Court-supervised liquidation sales may be reopened for defective process and inadequate price, with limited equitable compensation possible.

In a court-supervised liquidation sale, the SC upheld the setting aside of a confirmed auction where the sale proclamation omitted material particulars, including valuation, reserve price and inventory, and the court was not satisfied that the assets had fetched a fair or adequate price. The Court affirmed that defective sale may justify a fresh auction to protect the interests of the company and its creditors. Although the appellant's challenge failed, the Court granted limited equitable relief because the appellant had acted bona fide, deposited the bid amount, and lost the chance to complete the original bargain, directing payment of Rs. 30 lakhs.

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Issues: (i) whether the Company Court was justified in setting aside the confirmed auction sale in favour of the appellant and directing fresh auction in order to secure a higher price for the assets of the company in liquidation; (ii) whether, notwithstanding the dismissal of the appellant's challenge, any equitable relief was warranted for the appellant who had deposited the bid amount before the resale.

Issue (i): whether the Company Court was justified in setting aside the confirmed auction sale in favour of the appellant and directing fresh auction in order to secure a higher price for the assets of the company in liquidation.

Analysis: The sale proclamation did not disclose material particulars such as valuation of the movable and immovable properties, reserve price, and inventory of plant and machinery. On objections by other bidders, the Company Judge found that the auction process was not fully in accordance with law and, to protect the interests of the company and its creditors, directed a fresh auction. The governing principle is that a court conducting a sale of assets in liquidation must ensure that the property fetches an adequate and fair price, and even a confirmed sale may be disturbed where the process is defective or the price is not truly adequate.

Conclusion: The setting aside of the first sale and the direction for fresh auction were upheld, and this issue was decided against the appellant.

Issue (ii): whether, notwithstanding the dismissal of the appellant's challenge, any equitable relief was warranted for the appellant who had deposited the bid amount before the resale.

Analysis: The appellant had participated bona fide, its offer had initially been accepted, and it had paid the bid amount before the subsequent resale. Although the later auction fetched a substantially higher price and the new purchaser had acquired possession, the appellant had suffered loss of the opportunity to complete what had appeared to be a good bargain. In the circumstances, the Court considered a limited compensatory payment appropriate to balance fairness without unsettling the later sale.

Conclusion: Limited equitable relief was granted in favour of the appellant by directing payment of Rs. 30 lakhs.

Final Conclusion: The challenge to the resale process failed on merits, but the appellant received a modest compensatory relief for the loss occasioned by the change in auction outcome.

Ratio Decidendi: In a court-supervised sale of assets in liquidation, the court may set aside even a confirmed sale and order resale if the original process was deficient or the court is not satisfied that the property has fetched an adequate price, while also granting limited equitable compensation where justice so requires.

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