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TMI Blog2001 (8) TMI 1306X X X X Extracts X X X X X X X X Extracts X X X X ..... y the official liquidator as to the result of the said auction on receipt whereof by an order dated 19-2-2001 the learned company Judge directed the official liquidator to invite sealed tenders from prospective purchasers for the sale of assets of the company in liquidation upon making adequate publicity there for. In spite of the aforementioned advertisement and alleged efforts put in by the official liquidator no person came forward to purchase the assets of the company. The 7th respondent made an offer. 3. The official liquidator in the aforementioned situation himself took out a chambers summons praying therein that secured creditors be directed to go in for private negotiations with their existing clients. On the date of hearing the 3rd respondent as also the 1st and 2nd respondents expressed their willingness to negotiate with the prospective purchasers. 4. However, before the learned Single Judge an order passed in O.S.A. No. 16 of 1995 was produced as a result whereof a doubt was entertained by the learned Judge whether such a procedure can be adopted. 5. Let us now consider the order dated 19-11-1998 passed in O.S.A. No. 16 of 1995. In the said case a company w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of the Companies Act. The learned Judges were of the opinion that the official liquidator ought to have been taken into confidence and the proposal should have been placed before him for his consideration and concurrence so that appropriate steps could be taken by him to move the court. It was held: "Section 456 makes it clear that the custody and control of the property, effects and actionable claims of the company will be vested in the liquidator soon after winding up order is passed. Section 457 confers various powers on the liquidator which he can exercise with the sanction of the court. One such power is to sell immovable and movable properties and actionable claims of the company by public auction or private contract with power to transfer the whole thereof to any person or body corporate or to sell in parcels. The exercise or proposed exercise of the powers conferred by section 457 is subject to the control of the court. [ Vide sub-section (3) of section 457]. In the face of these provisions, it could not be open to the creditors to take independent decision without reference to the liquidator to sell the properties of the company under liquidation to a purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Company Court Rules, the official liquidator alone can sell the property, the decision of the Division Bench must be held to be correct. Strong reliance in this connection has been placed on Indian Textiles v. G. State Financial Corpn. [1994] 81 CC 599, Sirohi Cements Ltd., In re (Raj.) 1998 94 CC 769, A.P. S. Financial Corpn. v. Electrothermic (P.) Ltd. 1996 (2) ALD 213, Sunitibala Debi v. Dhara Sundari Debi AIR 1919 PC 24. Our attention in this connection has also been drawn to section 46 of the Companies Act and section 28 of the Provincial Insolvency Act. 11. Mr. G. Krishna Murthy, the learned counsel appearing on behalf of the 2nd caveator, on the other hand, submitted that right of the liquidator is circumscribed by the provisions contained in sections 456 and 457. Strong reliance in this connection has been placed on Maharashtra State Financial Corpn. v. Official Liquidator, Bombay High Court AIR 1993 Bom. 392. 12. Before proceeding to consider the rival contentions, we may notice the relevant portion of sections 456(1) and (2), 457 and 458 rules 272 and 273 of the Companies (Court) Rules, 1959 and section 28(6) of the Provincial Insolvency A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public auction or by inviting sealed tenders or in such manners as the Judge may direct. Section 28 of the Provisional Insolvency Act, 1920: Effect of an order of adjudication : ..... (6) Nothing in this section shall affect the power of any secured creditor to realise or otherwise deal with his security, in the same manner as he would have been entitled to realise or deal with it if this section had not been passed." 13. The aforementioned provisions in no unmistakable terms show that the assets of the company vest in the court and not in the official liquidator. The Official Liquidator has also no absolute say in the matter of disposal of the company s property. 14. On a winding up order being made thus, (1) the property of the company does not vest in the official liquidator as in the case of insolvency. The property remains the property of the company and the liquidator is only given custody thereof. The court although have jurisdiction, would not ordinarily interfere in the matter of obtaining possession by the official liquidator except on special grounds for breaking open locks, etc. Any secured creditor may take possession of the property only with the permiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to walk out of the sale only because of the rescheduling of the instalments of payment and that he had not acted fairly in failing to pay the first instalment. 4.The purchaser s interest had to be kept in mind because he had made certain investments and had re-employed the whole labour but because all the assets were transferred to him on the basis of deferred payments, it was desirable that he should be required to pay more expeditiously." 20. Yet again in United Bank of India v. Bharat Electrical Industries Ltd. AIR 1994 Cal. 283 although the original reserve price was Rs. 2.5 crores, having regard to the fact that the sale was advertised five times and the highest bid remained below that amount all the times, an order confirming the sale at Rs. 1 crore by the court was held to be not suffering from any illegality or irregularity. 21. The Division Bench in O.S.A. No. 16 of 1995 was dealing with a peculiar situation and merely observed, having regard to the facts and circumstances of the case that the official liquidator should have been taken into confidence. It did not hold that the assets of the company vest in the official liquidator or the court cannot pass an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration if the company is wound up." (p. 398) 26. In Sirohi Cements Ltd., In re supra a learned Single Judge of the Rajasthan High Court merely followed the decision of the Apex Court in Central Bank of India v. Elmot Engg. Co. [1994] 81 Comp. Cas. 13 (SC) wherein it was observed that the object of section 446 is to safeguard the assets of the company in winding up against wasteful or expensive litigation as far as matters which could be expeditiously and cheaply decided by the company court are concerned, but did not lay down any legal principles. It merely followed certain directions issued by the Apex Court. 27. In Indian Textiles case ( supra ) a learned single Judge of the Bombay High Court held that the State Financial Corpn. has to take possession of or put the property in sale only upon taking consent of the court. 28. In A.P. State Financial Corpn. v. Official Liquidator [1995] (2) ALT 406 upon referring to the decisions of Maharashtra State Financial Corpn. s case ( supra ) it was observed: "Having regard to the fact that the financial corporation has taken recourse to section 29 of the Act, it was not necessary to approach the court to take pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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