2009 (11) TMI 503 - HC - Companies Law

Winding up - auction sale of company s property challenged - Held that - At the outset we would reject the appeal of Sukhchainsingh because Sukhchainsingh had never offered any bid muchless higher bid than the successful bidder respondent No. 3 before confirmation of sale on 19-8-2009 and did not espouse his cause before the Learned Company Judge at an appropriate stage before confirmation of sale on 19-8-2009. In these circumstances, the appeal preferred by Sukhchainsingh, being Co. Appeal No. 7/2009, has no merit and substance and we dismiss it without any hesitation. In view of the undisputed facts floating on surface of record the original offer of ₹ 31 crores, which during the course of this appeal was revised to ₹ 35 crores, does not appeal to us so as to set aside the confirmed sale made by the Learned Company Judge in favour of the respondent No. 3. We feel disposed to take note of the fact that the EMD of ₹ 6 crores as deposited by the respondent No. 3 on 8-5-2008 was lying for more than a year with the Official Liquidator. Even by straight calculation this amount of ₹ 6 crores lying deposited with the Official Liquidator, if had not been deposited, would have been used by the respondent No. 3 and it could have at least fetched interest of ₹ 6 lakhs per month in the ordinary course of business. On the contrary the appellant did neither deposit any Earnest Money nor 18 per cent of his offer in violation to the court order which does not portray the picture of a bona fide and higher offerer. In these circumstances we are unable to hold that the appellant has made out any case calling for our interference in the matter. We are also unable to hold that the impugned orders dated 6-5-2009, 19-8-2009 and 8-10-2009 suffer from any illegality and we uphold the same. The appeal fails and is hereby dismissed with cost of ₹ 25,000. Thus company appeal No. 8/09 dismissed with costs of ₹ 25,000 payable by the appellant to the respondent No. 3.

Issues Involved:
1. Winding up of M/s. Bharat Commerce and Industries Limited.
2. Validity and process of asset disposal by the Official Liquidator.
3. Intervention applications by third parties.
4. Confirmation of sale by the Company Court.
5. Maintainability of appeals under Section 483 of the Companies Act.
6. Limitation period for filing appeals.
7. Consideration of higher bids post-confirmation of sale.

Detailed Analysis:

1. Winding up of M/s. Bharat Commerce and Industries Limited:
The company was declared sick by the BIFR, and a reference was made for its winding up on April 12, 2004. Subsequently, on July 11, 2005, the Company Judge ordered the winding up of M/s. Bharat Commerce & Industries Limited.

2. Validity and process of asset disposal by the Official Liquidator:
Efforts to dispose of the company's assets began in August-September 2006, with public notices issued in various newspapers. On February 25, 2008, a public notice was issued, and on May 8, 2008, respondent No. 3 submitted a tender and deposited Rs. 6 crores as earnest money. The Official Liquidator confirmed that the highest bids for lot Nos. 1 and 2 were received from respondent No. 3.

3. Intervention applications by third parties:
M/s. SPA Infrastructure Pvt. Ltd. filed an application to participate in negotiations, which was allowed by the Company Court on August 11, 2008. However, respondent No. 3 outweighed SPA Infrastructure Pvt. Ltd. in negotiations. Another intervention application was filed by M/s. Rohan Meta Chem Industries offering a higher bid, but they failed to deposit the required earnest money and 18% of their offer value, leading to the dismissal of their application.

4. Confirmation of sale by the Company Court:
On August 19, 2009, the Company Judge confirmed the sale in favor of respondent No. 3 as the highest bidder and directed the Official Liquidator to execute necessary documents. Respondent No. 3 deposited the balance amount of Rs. 22 crores on September 17, 2009, and possession was handed over on October 3, 2009.

5. Maintainability of appeals under Section 483 of the Companies Act:
The court discussed the interpretation of Section 483, which provides for appeals to the same court in the same manner as appeals from orders within its ordinary original jurisdiction. The court leaned towards a purposive construction, holding that an appeal against orders of the Company Judge would lie to a Division Bench, rejecting the preliminary objection raised by respondent No. 3.

6. Limitation period for filing appeals:
The court considered the Full Bench judgment in Punjab Co-operative Bank Ltd. and held that Section 12 of the Limitation Act applies to company appeals under Section 483. The time spent in obtaining certified copies of the orders was excludible, making the appeals within the limitation period.

7. Consideration of higher bids post-confirmation of sale:
The court referred to the judgment in FCS Software Solutions Ltd. and emphasized the need to consider the circumstances of each case. The appellant failed to deposit the required earnest money and 18% of their offer, and did not press their offer before the Company Judge, leading to the confirmation of the sale in favor of respondent No. 3. The court found no merit in the appeals and dismissed them with costs.

Conclusion:
The court upheld the orders of the Company Judge, confirming the sale in favor of respondent No. 3, and dismissed the appeals, emphasizing the need for timely and bona fide actions by bidders in liquidation proceedings. The appeals were found to be within the limitation period, but the appellants failed to demonstrate bona fides and compliance with court orders, leading to the dismissal of their claims.

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