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TMI Blog2008 (7) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... in Company Act Case No. 36 of 2001, directing to hold fresh auction in open court and consider the respective offers of the parties. 2. The case of the appellant is that in the winding up proceeding, learned company judge directed Industrial Development Corporation of Orissa (for short, "the IDCOL"), the holding company of M/s. Konark Jute Ltd. (for short "the KJL"), to publish advertisement by fixing appropriate upset price. It was further directed that the said offer so received in sealed cover should be placed before the Asset Disposal Committee (for short "the ADC") of IDCOL who shall open and consider the same and submit a report to the company judge with regard to acceptability of any of the offer so made. The final decision with regard to acceptance of such offer shall be taken up by the court in compliance of the said direction of the company judge, offers were invited with upset price of Rs. 5,60,28,000 and in response to said advertisement, the following bidders participated : (i)M/s. Collin Traders (P.) Ltd.; (ii)M/s. S.B. Overseas Ltd.; and (iii)M/s. Piyush Suppliers (P.) Ltd. 3. The appellant's bid was for Rs. 6.02 crores which was increased from time to time up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was opposed by the appellant as the same was inconsistent with the terms agreed between the appellant and IDCOL and was accepted by the company judge. On 20-7-2006, SBOL requested IDCOL to allow for furnishing bank guarantee. On 28-7-2006, IDCOL wrote a letter to the appellant for upfront payment. The appellant on 4-8-2006, filed an affidavit before the company judge for a direction to IDCOL to accept payment in instalments as approved by the company judge. On 15-9-2006, various parties appeared before the company judge and the company judge directed the appellant and other parties to take instruction as to whether the said purchasers were ready and willing to offer more than the amount offered before. Vide impugned order dated 2-2-2007, the company judge held that no finality had been arrived at for sale and handing over of the unit to the appellant and, therefore, the company judge has decided to hold a fresh auction in open Court. 4. Learned counsel appearing for the appellant submits that the Company Judge should not have directed for holding of a fresh auction before considering the prayer and the contention made by appellant-SBOL in their affidavit dated 4-8-2006. Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration by this Court : "Whether on the facts and circumstances, the learned company judge is justified in directing for a fresh auction in open court on the ground of inadequate consideration ?" 8. The facts of the case as narrated in chronological events filed by the appellant on 3-3-2008 and development in the matter as took place on dated 15-9-2006, 10-11-2006 and the order dated 2-2-2007, clearly reveal that till passing of the impugned order no finality has been arrived between appellant-SBOL and IDCOL in respect of sale of KJL in favour of appellant. At this juncture other intending parties come forward with higher bid amount and higher upfront payment. Needless to say that in absence of concluded sale no right accrues in favour of a negotiating purchaser. Therefore, the appellant cannot claim any exclusive right to purchase the company under the process of winding up. 9. Another important aspect of the case is that KJL which is put to auction is under the process of winding up. Winding up of a company arises when the concerned company is not able to satisfy its creditors. Thus, in the event of winding up of a company, it is always fair and desirable that all attempts shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further clarifies that every sale shall be subject to confirmation by the Court. Rule 273 says that all sales by Official Liquidator or by an agent of auctioneer shall be held by inviting sealed tender or any other mode as may be directed by the Court. Thus, no property belonging to a company under winding up process can be sold without the previous sanction of the Court and every sale shall be subject to confirmation by Court. In that view of the matter, the company court is always clothed with power to set aside any sale for the betterment of the company under winding up, when the Court comes to the conclusion that price offered by the auction purchaser is inadequate. 11. In the present context, it will be useful to refer to some of the decisions of the Hon'ble Supreme Court and the High Courts. 12. In the case of Union Bank of India v. Official Liquidator [2000] 101 Comp. Cas. 3171 while setting aside a confirmed sale, the Hon'ble Supreme Court held as follows : "At the outset, we would state that in proceedings for winding up of the company under liquidation, the Court acts as a custodian for the interest of the company and the creditors. Therefore, before sanctioning the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is equally well-settled, namely, that once the Court comes to the conclusion that the price offered is adequate, no subsequent higher offer can constitute a valid ground for refusing confirmation of the sale or offer already received." (p. 9.41) 14. In Divya Mfg. Co. (P.) Ltd. v. Union Bank of India [2000] 102 Comp. Cas. 661, the Hon'ble Apex Court held that where a higher price is offered, the Court can set aside a confirmed sale in the interest of the company and its creditors. 15. The Punjab and Haryana High Court in the case of Punjab Wireless Systems Ltd. (in liquidation) v. Indian Overseas Bank [2005] 126 Comp. Cas. 554, held as follows : "It is thus obvious that the power of the Court to set aside even a confirmed sale is unassailable. The judgment of the Supreme Court in Navalkha and Sons' case [1970] 40 Comp. Cas. 936 ; [1970] 3 SCR 1, has not dealt with such a power. However, in Union Bank of India's case [2000] 101 Comp. Cas. 317 (SC), the view taken in Navalkha and Sons' case [1970] 40 Comp. Cas. 936 ; [1970] 3 SCR 1, has been considered. Emphasising that the object of sale is to apply the sale proceeds to meet the claims of the creditors of the company, the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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