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TMI Blog2005 (2) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... interest to wind up the company and appointed the IPICOL (Industrial Promotion and Investment Corporation of Orissa Ltd.) as operating agency in terms of section 20(4) of the SICA to arrange for disposal of the assets of the company and directed that the entire sale proceeds after deducting expenses incurred in connection with the sale of the assets shall be deposited with the High Court for disposal by the Official Liquidator as per the provisions of the Companies Act, 1956. Paragraphs 12, 13 and 14 of the said proceedings of the B.I.F.R. held on 19-2-2001 are quoted hereinbelow : "12. After hearing the submissions of the OA, secured creditors, Banks, OSFC, OSEDC and others, the Bench noted that despite giving an opportunity to the company to rehabilitate itself no acceptable viable proposal had been submitted by the company which could be considered for its rehabilitation even at this late stage. The company had failed to take any steps to change its negative net worth and make it positive, although they had come to BIFR 10 years ago which fact gave an indication that the company and its promoters were taking undue advantage of law and were not serious about its rehabilitation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) of section 20 of the aforesaid Act to the effect that it is just and equitable and in public interest that the Sick Industrial Company should be wound up. ( d )The prospective buyers/bidders would be allowed to inspect the assets on stipulated date or dates in the presence of the company s representatives. Offers/bids should be made in sealed envelopes to be opened by the Assets Sale Committee on previously specified and notified place, date and time in the presence of the bidder s representatives. Sale of assets should be on As is, where is basis. ( e )The bidder should deposit by means of a Bank Draft earnest money equivalent to 10 per cent of the notified reserve price in respect of each asset along with the bid. This amount shall be forfeited if the party whose offer/bid is finally accepted defaults in making the balance of payment in terms of the conditions of sale and completing other sales formalities within the due date. If, however, the sale is completed within the specified time-limit, the EMD would be adjusted towards the final sale price. The EMD would not, however, carry any interest. ( f )Where a bid was finally accepted the purchaser should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scales of fees and expenses shall be regulated in accordance with the relevant provisions of the Companies (Court) Rules, 1989 and the standing orders of the concerned High Court relating to the liquidation of companies under the Companies Act, 1956. 14. The Bench also directed that a copy of today s proceedings along with the copies of the earlier proceedings and other related orders may be forwarded to the respective High Court for further necessary action. The Bench also discharged the Special Director, Mr. N.R. Hota from the Board of the Company." 3. A copy of the proceedings dated 19-2-2001 of the BIFR was received by the High Court and Company Act No. 17 of 2001 was registered in the High Court on 4-4-2001 under section 20(1) of the SICA. On 4-10-2002, the Court issued notice to the IPICOL to file a status report in respect of the Company and as to what steps have been taken pursuant to the aforesaid proceedings of the BIFR. On 4-10-2002, the Court also issued notice to the Company. 4. Thereafter, Misc. Case No. 35 of 2003 was filed by the IPICOL stating therein that pursuant to the proceedings of the BIFR dated 19-2-2001, IPICOL constituted an Assets Sale Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -12-2004 and reserved for orders. 6. Mr. S.A. Ali, Learned Counsel for the intervenor-employees of the Company, submitted relying on the averments in the Misc. Case application that as per the provisions of section 441(2) of the Companies Act, 1956, the winding up of the Company commenced on 4-4-2001 when the Company Act No. 17 of 2001 was registered on the opinion of the BIFR under section 20(1) of the SICA whereas the sale of the assets of the Company in favour of Mr. Shyam Sundar Agarwala was made by the IPICOL only on 20-1-2003 long after the commencement of the proceedings for winding up of the Company on 4-4-2001. He pointed out that section 537(1) of the Companies Act, 1956 provides that where any Company is being wound up by or subject to the supervision of the Court, any sale held, without leave of the Court, of any of the properties or effects of the company after such commencement of the winding up shall be void. He cited the decision of the Learned Company Judge of the Karnataka High Court in Karnataka State Industrial Investment Development Corpn. Ltd. v. Intermodel Transport Technology Systems AIR 1998 Kar. 195 wherein it has been held that any sale of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antaray and Company, an approved valuer and chartered engineer, which shows that the assets of the Company were valued at Rs. 1,23,99,000. He submitted that since the sale was made by the Assets Sale Committee at Rs. 1,31,00,000, the price fetched for the properties of the Company were reasonable and adequate and more than the value of the properties of the Company as determined by the approved valuer and chartered engineer. He submitted that it will be clear that the Assets Sale Committee followed the guidelines of the BIFR in the proceed-ings dated 19-2-2001 while making the advertisement in the newspapers and it is not correct that anything was suppressed at the time of sale. 8. Sections 20 and 32 of the SICA on which Mr. Rath places reliance are quoted hereinbelow : "20. Winding up of sick industrial company. (1) Where the Board, after making inquiry under section 16 and after consideration of all the relevant facts and circumstances and after giving an opportunity of being heard to all concerned parties, is of opinion that the sick industrial company is not likely to make its net worth exceed the accumulated losses within a reasonable time while meeting all its financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking with another company." 9. Sections 441 and 537 of the Companies Act, 1956 on which Mr. Ali places reliance are quoted hereinbelow : "441. Commencement of winding up by Court. (1) Where, before the presentation of a petition for the winding up of a company by the Court, a resolution has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Court, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken. (2) In any other case, the winding-up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up." "537. Avoidance of certain attachments, executions, etc., in winding up by or subject to supervision of Court. (1) Where any company is being wound-up by or subject to the supervision of the Court ( a )any attachment, distress or execution put in force, without leave of the Court, against the estate of effects of the company, after the commencement of the winding-up; or ( b )any sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court for orders for distribution in accordance with the provisions of section 529A and other provisions of the Companies Act, 1956. Hence, when orders are passed by the BIFR under sub-section (4) of section 20 of the SICA for sale of the assets of the Sick Industrial Company, such orders cannot be declared by the Company Court to be null and void under section 537(1) of the Companies Act, 1956 on the ground that no leave was taken from the Company Court before the sale was made. 11. A reading of sub-section (2) of section 441 of the Companies Act, 1956 makes it clear that in the case of winding up of a company by the Court, the commencement of winding up shall be deemed to be at the time of presentation of the petition for winding up. Sub-section (2) of section 441, therefore, does not apply to a case where winding up of a Company is commenced on the basis of the opinion of the BIFR under section 20 of the SICA. Sub-section (1) of section 537 in clause ( b ) further provides that where the Company is wound up by or subject to supervision of the Court, any sale held, without leave of the Court, of any of the properties or effects of the Company after such commencemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany has not been made under the provisions of the Companies Act, 1956 or rule 272 of the Companies (Court) Rules, 1959 by the Official Liquidator or by the Company Court but by the IPICOL as an operating agency pursuant to the orders passed by the BIFR under sub-section (4) of section 20 of the SICA before the commencement of winding up of the Company. It was, therefore, for the IPICOL as the operating agency and the BIFR to ensure that the sale of the assets of the Company was for adequate and reasonable price and was made after proper valuation by an expert valuer. Once such a sale has been made by the IPICOL as an operating agency and once such sale has been approved by the BIFR in exercise of its statutory powers under sub-section (4) of section 20 of the SICA, the High Court as a Company Court under the provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959 cannot declare such sale as null and void on the ground that the IPICOL and the BIFR did not ensure that the sale was made without a proper valuation of the assets of the Company which were put to sale. For the aforesaid reasons, I find no merit in this Misc. Case and, accordingly, dismiss the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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