Notice to official liquidator and fair auction are mandatory before sale of liquidation assets, with sale confirmed on best bid

Assets of a company in liquidation may be sold through recovery proceedings only after notice to, and hearing of, the official liquidator; the contrary view that the liquidator had no meaningful role was incorrect. A sale will be sustained where the auction process is fair, transparent, publicly notified, and competitive, and where the property fetches the best available price. On the facts, a fresh auction with safeguards produced the highest bid, so the sale was confirmed subject to an additional deposit, while the workmen's related claims were left for separate consideration by the High Court.

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Issues: (i) Whether the official liquidator was required to be noticed and heard before sale of the assets of a company in liquidation by the recovery machinery. (ii) Whether the confirmation of sale could be sustained after a fair and transparent auction process was conducted and the highest bid was obtained.

Issue (i): Whether the official liquidator was required to be noticed and heard before sale of the assets of a company in liquidation by the recovery machinery.

Analysis: The statutory scheme governing recovery against a company in liquidation requires that the company court and the official liquidator be kept in the loop when the assets of the company are sold through the recovery forum. The earlier pronouncement relied upon makes it clear that the Recovery Officer may proceed with sale of such assets, but only after notice to the official liquidator and after hearing him. The restricted role attributed by the tribunal to the official liquidator was therefore not correct.

Conclusion: The requirement of notice to and hearing of the official liquidator was mandatory, and the contrary view was incorrect.

Issue (ii): Whether the confirmation of sale could be sustained after a fair and transparent auction process was conducted and the highest bid was obtained.

Analysis: The decisive consideration was whether the sale process had been fair, competitive, and transparent so that the property fetched a reasonable price. After earlier irregularities were noticed, the Court itself directed a fresh auction with public advertisement, inspection, reserve price, and participation safeguards. The auction ultimately fetched the highest offer of Rs. 5.04 crores, and the Court treated that figure, along with the passage of time and the earlier deposit already made by the bidders, as sufficient basis to confirm the sale, subject to an additional deposit. The workmen's position was left to be dealt with separately by the High Court.

Conclusion: The sale was confirmed, subject to the stipulated further deposit, and the challenge to the sale did not succeed in substance.

Final Conclusion: The appeals ended with confirmation of the sale on modified terms, while the ancillary issue concerning the workmen's rights was left for appropriate consideration by the High Court.

Ratio Decidendi: Sale of assets of a company in liquidation through recovery proceedings must be conducted with notice to the official liquidator and in a fair, transparent auction that secures a reasonable price; once such a process yields the best available bid, the sale may be confirmed subject to appropriate conditions.

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