Judgment

AYYANGAR, J. :

The principal point raised for consideration in this appeal by special leave relates to the correctness and legality of an order by a Division Bench of the Calcutta High Court refusing to confirm a sale by the liquidators or the assets of a company which is being wound up. The company in question - The Luxmi Spinning and Weaving Mills Ltd. - a company incorporated under the Indian Companies Act -was carrying on business at Calcutta. On a petition of the 1st respondent -- Shankarlal Poddar - made to the High Court of Calcutta, this company was ordered to be wound up compulsorily by order dated August 22, 1955. But before this order was passed, certain matters had transpired to which it is necessary to advert. The appellants claiming that they had advanced loans to the company under two registered deeds of mortgage and alleging that there had been default on the part of the company in performing its obligations as to payment of interest etc. under the said deeds instituted a mortgage suit in the High Court of Calcutta for the usual reliefs under O. 34, Civil Procedure Code. Pending the disposal of the suit they moved the Court for the appointment of a receiver, and the second appellant and the Managing Director of the company were appointed joint receivers and they took possession of the assets of the company.

2. By reason of this circumstance, when the order for winding up was passed in August. 1955 though the Official Receiver was appointed as Official Liquidator, still he was directed not to interfere with the possession of the Joint Receivers. Sub-sequently by a further order dated September 8, 1955, two independent persons who are respondents 2 and 3 before us were appointed as Joint Receivers in the suit and they were also directed to function as Joint Liquidators in the winding up proceedings.

3. The Joint Liquidators applied for directions to the Court as regards the sale of the assets and properties of the company and the Court by an order dated December 20, 1955 directed their sale by public auction after due advertisement in the manner set out in the order and notice of this sale was directed to be given to the appellants who had by that date obtained a mortgage decree in their suit. At this stage it is necessary to mention that in the winding up proceedings the validity of the appellants claim as creditors and as secured creditors is challenged, and a claim by the State of West Bengal to arrears of certain taxes in regard to which priority is claimed is also pending adjudication by the Company Judge.

4. In pursuance of the aforesaid directions of the Court dated December 20, 1955 the liquidators held certain auctions to which it is unnecessary to refer since these proved infructuous, but ultimately the appellants and others agreed to have the sale of the assets to be held free of all charges and encumbrances and to their claims to security over the properties being transferred to the sale-proceeds when paid into Court. Consequent on this agreement the Court made an order on July 10, 1956 by which the Joint Liquidators were directed to sell the properties free of all encumbrances, the sale proceeds realised being held in Court to answer the claims of the creditors according to such priorities as might be determined by the Court.

5. The sale by public auction thus directed was duly advertised to be held on September 8, 1956 at 2 p.m. The conditions subject to which the properties were to be sold which were approved by the Court included, inter alia, (1) that the sale was subject to a reserve price to be determined by a valuer and surveyor which however was not to be made known to the bidders but had to be kept in a sealed cover until the bidding was over, (2) the sale was subject to confirmation by the Court, (3) that it was in the discretion of the liquidators to accept or reject any bid, (4) as far as possible the highest bid was to be accepted provided the liquidators considered that the bid was