2012 (12) TMI 393 - SC - Companies Law

Supreme Court Upholds Sale Process, Orders Payment to Appellants

Pravin Gada and another Versus Central Bank of India and others

The Supreme Court upheld the High Court's concerns regarding the lack of fairness and transparency in the sale process but confirmed the sale to the ... Winding up of Company - auction and re-auction of property as per the direction of the Supreme Court - whether the finding of the High Court as regards the role of the official liquidator is correct or not. - held that:- On a perusal of the record, it transpires that the official liquidator had appeared before the recovery officer on number of dates. However, the DRT had returned a finding that he has a restricted role which has been found fault with by the High Court. In our opinion, the High Court is absolutely correct in its analysis and we concur with the same, but, a pregnant one, the fact remains that the High Court had set aside the sale on the foundation that a fair and transparent procedure had not been adopted. Having given due respect to the same, this court had passed orders on earlier occasions which we have reproduced hereinabove to get the auction conducted in a fair and transparent manner and recorded our conclusion. Therefore, the confirmation of sale as has been directed by us shall be treated to have attained finality. While confirming the sale subject to the conditions imposed hereinbefore, we are disposed to think that keeping in view the interest of the workmen and their rights, the High Court should deal with the rights of the workmen regard being had to the submissions advanced by the first and second respondents before it in an apposite manner and, if required, monitor the same. Presently to the Interlocutory Applications which have been filed for impleadment and withdrawal of the amounts that have been deposited as earnest money. Regard being had to the facts and circumstances of the case, all impleadment applications are allowed and the bidders who have deposited the money are allowed to withdraw the same. Issues Involved:1. Validity of the High Court's order quashing the DRAT's confirmation of sale.2. Role of the Official Liquidator in the sale process.3. Fairness and transparency of the sale proceedings.4. Rights and interests of the workmen.Issue-wise Detailed Analysis:1. Validity of the High Court's Order Quashing the DRAT's Confirmation of Sale:The appeals challenged the High Court's decision to quash the DRAT's confirmation of sale dated 3rd March 2011. The High Court found that the sale process was neither fair nor transparent, and the price realized was not the best possible. It directed a fresh auction with public advertisement and new valuation. The Supreme Court upheld the High Court's concerns about fairness but confirmed the sale to the appellants subject to additional payment, considering the elapsed time and the highest bid received in the re-auction.2. Role of the Official Liquidator in the Sale Process:The High Court disagreed with the DRAT's view that the Official Liquidator's role was limited to disbursement of dues and not the sale process. Citing Rajasthan Financial Corpn. v. Official Liquidator, the High Court emphasized that the Official Liquidator must be involved in the sale process to ensure fairness. The Supreme Court concurred with this interpretation, affirming the Official Liquidator's significant role in the sale proceedings.3. Fairness and Transparency of the Sale Proceedings:The High Court identified procedural irregularities and lack of transparency in the initial sale process, leading to the setting aside of the sale. The Supreme Court, through multiple orders, ensured a fair and transparent re-auction process, setting conditions to avoid speculative bids and ensuring proper inspection of the property. Despite efforts, the highest bid received was Rs. 5.04 crores, leading the Supreme Court to confirm the sale to the appellants with an additional payment of Rs. 50 lacs.4. Rights and Interests of the Workmen:The High Court noted the workmen's union's challenge and the potential out-of-court settlement with the appellants. The Supreme Court emphasized the importance of addressing the workmen's rights and directed the High Court to monitor the settlement process, ensuring the workmen's interests are protected. The matter was referred back to the same Division Bench or the presiding Judge for consistency in handling the workmen's claims.Conclusion:The Supreme Court balanced the need for a fair sale process with practical considerations of elapsed time and highest bids received. It confirmed the sale to the appellants with additional conditions, upheld the High Court's interpretation of the Official Liquidator's role, and directed the High Court to oversee the settlement of workmen's dues. The appeals were disposed of, allowing the bidders to withdraw their deposited amounts.