Sick company asset sale under BIFR order upheld; pre-winding-up sale was not void for lack of Company Court leave.

A sale of a sick industrial company's assets made by the operating agency under a valid BIFR order before commencement of winding up was not void for want of leave of the Company Court, because section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985 authorised the sale and section 32 gave that scheme overriding effect over inconsistent provisions of the Companies Act, 1956. Section 537(1) therefore did not apply, as winding up had not yet commenced when the sale was authorised and conducted. The Court also held that the Company Court could not invalidate the sale on alleged inadequacy of valuation or publicity where the sale had been carried out under the Board's statutory directions and approved by it.

---

---

Issues: Whether a sale of the assets of a sick industrial company, made by the operating agency pursuant to the Board for Industrial and Financial Reconstruction's order under the Sick Industrial Companies (Special Provisions) Act, 1985 before commencement of winding up, could be declared void under the Companies Act, 1956 for want of leave of the Company Court, and whether the sale was invalid for want of proper valuation and publicity.

Analysis: Section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985 empowered the Board to cause sale of the assets of the sick company in such manner as it deemed fit and to forward the sale proceeds for distribution in accordance with section 529A of the Companies Act, 1956. By virtue of section 32(1) of the same Act, that statutory power operated notwithstanding anything inconsistent in the Companies Act, 1956. The winding up, in the present facts, commenced only when the company petition was registered on the basis of the Board's opinion; the sale in question was already authorized by the Board earlier and was carried out pursuant to that authorization. Section 537(1) of the Companies Act, 1956, which voids sales without leave of court after commencement of winding up, therefore did not apply. The precedents relied upon by the intervenors were distinguished on facts, as they involved sales after commencement of winding up or sales under a different procedural setting. The Court further held that once the sale had been conducted by the operating agency under the Board's statutory directions and approved by the Board, the Company Court could not invalidate it on the ground of alleged inadequacy of valuation or publicity.

Conclusion: The sale was not void and the challenge to it failed.

Final Conclusion: The application challenging the sale was dismissed, and the sale proceedings made under the statutory scheme governing sick industrial companies were upheld.

Ratio Decidendi: A sale of a sick industrial company's assets made pursuant to a valid Board order under section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985 before commencement of winding up cannot be invalidated under section 537(1) of the Companies Act, 1956 for want of leave of the Company Court.

---