2011 (4) TMI 1511 - HC - Indian Laws

Summary

Issues Involved:
1. Powers of the Provisional Liquidator to sell assets.
2. Authority of the Court to order the sale of assets on application by a secured creditor.
3. Whether the Provisional Liquidator's powers are restricted by the Court's order.
4. Rights of secured creditors in liquidation proceedings.
5. Status of IREDA's rights after surrendering possession to the Official Liquidator.
6. Inclusion of NHSM's assets in the sale.
7. Sundaram Finance Limited's right to recover leased machinery.
8. Claims of BHEL and Walchandnagar Industries Limited.
9. Valuation and upset price of ASM's assets.

Detailed Analysis:

1. Powers of the Provisional Liquidator to Sell Assets:
The Court held that under Section 450(3) of the Companies Act, the Provisional Liquidator has the same powers as the Official Liquidator unless restricted by the Court. The order dated 22.07.2005 did not limit the Provisional Liquidator's powers, thus authorizing the sale of ASM's assets under Section 457(1)(c).

2. Authority of the Court to Order Sale of Assets on Application by a Secured Creditor:
The Court affirmed its power to order the sale of assets through the Official Liquidator on the application of a secured creditor like IREDA. This is consistent with the Court's duty to protect and realize the company's assets for equitable distribution among creditors.

3. Whether the Provisional Liquidator's Powers are Restricted by the Court's Order:
The Court clarified that the Provisional Liquidator's powers were not restricted by the order of 22.07.2005, thus allowing the sale of assets. The Court's distinction between its power to order a sale and the Liquidator's power to execute it was upheld.

4. Rights of Secured Creditors in Liquidation Proceedings:
The Court ruled that IREDA, a secured creditor, did not relinquish its security by handing over possession to the Official Liquidator under Court orders. IREDA retained its rights and could seek the sale of assets through the Company Court while standing outside the winding-up proceedings, consistent with Sections 529 and 529-A of the Companies Act.

5. Status of IREDA's Rights after Surrendering Possession to the Official Liquidator:
The Court found that IREDA's act of handing over possession to the Official Liquidator did not constitute a relinquishment of its security rights. IREDA's continued assertion of its secured creditor status and its application for asset sale were valid.

6. Inclusion of NHSM's Assets in the Sale:
The Court held that the integrated nature of NHSM's Energy Efficiency Equipment installed in ASM justified their inclusion in the sale. Segregating these assets would reduce their value and the overall sale proceeds.

7. Sundaram Finance Limited's Right to Recover Leased Machinery:
Sundaram Finance Limited, as the owner of the leased machinery, consented to the sale without relinquishing ownership. The machinery forms an integral part of ASM, and separating it would reduce the value of the assets.

8. Claims of BHEL and Walchandnagar Industries Limited:
The Court dismissed BHEL's applications under Section 9 of the Arbitration Act, ruling that BHEL had no lien over the supplied Turbo Generators as the title had passed to ASM. Similarly, Walchandnagar Industries Limited's claim for excluding its supplied boiler was rejected as it had become an unsecured creditor after transferring ownership to ASM.

9. Valuation and Upset Price of ASM's Assets:
The Court found the initial upset price of Rs. 86.44 Crores to be undervalued. Considering the previous bid and market conditions, the Court revised the upset price to Rs. 204.46 Crores, ensuring a fair and reasonable valuation for the assets.

Conclusion:
The Court upheld the Provisional Liquidator's powers to sell assets, validated the secured creditor's application for asset sale, and ensured the inclusion of all relevant assets for a comprehensive sale. The revised upset price aimed to achieve a fair market value, benefiting all creditors involved. The appeals were dismissed, and detailed directions were provided for the sale process.