M/S Tech Invest India Pvt. Ltd. Through ... vs Assam Power And Electricals Ltd & Ors

The facts of the case lie in a narrow compass. The respondent no. 1 had sent a statutory notice under Section 434 of the Companies Act, 1956 and filed a winding up petition against the appellant-company alleging that the appellant-company had taken a loan of Rs. 6 lakhs from respondent no. 1 on 23rd March, 1999 and promised to repay it within 30 days with 18% interest. The appellant-company was alleged to have, however, initiated measures to shut down its operations and sell its assets and issued closure notices in May, 1999 without repaying the dues to the respondent.

The Company Judge appointed an Official Liquidator on 14.10.1999 and the possession of the assets of the appellant-company was taken over by the Official Liquidator who was also granted permission to assess the valuation in terms of order dated 23.02.2000. The Official Liquidator filed an application for selling the assets of the appellant-company through a public auction and it was allowed on 11.08.2003. The public auction was to be held on 29.09.2003.

In the auction, respondent no. 3 purchased the assets of the appellant- company for Rs. 45.55 lakhs and deposited 10% of the consideration. Vide order dated 28.05.2004, respondent no. 3 was directed to deposit the remaining amount after it was noted that the counsel for the major shareholders in the appellant-company had no objection. Noting that respondent no. 3 had deposited the said amount as directed, the sale in favour of respondent no. 3 was confirmed and possession of the assets of the company was directed to be given vide order dated 30.06.2004.

Rajiv Gosain, a shareholder in the appellant-company, filed an application for rejecting the auction sale and for re-auction. It was alleged that respondent no. 1 and the Official Liquidator had appointed S. K. Ahuja & Associates who had inspected the assets of the appellant-company and valued the assets to be worth Rs. 6.25 crores. The same was said to have been communicated to the petitioner vide letter dated 15.05.2000 and it was in turn said to have been communicated by the appellant-company to the Official Liquidator vide letter dated 26.06.2003. The Official Liquidator was, however, alleged to have not informed the High Court of the valuation by S. K. Ahuja and Associates and consequently secured permission for valuation on 23.02.2000 pursuant to which the Official Liquidator was alleged to have illegally and with mala fide intention appointed an ineligible valuer, Mr. S. B. Bhargava, to value the assets of the appellant- company. Mr. S. B. Bhargava was alleged to have drastically and illegally reduced the value of the assets of the appellant-company to Rs. 76.80 lakhs and his report was submitted to the High Court by the Official Liquidator. The same was alleged to have led to the issuance of an erroneous auction notice which did not mention minimum reserve price and many other vital details and which notice only came to the knowledge of a very limited number of individuals. The auction was further challenged on the ground of procedural irregularity.

Hence, the present appeals.

Having considered the illegality and irregularity committed in the auction sale of the property, the entire process is vitiated. Further we are of the view that the Company Judge also failed to exercise its judicial discretion to see that the properties are sold at a reasonable price.

We, therefore, allow these appeals and set aside the judgment and order passed by the Company Judge and also the order passed by the High Court in appeal. Consequently the Official Liquidator is directed to forthwith recover the possession of the properties and proceed with a fresh auction after obtaining the fresh valuation report and fixing the reserve bid. Needless to say that all further actions shall be taken in accordance with the procedure established by law.

…………………………….J. (M.Y. Eqbal) …………………………….J. (Arun Mishra) New Delhi August 11, 2015 ITEM NO.1A COURT NO.10 SECTION X (For Judgment) S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS Civil Appeal Nos. 6055-6056 of 2015 @ Petition(s) for Special Leave to Appeal (C) No(s). 27113-27114/2013 M/S TECH INVEST INDIA PVT. LTD. THROUGH MAJOR SHAREHOLDER RAJIV GOSAIN Petitioner(s) VERSUS ASSAM POWER AND ELECTRICALS LTD & ORS. Respondent(s) Date : 11/08/2015 These petitions were called on for pronouncement of judgment today.

For Petitioner(s) Mrs. Priya Puri,Adv.

Mr. Ranjay Kr. Dubey, Adv.

For Respondent(s) Mr. M. T. George,Adv.

Mr. Ravindra Kumar,Adv.

Mr. Subhash Chandra Jain,Adv.

Mr. M. C. Dhingra,Adv.

Mr. Rajinder Mathur,Adv.

Mr. Subhash Chandra Jain,Adv.

Hon'ble Mr. Justice M.Y. Eqbal pronounced the judgment of the Bench comprising His Lordship and Hon'ble Mr. Justice Arun Mishra.

Leave granted.

The appeals are allowed in terms of the signed reportable judgment.

(Signed reportable judgment is placed on the file)