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Issues: (i) Whether the sale of the company's properties could be set aside for want of sale through the court auctioneer and for alleged lack of adequate publicity; (ii) whether the sale was void for want of leave under section 537 of the Companies Act, 1956; (iii) whether the sale was vitiated by fraud in the subsequent notices and writ proceedings; and (iv) whether the challenge to the sale was barred by limitation and whether the ex-director had locus standi.
Issue (i): Whether the sale of the company's properties could be set aside for want of sale through the court auctioneer and for alleged lack of adequate publicity.
Analysis: The sale notice was shown to have been published in leading newspapers, and the official liquidator was associated with the sale. The requirement that the sale be conducted through the court auctioneer was treated as a condition attached to permission, but the Corporation had already taken possession under section 29 of the State Financial Corporations Act, 1951, and was selling as a deemed owner rather than conducting a court sale governed by Order 21 of the Code of Civil Procedure. Non-compliance with the auctioneer condition was therefore only an irregularity, and no material prejudice was established.
Conclusion: The sale was not liable to be set aside on these grounds.
Issue (ii): Whether the sale was void for want of leave under section 537 of the Companies Act, 1956.
Analysis: The Corporation had sought permission from the company court before selling the assets. The application had been filed under section 446, but the power exercised was one that properly fell under section 537. A wrong mention of the section did not affect the court's sanction or the validity of the sale proceedings.
Conclusion: Absence of a correct statutory reference did not invalidate the sale.
Issue (iii): Whether the sale was vitiated by fraud in the subsequent notices and writ proceedings.
Analysis: The Corporation's later notices to the auction purchaser and the agreed order quashing them did not establish fraud. The company was not a necessary party in the writ petition challenging the notices, and the later conduct of the Corporation could not retroactively taint the completed sale.
Conclusion: No fraud was proved, and the sale was not vitiated.
Issue (iv): Whether the challenge to the sale was barred by limitation and whether the ex-director had locus standi.
Analysis: A challenge to the sale had to be brought within the period prescribed by law, and the residuary period under Article 137 of the Limitation Act, 1963, was held applicable. The petition filed nearly four years after the sale was therefore time-barred. The ex-director also lacked locus standi because, after liquidation, the official liquidator represented the company.
Conclusion: The challenge was barred by limitation, and the ex-director had no locus standi.
Final Conclusion: The sale was upheld, and the challenges failed both on merits and on limitation grounds.
Ratio Decidendi: A sale by a secured creditor acting as deemed owner under the State Financial Corporations Act is not invalidated by a procedural departure that causes no material prejudice, and any challenge to such sale must be brought within the applicable limitation period.
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