TaxTMI Login
AI OCR ✕Convert scanned orders, printed notices, PDFs and images into clean, searchable, editable text within seconds. Starting at 2 Credits/page
Try Now →Just a moment...
AI OCR ✕Convert scanned orders, printed notices, PDFs and images into clean, searchable, editable text within seconds. Starting at 2 Credits/page
Try Now →
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether a sale of a sick company's assets made by a secured creditor under section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985 before an order of winding up under section 20(2) becomes void because a winding up petition under section 433 of the Companies Act, 1956 was pending and leave of the company court was not obtained. (ii) Whether a sale by a secured creditor in possession under section 29 of the State Financial Corporations Act, 1951 during pendency of winding up proceedings is void for want of leave of the company court and absence of the official liquidator. (iii) Whether the sale in favour of BPL was liable to be set aside on the ground of alleged irregularity or inadequacy of price.
Issue (i): Whether a sale of a sick company's assets made by a secured creditor under section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985 before an order of winding up under section 20(2) becomes void because a winding up petition under section 433 of the Companies Act, 1956 was pending and leave of the company court was not obtained.
Analysis: Section 20(4) empowers the Board to authorise sale of the sick company's assets and forward the proceeds to the High Court for distribution. The scheme of sections 20, 22, 22A and 32 gives the Board control over the company until the High Court passes an order under section 20(2). In such a case, the winding up order does not relate back to the date of the pending petition under section 433, because the order is not one passed under section 433 but under section 20(2) on the basis of the Board's opinion. The statutory bar in section 537(1)(b) and the connected requirement of leave of court apply to post-winding up sales in winding up under the Companies Act, not to a sale completed before the section 20(2) order pursuant to the Board's direction. The overriding effect of section 32 also supports that position.
Conclusion: The sale made before the order under section 20(2) and in accordance with section 20(4) was valid and did not require leave of the company court.
Issue (ii): Whether a sale by a secured creditor in possession under section 29 of the State Financial Corporations Act, 1951 during pendency of winding up proceedings is void for want of leave of the company court and absence of the official liquidator.
Analysis: The law on secured creditors distinguishes between sales after a winding up order and sales before such order. While later case law recognised that after winding up the secured creditor must act with regard to the workmen's pari passu charge and the official liquidator's role, the sale here had already been concluded before the winding up order passed under section 20(2). The pari passu charge under the proviso to section 529(1) and section 529A of the Companies Act, 1956 arises in the context of winding up and does not operate retrospectively to invalidate a prior sale by a secured creditor standing outside winding up. The principle that a secured creditor may realise security without court intervention therefore remained applicable to this pre-winding up sale.
Conclusion: The sale was not void for want of leave of the company court or for non-association of the official liquidator.
Issue (iii): Whether the sale in favour of BPL was liable to be set aside on the ground of alleged irregularity or inadequacy of price.
Analysis: The Board had permitted the sale, the Appellate Authority had affirmed the relevant order, and the sale was concluded after wide publicity and approval by the Board. The company court does not sit in appeal over the Board's decision or undertake a fresh review of the price or sale procedure once the statutory authorities have approved the sale. On that basis, allegations of irregularity or inadequacy of consideration could not justify interference with the sale.
Conclusion: The sale could not be set aside on the ground of alleged irregularity or inadequacy of price.
Final Conclusion: The sale of the assets to BPL was upheld, the direction requiring the official liquidator to take over those assets was modified, and the sale proceeds were directed to be preserved for distribution in accordance with the statutory priorities.
Ratio Decidendi: A sale of a sick company's assets completed before an order of winding up under section 20(2) of the Sick Industrial Companies (Special Provisions) Act, 1985, pursuant to a valid direction under section 20(4), is not rendered void by the pendency of a winding up petition under section 433 of the Companies Act, 1956, and does not require leave of the company court or association of the official liquidator.
TaxTMI 
TaxTMI 
