Private sale sanction invalid where lack of notice and a superior bona fide offer; sale set aside and purchaser repaid.

Sanction for a private sale under Section 144 was set aside because the Court exercised judicial discretion without required procedure: no affidavit application, no notice to contributories or creditors, no advertisement, and a bona fide higher offer existed; consequence-the private sale was invalidated. The impugned sanction could be recalled or reviewed on appeal under the appeal/rehearing mechanism and, alternatively, under the Court's inherent power, permitting the appellate Court to set aside the earlier order. Relief ordered: repayment to the innocent purchaser with 12% interest, prompt public auction of the property, auction proceeds to satisfy purchaser and costs, and conditional confirmation of the private sale if auction proceeds proved insufficient.

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Issues: (i) Whether the District Judge's ex parte sanction under Section 144 of the Indian Companies Act, 1882 for a private sale could stand where the price appeared grossly inadequate and no notice was given to contributories or creditors; (ii) Whether the District Judge (or the Court on appeal) had power to cancel or review his earlier sanction/order; (iii) Relief and consequences if the sanction and sale were set aside.

Issue (i): Whether the District Judge's sanction of the Official Liquidator to sell the mill by private contract at the price accepted on 20th February, 1920 was valid despite lack of formal application under the rules, absence of notice to persons interested, and the existence of a substantially higher genuine offer.

Analysis: Section 144 conditions the Official Liquidator's power to sell upon the sanction of the Court, which must be exercised with judicial discretion in the interest of the company and its creditors. The procedural rules (including Rule 74 and Rule 80 under the Companies Act framework) require application on affidavit and prohibit ex parte orders to the prejudice of contributories or creditors. The sanction was granted hastily on the strength of the Official Liquidator's letter and a private interview, without advertisement, invitation of offers, or notice to interested parties, while a bona fide higher offer existed and evidence showed the property would fetch materially more at public sale.

Conclusion: The sanction granted on 20th February, 1920 was unsound and cannot be upheld; the private sale based on that sanction must be set aside.

Issue (ii): Whether the District Judge could cancel his own earlier sanction/order and whether the appellate Court could review or set it aside under Section 169 of the Indian Companies Act, 1882 or by inherent jurisdiction.

Analysis: Section 169 contemplates re-hearings and appeals in relation to orders of the Court and affords the appellate court power to excuse delay in presenting appeals. Even if the precise scope of "re-hearing" by the original Judge under Section 169 is not decided, the appeal mechanism enables review of the sanction. Independently, where an order is obtained without notice and works serious prejudice, the Court possesses inherent power to recall or set aside such an order to prevent injustice. The facts show the sanction was granted without notice and resulted in substantial prejudice to contributories and creditors.

Conclusion: The District Judge's cancellation of his earlier sanction is supportable in exercise of the appellate power under Section 169 or, alternatively, on the Court's inherent power; the appellate Court may set aside the original sanction.

Issue (iii): What relief and incidental orders should follow from setting aside the sanction and sale?

Analysis: Where a sale founded on an invalid sanction fails, the purchaser who advanced money without fraud is entitled to repayment of sums paid together with interest. Practical constraints where funds have been applied (e.g., to mortgagee) justify ordering a prompt public auction and payment to the purchaser out of auction proceeds. Provision for confirming the prior private sale in the contingency the auction yields an insufficient price is an appropriate protective measure for the purchaser.

Conclusion: The sale to the purchaser is set aside; the purchaser shall be repaid the amounts paid with interest at 12% per annum from date of payment to date of repayment or tender; the property shall be sold by public auction with the auction proceeds applied first to the purchaser's repayment and sale expenses, and if the auction price fails to cover the repayment plus interest and costs, the private sale shall be confirmed.

Final Conclusion: The original sanction for private sale is vitiated by the want of proper procedure and notice and by the existence of a substantially higher genuine offer; the sanction and sale are set aside, the purchaser is protected by repayment with interest and conditional confirmation in the contingency of an unsuccessful auction, and costs are to be paid out of the company's assets.

Ratio Decidendi: An order sanctioning a private sale of company property under Section 144 must be granted only after judicial consideration and notice to interested contributories or representation for them; absent such procedure and where the sanction works serious prejudice and a better bona fide offer exists, the sanction may be set aside on appeal or by the Court's inherent power, with equitable relief to protect an innocent purchaser.

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