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Issues: (i) Whether it was mandatory for the applicant to place the valuation report before the Court before proceeding to sell the properties, and whether non-compliance vitiated the sale. (ii) Whether, after winding up, the State Financial Corporation could rely on section 29 of the State Financial Corporations Act, 1951 to confirm the sale and appropriate the proceeds without regard to the workmen's pari passu rights under the Companies Act, 1956.
Issue (i): Whether it was mandatory for the applicant to place the valuation report before the Court before proceeding to sell the properties, and whether non-compliance vitiated the sale.
Analysis: The earlier order permitting the applicant to remain outside liquidation expressly required the valuation report to be filed in Court before the mortgaged properties were put to sale. That direction was held to be mandatory, not directory. The purpose of the condition was to enable judicial scrutiny of valuation, and to allow the Official Liquidator and other interested secured creditors an opportunity to object if necessary. Mere circulation of the report to the Official Liquidator, or participation in the sale process, was held not to amount to compliance. The sale was also found to suffer from unexplained discrepancies in the valuation itself, which reinforced the need for prior court scrutiny.
Conclusion: Non-placement of the valuation report before the Court amounted to violation of a mandatory condition and the sale stood vitiated.
Issue (ii): Whether, after winding up, the State Financial Corporation could rely on section 29 of the State Financial Corporations Act, 1951 to confirm the sale and appropriate the proceeds without regard to the workmen's pari passu rights under the Companies Act, 1956.
Analysis: The Court applied the principle that the unilateral power under section 29 of the State Financial Corporations Act, 1951 is available only so long as the debtor company has not gone into winding up. Once winding up is ordered, the secured creditor's right under the special statute operates subject to sections 529 and 529A of the Companies Act, 1956, and the workmen's pari passu charge must be protected under the supervision of the Company Court. On that footing, the applicant could not insist on absolute control over the sale proceeds, nor could conditions designed to safeguard the workmen and other secured creditors be treated as impermissible.
Conclusion: The applicant could not claim an unfettered right under section 29 to confirm the sale or appropriate the proceeds free of the winding up regime and the pari passu charge of workmen.
Final Conclusion: The application for confirmation of sale could not be granted, and the sale was liable to be set aside in view of the mandatory breach and the governing winding up principles.
Ratio Decidendi: After a winding up order, a State Financial Corporation's right to realize secured assets under section 29 is subject to the Company Court's supervision and the pari passu charge of workmen under sections 529 and 529A of the Companies Act, 1956, and failure to comply with a mandatory court-imposed condition governing sale renders the sale unsustainable.
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