Supreme Court upholds SIPCOT's sale of mortgaged assets after fair process

Chairman And Managing Director, SIPCOT, And Madras And others Versus Contromix Pvt. Ltd. by its Director (Finance) Seetharaman, Madras And another

Chairman And Managing Director, SIPCOT, And Madras And others Versus Contromix Pvt. Ltd. by its Director (Finance) Seetharaman, Madras And another - ... Issues Involved:

1. Validity of the sale of mortgaged assets by SIPCOT.
2. Compliance with the guidelines laid down by the Supreme Court in Mahesh Chandra case.
3. Adequacy of the sale price of the mortgaged assets.
4. Procedural fairness in the sale process.

Summary:

1. Validity of the Sale of Mortgaged Assets by SIPCOT:

The Supreme Court reviewed the actions of SIPCOT in selling the mortgaged assets of respondent No. 1. SIPCOT had taken possession of the unit due to continuous defaults by respondent No. 1 in repaying the loan. The sale was conducted through tenders followed by negotiations, resulting in the sale of the assets to respondent No. 2 for Rs. 38 lakhs. The Court found that SIPCOT had been accommodating in rescheduling the repayment and had acted within its rights to take possession and sell the assets after multiple defaults by respondent No. 1.

2. Compliance with the Guidelines Laid Down by the Supreme Court in Mahesh Chandra Case:

The High Court had set aside the sale, citing non-compliance with the guidelines in Mahesh Chandra v. Regional Manager, U.P. Financial Corporation, which emphasized the need for public auction or wide publicity in case of sale by tender. The Supreme Court clarified that while public auction is preferred, sale by tender is not ipso facto invalid if conducted with adequate publicity and efforts to secure the best price.

3. Adequacy of the Sale Price of the Mortgaged Assets:

The Supreme Court noted that the initial offer received was Rs. 14.86 lakhs, which was negotiated up to Rs. 38 lakhs by SIPCOT. The unit was valued at Rs. 36.44 lakhs, and no higher offers were received despite opportunities given to respondent No. 1 during the proceedings. The Court held that the sale price was not low, considering the circumstances and the failure of respondent No. 1 to secure a higher offer.

4. Procedural Fairness in the Sale Process:

The Court addressed the procedural fairness, noting that SIPCOT had given sufficient opportunities to respondent No. 1 to repay the loan and had acted reasonably in taking possession and selling the assets. The failure to give prior intimation to respondent No. 1 before accepting the offer of Rs. 38 lakhs was deemed inconsequential, as respondent No. 1 had ample opportunity to present a higher offer during the litigation.

Conclusion:

The Supreme Court allowed the appeal, setting aside the judgments of the Division Bench and the learned single Judge of the High Court. The writ petition filed by respondent No. 1 was dismissed, and the sale of the unit to respondent No. 2 for Rs. 38 lakhs was upheld. There was no order as to costs.