2016 (11) TMI 26 - HC - Companies Law

Court approves sale of company's Gujarat unit to highest bidder under Companies Act, 1956

The Court allowed the application under Section 457(3) of the Companies Act, 1956, confirming the highest bid of &8377;66.51 lacs for the sale of the ... Acceptance of highest bid after inter-se bidding - confirmation of sale by Official Liquidator under court supervision - handing over possession upon receipt of entire sale consideration - refund of earnest money to unsuccessful bidders - priority payment of publication expenses under Rule 272 of the Companies (Court) Rules, 1959 - secured creditor's acquiescence and stepping into the shoes of creditorAcceptance of highest bid after inter-se bidding - confirmation of sale by Official Liquidator under court supervision - Confirmation of the highest bid of Rs. 66.51 lacs made by Sh. Virti R. Shah and approval of the minutes dated 14.07.2016. - HELD THAT: - The Court recorded that six sealed offers were received, inter-se bidding produced the highest offer of Rs. 66.51 lacs, and the reserved price had been fixed. The ex-Managing Director filed an affidavit stating that he has paid secured creditors' dues and has no objection to the sale, effectively assenting as the creditor. No party objected to the confirmation. On these facts the Court allowed the application under Section 457(3) of the Companies Act, 1956 read with the relevant rules and confirmed the minutes of the sale meeting dated 14.07.2016 thereby approving the highest bid for consideration by the Official Liquidator and the Court.Minutes dated 14.07.2016 are confirmed and the highest bid by Sh. Virti R. Shah is approved for confirmation of sale.Handing over possession upon receipt of entire sale consideration - Whether physical possession of the purchased property should be handed over to the highest bidder immediately or only after receipt of the entire sale consideration. - HELD THAT: - The Court specified the condition under which possession is to be delivered: although the Official Liquidator was directed to hand over possession to the highest bidder, the order expressly conditions physical delivery upon receipt of the entire sale consideration. This preserves the Official Liquidator's duty to ensure full payment before transfer of physical possession.Possession to be handed over to the purchaser only after receipt of the entire sale consideration.Refund of earnest money to unsuccessful bidders - Refund of earnest money deposits of other bidders who were not highest bidders. - HELD THAT: - The minutes provided for retention of EMDs of the top three bidders and the immediate return of EMDs to other bidders. The Court allowed the Official Liquidator to refund the earnest money of the other bidders in accordance with those minutes, permitting the Official Liquidator to complete the prescribed disbursements arising from the sale process.Official Liquidator permitted to refund the earnest money of the unsuccessful bidders as per the minutes dated 14.07.2016.Priority payment of publication expenses under Rule 272 of the Companies (Court) Rules, 1959 - Whether expenditure incurred on publication of the sale notice by the ex-management/secured creditor is payable in priority to other debts. - HELD THAT: - The Official Liquidator sought permission to pay the bill of publication expenses incurred by the ex-management/secured creditor. Relying on Rule 272 of the Companies (Court) Rules, 1959 as cited in the application and minutes, and in the absence of objection, the Court authorised payment of those publication expenses in priority to other debts, directing the Official Liquidator to effect such payment from the sale proceeds as permitted by the Rules.Official Liquidator permitted to pay the publication expenses incurred by the ex-management/secured creditor in priority to other debts in terms of Rule 272.Final Conclusion: The application under Section 457(3) of the Companies Act, 1956 read with the Companies (Court) Rules, 1959 is allowed: the minutes of 14.07.2016 are confirmed, the highest bid is approved, possession shall be delivered after full payment, earnest monies of unsuccessful bidders are to be refunded as directed, and publication expenses are to be paid in priority under Rule 272. Issues:Consideration of highest bid for sale conducted by Official Liquidator under Companies Act, 1956.Analysis:The case involved an application filed under Section 457(3) of the Companies Act, 1956, read with Rule 9, 272 of the Companies (Court) Rules, 1959, for the consideration of the highest bid in terms of a sale conducted by the Official Liquidator. The respondent-company had been wound up, and the Official Liquidator had taken over its assets. There were two secured creditors, Punjab and Sind Bank and PICUP. The company had two units - one in Rajkot (Gujarat) and the other in Noida (UP). The Noida unit was hypothecated to PICUP, and the Gujarat unit was hypothecated with Punjab and Sind Bank. The sale of the Gujarat unit was under consideration, and six bids were received, with the highest bid being &8377; 66.51 lacs. A meeting was held where the highest bid was accepted, and the Official Liquidator sought confirmation of the bid.The Official Liquidator made several prayers in the application, including the consideration of the highest bid, permission to hand over possession to the highest bidder, refund of earnest money to other bidders, and payment of expenses incurred for the sale notice publication. The Ex-Managing Director, now the sole secured creditor, had no objections to the sale. The Court allowed the application, directing the Official Liquidator to hand over possession to the highest bidder, refund earnest money to other bidders, and pay the expenses of sale notice publication. The physical possession would be handed over after receipt of the entire sale consideration.In conclusion, the Court disposed of the application, confirming the highest bid and outlining the necessary steps for the transfer of possession and financial transactions related to the sale.