9911796707
TMI Blog2007 (3) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, in the year 1994. The BIFR explored the possibility of rehabilitation and revival of the company and ultimately, by an order dated August 2, 2002, opined that NGEF is not likely to make its net worth exceed its accumulated losses within any reasonable time and held that it is just and equitable and in public interest to be wound up and recommended accordingly to the High Court of Karnataka. The opinion which was received by the High Court on August 24, 2002, was registered as Company Petition No. 154 of 2002. The company court accepted the recommendation of the BIFR and NGEF was ordered to be wound up by the court's order dated August 3, 2004. By a further order dated October 20, 2005, the company court approved the draft terms and conditions of the proposed sale of the assets of NGEF by the invitation of sealed tenders and accordingly permitted the official liquidator to take further steps in terms thereof. On November 3, 2005 the official liquidator published a public sale notice, inviting sealed tenders in respect of the sale of the assets of NCEF. On November 28, 2006 the State Government, fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006. On February 28, 2006 however, the same was withdrawn with liberty to make appropriate applications before the company judge in Company Application Nos. 1052 and 1053 of 2005 to implead itself as a party, for recalling the order dated December 22, 2005 and for confirmation of the sale in its favour. It is in this background that the appellant had filed several applications. Company Applications Nos. 173, 175, 176, 177 and 178 of 2006 were filed by the appellant seeking to implead itself as a necessary party in company application in Company Petition No. 154 of 2002 namely ( a ) C.A. No. 1052 of 2005 by the State of Karnataka seeking stay of a sale notice dated November 14, 2005 issued by the official liquidator ( b ) C. A. No. 1053 of 2005, by the State of Karnataka seeking sanction of sale of land and stay of the sale proceedings to be conducted pursuant to the sale notice dated November 14, 2005 ; ( c ) C. A. No. 1095 of 2005 by BMTC; ( d ) C. A. No. 1096 of 2005, by Karnataka State Road Transport Corporation; and ( e ) C. A. No. 1097 of 2005 by BMRCL, respectively. On these applications seeking to implead itself as a party, the company judge has held that the appellant her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court not to confirm the sale, would submit that the ''court not assigning reasons" would not mean the absence of reasons. The question would be whether that power of the court has been judiciously exercised. The only reason for cancelling the sale notification and proceedings was on account of a possible revival plan of the State Government. In the absence of any material before the court, as on December 22, 2005, there was no basis for the court, to have passed the said order. Further, that in the absence of any arrangement having been agreed to by the several creditors and the contributory, the exercise of the discretionary power of the court under rule 9 of the Companies (Court) Rules, 1959, was in violation of a statutory requirement, in having brought the sale process to a halt and in staying the winding up proceedings as it were. That there were no supervening circumstances from the date the State Government filed its applications seeking stay of sale proceedings as on November 25,2005, and the date of order dated December 22,2005. In fact the court, had postponed the consideration of the applications to enable the State Government to place material before it to satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons seeking a hearing on such a reversal, being summarily rejected on the footing that the appellant had no vested right, as its bid was not formally accepted is clearly unjust and illegal. The absence of a contractual right did not preclude the appellant from being heard on the propriety of termination of the sale proceedings, especially in the circumstances of the present case. The fact that the bidders were specifically informed of the applications filed by the State Government in C.A. No. 1052 and C.A. No. 1053 is significant and presupposes that the court intended to take the bidders into confidence of the State's intentions which were as yet nascent. The denial of hearing, at a later point of time, is hence unjust and inexplicable. Counsel for the appellant places reliance on a large number of authorities in support of his contentions. Counsel for the appellant concludes that the company judge had committed an irregularity in cancelling the sale notification and terminating the sale proceedings at the behest of the State Government and without affording any opportunity of hearing to the appellant. And that the exercise of inherent power without the statutory requirements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the last one year. This circumstance by itself would be enough to hold that even if the appellant was the highest bidder which required to be accepted it would result in gifting the land to the appellant at less than current market value. This would be contrary to the public interest. The sale proceedings of December, 2005, are no longer relevant and hence the appellant's claims are an exercise in futility. The bid of the appellant cannot be accepted even de hors the revival plan of the State Government at this point of time. Reliance is placed by the learned Advocate General on several authorities in support of his contentions. The