M/S. TECH INVEST INDIA (PVT.) LTD. THR. MAJOR SHAREHOLDER RAJIV GOSAINversusM/S. ASSAM POWER & ELECTRICALS LTD. AND OTHERS

                        [2015] 9 S.C.R. 970


A            M/S. TECH INVEST INDIA (PVT.) LTD.
          THR. MAJOR SHAREHOLDER RAJIV GOSAIN
                                  v.
           M/S. ASSAM POWER & ELECTRICALS LTD.
B                      AND OTHERS
               (Civil Appeal Nos. 6055-6056 of 2015)
                         AUGUST 11, 2015
             [M. Y. EQBAL AND ARUN MISHRA, JJ.]
c
           Company law: Sale of assets of company - Public
    auction - Stay application by company on the ground that its
    assets were worth Rs. 7 crores and public auction was being
    held without fixing the minimum reserve price after issuing
D   auction sale notice only once - Company judge refused to
    interfere with the auction and directed the company to raise
    the objections at the time of confirmation of safe - In auction,
    respondent no.3 purchased assets for Rs. 45. 55 fakhs- High
    Court held that counsel representing shareholders of the,
E   company had no objections and confirmed the sale -
    Company's appeal dismissed on the ground that Counsel
    had not made any objections at the time of confirmation of
    safe - On appeal, held: Sale at a price of Rs. 45.45 lakhs
    without proper publicity through advertisement or fixing any
F   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 -
    Having considered the illegality and irregularity committed
G   in the auction sale of the property, the entire process was
    vitiated.

         Allowing the appeals, the Court

      HELD: 1. Prima facie, the objections raised by the
H appellant were not properly considered inasmuch as the
                                 970
  TECH INVEST INDIA (P.) LTD. v. ASSAM POWER &                  971
                ELECTRICALS LTD.

objections were not heard on merit and the auction sale         A
was confirmed. The Advocate, had made the said
statement before the Company Court, however, he had
never been engaged either by the shareholders.
Therefore, making statement by the Advocate that he has
no instruction or waiving the disposal of objection on          B
merit, was without any basis which ought to have been
considered by the High Court. 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               C
sustained in law, particularly, when the predecessor
Official Liquidator reported that the property put in
auction is of much higher valuation. Having considered
the illegality and irregularity committed in the auction sale   D
of the property, the entire process was vitiated. Further,
the Company Judge also failed to exercise its judicial
discretion to see that the properties are sold at a
reasonable price. Apart from that, when the valuation
report was submitted before the Company Judge, it               E
ought to have disclosed the secured creditors and other
interested persons in order to ascertain the market value
of the property before property was auction sold. Since
the same was not done, the auction sale and the order
confirming the sale were liable to be set aside.                F
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. [Paras 14 to
18] [975-F-G, H; 976-A-E, F]                                    G

    CIVILAPPELLATE JURISDICTION: Civil Appeal Nos.
6055-6056 of2015.

     From the Judgment and Order dated 25.09.2012 of the        H
High Court of Uttarakhand at Nainital in Review/Recall
972        .SUPREME COURT REPOR:rS                 [2015) 9 S.C.R.


A     Application No. 660 of 2012 in Company Appeal No. 01·of
      2005.

           Priya Puri, Ranjay Kr. Dubey for the Appellant.

            M. C. Dhingra, Piyush Kant Roy, M. T. George, M. G.
 8
      Yogamaya, Pulak Raj Mullick, Tanuj Bagga Sharma, Sahil
      Mullick (for Rajinder Mathur), Ravindra Kumar, M. Shakeel,
      Subhash Chandra Jain for the Respondents.

           The Judgment of the Court was delivered by
c
           M. Y. EQBAL, J. 1. Leave granted.

            2. These appeals by special leave are directed against
      the judgments dated 25.09.2012 and 16.07.2012 of the High
D     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.

 E            3. The facts of the case lie in a narrow compass. The
      respondent no. 1 had sent a statutory notice under Section
      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.
 F    1 on 23'd 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.
 G
        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
 H terms of order dated 23.02 .2000. The Official Liquidator filed
  TECH INVEST INDIA(P.)°lTD. v. ' 1 ASSAMPOWER &                  973
         ELECTRICALS LTD. [M. Y. EQBAL, J.]

an application for selling the assets of the appellant~company    A
through a public auction and it was allowed on 11.08.2003.
The public auction was to be held on 29.09.2003.

      5. The appellant-company filed an application to stay the
auction on the ground that its assets worth Rs. 7 crores were B
going to be auctioned without fixing the minimum reserile 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 C
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    o
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 ncited that the counsel for the major shareholders
in the appellant-company hi;id no objection. Noting that          E
respondent no. 3 had deposited the said amount as directed,
the sale in favour of respondent no. 3 was confirmed and
possession of the assets of the company was directed to be
given vide order dated 30.06.2004.
                                                                  F
      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 G
assets to be worth Rs. 6.25 crores. The same was said tp
have been commupicated 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, H
974         SUPREME COURT REPORTS                  [2015] 9 S.C.R.


A  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,
 B to value 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
 C 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.
 0
            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
 E    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
 F    deposit the remaining amount. On 30.06.2004, the 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.

 G       10. The appellant-company filed an appeal to the [•!vision
   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
 H dated 16.07.2012 on the ground that the counsel for the
   TECHINVESTINDl~(P.)LTD.     v. ASSAMPOWER&                     975
            ELECTRICALS LTD. [M. Y. EQBAL, J.]

appellant-company had not made any objections at the time         A
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 28 1h May, B
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 28.05.2004 of C
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 D
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.
                                                               E
      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.                                         F

      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             G
aforesaid statement before the Company Court on 28.5.2004,
however, he had never been engaged either by Mr. Raj iv Gosa in
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   H
ought to have been considered by the High Court.
976          SUPREME COURT REPORTS                     [2015] 9 S.C.R.


A           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 pr fixing any reserve
      price for the assets cannot be sustained in law, particularly,
      when the predecessor Official Liquidator reported that the
 B    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
C     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
 o    disclosed the secured creditors and other interested persons
      in ocder 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.
 E
            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
 F    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.

 G    Devika Gujral                                       Appeals allowed.