2009 (8) TMI 706 - HC - Companies Law

Winding up - grant of permission to intervene to participate in further negotiations and proceedings for the purposes of purchasing the property of respondent No. 1 herein (a Company in liquidation) has been dismissed - Held that - The Official Liqudator has acted in hasty manner by giving possession of the assets of the company to Respondent No. 2 immediately on the next day of passing of impugned order by the learned Company Judge in favour of Respondent No. 2 and he had not apprised the Appellate Court when the appeal was heard at motion stage itself on 12-8-2008, in presence of both the respondents and learned counsel for the Respondent No. 2 could not undertake not to get the documents executed in favour of his client. Probably if this Court would have been apprised of handing over of possession, the interim order would not have been passed or the respondent No. 2 could have been restrained from incurring expenditure for bringing the company into order. Thus his Court is of the opinion that there is no point in favour of the appellant to interfere in the impugned order. The appeal is, therefore, dismissed. Appellant is allowed to take back the cash amount of ₹ 8.75 crores (eight crore seventy five lakh) in accordance with the provisions of law as may be applicable in this regard.

Issues Involved:
1. Validity of the Company Court's order dismissing the appellant's application to intervene in the sale proceedings.
2. Adequacy of the steps taken by the Official Liquidator and the Company Court to fetch the highest price for the assets of the company in liquidation.
3. Alleged procedural irregularities and the appellant's claims of being excluded from the bidding process.
4. Legal implications of the Official Liquidator's actions in transferring possession of the property to the highest bidder.

Detailed Analysis:

1. Validity of the Company Court's Order:
The appellant challenged the Company Court's order dated 5-8-2008, which dismissed the appellant's application (I.A. No. 4938/08) to intervene in the sale proceedings of the assets of a company in liquidation. The appellant had sought permission to participate in further negotiations and proceedings for purchasing the property of the respondent company.

2. Adequacy of Steps to Fetch Highest Price:
The Company Court and the Official Liquidator undertook several steps to ensure the highest price for the assets:
- The Official Liquidator was appointed following a reference from the Board for Industrial and Financial Reconstruction (BIFR) under section 20(1) of the Sick Industrial Companies (Special Provisions) Act, 1985.
- Tenders were invited multiple times, and the highest offer received was Rs. 4.27 crores, which was deemed unsatisfactory.
- Fresh tenders were invited, and negotiations were held with bidders, leading to a final offer of Rs. 8.01 crores from Respondent No. 2, M/s. Dhan Laxmi Solvex (P.) Ltd.
- Financial institutions and government views were sought to ascertain the reasonableness of the final offer.

3. Procedural Irregularities and Exclusion Claims:
The appellant claimed to have sent a letter offering Rs. 6.01 crores to the Official Liquidator, which was allegedly ignored. The appellant later offered Rs. 8.05 crores and sought to participate in the bidding process.
- The Official Liquidator denied receiving the appellant's letter, and no proof was provided by the appellant.
- The Company Court dismissed the appellant's application, noting that tenders had been widely published over three years, and the appellant had not participated earlier.
- The Court observed that the appellant's intervention seemed motivated by business rivalry rather than a bona fide interest in the tender.

4. Legal Implications of Official Liquidator's Actions:
The appellant argued that the Official Liquidator acted hastily by transferring possession of the property to Respondent No. 2 immediately after the impugned order.
- The Company Court found that the Official Liquidator's actions were in line with the usual practice of giving possession before executing transfer documents.
- The Court noted that Respondent No. 2 had already invested significantly in the property, and there was no fraud or collusion in the sale process.

Conclusion:
The appeal was dismissed, with the Court finding no merit in the appellant's claims. The Court held that:
- The Company Court and the Official Liquidator had taken all necessary steps to fetch the highest price for the assets.
- The appellant's intervention was not bona fide and appeared to be motivated by business rivalry.
- The transfer of possession to Respondent No. 2 was legally permissible, and there was no ground for setting aside the sale.

The appellant was allowed to withdraw the deposited amount of Rs. 8.75 crores in accordance with applicable legal provisions.

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