Companies Act sale orders and urban land vesting must follow the statutory framework; equitable shortcuts were rejected.

The SC held that a High Court cannot, in proceedings under the Companies Act, approve a sale of surplus land and issue consequential directions without following the statutory scheme for a compromise or arrangement; the sale order and related directions were therefore unsustainable. It also held that the exemption question under section 20 of the Urban Land (Ceiling and Regulation) Act had to be reconsidered in accordance with law, as the pendency of company proceedings did not displace the Act's operation and the matter had to be tested against the applicable guidelines and facts. Further, repeal of the Act did not defeat vesting in West Bengal absent the required constitutional adoption, and encumbrances did not prevent vesting under section 10(3).

---

---

Issues: (i) Whether the High Court could, in proceedings under the Companies Act, approve a sale of surplus land and issue consequential directions without following the statutory scheme for arrangement or compromise. (ii) Whether the High Court was justified in setting aside the State Government's refusal of exemption under section 20 of the Urban Land (Ceiling and Regulation) Act on the basis of public interest and undue hardship. (iii) Whether the repeal of the Urban Land (Ceiling and Regulation) Act and the existence of encumbrances prevented operation of vesting under section 10(3).

Issue (i): Whether the High Court could, in proceedings under the Companies Act, approve a sale of surplus land and issue consequential directions without following the statutory scheme for arrangement or compromise.

Analysis: The order approving the sale of land in favour of a selected purchaser was found to have been passed without adherence to the procedure contemplated by the Companies Act. The necessary requirements for a scheme or arrangement, notice to the Central Government, consideration of the financial position of the company, and proper publicity for inviting bids were not followed. The Court held that the High Court acted on its own notions of justice and exceeded the limits of its jurisdiction by confirming a sale, selecting the purchaser, and issuing sweeping directions for implementation without ensuring any legally sanctioned revival mechanism or monitoring arrangement.

Conclusion: The High Court had no jurisdiction to pass the impugned sale order and the directions founded on it were unsustainable.

Issue (ii): Whether the High Court was justified in setting aside the State Government's refusal of exemption under section 20 of the Urban Land (Ceiling and Regulation) Act on the basis of public interest and undue hardship.

Analysis: The Court held that the exemption question was intertwined with the invalid sale directions and that the High Court had not properly considered the Government's guidelines governing sick industrial units or the relevance of the statutory framework. The pendency of proceedings under the Companies Act was held not to bar operation of the Urban Land (Ceiling and Regulation) Act because of the overriding effect of section 42. The Court further held that the exemption issue had to be reconsidered by the High Court in accordance with law, including the applicable guidelines and the factual position.

Conclusion: The High Court's declaration of exemption under section 20 was set aside and the writ petition was remitted for fresh decision.

Issue (iii): Whether the repeal of the Urban Land (Ceiling and Regulation) Act and the existence of encumbrances prevented operation of vesting under section 10(3).

Analysis: The Court held that the repeal did not automatically apply in West Bengal because the State had not adopted the repealing Act by the required resolution under Article 252 of the Constitution. It also held that the existence of a mortgage or other encumbrance did not defeat vesting, because section 10(3) operates precisely to vest excess vacant land in the State free from encumbrances.

Conclusion: Neither the repeal argument nor the encumbrance argument could defeat the statutory vesting.

Final Conclusion: The impugned order was set aside, the company proceeding was restored to the High Court for fresh consideration, and the writ petition was also restored for expeditious adjudication in accordance with law.

Ratio Decidendi: A court cannot, in the guise of company-law jurisdiction or equitable considerations, bypass the statutory procedure governing schemes and sales, and exemption or vesting issues under urban land ceiling law must be decided strictly within the statutory framework.

---