2019 (7) TMI 1358 - HC - Companies Law

Confirmation of the sale of the property - Recovery of balance sale consideration - auction of property - HELD THAT - It is now well-settled that the role of the Official Liquidator is limited to the extent of ensuring protection of the workers interests, in terms of Section 529-A of the 1956 Act (now repealed). This Court, while allowing Company Application No. 820 of 2014, after taking note of the legal position had permitted the applicant company to proceed with liquidating the assets in association with the Official Liquidator. Though it is the argument of the learned counsel for the Official Liquidator that this Court directed sale of assets by following the procedure prescribed under the 1959 Rules, practically, there being not much of variation with respect to the procedure prescribed under the SARFAESI Act and 1959 Rules, in the facts of the present case, the difference, if any in procedure is not of much consequence. A part of the loan was extended to clear the arrears of the Syndicate Bank and the other part for expansion of the unit after revival. By the date of the applicant bank financing the company in liquidation, a part of the machinery was about eight-year old (originally the company was promoted in 1990s). It is but natural that machinery depreciates in value over the years and even under the Income Tax Rules, value becomes depreciated and becomes zero in eight years time. It cannot be said that the valuation provided by the valuers with respect to unit, plant and machinery at ₹ 7 crores, in no way, is low and not justified. In the circumstances, the objections raised by the Official Liquidator are liable to be rejected. Company Application is allowed confirming the sale of the subject property in favour of the 3rd respondent.

Summary

Issues:
Confirmation of sale of property in liquidation to highest bidder.

Detailed Analysis:
The Application was filed by the petitioner, a bank, seeking confirmation of the sale of property of a company in liquidation to the highest bidder, M/s Lakshmi Engineering Enterprises. The company had become a non-performing asset, leading to initiation of proceedings under the SARFAESI Act. The bank had sought and obtained permission from the High Court to sell the properties in association with the Official Liquidator. Despite efforts from 2014 to 2018, a successful bidder emerged in 2018, depositing the bid amount and complying with auction conditions. The bank sought permission to receive the balance sale consideration and register the sale certificate in favor of the highest bidder.

The auction purchaser detailed their participation and successful bid in an affidavit, expressing intent to revive the company. The Official Liquidator filed a counter-affidavit, alleging the bank failed to follow procedures and associating with them during the auction. The Official Liquidator questioned the reduced valuation of the property and raised objections to the sale confirmation.

The bank's counsel refuted the Official Liquidator's allegations, providing a detailed chronology of events, valuations, and auction attempts. The bank had revalued assets due to nonoperation, setting a reserve price of ?7 crores. The successful auction was conducted after multiple failed attempts, with no objections raised by the Official Liquidator during the process.

The auction purchaser's counsel emphasized the need for swift confirmation to revive the company, justifying the valuation offered and requesting immediate sale confirmation.

After considering submissions and documents, the Court noted the bank's communication with the Official Liquidator regarding developments. The Court highlighted the limited role of the Official Liquidator and the legal permission granted to the bank to proceed with asset liquidation. The Court found no irregularities in the auction process conducted under the SARFAESI Act and Rules. Valuation reports indicated natural depreciation of machinery, justifying the reduced valuation and rejecting objections raised by the Official Liquidator.

The Court allowed the Company Application, confirming the sale of the property in favor of the auction purchaser and directing the Official Liquidator to take necessary steps for the sale confirmation.