learned Advocate General would therefore submit that there are no reliefs capable of being granted to the appellant and that the appeals be dismissed. Counsel for Respondent. No. 3, State Bank of Mysore, one of the banks comprising the consortium of banks (namely, State Bank of India, Vijaya Bank, Canara Bank, State Bank of Patiala, State Bank of Travancore, State Bank of Hyderabad and State Bank of Saurashtra) financing NGEF Ltd., would submit that the consortium of banks had independently initiated proceedings under the Recovery of Debts Due t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary (paragraph 16 of the application) ( c )... to stay the sale proceedings to be conducted as per the sale notice terms and conditions issued by the official liquidator... (para graph 17 of the application)" The reasons assigned to support the reliefs prayed for in the two applications were identical, namely : ( a )After the winding up order was passed by the High Court as on August 3, 2004, the Government has decided to prepare a suitable proposal for NGEF's revival and rehabilitation. ( b )Pursuant to the issuance of sale notice by the official liquidator, on November 3, 2005, the Government decided on November 7, 2005, that NGEF should be revived and its factory relocated at some other place and the existing NGEF lands should be put for better use. ( c )BMRCL, KSRTC and BMTC had approached the Government, well before the issuance of the sale notice, for sale of 53-91 acres of the land to them. As it was required for development of various transport infra structure facilities. ( d )The consortium of banks have been requesting for settlement of their outstanding dues. A meeting was held with them on November 11, 2005, and a one-time settlement was worked out and it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the opinion of the Government to revive the company supported by the relevant material, on or before March 16, 2006. In other words, the company judge was yet to be satisfied on the feasibility of a revival plan as there was no revival plan placed before him. The company judge was at best expressing confidence that a revival plan would be placed before him before March 16, 2006. It therefore follows that the sale proceedings which were not alleged to be irregular or otherwise invalid ought not to have been set at naught, but could properly have been kept in abeyance which in any event was the prayer of the applicant, State Government. Curiously, the other reliefs claimed in C. A. No. 1053 of 2005 were neither argued nor addressed either before the company court or before the court. The cancellation and termination of the proceedings on the footing that keeping the deposits of the intending purchasers indefinitely, would be unfair was not so much on the complaint of the appellant or others but was possibly in order to avoid any loss to the bidders. There fore in our opinion, the order of cancellation of the sale notification, and termination of the proceedings under the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Chandra Developers P. Ltd. [2005] 127 Comp. Cas. 822 ; [2005] 8 SCC 219 ; Smt. Jatan Kanwar Gotcha v. Golcha Properties P. Ltd. [1971] 41 Comp. Cas. 230 ; AIR 1971 SC 374. There can be no quarrel over the propositions in terms of the apex court judgments. What is required to be considered in this case, however, is whether the company judge, in accepting the highest bid and confirming a sale in terms of the proceedings is in any manner fettered. The case law cited does not deal with this power, particularly in terms of the present circumstances. The exercise of power by the company court cannot be viewed with the degree of scrutiny in relation to executive action. A fair decision would require a fair opportunity being afforded to a party who is not a total stranger to the issue on hand. The case of Chandra Developers P. Ltd. [2005] 127 Comp. Cas. 822 ; [2005] 8 SCC 219, involving the very company is a case in point wherein a bidder has agitated its claim right up to the Supreme Court. The highest bidder may not possess any contractual right nor be an absolutely necessary party but is certainly a proper party to be heard in arriving at a fair decision in court aucti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar that arguments have been addressed whether the scheme should be considered by the company judge himself or whether leave should be granted to prosecute the same before the Central Government and the said application is reserved for orders. In the above back drop and on a close examination of the material on record and the vehement contentions on behalf of the State Government of the protection of public interest notwithstanding primarily on account of the company in liquidation being a Government company does not have the effect of requiring different considerations being applied at the behest of a "new dispensation". A change in guard at the helm of affairs and "bold" thinking would not negate long drawn out proceedings before the BIFR. where there was scope for considering all alternatives including development of real estate of the company, to bring it out of the red. Nor can the inaction of a major shareholder for over two years after the matter was transferred to the company court with a recommendation for winding up, be condoned. The further fact that the court has chosen to pass a winding up order of a major Government company is not without circumspection and caution. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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