1963 (1) TMI 40 - SC - Companies Law

Correctness and legality of an order by a Division Bench of the Calcutta High Court refusing to confirm a sale by the liquidators of the assets of a company which is being wound up questioned Held that - If the sale of which confirmation was sought was characterised by any deviation from the conditions subject to which the sale was directed to be held or even otherwise was for a gross undervalue in the sense that very much more could reasonably be expected to be obtained if the sale were properly held in view of the figure of ₹ 3,37,000 which had been bid by Nandlal Agarwalla, it would be the duty of the court to refuse the confirmation in the interests of the general body of creditors and this was the submission made by the first respondent. There were thus two points of view presented to the court by two contending parties or interests and the court was called upon to decide between them. And the decision vitally affected the rights of the parties to property. In this view we are clearly of the opinion that the order of the court was in the circumstances, a judicial order and not an administrative one and was, therefore, not inherently incapable of being brought up in appeal. Appeal dismissed.

Issues Involved:
1. Whether the order of the company judge confirming the sale was an administrative or judicial order.
2. Whether the order was a "judgment" within clause 15 of the Letters Patent of the Calcutta High Court.
3. Whether the appellate court acted improperly in interfering with the order of the learned company judge.

Issue-Wise Detailed Analysis:

1. Administrative vs. Judicial Order:
The principal issue was whether the order of the company judge confirming the sale was merely an administrative order passed in the course of the administration of the assets of the company under liquidation and, therefore, not a judicial order subject to appeal. The court examined the relevant provisions under the Companies Act, particularly sections 179, 180, 183, and 184. It was determined that the confirmation of the sale was not merely an administrative act but involved judicial discretion. The court noted that the order according sanction to a sale involves discretion and cannot be termed merely a ministerial order. The court must be satisfied that the sale was held in accordance with the conditions and that it was fair and did not result in any loss to the parties involved. Therefore, the order was classified as a judicial order and not an administrative one.

2. Judgment within Clause 15 of the Letters Patent:
The second issue was whether the order of the company judge was a "judgment" within the meaning of clause 15 of the Letters Patent of the Calcutta High Court. Section 202 of the Indian Companies Act allows appeals from orders and decisions in the course of a winding up, but it was argued that for an order to be appellable under section 202, it must satisfy the requirements of clause 15 of the Letters Patent. The court referred to conflicting interpretations by various High Courts. The Bombay High Court in Bachharaj Factories Ltd. v. Hirjee Mills Ltd. held that the right of appeal under section 202 is not restricted by clause 15 of the Letters Patent. The court agreed with this interpretation, stating that the second part of section 202 regulates the procedure for appeals and does not restrict the substantive right of appeal. The court did not find it necessary to examine the scope of the expression "judgment" within clause 15 of the Letters Patent.

3. Interference by the Appellate Court:
The third issue was whether the appellate court acted improperly in interfering with the order of the company judge. The court examined whether the liquidators were within their power to proceed with the sale after the highest bidder, Nandlal Agarwalla, failed to turn up after an appreciable interval. The conditions of sale required the bidder to deposit 25% of the bid amount immediately upon acceptance. The liquidators waited for about 20 minutes for Nandlal to return with the money, during which time several bidders left. The court found that this interval of time and the subsequent actions of the liquidators were not in accordance with the conditions of sale. The appellate court was justified in considering that the sale to the appellant ought not to have been confirmed. The court also rejected the appellant's argument that the appellate court should have confirmed the sale to them at the price of Rs. 3,35,000, which was their bid at the first auction. The undertaking given by the appellants during the interim stay application did not confer any legal right to insist on the sale at that price.

Conclusion:
The appeal was dismissed with costs to the first respondent. The order of the company judge confirming the sale was determined to be a judicial order, not an administrative one. The right of appeal under section 202 of the Indian Companies Act was not restricted by clause 15 of the Letters Patent. The appellate court acted within its discretion in setting aside the sale and directing a fresh auction.

← Previous Next →