9911796707
TMI Blog1999 (4) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... nate Judge, Burdwan. On the same day a hypothecation suit (Suit No. 736 of 1986) was filed by the United Bank of India, the Punjab National Bank and American Express against the said company for recovery of the sums of Rs. 20,46,010.31 and 17,87,796.49 in the Calcutta High Court. On the same day, a hypothecation suit (Suit No. 737 of 1986) was filed by the Allahabad Bank against the said company for recovery of the sums of Rs. 29,18,360.65 and 11,64,370.00 in the Calcutta High Court. Again on the same day, the Punjab National Bank and American Express filed a hypothecation suit (Suit No. 738 of 1986) against the said company for the recovery of the sums of Rs. 5,30,38,922.28 and Rs. 2,14,548.00 in the Calcutta High Court. On 3-12-1986 the Calcutta High Court passed an interim order in Suit No. 738 of 1986 appointing joint receivers. From time to time, further orders were passed in the same suit for inventory and sale of the hypothecated goods. 3. On 24-4-1987, in the winding up petition aforementioned, the said company was ordered to be wound up and the Official Liquidator was directed to take possession of the said company's assets and properties. On 15-5-1987 an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets of the said company lying in its factory premises at Ballavpur, Ranigunge, District Burdhaman and mov-able assets lying in its registered office at Calcutta. The sale was to be on "as is where is and whatever there is" basis. The terms and conditions of sale were stated to be available at the office of the Official Liquidator. 7. Clause (1 ) of the terms and conditions of sale stated that the sale would be as per inventory on 'as is where is and whatever there is' basis and subject to the confirmation by the Court. Clause (5) stated that the offer made by intending purchasers should be contained in a sealed cover enclosing a bank draft or pay order equivalent to 10 per cent of the offer. Clause (5) stated that "the successful purchaser will have to pay the balance purchase price to the Official Liquidator within a week from the date of sale by the Court either by bank draft or pay order. It is made clear that this would not prevent the Court from fixing any other date for such deposit or extending such time even if such time has expired on such terms and conditions as the court may deem fit." Clause (9) stated that the sale 'would be subject to such modifications/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter from the Bengal Paper Mill Mazdoor Congress affiliated to INTUC wherein an unequivocal acceptance of the terms had been recorded. The Advocate General had assured the Court that 1700 people would be re- employed within a span of two weeks and to those who could not be taken in necessary compensation would be paid, which might exceed Rs. 50 lakhs. The learned single Judge recorded that the learned advocate appearing for the secured creditors has raised no objection excepting however that the prayer for direction on the Official Liquidator for disbursement of some money to the secured creditors as a long period of time has already elapsed in the meanwhile". The learned single Judge then passed the following order: "Considering the above and considering the factum of re-employment of 1700 people of the Mill which has been under closure for the last 7-8 years, the sale in favour of M/s. Eastern Minerals & Trading Agency (Paper Division) ought to be confirmed at Rs. 2 crores. It is ordered thus accordingly. Consequently directions follow. It is recorded that a total sum of Rs. 20 lakhs has been made over to the Official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans granted by the banks were fully secured and should have been fully recovered if the assets had been sold at a proper price. Since the valuation report was not shown to the banks, the banks had no opportunity to point out the defects in the valuation report. The said company had 15.2.73 acres of lease-hold land. This was not taken into consideration by the valuer on the ground that the lease was only upto 14-10-1992. The valuer had not indicated whether he had examined the lease-deed or whether there was any renewal clause in it. The counsel on behalf of the banks had submitted that no proper effort was made to obtain a fair market price for the property sold. Advertisements should have been given all over India, particularly in Bombay, Delhi, Madras and other important commercial centers, to obtain the best possible price. This had not been done. Because of the non-disclosure of the valuation report, the secured creditors were unable to raise any objection and were not in a position to know whether the assets had been sold at a low price. The assets were the securities of the banks. The banks had filed several suits and receivers had been appointed. The assets could not have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty all over India. Moreover, the successful bidder's offer should have been examined in depth before acceptance. Some enquiry should have been made to find out the number of workers actually employed by the company in liquidation at the time of the closure of its mills. No attempt was made out to find out how many of those workers were still unemployed and whether the Trade Union with which the purchaser had entered into an agreement represented all the unemployed workman of the company in liquidation. It appears that 1700 of the workmen of the company