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TMI Blog2013 (4) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... reas the High Court, on the basis of the opinion of the Board is to order the winding up of sick industrial company or cause it to be so done in accordance with the provisions of 1956 Act, the Board as envisaged in sub-section (4) may cause to be sold the assets/properties of the Company in such manner as it may deem fit and forward the sale proceeds to the High Court for orders for distribution thereof in accordance with the provisions of Section 529A and other provisions of the said enactment. The Hon'ble Apex Court in NGEF Ltd.(2005 (9) TMI 306 - SUPREME COURT OF INDIA) stated that on a comparative analysis of the provisions of the 1956 Act, the rules thereunder as well as Sections 20 and 22A of SICA, their Lordships held in authoritative terms that a Company declared to be sick in terms of the provision of SICA, continued to be sick unless it was directed to be wound up and having regard to Section 20(4) of the enactment, the Board alone had the jurisdiction as regards sale of its assets, till the order of winding up of a Company is passed. Having regard to the scope and ambit of the power of the Company Court to order or cause to effect sale of the assets of a sick ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arleys were held in connection therewith. While such efforts were in progress, the learned Company Judge, on a scrutiny of the records forwarded by the Board, by order dated 23.1.2004, appointed Mr.B.C.Meena as the Provisional Official Liquidator. It was thereafter that on 18.1.2007, the official liquidator issued an advertisement inviting tenders for sale of the assets of the Company. On this advertisement, the Company made necessary enquiries and it transpired that there was no judicial order permitting such sale, and that the leave to that effect had been granted only on the administrative side. It, therefore, filed an application under Rule 9 of the Company (Court) Rules, 1959 (hereinafter referred to as 'the Rules') before the learned Company Judge to recall the advertisement dated 18.1.2007. The learned Company Judge by his order dated 2.3.2007, however, on a consideration of such application, made the sale subject to the decision rendered in the company petition. The appellant-Company thereafter filed another application on 13.4.2007 praying for a copy of the application said to have been filed by the Provisional Official Liquidator seeking permission to put on sale its pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be represented to be in the offing. On the next date i.e.20.7.2007 as the appellant-Company sought for further time to complete the negotiations, the learned Company Judge, on a consideration of the relevant aspects and noticing, amongst others, the failure on its part to give a written undertaking in terms of its assurance on the previous date and make payment of interest on the earnest money, declined to accede to its prayer and directed that the sale be confirmed in favour of M/s.Chaudhary Sons (Forgings) Pvt.Ltd., Ghaziabad (UP). The official liquidator was ordered to take necessary consequential steps as contemplated in law. In the above factual backdrop, the learned counsel for the appellant has insistently argued that sans any order for winding up of the appellant-Company, the process of sale of its assets is per se not sanctioned by law and is thus liable to be adjudged non est. Referring to Section 20(4) of SICA, in particular, the learned counsel has urged that forwarding of the report of the Board to the High Court ipso facto does not equip it with the authority to permit sale of the assets of the sick establishment without first directing the winding up thereof. Wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent impugnment ought to be rejected in limine as every day's delay is causing immense detriment and hardship to the auction purchaser and all concerned, he urged. Reliance was placed on the decision of the Apex Court in FCS Software Solutions Ltd. Vs. LA Medical Devices Ltd. and Ors. (2008) 10 SCC 440. The pleadings of the parties and the contrasting arguments have been duly evaluated. Admittedly, as on date, the company petition has not yet been finally disposed of and no final order for winding up of the appellant-Company has yet been passed. As the sequence of the orders passed by the learned Company Judge would reveal, following an evaluation of the report of the Board recommending winding up of the appellant-Company and other records, a Provisional Official Liquidator had been appointed and as permitted by the Company Court auction sale of its assets/properties has been completed and proceeds thereof lie in deposit with the Provisional Official Liquidator. A bare perusal of the report dated 11.6.2003 of the Board reveals its considered opinion that the appellant-Company is not likely to be viable in future and that it was just, equitable and in public interest that it oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purposes of the winding up of the sick industrial company be deemed to be, and have all the powers of, the official liquidator under the Companies Act, 1956 (1 of 1956). (4) Notwithstanding anything contained in sub-section (2) or sub-section (3), the Board may cause to be sold the assets of the sick industrial company in such manner as it may deem fit and forward the sale proceeds to the High Court for orders for distribution in accordance with the provisions of section 529A, and other provisions of the Companies Act, 1956 (1 of 1956). It would be patent from sub-section (2) of Section 20 that whereas the High Court, on the basis of the opinion of the Board is to order the winding up of sick industrial company or cause it to be so done in accordance with the provisions of 1956 Act, the Board as envisaged in sub-section (4) may cause to be sold the assets/properties of the Company in such manner as it may deem fit and forward the sale proceeds to the High Court for orders for distribution thereof in accordance with the provisions of Section 529A and other provisions of the said enactment. Noticeably, under Section 22A, the Board is vested with the power to direct, in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the company petition. The Hon'ble Apex Court was of the view that the scheme of SICA suggested that the Board retains control over the assets of the sick industrial company pending decision of the High Court on the issue of winding up thereof and in terms of the relevant provisions it could either prevent or permit any sale of its assets. It was clarified that such power with the Board would remain till a winding up order is passed by the High Court and a stage arrives for the High Court for issuing orders for distribution of the sale proceeds. That the provisions of SICA would prevail over those of the 1956 Act was emphasized upon. Resort to the inherent power of the Company Court to validate any sale of the assets of the sick industrial company pending a decision on the aspect of its winding up, was not approved as well. Though great emphasis has been laid by the learned counsel for the respondents, amongst others, on Sections 450, 454 and 457 of the 1956 Act contending as well that the reported decision is distinguishable on facts, in the teeth of the unqualifying and resounding conclusions drawn against the permissibility of sale of the assets of the sick industrial co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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