1963 (1) TMI 31 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the District Judge's order rejecting the application for review of the sale confirmation.
2. Applicability of section 483 of the Indian Companies Act, 1956.
3. Authority of the official liquidator to sell the company's properties.
4. Interpretation of clauses 165 and 166 of the company's articles of association.
5. Preliminary objection regarding the appeal's admissibility.

Detailed Analysis:

1. Validity of the District Judge's Order Rejecting the Application for Review of the Sale Confirmation:
The appeal concerns the correctness of the District Judge's order rejecting an application for review of an earlier order confirming a sale held by the official liquidator. The properties sold included land and buildings belonging to the company. The sale was confirmed on April 16, 1957, and the property was delivered to the purchaser on April 25, 1957. The appellants filed the application for review more than three years later, on March 27, 1960, alleging inadequacy of price and irregularities in the conduct of the sale. The District Judge rejected the application on the grounds that there was no proof of any illegality or irregularity in the sale and that an application for review could not lie under the circumstances.

2. Applicability of Section 483 of the Indian Companies Act, 1956:
The preliminary objection raised was that no appeal would lie from an order refusing to grant an application for review, as per Order 47, Rule 7 of the Civil Procedure Code. Section 202 of the Companies Act, 1913, which permitted a rehearing of orders, was a procedural rule and did not apply as it was superseded by the Act of 1956. Section 483 of the latter Act did not confer any such power. The court found it unnecessary to deal with the preliminary objection, as the judgment of the District Judge could be sustained on the merits.

3. Authority of the Official Liquidator to Sell the Company's Properties:
The court held that the official liquidator had the authority to sell the properties of the company. The liquidator's principal duty is to collect the assets of the company, pay the general body of creditors, and distribute the surplus amongst the members. Section 179 of the Indian Companies Act, 1913, empowers the liquidator to sell the movable and immovable properties of the company with the court's sanction. The court emphasized that the liquidator's power to sell is a statutory power and not derived from the articles of association. The sale conducted by the liquidator was after obtaining the court's sanction, and all formalities of a public auction were observed. There was no objection from the shareholders at any time to the sale.

4. Interpretation of Clauses 165 and 166 of the Company's Articles of Association:
The appellants argued that the liquidator should have distributed the properties in specie amongst the shareholders, as per clauses 165 and 166 of the articles of association. Clause 165 states that surplus assets after paying off debts and paid-up capital shall be distributed amongst its members. Clause 166 allows the liquidator, with the sanction of an extraordinary resolution, to divide the assets in specie among the contributories. The court held that these clauses give discretion to the liquidator but do not limit the statutory power to sell the properties. The properties had to be sold to clear off the liabilities to third parties, and the liquidator's actions were justified.

5. Preliminary Objection Regarding the Appeal's Admissibility:
The preliminary objection was that no appeal would lie from an order refusing to grant an application for review, based on Order 47, Rule 7 of the Civil Procedure Code. The court found it unnecessary to address this objection in detail, as the judgment of the District Judge could be sustained on the merits.

Conclusion:
The court dismissed the appeal, holding that the official liquidator had the statutory authority to sell the properties, and the sale was conducted properly with the court's sanction. The arguments based on the articles of association were not sufficient to invalidate the sale. The appeal was dismissed with costs.