2011 (3) TMI 1477 - HC - Companies Law

Winding up liquidation proceedings - ARCIL have contended that the learned company judge has committed a gross error in not confirming the sale as proposed by the sale committee in favour of Wearit Global Ltd., who s offer was much more than the fair market value of the properties in question. They argued that the order passed by the learned company judge is not a speaking order as no reasons have been assigned by the learned company judge for not accepting the offer of the highest bidder when the offer of the highest bidder was much more than the fair market value of the properties in question - sale committee comprising of representative of ARCIL and the official liquidator after giving wide publicity in various newspapers including newspapers of wide circulation in the country to the proposed auction received various offers. After evaluation and inter se bidding it found the offer of Wearit Global Ltd. (appellant in Company Appeal No. 7 of 2010) to be the highest. The offer was also found to be much more than the fair market value. In the circumstances, the learned company judge fell into error in setting aside the proposal made by the sale committee to confirm the bid of the highest bidder Held that;- no objection from any corner that the properties in question can be sold at a higher price than the price offered by the highest bidder Wearit Global Ltd. The said proposal of the sale committee was not even objected by the second highest bidder. Neither the official liquidator who was party to the sale proceedings nor any other creditor of the company in liquidation ever submitted or stated before the company judge or before us that the properties can be sold at a higher price than the price offered by the highest bidder. company judge has committed an error in not approving the report submitted by the sale committee seeking declaration of Wearit Global Ltd., as successful bidder. Accordingly, we set aside the order dated December 9, 2010, passed by the learned company judge and declare Wearit Global Ltd. (appellant of Appeal No. 7 of 2010) a successful bidder and confirm the sale of assets of the company (in liquidation) in favour of Wearit Global Ltd. The sale certificate be issued and sale deed be executed by the sale committee as per the provisions contained in the SARFAESI Act and the Companies Act and the Rules made thereunder in favour of the said successful bidder upon receipt of the entire offer amount of Rs. 29,25,00,000. The sale committee is directed to return the earnest money deposit received from other bidders. company appeal stands allowed

Summary

Issues Involved:
1. Confirmation of sale of assets of the company in liquidation.
2. Adequacy of the highest bid in relation to the fair market value.
3. Objections regarding the sale process and valuation.
4. Adjudication of claims by intervenors.

Detailed Analysis:

1. Confirmation of Sale of Assets:
The appeals were filed under Section 483 of the Companies Act, 1956, challenging the order dated December 9, 2010, by the company judge in Company Petition No. 8 of 2005. The appeals were decided by a common order due to common questions of facts and law. The respondent company was ordered to be wound up on January 6, 2010. Earlier, the company judge had declined permission to ARCIL to sell the assets under the SARFAESI Act. The Division Bench later permitted the sale with specific directions. The sale committee was formed to oversee the sale process, and the highest bid received was Rs. 29.25 crores by Wearit Global Ltd., which was significantly higher than the fair market value of Rs. 21,10,50,000.

2. Adequacy of the Highest Bid:
The highest bid was much more than the fair market value, and there were no objections to the sale process. The company judge refused to confirm the sale, citing a large difference between the distress market value and the highest offer. However, the court held that this difference should have been a reason to accept the highest bid. The court emphasized the duty to ensure the price offered is reasonable and noted that the company judge did not provide reasons for rejecting the highest bid, which is essential for judicial decisions.

3. Objections Regarding the Sale Process and Valuation:
The court reviewed the valuation reports and found that even the fresh valuation was lower than the highest bid. The official liquidator confirmed that the highest bid was reasonable and not objected to by any party, including the second highest bidder. The court cited Supreme Court precedents emphasizing the importance of finality in auctions and the need for courts to act with caution and discretion in such matters.

4. Adjudication of Claims by Intervenors:
Ruby Traders claimed a diesel generator set and sought Rs. 90 lakhs from the sale proceeds. The court directed that this amount be kept in a nationalized bank pending adjudication by the company judge. The Sut Mill Kshramik Sangh's application for disbursement of the amount was also directed to be decided by the company judge.

Conclusion:
The court set aside the company judge's order and confirmed the sale in favor of Wearit Global Ltd. It directed the sale committee to execute the sale deed and return the earnest money to other bidders. The claims of Ruby Traders and Sut Mill Kshramik Sangh were to be adjudicated by the company judge. The appeal was allowed with no order as to costs.