1981 (7) TMI 163 - HC - Companies Law

Summary

Issues Involved:
1. Principle and procedure for the sale of assets of a company in liquidation.
2. Whether the sale should be conducted by public auction or private treaty.
3. Consideration of public interest, employment, and socio-economic factors in the sale process.
4. Objections by ex-management and ex-employees against the sale to the applicant-society.

Detailed Analysis:

1. Principle and Procedure for the Sale of Assets of a Company in Liquidation:
The judgment addresses the significant public importance of determining whether the sale of a company's assets in liquidation should solely aim to fetch the maximum price or if the court should consider socio-economic factors and public interest. The court must apply the law pragmatically, considering the realities and interests of the public in a welfare state like India.

2. Whether the Sale Should be Conducted by Public Auction or Private Treaty:
The applicant-society, formed by the company's workers, applied for a lease or license to operate the company's assets. Initially, a one-year license was granted, with potential renewal. The applicant-society successfully revived the company, securing orders from government entities and export contracts. They applied to renew the lease or purchase the assets by private treaty. The court had to decide whether to sell the assets by public auction, as generally prescribed, or by private treaty, considering the applicant-society's achievements and potential.

3. Consideration of Public Interest, Employment, and Socio-Economic Factors in the Sale Process:
The court acknowledged the applicant-society's significant progress in reviving the company, creating employment, and securing substantial orders. The society's efforts were supported by financial institutions and government entities. The court emphasized that public interest, including employment and economic revival, should be paramount. The court considered the Supreme Court's decision in Navalkha & Sons v. Ramanya Das, which allows deviation from public auction if a reasonable price can be obtained and public interest is served.

4. Objections by Ex-Management and Ex-Employees Against the Sale to the Applicant-Society:
Objections were raised by ex-employees and ex-management, alleging the applicant-society's nominal capital and potential ulterior motives of Chloride India Ltd., which supported the society. The court found these objections to be motivated by the ex-management's interest in regaining control and not bona fide. The court noted that the ex-management's actions had previously led to the company's liquidation and that their opposition aimed to frustrate the applicant-society's achievements.

Conclusion:
The court concluded that the sale should be made by private treaty to the applicant-society, considering their successful revival of the company and the larger public interest. The court directed the applicant-society to make an offer to the official liquidator, which would be reviewed to ensure a reasonable price. The decision was made based on the peculiar circumstances of this case and was not intended to set a precedent. The court emphasized the importance of maintaining the revived industry and the socio-economic benefits it provided.