser.

7. Lastly, the judgment addresses allegations of dragging on litigation and prolonging legal proceedings. The court dismisses appeals that seek to continue the litigation on various pretexts, emphasizing the need for timely resolution and the acceptance of the auction outcome. The judgment concludes by dismissing certain appeals with costs imposed on the appellants.

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