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High Court Of Delhi
MICRONIX INDIA - Appellant
Versus
DISCO ELECTRONICS LIMITED - Respondent
Decided On : 09/13/1996
In this case, the Official Liquidator challenged the sale of certain properties of the company in respect whereof Official Liquidator had been appointed as the Provisional liquidator, purported to have been affected by Delhi Financial corporation limited (hereinafter referred to as "the DFC") in exercise of its powers under Section 29 of the State Financial Corporations Act. The court held that the provisions of the Companies Act are the special law and that the provisions of the Financial Corporation Act would be deemed to be the general law in cases of companies under winding up. The court also held that it has power to grant leave to sell ex-post facto provided the sale is bonafide, legally valid and maximum price has been obtained.
Fact of the Case:
The company "disco Electronics Ltd. " (hereinafter referred to as "disco") had created a mortgage in favour of the delhi Financial Corporation to secure loan facilities obtained by it on 20-1-1986. On 4/7-12-1990, the dfc on account of unsatisfactory operation and the defaults committed by the company recalled the loan. This notice was followed by another notice of 2 9/10/1991 threatening to take possession of the unit at premises No. A-83, Okhia Industrial Area, phase-11, New Delhi and the machinery installed ata-84 Okhia Industrial Area, Phase-11, New Delhi. After the DFC had resumed possession under Section 29 of the State Financial Corporation Act, the DISCO approached the DFC with the proposal that it should carry out the sale of the said property and in fact produced an intending purchaser namely M/s. Shivalik traders for settling dues of the Corporation, but despite the Corporation having agreed to accommodate DISCO the said purchaser failed to honour its commitments as a consequence whereof possession of the said property No. A-83 Okhia Industrial Area, Phase II together with the machinery lying at A-84 Okhia Industrial Phase-11 was taken over by the Corporation on 23-2-1992. DISCO had undertaken to retain the possession for and on behalf of the DFC. In other words, DISCO continued to hold the property though as agent of the DFC and for and on its behalf. The said properties were advertised for safe by the DFC on 4-6-1992.
Finding of the Court:
The court held that the provisions of the Companies Act are the special law and that the provisions of the Financial Corporation Act would be deemed to be the general law in cases of companies under winding up. The court also held that it has power to grant leave to sell ex-post facto provided the sale is bonafide, legally valid and maximum price has been obtained. In this case, the court found that the price offered was not the maximum price and that the sale was not bonafide. Therefore, the court did not grant leave to sell the property ex-post facto.
Issues: 1. Whether presentation of the winding up petition, without the consent of the Delhi Financial Corporation after taking over by it of the possession permissible and competent in law in view of the provisions contained in Section 32e of the State Financial Corporations Act ? 2. What is the effect of amendment to the Companies act, which is subsequent to the enactment of State financial Corporation Act with particular reference to sections 529-A, 446 (2), each of which contains a non-obstante clause read with proviso to Sections 529, 537. and 441 (2) of the Companies Act in the light of the provisions of Sections 29 and 46-B of State Financial corporation Act ? 3. If the provisions of Section 537 of the Companies Actare applicable, can in the circumstances of this case. leave to sell be granted to the D. F. C. ex-post facto ? If so, is the Company Court competent not to accept the offer on the plea that the price offered is not adequate ?
Ratio Decidendi: The provisions of the Companies Act are the special law and that the provisions of the Financial Corporation Act would be deemed to be the general law in cases of companies under winding up. The court has power to grant leave to sell ex-post facto provided the sale is bonafide, legally valid and maximum price has been obtained.
Final Decision: The sale affected by DFC for inadequate consideration and contrary to the subsisting injunction order of the court and whereby the possession of the property was delivered after the order of appointment of the provisional liquidator is not approved and is set aside. The DFC is granted leave to auction the property afresh by associating the Official Liquidator with settlement of proclaimation of auction and the auction. Both the parties, would be at liberty to, scout for suitable bidders. The proclaimation containing terms of sale shall be subject to the approval of the Company judge. The DFC should take steps to recover possession of the property delivered. Rs. 28. 5 lakhs shall be fixed as the reserve price. However, the highest bidder at the sale by DFC is granted liberty to join in the future auction and bid for the same property. The sale shall be subject to confirmation by the Company Judge. In the circumstances of the case, the parties are left to bear their own costs.
