Hon'ble Mrs. Vijay Lakshmi, J.
Re: Civil Misc. Impleadment Application No. 249620 of 2014 Though a counter affidavit has been filed by the appellant but the learned counsel for the appellant does not have any objection to the applicant-Dayal Swarup Kulshrestha being impleaded as respondent no. 6 in this appeal.
Accordingly, this application stands allowed. The applicant-Dayal Swarup Kulshrestha be impleaded as respondent no. 6.
Necessary amendment in the array of parties shall be carried out during the course of the day.
Re: Special Appeal This is an intra court appeal challenging the order dated 12.5.2014 passed by the learned Company Judge in Company Petition No. 29 of 1995, whereby the Official Liquidator has been directed to re-advertise the property of the company for sale by public auction, after fixing a reserve price of Rs. 4.7 crore.
We have heard Sri Ravi Kant, learned Senior Counsel along with Sri Swapnil Kumar appearing for the appellant, as well as Sri Arvind Sirkaria, learned counsel holding brief of Sri Shubham Agrawal appearing for the respondent no. 1-Official Liquidator and Sri Anadi Krishna Narayana, learned counsel for the respondent no. 2-Bank of Baroda and Sri A.A. Khan, learned counsel for the respondents no. 3 and 4-U.P. Financial Corporation and Sri Manish Goyal, learned counsel for the newly impleaded respondent no. 6 who is Ex. Director of the Company. Although copy of the appeal has been served on learned counsel appearing for the respondent no. 5-M/s K.P. Cold Storage, but no one is present on behalf of the said respondent.
In short, the facts of the present case are that the company under liquidation M/s Seema Ice & Cold Storage Private Limited (hereinafter referred to as the 'Company') had taken a loan from the Uttar Pradesh Financial Corporation (hereinafter referred to as the 'U.P.F.C.'), which was not repaid. The U.P.F.C. initiated proceedings under Section 29 of the U.P. State Financial Corporation Act, 1951. In the process, an advertisement was issued by the U.P.F.C. on 24.2.1995 for sale of the property of the company and tenders were invited by 13.3.1995. The offer of the appellant-Subhash Chand Goyal was the highest at Rs. 59 lacs. The next offer for Rs. 47 lacs was of respondent no. 5 and according to the appellant, the sale was finalized in favour of the respondent no. 5, which transferred it to M/s Dass Cold Storage, from whom the the property was subsequently purchased by M/s Mahesh Chandra Agrawal and Rajesh Agrawal. Since the property was finalized in favour of respondent no. 5-K.P. Cold Storage/Dass Cold Storage, which was not the highest bidder, the appellant-Subhash Chand Goyal challenged the same in writ petition no. 7481 of 1995, primarily on the ground that even though the offer of the appellant-Subhash Chand Goyal was highest at Rs. 59 lacs, then too the property of the company had been wrongly and illegaly transferred in favour of the person whose offer was for an amount of Rs. 47 lacs only.
In the said writ petition, the question considered by the Division Bench was the decision making process for the finalization of the sale made by the U.P.F.C. in favour of the K.P. Cold Storage/Dass Cold Storage on the ground that the decision of the respondent-Financial Corporation was unreasonable/unfair and not transparent. The Division Bench allowed the said writ petition vide its judgement and order dated 24.3.2005 and directed the U.P.F.C. to consider the offer of the present appellant herein and proceed to negotiate the property so as to get the best possible price. The sale deed of the property in question, which was executed in favour of M/s Dass Cold Storage on 5.7.1996, was set aside by the aforesaid judgement.
It is pertinent to note that in the meanwhile the Ex. Director of the company had applied before this Court on 30.5.1995 for winding up of the company, which was registered as Company Petition No. 29 of 1995. By order dated 22.8.1996, the company was wound up and the official liquidator, attached to the High Court, was appointed as the liquidator.
