Court dismisses sale confirmation application for non-compliance, modifies terms, and refunds earnest money.

The court dismissed the application for confirmation of the sale of a property belonging to a company in liquidation due to non-compliance with the terms and conditions of sale. The court directed the objector to deposit sale expenses and ordered the modification of terms to limit the balance payment period. The earnest money deposited by the auction purchaser was to be refunded or retained for future participation in the auction. Another application challenging the sale was disposed of as infructuous.

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Issues Involved:

1. Confirmation of sale of the property belonging to Hada Steel Products Limited (in liquidation).
2. Setting aside the sale by the court in exercise of its inherent powers.
3. Compliance with the terms and conditions of sale.
4. Adequacy of the sale price and valuation of the property.
5. Notification and involvement of guarantors and ex-directors.
6. Procedural fairness and adherence to legal guidelines.

Issue-wise Detailed Analysis:

1. Confirmation of Sale:
The Haryana Financial Corporation filed an application (C.A. No. 171 of 1995) for the confirmation of the sale of the property belonging to Hada Steel Products Limited (in liquidation) in favor of Precision Tools and Knives, Faridabad, by tender dated August 23, 1995. The court noted that the sale was subject to confirmation by the court and could only be allowed if the sale took place in accordance with the terms and conditions of sale.

2. Setting Aside the Sale:
Anil Hada, ex-director of the company, filed an application (C.A. No. 218 of 1995) under rule 9 of the Companies (Court) Rules, 1959, to set aside the sale. He challenged the sale on several grounds, including lack of notice to guarantors, inadequate property valuation, and improper publicity.

3. Compliance with Terms and Conditions:
The court examined whether the sale complied with the terms and conditions. The tenders were required to be accompanied by a bank draft of Rs. 5 lakhs, and 25% of the amount (inclusive of earnest money) was to be paid within 30 days from the acceptance of the offer. The balance 75% was to be paid in one and a half years in quarterly installments. Precision Tools and Knives did not deposit the 25% within the stipulated 30 days, rendering the sale proceedings a nullity as per the precedent set in Manilal Mohanlal Shah v. Sardar Sayed Ahmed Sayed Mahmad, AIR 1954 SC 349.

4. Adequacy of Sale Price and Valuation:
Anil Hada contended that the value of the land alone was approximately Rs. 5 crores, while the property was proposed to be sold for Rs. 1.41 crores. He also argued that the Corporation did not get the property valued by an approved valuer before inviting tenders. The court found that the sale price was not adequately justified and that the property should have been sold by public auction to ensure a fair market value.

5. Notification and Involvement of Guarantors and Ex-directors:
The objector argued that the Corporation did not issue any notice to the guarantors regarding the sale and that he, as an ex-director and guarantor, was a necessary party. The court noted that the sale being subject to its confirmation, it had a duty to ensure compliance with the terms and conditions of sale, irrespective of whether such objections were raised.

6. Procedural Fairness and Adherence to Legal Guidelines:
The court referred to the guidelines laid down by the Supreme Court in Mahesh Chandra v. U.P. Financial Corporation [1993] 78 Comp. Cas. 1; AIR 1993 SC 935, emphasizing that the Corporation, being an instrumentality of the State, must act reasonably and fairly. The court found that the terms allowing the balance 75% payment over one and a half years were unfair, and the property should have been sold by public auction to ensure transparency and fairness.

Conclusion:
The court dismissed Company Application No. 171 of 1995, setting aside the sale for non-compliance with the terms and conditions. It directed the objector to deposit Rs. 15,000 towards sale expenses and ordered the Haryana Financial Corporation to modify the terms to limit the balance payment period to three months from the date of confirmation of sale. The earnest money deposited by the auction purchaser was to be refunded or retained for future participation in the auction. Consequently, Company Application No. 218 of 1995 was disposed of as infructuous.

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