2009 (3) TMI 577 - HC - Companies Law

Winding up - whether the valuation report is below the market price? - Whether there is absence of authority in the provisional liquidator to sell the property Held that - The learned Company Judge in our view rightly found that there was no such material to arrive at the conclusion. It was taken note of that in such auctions the value achieved is normally less than the true market value. The payment to be realized by auction is utilized to settle the claims of the creditors and the appellant-company could not in this manner indefinitely postpone its obligations while giving no alternative solution. Thus there is no infirmity in the impugned order in this behalf. In the present case the sale was directed by the Company Court and in fact the auction was finalized before the Court. Thus the sale has taken place in pursuance to the specific authority and sanction of the Court and it certainly is not the plea that the Company Court cannot authorize the provisional liquidator to do the needful. This aspect has been considered in para 8 of the impugned order and we find no reason to differ from the same. Thus the learned Company Judge has rightly found that there was no infirmity in the sale of the assets. Appeal dismissed.

Summary

Issues:
Winding up petition due to non-payment of debentures, challenge to valuation report, authority of provisional liquidator to sell property, interim stay against disposal of assets.

Winding up petition due to non-payment of debentures:
A winding up petition was filed against the appellant for non-payment of debentures. The appellant did not respond, leading to the admission of the petition and the appointment of an official liquidator. The Company Judge directed the valuation of the appellant's properties, which the appellant challenged, seeking to halt the auction. Despite the challenge, the auction proceeded, and the property was sold for Rs. 5.5 crores, with possession handed over to the purchaser.

Challenge to valuation report:
The appellant contended that the valuation report undervalued the properties. However, the Company Judge found no material to support this claim. It was noted that auction values typically fall below market value, and the proceeds are used to settle creditor claims. The court upheld the auction process, emphasizing the appellant's obligation to meet financial responsibilities.

Authority of provisional liquidator to sell property:
The appellant argued that the provisional liquidator lacked the authority to sell the property. The court disagreed, citing Section 450 of the Companies Act, which allows the Company Court to limit or restrict the provisional liquidator's powers. As the sale was directed and sanctioned by the court, the appellant's argument was deemed unfounded.

Interim stay against disposal of assets:
The appellant claimed an interim stay by the Allahabad High Court against asset disposal. However, the Company Judge found that this order was not brought to the official liquidator's or the court's attention. As the official liquidator was not a party to those proceedings, the sale was deemed not in violation of the interim stay order.

In conclusion, the High Court upheld the auction sale of the assets, dismissing the appellant's challenges and emphasizing the appellant's responsibility to address financial obligations. The court found no infirmity in the sale process and noted the appellant's attempt to avoid its financial liabilities. The appeal challenging the orders was ultimately dismissed.