M/S TECH INVEST INDIA PVT. LTD. THROUGH MAJOR SHAREHOLDER RAJIV GOSAIN Vs. ASSAM POWER AND ELECTRICALS LTD & ORS.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 6055-6056 of 2015, Judgment Date: Aug 11, 2015
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL Nos. 6055-6056 OF 2015
(Arising out of SLP (Civil) Nos. 27113-27114 of 2013)
M/s. Tech Invest India (Pvt.) Ltd.
Thr. Major Shareholder Rajiv Gosain …..Appellant
versus
M/s. Assam Power & Electricals Ltd.
and others ..Respondents
JUDGMENT
M. Y. EQBAL, J.
Leave granted.
These appeals by special leave are directed against the judgments dated
25.09.2012 and 16.07.2012 of the High Court of Uttarakhand at Nainital,
which dismissed the appeal and review application filed by the appellant
company challenging the order confirming the sale and handing over the
assets of the appellant-company to the respondent.
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.
The appellant-company filed an application to stay the auction on the
ground that its assets worth Rs. 7 crores were going to be auctioned
without fixing the minimum reserve price and after issuing the auction sale
notice only once. The appellant accordingly expressed apprehension about
the highest price being secured. The Company Judge disposed of the
application vide order dated 26.09.2003 refusing to interfere with the
auction and directed the appellant-company to raise the aforesaid
objections at the time of confirmation of sale.
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.
One Advocate Mr. Sharad Sharma appeared before the High Court on 13.04.2004
claiming to represent the shareholders of the appellant-company and the
matter was listed for filing of objections by him and on 30.04.2004 one
last opportunity was given to him for filing of objections.
On 28.05.2004, the High Court, after noting that the counsel representing
the shareholders of the appellant-company had no objections, directed
respondent no. 3 to deposit the remaining amount. On 30.06.2004, the High
Court confirmed the sale in favour of respondent no. 3 and the assets of
the appellant-company were directed to be given to respondent no. 3.
The appellant-company filed an appeal to the Division Bench of the High
Court contending that its assets were worth much more than the price at
which it was sold and that its objections were not considered at the time
of confirmation of sale. The Division Bench dismissed the appeal vide
judgment dated 16.07.2012 on the ground that the counsel for the appellant-
company had not made any objections at the time the sale was confirmed.
The appellant-company filed a review application alleging that the counsel
who claimed to be representing the appellant-company before the Company
Judge on 28th May, 2004 was not engaged by them and hence there was an
error on the face of judgment dated 16.07.2012 which had made recorded the
same. The High Court, however, held that such a statement in the judgment
dated 16.07.2012 was a mere repetition of what was stated in the order
dated 28.05.2004 of the Company Judge and hence an error, if any, was in
the order dated 28.05.2004 which was appealed against by the appellant-
company. The High Court held that the appeal filed by the appellant-company
was dismissed mainly because the sale was confirmed in favour of respondent
no. 3, possession handed over and encumbrances created, before any steps
were taken by the appellant-company. The High Court accordingly dismissed
the review application vide judgment dated 25.09.2012.
Hence, the present appeals.
We have heard learned counsel for the parties. We have also perused the
entire facts of the case and the order passed by the High Court.
Prima facie, it appears that the objections raised by the appellant were
not properly considered inasmuch as the objections were not heard on merit
and the auction sale was confirmed. Shri Sharad Sharma, Advocate, had made
the aforesaid statement before the Company Court on 28.5.2004, however, he
had never been engaged either by Mr. Rajiv Gosain or by any person
authorized by him. Therefore, making statement by the Advocate that he has
no instruction or waiving the disposal of objection on merit, was without
any basis which ought to have been considered by the High Court.
Be that as it may, the conduct of the Official Liquidator in selling the
property at a price of Rs. 45.45 lakhs without proper publicity through
advertisement or fixing any reserve price for the assets cannot be
sustained in law, particularly, when the predecessor Official Liquidator
reported that the property put in auction is of much higher valuation.
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.
Apart from that, when the valuation report was submitted before the Company
Judge, it ought to have been disclosed the secured creditors and other
interested persons in order to ascertain the market value of the property
before property was auction sold. Since the same has not been done, the
auction sale and the order confirming the sale are liable to be set aside.
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.
[INDU POKHRIYAL] [SUKHBIR PAUL KAUR]
COURT MASTER A.R.-CUM-P.S.
(Signed reportable judgment is placed on the file)