1974 (2) TMI 49 - HC - Companies Law

Custody of company s property, Winding up - Powers of liquidator, Applications how made, Summons for directions to be taken out by official liquidator, Sale to be subject to confirmation by court, Procedure at sale

Issues Involved:
1. Compliance with Rule 139 of the Companies (Court) Rules, 1959.
2. Adequacy of the sale price for the assets of the company in liquidation.
3. Validity of the official liquidator's actions in accepting and rejecting offers.
4. Maintainability of the appeals by the appellants.

Detailed Analysis:

Compliance with Rule 139 of the Companies (Court) Rules, 1959
The appellants argued that the method prescribed for sanction of sale of the property of a company in liquidation is by a summons for directions as required by Rule 139, which they claimed is mandatory. They contended that non-compliance with Rule 139 renders the order and proceedings null and void. The court, however, held that Rule 10 of the Companies (Court) Rules allows the judge to permit applications to be made otherwise than by a petition or a judge's summons. The court emphasized that the practice of seeking directions on the official liquidator's report, consistent with the earlier practice and procedure of the court, is permissible. Thus, the court concluded that even in respect of matters referred to in Rule 139, it is permissible to approach the court for directions either in the manner prescribed by Rule 139 or in any other manner permitted by the judge.

Adequacy of the Sale Price for the Assets of the Company in Liquidation
The court scrutinized the adequacy of the price offered by respondent No. 3 (Rs. 39,57,755) and noted that the valuation reports and past offers were not reliable indicators of the market value. The court observed that the offers received pursuant to the public advertisement varied significantly, indicating that offers alone are not always reliable guides for determining adequate price. The court found that the price offered by respondent No. 3 did not represent the adequate market value of the assets, especially considering the higher offers made by Amba Tannin & Pharmaceuticals Ltd. (Rs. 43,13,000). The court emphasized that the primary concern is the interest of creditors and contributories, and the sale should be confirmed only if the price is adequate.

Validity of the Official Liquidator's Actions in Accepting and Rejecting Offers
The court noted that the official liquidator had not followed the terms and conditions which required all offers to be placed before the judge for directions. The official liquidator's acceptance of respondent No. 3's offer and rejection of others without court approval was deemed unjustified. The court held that non-compliance with the procedure prescribed by the terms and conditions was a mere irregularity that did not affect the right of the highest offeror if the court found the offer adequate. However, the court found that the price offered by respondent No. 3 was not adequate.

Maintainability of the Appeals by the Appellants
The court rejected the preliminary objections to the maintainability of the appeals. It held that Amba Tannin & Pharmaceuticals Ltd. was competent to file the appeal as it was one of the offerors and had increased its offer during the hearing. The court also held that Poison Ltd., which was substituted in place of Amba Tannin & Pharmaceuticals Ltd. following their amalgamation, had the right to continue the appeal. The court noted that the scheme of amalgamation transferred all interests, rights, and powers of Amba Tannin & Pharmaceuticals Ltd. to Poison Ltd., making the latter a proper party to the appeal.

Conclusion:
The court allowed the appeals, set aside the order confirming the sale to respondent No. 3, and directed the official liquidator to sell the assets of the company by public auction through Messrs. Bennet & Co., with modified terms and conditions to be approved by the court. The court also directed that the official liquidator should give notice to the petitioner on whose petition the company was ordered to be wound up before seeking directions for sanctioning or confirming the sale. The appellants and respondent No. 3 were directed to bear their respective costs, while the official liquidator's costs were to come out of the assets of the company in liquidation.

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