( 1 ) IN this case the Official Liquidator haschallenged the sale of certain properties of the company in respectwhereof Official Liquidator had been appointed as the Provisionalliquidator, purported to have been affected by Delhi Financialcorporation limited (hereinafter referred to as "the DFC") inexercise of its powers under Section 29 of the State Financial Corporations Act.
( 2 ) AFTER the arguments, I was informed that similar controversyis pending decision by the Hon ble Supreme Court and I should awaitthe outcome thereof. Now, counsels have pointed out that thehon ble Supreme Court has since decided the matter in the case ofindustrial Credit and Investment Corporation of India Ltd. Vs. M/s. Srinivas Agencies and Ors. . reported as 1996 (3) Supreme 400 ). Mr. Nayar, counsel for the Official Liquidator, concedes that thecontroversy before the Hon ble Supreme Court was not identicalwith the questions arising in the present case as would appear fromthe discussion appearing hereinafter.
( 3 ) BRIEFLY stating the facts of the case are as under :-The Company "disco Electronics Ltd. " (hereinafter referredto as "disco") had created a mortgage in favour of thedelhi Financial Corporation to secure loan facilitiesobtained by it on 20-1-1986. On 4/7-12-1990, thedfc on account of unsatisfactory operation and thedefaults committed by the company recalled the loan. This notice was followed by another notice of 2 9/10/1991 threatening to take possession of theunit at premises No. A-83, Okhia Industrial Area,phase-11, New Delhi and the machinery installed ata-84 Okhia Industrial Area, Phase-11, New Delhi. Afterthe DFC had resumed possession under Section 29 ofthe State Financial Corporation Act, the DISCOapproached the DFC with the proposal that it shouldcarry out the sale of the said property and in fact produced an intending purchaser namely M/s. Shivaliktraders for settling dues of the Corporation, but despitethe Corporation having agreed to accommodate DISCOthe said purchaser failed to honour its commitments asa consequence whereof possession of the said property No. A-83 Okhia Industrial Area, Phase II together with themachinery lying at A-84 Okhia Industrial Phase-11 wastaken over by the Corporation on 23-2-1992. DISCOhad undertaken to retain the possession for and onbehalf of the DFC. In other words, DISCO continuedto be in possession, but only as custodian on behalfof the DFC which means that DISCO continued to holdthe property though as agent of the DFC and for andon its behalf. The said properties were advertised forsafe by the DFC on 4-6-1992. iiid llic sul. c wus conducted in the office of the DFC on 22-6-1992 whenthe highest bid of Rs. 18 lakhs was received. Thedfc called upon DISCO to produce a higher bid ifthey wanted to do so. Thereafter, one Mr. Vinod Guptamade an offer of Rs. 20 lakhs. However, this bidderaftersome time withdrew his offer in view of the DFChaving received an offer of Rs. 28. 5 lakh s on 23-9-1992whieh offer was accepted by the DFC.
( 4 ) CANARA Bank claimed to. have a charge on the moveableslying stored at A-83 Okhia Industrial Area, the DFC called uponthe Canara Bank to lift the stock as it wanted to hand over thevacant possession of the premises to the successful bidder.
( 5 ) WHILE all this was going on, a petition for winding up ofdisco was filed on 3/03/1992 which was returned for removal of office objection and was refiled on 26/03/1992 i. e. ,before the sale of the property and it came up for orders on 2 7/03/1992. Even before passing of the order for admission,the Court had passed an order on 4-8-1992 (before the offer ofimpugned sale was received on 23-9-1992) restraining DISCO fromdisposing of in any manner any of its assets or making any paymentto any creditor till further orders. The winding up petition wasadmitted vide orders dated 29-9-1992. On the same day, theofficial Liquidator attached to this Court was appointed as a Provisional Liquidator of the company with the d
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