After the judgement dated in the aforementioned writ petition, a company application no. 361659 of 2010 was moved on behalf of the U.P.F.C. with the prayer for leave of the Court to issue an advertisement for sale of the assets of the company in liquidation in compliance of the judgement dated 24.3.2005. The said application was decided and rejected by the learned Company Judge vide its order dated 20.7.2012 after holding that the judgement of the Division Bench did not intend to permit the U.P.F.C. to enter into a de-novo exercise for sale of the above property. Learned Company Judge considered the implication of Section 537 of the Companies Act, 1956, which provides that wherein a company has been wound up by the Court, no sale of the property of the company shall be proceeded with or affected except with the leave of the Court. Since the winding up order of the company had already been passed, the question of permitting the U.P.F.C. to sell the property of the company by auction, was thus denied.
In compliance of the directions of the Division Bench passed in the aforesaid writ petition, the U.P.F.C. had, in the meanwhile, proceeded to negotiate with the appellant-Subhash Chand Goyal, who enhanced his earlier offer of Rs. 59 lacs made in 1995 to Rs. 66 lacs. The said offer of the appellant was considered by the U.P.F.C. but rejected. The U.P.F.C. took into account that the winding up petition was now pending and after the order for winding up of the company had been passed, such exercise had been undertaken by the U.P.F.C. only in compliance of the judgement of the Division Bench dated 24.3.2005. The enhanced offer of the appellant was only Rs. 66 lacs whereas M/s K.P. Cold Storage had made an offer of Rs. 3.2 crore. In the aforesaid circumstances, the U.P.F.C. rejected the offer of the appellant on 1.10.2012.
After considering the entire facts of the case and the offer made before the U.P.F.C. by M/s K.P. Cold Storage, which was for Rs. 3.2 crore and subsequent offer having been made before the learned Company Court by M/s Prem Chandra Sharma and Deo Raj, which was for Rs. 4.7 crore, learned Company Judge has, by the impugned order, directed the Official Liquidator for issuance of an advertisement for sale of the property of the company by public auction, keeping a reserve price of Rs. 4.7 crore. Challenging the said order, this appeal has been filed.
The submission of Sri Ravi Kant, learned Senior Counsel appearing for the appellant is that the learned Company Judge could not nullify the directions of the writ court dated 24.3.2005, which provided for the matter of sale of the property of the company to be re-negotiated by the U.P.F.C. with the appellant-Subhash Chand Goyal, and by having issued the advertisement for sale of the property by public auction, the directions of the Division Bench passed by the writ court have been violated. It is also submitted that the Company Court has reversed its own order, inasmuch as by order dated 20.7.2012 the Company Court had mentioned that the judgement of the writ court never intended to permit the U.P.F.C. to enter into a de-novo exercise for sale of the above property and only opportunity was given to re-negotiate the price of the property of the company with the appellant-Subhash Chand Goyal or with those opposing his claim or in whose favour the property was earlier settled, so as to obtain the highest price. It is thus contended that the exercise, which could have been carried out for settling the sale of the property of the company, could have been between the appellant and earlier bidders and not by open auction.
We shall first consider the last submission of the learned counsel for the appellant that the matter could have been negotiated only with the appellant (or earlier original bidders) and by permitting the Official Liquidator to auction the property, the Company Court has reversed its earlier order dated 20.7.2012. The Company Court while passing the order dated 20.7.2012, considered the application of the U.P.F.C. (and not the Official Liquidator) for being permitted to advertise the property of the company for sale. The Company Court has considered the express provision of Section 537 of the Companies Act and after noting that an order winding up of the company has already been passed, fresh negotiation for sale by the U.P.F.C. could not be permitted, as it could now only be done by the Official Liquidator. It was such application of the U.P.F.C. (for sale of the property by open auction), which was under consideration by the learned Company Court while passing the aforesaid order dated 20.7.2012. It was, thus, in such circumstances that observations had been made in the order dated 20.7.2012.
As regard the first submission of the appellant, the order now passed by the Company Court (directing the Official Liquidator to sell the property of the company by open auction) cannot thus be said to be reversal of the order dated 20.7.2012.
