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TMI Blog2005 (2) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... . Cas. 345 (AP) under section 446 of the Companies Act (for short 1956 Act ) read with sections 29 and 46B of the 1951 Act read with rule 9 of the Companies (Court) Rules, 1959, seeking the permission of this Court for sale of the immovable properties, viz., land and buildings of the respondent-company in liquidation for a consideration of Rs. 56 lakhs in favour of the appellant in OSA No. 13 of 2004. This application was rejected and the sale by the Corporation was set aside by the impugned order of the learned company judge dated September 12, 2003. These two appeals are preferred against the said order. 4. The assets of the respondent-company were seized on August 31, 1994 by the Corporation, in exercise of its power under section 29 of the 1951 Act. Earlier three petitions, viz., C.P. Nos. 35 of 1990, 34 of 1991 and 24 of 1992 were filed seeking winding up of the respondent-company. By an order dated July 7, 1995, this Court ordered the winding up of the respondent-company. Thereafter in C.A. No. 464 of 1998, the Corporation sought permission of this Court to remain outside the liquidation proceedings with a view to pursue the available statutory remedies to realize it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficial Liquidator as well. As the offer received from the other appellant herein was the highest and over and above the upset price fixed by the Corporation, its board of directors, at a meeting held on December 19, 2002, resolved to approve the sale in favour of the appellant and addressed a letter dated December 21, 2002 to the Official Liquidator to accord them permission for proceeding further with the sale. As the permission of this Court is required before confirmation or finalisation of sale by the Corporation, the Corporation filed C.A. No. 336 of 2003. The Official Liquidator opposed this application of the Corporation contending, inter alia, that the Corporation violated condition No. 2 namely "filing of a valuer s report before this Court before the properties covered under the mortgage deeds are put to sale". It was the case of the Official Liquidator that in view of the violation by the Corporation, the condition being mandatory, the sale stood vitiated and no permission for confirmation of sale should be accorded by this Court. 6. Condition No. 2 of the conditions imposed by this Court in C.A. No. 464 of 1998 of the Corporation was not complied with by the Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o it is a special remedy under section 29 of the 1951 Act and therefore the Company Court acted beyond its jurisdiction in imposing conditions while permitting it to remain outside the liquidation proceedings, in an application filed by the Corporation under section 446 of the 1956 Act. In any event, contends the Corporation, the order of the learned Company Judge setting aside the sale is unwarranted and works to the detriment of the Corporation as it has not been established on any material or by the Official Liquidator that a higher price would be fetched if the properties were now put to sale after invalidating the sale which has already been made. It is alternatively contended that condition No. 2 is merely directory, violation of such condition would not ipso facto vitiate the sale and that the learned Company Judge ought to have exercised his discretion to confirm the sale notwithstanding the transgression by the Corporation of condition No. 2. 9. It requires to be noticed that the order of this Court dated September 30, 1999 in C.A. No. 464 of 1998 has become final. The conditions imposed by this Court in the order dated September 30, 1999 are binding on the Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany in liquidation vest in the Official Liquidator for the benefit of its creditors and others too. To ensure that the creditors of the company can hope to recoup their dues and to ensure that the best possible price is realised upon the sale of such assets and properties, the sale 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 ensure that the best possible price is realised. It is in the effectuation of such composite and holistic jurisdiction of the Company Court that the provisions of section 446 of the 1956 Act obligate a secured creditor who seeks to remain out of the liquidation proceedings to seek the leave of the Court. The Corporation had filed C.A. No. 464 of 1998 seeking permission of the Court to remain outside the liquidation proceedings. While granting such permission, this Court imposed certain conditions. Condition No. 2 obligated the Corporation to file the valuer s report in this Court before proceeding to put the properties to sale. This condition was to ensure that the best possible price for the properties is realised by the Corporation. The condition op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in all cases, enure to the overall interests of the varied class/category of the creditors, shareholders and others who are interested in realisation of the best possible price on the sale of the assets of the company in liquidation. Even the interests of the workmen of such company which have been specially protected under section 529 of the Companies Act might suffer in a given factual matrix if an invariable principle is spelt out that violation of a condition would nullify the sale proceedings. As already noticed the jurisdiction of the Company Court and, therefore, its corollary obligation is the effective management of the assets and properties of a company in liquidation. This obligation may on occasion be frustrated if it is held as a rule that violation of a condition would invalidate the sale proceedings. 16. When conditions are specified by the Company Court while permitting a creditor to remain outside the liquidation proceedings, it is not open to such creditor to contend that the Court should ignore such transgression and permit confirmation of the sale for the mere asking. However, the invariable consequences of violation of a condition cannot be the invalid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding. However, the value of the land was taken at Rs. 6.83 lakhs per acre considering the average rate of market rate at Rs. 12 lakhs and registry rate at Rs. 1.65 lakhs per acre. This is clearly more than Rs. 10 lakhs difference between market rate and the registry rate but what is the basis to take the average rate of the above has not been spelt out. The report of the valuer s also contains a footnote which reads as under: We have made a local enquiry in and round areas, the market rate is rapidly increasing day by day due to real estate owners in that area, the prevailing market is in between rupees ten lakhs to twelve lakhs per acre, this unit is abutting to National Highway, opposite to this land the real estate owners are developing the land into plots and it is surrounded by industrial unit, hence, we have taken high value, i.e., rupees twelve lakhs per acre ." 19. It is the assessment of the Official Liquidator which assessment has commended acceptance by the learned Company Judge that the assets of the company in liquidation are capable of fetching a higher value than the amount of Rs. 56 lakhs at which they were sold to the appellant in OSA No. 13 of 2004 (in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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