2008 (12) TMI 784 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the sale of assets of the liquidated company.
2. Compliance with Rule 273 of Companies (Court) Rules, 1959.
3. Authority of KSFC and Official Liquidator in conducting the sale.

Summary:

1. Validity of the Sale of Assets of the Liquidated Company:
The appellant, a shareholder and Ex-Director of the first respondent-Company, challenged the order dated 29.1.2007 which allowed the sale of the company's assets. The sale was conducted by KSFC in association with the Official Liquidator and KSIIDC. The appellant alleged material irregularities, including the omission of KSIIDC's name in the sale notification and the failure to sell several movable assets. The court found that the sale notification was defective as it did not mention KSIIDC and did not follow the proper procedure for selling leasehold rights.

2. Compliance with Rule 273 of Companies (Court) Rules, 1959:
The appellant contended that the sale did not comply with Rule 273, which requires sales to be conducted by public auction or by inviting sealed tenders under the court's supervision. The court agreed, noting that the sale notification was vague and did not specify the leasehold rights. The sale was conducted by inviting offers rather than a public auction, which violated Rule 273.

3. Authority of KSFC and Official Liquidator in Conducting the Sale:
The court observed that KSFC did not follow the procedure under Sec.32 of the SFC Act, which requires an application to the district judge for the sale of mortgaged property. The leasehold rights of the liquidated company could not be sold as absolute ownership. The court concluded that the sale and confirmation of the property were not legal and valid.

Conclusion:
The appeal was allowed, and the impugned order dated 29.01.2007 was set aside. The court permitted KSFC to sell only the leasehold rights of the liquidated company in association with the Official Liquidator and KSIIDC, in compliance with Rule 273, by inviting tenders followed by a public auction.