2019 (1) TMI 2019 - HC - Companies Law

Recovery of dues by auction of assets - petitioners submits that data relevant for finding out how valuation of properties has been arrived at is not furnished and therefore he is not in position to effectively advance the case of his clients - HELD THAT - Papers show that there have been 8 rounds of auction on various dates starting from 18/10/2017 till 18/9/2018. Respondent No.2 submits that in first round of auction the price disclosed by respondent No.3 company was itself accepted and accordingly 90% of it was worked out as reserve price. He also has explained how that price is required to be scaled down thereafter. 53 properties are still to be auctioned, we direct Respondent No.1 and 2 to permit representative of petitioners along with their advocate to inspect the valuation papers in relation to those properties - As 15 auctions have already been completed, we permit successful auction purchasers to complete the transaction and to take possession. However, same shall be subject to further orders of this Court in the matter. In relation to remaining 53 properties though respondent Nos.1 and 2 may take necessary preparatory steps, actual auction shall not be conducted until further orders - List the matter for further consideration on 29/1/2019.

Summary

Issues Involved:
1. Disclosure of valuation data for properties in auction.
2. Interim orders affecting possession and auction process.
3. Rights of investors in recovering auction proceeds.
4. Creation of third-party interests in auctioned properties.
5. Inspection of valuation papers by petitioners' representatives.
6. Completion of auction transactions and possession.
7. Prohibition on creating third-party interests in auctioned properties.
8. Stay on conducting further auctions pending court orders.

Analysis:

1. The petitioners raised concerns regarding the unavailability of crucial valuation data necessary for presenting their case effectively. The petitioners, who are investors in a company facing auction to recover dues exceeding Rs. 7000 crores, sought access to the valuation reports to understand the property valuation process.

2. Respondent No.1 and 2 acknowledged that out of 68 properties, 15 had already been auctioned, and the remaining 53 were in the process. They offered to provide the valuation data to the petitioners' counsel to address the lack of transparency in the valuation process, subject to confidentiality agreements.

3. Various respondents highlighted their participation in multiple auction rounds and the challenges posed by interim orders preventing them from taking possession of successfully auctioned properties. The court noted the need to distribute auction proceeds of around Rs. 100 crores among investors equitably.

4. The court observed the creation of third-party interests in the auctioned properties before a specific interim order date, emphasizing the need to maintain the status quo and prevent further complications arising from such interests.

5. To address the transparency concerns, the court directed Respondent No.1 and 2 to allow the petitioners' representatives, accompanied by their advocate, to inspect the valuation papers for both the properties already auctioned and those yet to be auctioned, within a specified timeframe.

6. The court permitted successful auction purchasers to complete transactions and take possession of the properties, subject to ongoing court orders. However, these purchasers were prohibited from creating any third-party interests in the properties until further directives from the court.

7. While Respondent Nos.1 and 2 were instructed to make necessary preparations for the remaining 53 properties, the court ordered a stay on conducting further auctions until subsequent court orders. The matter was scheduled for further consideration on a specified date to monitor compliance and address any outstanding issues effectively.