M/S TECH INVEST INDIA PVT. LTD. THROUGH MAJOR SHAREHOLDER RAJIV GOSAIN Vs ASSAM POWER AND ELECTRICALS LTD .
Bench: M.Y. EQBAL,ARUN MISHRA
Case number: C.A. No.-006055-006056 / 2015
Diary number: 503 / 2013
Advocates: PRIYA PURI Vs
Page 1
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
1
Page 2
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.
2
Page 3
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
3
Page 4
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
4
Page 5
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
5
Page 6
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
6
Page 7
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
7
Page 8
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
8
Page 9
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
9
Page 10
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)
10