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Issues: (i) Whether the auction sale conducted by the secured creditor was void under the Companies Act and the SARFAESI framework for want of compliance with the statutory requirements. (ii) Whether the challenge to the sale and the connected objections were maintainable before the High Court in the circumstances of the case.
Issue (i): Whether the auction sale conducted by the secured creditor was void under the Companies Act and the SARFAESI framework for want of compliance with the statutory requirements.
Analysis: The sale took place after the commencement of winding up proceedings and was examined against the prohibitions under Sections 531, 531-A and 537 of the Companies Act, 1956, together with Rule 9 of the Security Interest (Enforcement) Rules, 2002. The Court found that the transfer fell within the relevant prohibited period, that the sale was conducted without proper compliance with the mandatory timeline for payment of balance consideration, and that the subsequent steps taken by the secured creditor could not cure the defect. The Court further held that a sale in violation of these statutory requirements could not be treated as a valid sale and that the secured creditor could not derive benefit from such a transaction.
Conclusion: The sale was void and without legal effect.
Issue (ii): Whether the challenge to the sale and the connected objections were maintainable before the High Court in the circumstances of the case.
Analysis: The Court held that where the sale itself is statutorily void, the question is one of legal validity falling within the Company Court's domain, and the absence of a separate application to set aside a void transaction did not preclude examination of the issue. It also held that, in the peculiar facts, the auction purchaser's writ challenge to the irregularities and the bank's conduct was maintainable, and that the Official Liquidator was entitled to oppose registration and assert the invalidity of the sale. The Court treated the company court jurisdiction under the winding up provisions as available alongside the SARFAESI framework in this factual matrix.
Conclusion: The challenge was maintainable, and the Court had jurisdiction to decide the validity of the sale.
Final Conclusion: The statutory invalidity of the sale prevailed over the secured creditor's claim, the sale could not confer enforceable rights, and the auction purchaser was entitled to consequential relief while the creditor could not insist on registration or enforcement of the void transaction.
Ratio Decidendi: A sale of company assets conducted in breach of mandatory statutory restrictions during winding up, and in non-compliance with the prescribed sale procedure, is void and can be ignored without a separate setting-aside order.
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