2005 (7) TMI 373 - HC - Companies Law

Summary

Issues Involved:
1. Confirmation of the highest offer of Rs. 140 crores by Thiru T.S.R. Khannaiyann.
2. Adequacy of opportunity given to other bidders before accepting the highest offer.
3. Directions to the official liquidator regarding the claims of workers, lessees, creditors, etc.

Detailed Analysis:

Issue 1: Confirmation of the highest offer of Rs. 140 crores by Thiru T.S.R. Khannaiyann

The court examined whether the learned company judge was correct in confirming the highest offer of Rs. 140 crores made by Thiru T.S.R. Khannaiyann. The court noted that the highest bidder, T.S.R. Khannaiyann, was directed to pay the balance amount of Rs. 133.70 crores in three installments. However, the first installment of Rs. 13.37 crores was not paid by the stipulated date of December 8, 2004. The court observed that although Khannaiyann cited the appeal and stay order as reasons for non-payment, the stay was granted only on December 23, 2004, which was after the due date. Additionally, the court found that Khannaiyann's cheque for the first installment was dishonored, and subsequent attempts to rectify this also failed. Therefore, the court concluded that the highest bidder did not fulfill the conditions stipulated by the Company Court.

Issue 2: Adequacy of opportunity given to other bidders

The court addressed whether adequate opportunity was given to all other bidders before accepting the highest offer. It was noted that only two bidders, T.S.R. Khannaiyann and M/s. Nuziveedu Seeds Ltd., actively participated in the auction. The court found that there was no information indicating that all other participants were duly informed about the opportunity to increase their bids beyond Rs. 135 crores. The court emphasized that considering the nature and extent of the property, it was essential to afford adequate opportunity to all intending bidders to secure a good price. The court found the grievances expressed by the appellants in both appeals reasonable and acceptable. Consequently, the court set aside the order of the Company Judge dated November 24, 2004, and directed the official liquidator to call for fresh tenders through fresh publication in leading newspapers.

Issue 3: Directions to the official liquidator regarding the claims of workers, lessees, creditors, etc.

The court provided specific directions to the official liquidator concerning the claims of various stakeholders. Upon confirmation of the sale by the Company Court, the official liquidator was directed to disburse the amount among the eligible workers on a priority basis, treating their claims as the first claim before settling other creditors. The court also addressed the claims of lessees and other creditors, directing that their applications be considered and orders passed subject to their eligibility. The court further directed that the official liquidator return the earnest money deposit paid by T.S.R. Khannaiyann after adjusting the amount payable to the bank for cheque return charges.

Conclusion:

The court allowed the original side appeals with the above directions and ordered the official liquidator to proceed with fresh tenders. The claims of workers were to be prioritized, and other creditors' claims were to be settled based on eligibility. The stay petitions and vacate stay petitions were closed accordingly.