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2000(4) Supreme 426
SUPREME COURT OF INDIA
(From Calcutta High Court)
M.B. Shah & R.P. Sethi, JJ.
Union Bank of India -Appellant
versus
Official Liquidator, H.C of Calcutta & Ors. -Respondents
Civil Appeal No. 3109 of 1998
Decided on 26-4-2000
Counsel for the Parties :
For the Appearing Parties : V.R. Reddy, G.L. Sanghi, A.K. Ganguli, Sr. Advocates, Ravindra Bhat, Dhruv Mehta Ms. Shobha, S.K. Mehta, Ms. Shipra Ghose, Pranab Kumar Mullick, Sanjay Kumar Ghosh, A. Bhattacharya, Rajiv Talwar, Advocates.
In proceedings for winding up of the Company under liquidation, the Court acts as a custodian for the interest of the company and the creditors. Therefore, before sanctioning the sale of its assets, the Court is required to exercise judicial discretion to see that properties are sold at a reasonable price. For deciding what would be reasonable price, valuation report of an expert is must. Not only that, it is the duty of the Court to disclose the said valuation report to the secured creditors and other interested persons including the offerors. Further, it is the duty of the Court to apply its mind to the valuation report for verifying whether the report indicates reasonable market value of the property to be auctioned, even if objections are not raised. (Para 9)
From the facts narrated above, it is apparent that the attention of learned Company Judge was not focussed to the fact that since 1980 Company was closed and that there was no question of selling the Company s assets as a going concern. Not only that it was the duty of the Court to verify the statement made by some applicant that sale of the Company on "as is where is basis" will affect 1200 workers and for that proper notice was required to be issued to the secured creditors for whose benefit the property was to be auctioned. To straightway rely upon such statement was, to say the least, not judicious. The Company Judge ought to have also considered the fact that an attempt made by the BIFR an AIFR which are expert bodies under the SICA to revive the sick unit had failed. In any set of circumstances, there was no material on record before the Id. Judge for holding that Company could be revived and the employees would be reinstated to service by giving them re-employment. Without indulging in any such exercise straightaway to state that property would be sold as a going concern was totally without any basis and, therefore, unjustified. At the time of hearing of this matter it is admitted that after purchase of the Company it was restarted only for one day i.e. on the day of inauguration. It also appears that the Division Bench was persuaded by the so-called sympathy for the workers, without verification of the fact that Company was closed before 17 years of sale. Court has noted in the beginning while narrating the submission of the ld. Counsel who appeared for the benefit of the employees that more than 100 employees were starving to death and in the later para stated that Court was informed by the learned advocate appearing for the employees union that more than 100 employees have already died. Without there being any application on record and without there being proper verification of the facts from the concerned parties, it is not just and proper to make such observations. As discussed above, in the present case, there is total non-application of mind to the material which is required to be considered for auction sale of the assets of the Company. The impugned order passed by the Company Judge in Company Petition No. 316/1981 confirmed in appeal GA No. 708/96 is quashed and set aside with costs. Official Liquidator is directed to recover the possession of the property sold as per the inventory and thereafter to refund the amount deposited by the respondent No. 2 - auction purchaser. It would be open to respondent No. 2 to file proper application for recovering any other expenditure incurred by it after purchase of the said property if it is entitled to recover the same. (Paras 10, 11, 17 & 24)
JUDGMENT
Shah, J.-This appeal is filed against the judgment and order dated 24.12.1996 passed by the Division Bench of the Calcutta High Court dismissing the Appeal No. GA 708 of 1996 arising out of Company Petition No. 316 of 1981 whereby the learned Single Judge had confirmed the auction sale of the property of Messrs. Kolay Biscuits Company Pvt. Ltd.- Company under liquidation.
2. In the present case, it is admitted fact that on 9th July 1965 Messrs. Kolay Biscuits Company Private Limited created a mortgage of its land and building in favour of Union Bank of India for the loan granted in its favour. The factory of the company was closed down in 1980. On 20th March, 1991 under the provisions of the Sick Industrial Companies Act (SICA), the company was declared as sick unit by the Board of Industrial and Financial Reconstruction (for short "B.I.F.R.") and thereafter application under the said Act was rejected by the Board. Appeal filed before the A.I.F.R. was also dismissed. It is the contention of the Bank that on 30th March, 1981, the borrowings by the Company increased to about Rs. 3 Crores and Company executed four balance confirmations in respect of the dues in various accounts. The bank also filed a title mortgage suit No. 103/1992 before the Assistant District Judge, Sealdah against the Company and five guarantors for recovering Rs. 4,11,21,411/- alongwith interest after obtaining leave by the Company Judge under Section 446 of the Companies Act. By order dated 19th August, 1991 the Company Judge issued directions for winding up of the Company and appointing official liquidator to take over assets. On 16th February, 1996, the Company Judge appointed Mr. Pranoj Roy Chowdhary of M/s. Chowdhary Associates as a valuer with a direction to submit a report within six weeks from the date. Official Liquidator has stated that he informed the appellant Bank about the said order by letter dated 29th February, 1998. Thereafter the matter was placed before the Company Judge on 21st June, 1996 and on the same date Company Judge passed an order fixing date of sale of Company s assets as 2nd August 1996 and directed the official liquidator to make advertisement for notice of sale of assets of the Company in newspapers, namely, the Statesman, Dainik Bishwamitra and Anand Bazaar Patrika inviting applications for purchase of the property on "as is where is basis" with a direction that purchaser will be bound to deposit 20 percent of the tender amount alongwith the tender by Bank draft or bankers cheque or pay order.
3. On 2nd August, 1996, one Advocate Mr. Dutta moved an application stating that nearly 1200 workmen would be affected if the sale does not take place as a going concern and the workmen are not re-employed. The Company Judge observed:
"the fate of so many workmen nearly 1200 in number with their families depending upon them cannot be ignored by the Court."
On that day on behalf of the State of West Bengal it was submitted that its Corporation (R. No. 4) was interested to purchase the land and the entire Company and they were also interested in re-employment of workers so the Company be sold out as a going concern. Thereafter, the Court straightaway directed that the sale fixed on that day would not be held and Official Liquidator was directed to issue fresh advertisement in the same newspapers on 22nd August 1996 fixing the date for auction sale on 13th September, 1996 for the assets of the Company as a going concern .
4. On 20th September, 1996 the matter was placed before the Court and it was stated on behalf of the State Government Corporation that it was not agreeable to purchase with the condition of re employing workmen. Therefore, they withdrew their offer to purchase the Company as a going concern. The Court also considered the Valuation Report which was placed before it wherein the assets of the Company were valued at Rs. 66,90,032/-. On the basis of the said valuation M/s. Indrani Soft Drinks-respondent No. 1 whose offer
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