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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.

2.    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.  

3. The  facts  of  the  case  lie  in  a  narrow  compass.   The

respondent no. 1 had sent a statutory notice under Section

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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.  

4. 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.

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5. 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.

6. 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

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possession of the assets of the company was directed to be

given vide order dated 30.06.2004.

7. 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

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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.

8. 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.  

9. 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

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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.

10. 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.

11.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

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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.

12. Hence, the present appeals.

13. 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.

14.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

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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.

15. 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.

16. 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.

17. 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

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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.

18. 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

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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)

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