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Issues: (i) Whether the auction sale of the company's assets could be sustained when it was undertaken without associating the official liquidator and in the face of the company court's earlier order restraining coercive steps against the assets. (ii) Whether the sale confirmation by the Recovery Officer could stand, or whether the sale was liable to be set aside with a direction for a fresh sale after proper valuation and participation of the official liquidator.
Issue (i): Whether the auction sale of the company's assets could be sustained when it was undertaken without associating the official liquidator and in the face of the company court's earlier order restraining coercive steps against the assets.
Analysis: The assets of the company in liquidation were in the custody of the official liquidator pursuant to the winding-up order. The earlier order of the company court expressly required impleadment of the official liquidator and prohibited coercive steps against the assets during or after the proceedings before the Tribunal. That order had never been varied. The valuation and inventory were prepared without notice to the official liquidator, while the properties remained under his seal and possession. The auction was conducted hurriedly, despite objections already on record, and the objections of the official liquidator were rejected in a cursory manner. Although the Recovery Officer acted under the debt recovery regime, the exercise remained bound by the company court's directions and could not ignore the liquidator's representative role for the creditors and workmen.
Conclusion: The auction sale could not be sustained and was illegal in the facts of the case.
Issue (ii): Whether the sale confirmation by the Recovery Officer could stand, or whether the sale was liable to be set aside with a direction for a fresh sale after proper valuation and participation of the official liquidator.
Analysis: The court applied the settled principle that, even where the Recovery Officer has jurisdiction to execute a recovery certificate, the official liquidator must be associated so that the assets are properly valued and a fair price is secured for all stakeholders. The company court's earlier order was binding, and the Recovery Officer could not validly confirm a sale that was inconsistent with that order. The circumstances also showed that the valuation process was deficient and did not reflect the true worth of the property. In these circumstances, the proper course was to undo the sale and direct a fresh auction with a fresh valuation done by the panel of valuers appointed by the company court in association with the official liquidator.
Conclusion: The sale confirmation was unsustainable and the sale was rightly set aside, with a direction for a fresh sale in accordance with law.
Final Conclusion: The appeals succeeded, the impugned order was set aside, and the sale of the company assets was annulled in order to protect the interests of the creditors, workmen, and the liquidation estate.
Ratio Decidendi: A sale of assets in liquidation under debt recovery proceedings cannot override a subsisting company court order, and the official liquidator must be associated in the valuation and sale process to secure a fair realisation for all stakeholders.
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