have not been reemployed. No attempt was made to find out whether there was any outstanding liabilities of the company, statutory or otherwise, in respect of its workers. The company might have other liabilities. The nature and extend of such liabilities were not found out. The sale of the assets should not have been made in a way to deprive the right of all the creditors, including the banks, to proceed against the assets of the company to realise their dues." The Division Bench then stated: "However the only parties that have come to this Court for setting asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said company's ex-employees were only some of its creditors and that they stood on no better footing than its other unsecured creditors. No order could have been passed that, while it favored them, took no account of other unsecured creditors. The employees of the said company had been, as the order of the learned single Judge itself shows, out of employment for 7 to 8 years but the learned single Judge did not inquire how many of them had secured other employment in the interven-ing years. 16. The learned single Judge did not ascertain and set out what the total amount of the claims, secured and unsecured, again the said company was and whether the assets and the property of the said company, other than those sold, were adequate to pay off these claims, even in part. The learned single Judge did not even ascertain and state how many unse- cured creditors there were, what the aggregate amount of their claims was and what part thereof could be ascribed to the erstwhile employees of the said company. The learned single Judge did not, it appears, appreciate that his principal obligation in conducting and confirming the sale was to the body of creditors of the said company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture. In our view, the Division Bench was in error. 21. Upon liquidation, the assets and properties of the company in liquida-tion vest in the Official Liquidator for the benefit of its creditors. It is only from out of the sale proceeds of these assets and properties that the creditors of the company can hope to recoup their dues. To ensure that the best possible price is realised upon the sale of these assets and properties, the sale thereof by the liquidator is required to be confirmed by the High Court. It is the obligation of the High Court to the creditors of the company in liquidation to make sure that the best possible price has been realised. 22. In Navalkha & Sons v. Sri Ramanya Das 1970(3) SCR 1, this Court quoted rule 273 of Companies (Court) Rules, 1959, thus: "Procedure at sale. - Every sale shall be held by the Official Liquidator, or, if the Judge shall so direct, by an agent or an auctioneer approved by the Court, and subject to such terms and conditions, if any, as may be approved by the Court. All sales shall be made by public auction or by inviting sealed tenders or in such manner as the Judge may direct." It then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court is expected to protect when confirming a sale by the liquidator. 24. We think that the Division Bench lost sight of what is stated above. It could not have realistically expected the ordinary unsecured creditors of the said company to have filed appeals on the ground of inadequacy of the sale price. It could not have turned a blind eye to the many defects that it itself noted in the order of sale merely because the banks had moved the appeals after five months; nor was there any justification for taking into consideration the expenditure that had been incurred by the second respondent subsequent to its possession of the assets and properties. In the first place, the Division Bench should have noted that the learned single Judge had with unseemly haste ordered possession thereof to be handed over to the second respondent on the very next day. In the second place, the appeals had been filed within the period of limitation. Expendi-ture incurred during this period could not render the appeals, in effect, infractuous. The same would apply to expenditure incurred subsequent to the filing of the appeals and until the time that they were heard. The second respondent knew that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the equity of redemption in the mortgaged property. These contentions were repeat- ed before us. On behalf of the second respondent it was contended, on the other hand, that the banks had given up their securities and become unsecured creditors. 28. It is to be noted than on 11/12-1-1988, the Punjab National Bank had made an application to the High Court in the transferred suit and prayed that the Official Liquidator should be appointed receiver in place and stead of the joint receivers in Suit No. 738 of 1986 with directions to take possession, make inventory and sell the securities both in the transferred suit as well as in Suit No. 738 of 1986, which application was allowed on 12-1-1988. It is not clear from the submissions whether, as a result, the Official Liquidator was appointed receiver of the mortgaged properties in the transferred suit. It is also not clear whether any similar application had been made by the other banks in their suits. It is pertinent to note that in the subsequent order dated 29-6-1989 passed in the winding up petition, giving to the Official Liquidator leave to sell the assets and properties of the said company, reference was made to the 'secur ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
