Company Court order binds recovery action; auction sale in breach of that order was set aside.

A subsisting Company Court order permitting recovery proceedings but restraining coercive action against company assets bound the Recovery Officer, so a sale held in breach of that order and its confirmation were liable to be set aside. The auction of assets of a company in liquidation was also unsustainable because the Official Liquidator was not effectively associated and the objections of the Official Liquidator and workers were not properly considered, undermining fairness and transparency in the process. Exclusive DRT jurisdiction, alternate remedy, and equity did not protect a sale conducted contrary to the Company Court's order and with procedural defects. The appeal failed and the auction sale was set aside.

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Issues: (i) Whether the order of the Company Court permitting recovery proceedings before the Debts Recovery Tribunal but restraining coercive steps against the company assets bound the Recovery Officer and invalidated the auction sale and its confirmation; (ii) whether the sale of the assets of a company in liquidation could be sustained without effective association of the Official Liquidator and proper consideration of objections; (iii) whether the auction purchaser could resist interference on the grounds of exclusive DRT jurisdiction, alternate remedy, and equity.

Issue (i): Whether the order of the Company Court permitting recovery proceedings before the Debts Recovery Tribunal but restraining coercive steps against the company assets bound the Recovery Officer and invalidated the auction sale and its confirmation.

Analysis: The Company Court had granted leave to pursue the recovery proceedings subject to conditions, including impleadment of the Official Liquidator and a clear restraint against coercive steps being taken against the company assets. That order was not varied or vacated. A judicial order subsists and binds the parties and those claiming through the proceedings until set aside. The Recovery Officer could not proceed in disregard of that subsisting order.

Conclusion: The Company Court order was binding, and the sale and its confirmation made in breach of it were liable to be set aside.

Issue (ii): Whether the sale of the assets of a company in liquidation could be sustained without effective association of the Official Liquidator and proper consideration of objections.

Analysis: Once winding-up had commenced and the Official Liquidator had taken charge of the assets, the sale process had to protect the interests of workmen and creditors and had to be conducted with the Official Liquidator associated. The objections of the Official Liquidator and the workers were not shown to have been meaningfully dealt with. The Court treated the absence of proper association and fair consideration as vitiating the auction process, especially where the auction yielded only two bids and the process was found lacking in transparency and effectiveness.

Conclusion: The auction proceedings were unsustainable for want of effective association of the Official Liquidator and fair consideration of objections.

Issue (iii): Whether the auction purchaser could resist interference on the grounds of exclusive DRT jurisdiction, alternate remedy, and equity.

Analysis: The exclusive jurisdiction of the Debts Recovery Tribunal and Recovery Officer under the recovery statute did not override a subsisting order of the Company Court in the factual setting of this case. The parties were justified in approaching the Company Court to enforce its own order. The plea of alternate remedy did not bar such recourse, and equity could not protect a sale conducted in breach of the court's order and under procedurally defective circumstances.

Conclusion: The appellant's objections based on exclusive jurisdiction, alternate remedy, and equity were rejected.

Final Conclusion: The appeal failed, the High Court's decision was upheld, and the auction sale together with its confirmation was set aside.

Ratio Decidendi: A subsisting order of the Company Court regulating recovery proceedings and requiring association of the Official Liquidator binds the Recovery Officer and cannot be ignored; any sale held in violation of that order is liable to be set aside notwithstanding the exclusive execution powers under the recovery statute.

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