2018 (4) TMI 486 - HC - Companies Law

Sale conducted become void under provisions of Section 536 of the Companies Act, 1953 - Held that - Learned Judge in the company court has not gone deep into the above said aspects. Question as to whether the sale itself was void ab initio by virtue of provisions contained in Section 537 (1) (b) or under Section 536 (2); or as to whether there existed any reasons to hold the sale otherwise than void, has not been seen examined. The factual aspects like, whether there was notice about the winding up proceedings, either direct or constructive, whether the sale was conducted for any reasonable price, whether the purchase was bonafide or not etc are matters which are relevant to be considered. Appellant had pleaded for a decision on the above said aspects by this court itself, in exercise of the appellate jurisdiction, we are of the opinion that such a course may end in denying the right of appeal to any one of the parties. Hence we are of the opinion that the matter can be relegated for a fresh decision by the company court itself. The order of the company court impugned in this appeal, passed on Report No.1 is hereby set aside. The report of the Official Liquidator is remitted for fresh consideration and disposal by the company court.

Summary

Issues: Challenge to order setting aside auction sale of property by company court under Sections 536 and 537 of the Companies Act, 1953.

Analysis:
1. Background: The appellant, an auction purchaser of certain properties belonging to a company under winding up proceedings, challenged the order setting aside the sale conducted by the 2nd respondent Tahsildar for recovery of electricity charges and sales tax arrears. The company court set aside the sale based on the Official Liquidator's report.

2. Appellant's Contentions: The appellant argued that the sale should not be automatically void under Section 536(2) of the Companies Act, citing a Supreme Court decision. They emphasized that the court has the power to order otherwise and should consider the circumstances to uphold the sale, as seen in a Delhi High Court case.

3. Respondent's Arguments: The Official Liquidator contended that the sale was void ab initio under Section 537(1)(b) due to lack of court permission, with an exemption for tax recovery proceedings. Constructive knowledge of winding up proceedings was assumed, and the sale was deemed invalid.

4. Court's Analysis: The court noted that the company court did not delve deep into crucial aspects like notice of winding up proceedings, reasonableness of the sale price, and buyer's bona fides. The court refrained from deciding these matters on appeal to avoid denying parties their right to appeal and remitted the case for fresh consideration by the company court.

5. Conclusion: The High Court set aside the company court's order and remitted the Official Liquidator's report for fresh consideration. The company court was directed to reevaluate the sale in light of all relevant factors and make a fresh decision based on the points highlighted in the judgment.