The writ court in its order dated 24.3.2005 has, in paragraph 63, directed the U.P.F.C. to consider the offer of the appellant and proceed to negotiate the property of the company in accordance with the principle of obtaining the best possible price. The operative paragraph 63 of the said judgement is reproduced below:-
" In view of the findings arrived at hereinabove, the writ petition consequently succeeds and is allowed and the entire proceedings finalized in favour of the respondent No. 3 including the execution of the sale deed are hereby quashed. As a consequence thereof, the respondent Nos. 5 and 6 are also not entitled to retain possession of the property as the sale deed executed in their favour on 29.10.1999, cannot confer any right upon them as the present writ petition has been allowed. The respondent-U.P. Financial Corporation is hereby directed to consider the offer of the petitioner and proceed to negotiate the property in accordance with the principle of obtaining the best possible price..............."
The appellant does not deny that negotiation had been held with him. The offer of the appellant, enhancing the price from Rs. 59 lacs to Rs. 66 lacs, had been rejected by the U.P.F.C. in the circumstances, which have already been enumerated hereinabove, which was primarily that the other party had made a much higher offer of Rs. 3.2 crore, which was nearly five times the enhanced offer of the appellant.
In the judgement of the writ court, it was not brought to the notice that the winding up order of the company had already been passed. As such, the implication of the provision of Sections 446 and 537 of the Companies Act, 1956 could not be considered by the writ court.
Section 446 clearly provides that after winding up order is passed or the official liquidator is appointed, no suit or other legal proceeding shall be commenced, or if pending on the date of the winding up order, shall be proceeded with against the company, except by leave of the Court. Section 537 clearly provides that where the Company is being wound up by the Court, any sale held, without the leave of the Court of any of the properties or effects of the company, after such commencement, shall be void.
Sri Ravi Kant, learned Senior Counsel appearing for the appellant has submitted that the prohibition under Section 446 would not be on the writ court and it would be only for suits or other legal proceedings.
Without going into such question, we would only like to mention that the fact of the winding up order having been passed was not in the notice of the writ court and what the writ court may have done if the same was brought to its notice, is only a matter of conjecture. The matter under consideration before the writ court was the question of entire decision making process with regard to the finalization of the sale made by the U.P.F.C. in the year 1995, as would be clear from paragraph 63 of the said judgement, which has been referred to above. The writ court held that the said process of finalization of the such sale was not proper and set aside the sale made by the U.P.F.C. The effect of the winding up order having been passed was not under consideration of the writ court.
It was in such facts, where the Court was only considering the matter relating to the finalization of the sale of property of the company, which was held to be illegal that the writ court had made observations and directions in paragraph 63 of its judgement, only providing for fresh negotiation with the appellant and also to proceed to negotiate the property of the company in accordance with the principle of obtaining the best possible price.
By the impugned order, the Company Court has done nothing but directed the Official Liquidator to proceed in a manner so as to get possible price for the property of the company. That too has been done only after the U.P.F.C. had considered the offer of the appellant in terms of the judgement of the writ court and rejected the same for valid reasons, which have been enumerated hereinabove. The interest of the debtors and shareholders of the company is paramount. Such interest is best served when the best possible price is got from sale of the properties of the company. An offer made by the appellant for an amount of Rs. 59 lacs in the year 1995, which was not even accepted by the U.P.F.C. at any stage and no amount had been deposited and accepted at the time of making such offer, would thus not be a concluded contract or agreement. Since then nearly two decades have passed. One offer of Rs. 3.2 crores and another of Rs. 4.7 crores have since been received, one by the U.P.F.C. and the other by the Official Liquidator. The same could not have been ignored by the Company Court. In the aforesaid facts, the order for re-advertisement, after keeping a reserve price of Rs. 4.7 crores, is perfectly justified.
In view of the aforesaid, we do not find any good ground to interfere with the order impugned in this appeal.
This appeal is accordingly dismissed. The direction given by the Company Court be complied with at the earliest.
There shall be no order as to costs.