1960 (8) TMI 40 - HC - Companies Law

High Court sets aside textile mill sale, orders fresh auction with conditions & compensation.

The High Court allowed the appeals, setting aside the sale of Kapila Textile Mills at a public auction due to concerns over the sale price and creditor ... Winding up - Powers of liquidator and Appeals from orders Issues:1. Confirmation of sale of Kapila Textile Mills at an auction.2. Allegation of grossly inadequate sale price.3. Concerns regarding creditors' dues and impact on unsecured creditors.4. Adequacy of advertisement for the auction.5. Jurisdiction of the court to hear appeals in company matters.6. Interpretation of Section 483 of the Companies Act 1956 regarding appeals.7. Conditions for setting aside the sale and conducting a fresh auction.8. Allocation of costs and compensation.Confirmation of Sale:The High Court considered two appeals challenging the confirmation of the sale of Kapila Textile Mills at a public auction. The sale was subject to court confirmation, and the highest bidder was Davanagere Cotton Mills. The appellants contended that the sale price was grossly inadequate compared to the realizable value of the property, citing various expert opinions and valuations.Creditor Concerns:The appellants argued that the sale price would not be sufficient to cover the dues of both secured and unsecured creditors of the mills. They highlighted that after deducting amounts owed to secured creditors like Mysore Bank and the Government of Mysore, there would be little left for unsecured creditors, potentially harming their interests.Advertisement Adequacy:While no adverse comments were made on the conduct of the sale, the appellants raised concerns about the adequacy of the advertisement. They argued that more extensive publicity would have been beneficial to attract a wider range of bidders, as only three parties participated in the auction, indicating a lack of sufficient interest.Jurisdiction and Appeals:There was a dispute over the court's jurisdiction to hear appeals in company matters. The respondent's counsel argued that the court had no jurisdiction to review the company judge's orders. However, the appellants cited Section 483 of the Companies Act 1956, asserting their substantive right of appeal against orders made in winding up proceedings.Setting Aside the Sale:After a detailed analysis of the facts and circumstances, the court decided to set aside the sale and allow the appeals. The court imposed conditions for conducting a fresh sale, including additional advertising and depositing funds for expenses. The court also outlined the compensation to be paid to the auction-purchaser and the appellants' obligations in this regard.Costs and Compensation:Regarding costs, the court ordered each party to bear their own costs for the appeal. Additionally, the court directed the appellants to pay compensation to the auction-purchaser for expenses incurred during the purchase, including interest payments, and set conditions for the refund of the bid amount and interest earned.Conclusion:The High Court allowed the appeals, set aside the sale of Kapila Textile Mills, and outlined conditions for conducting a fresh auction to address concerns regarding the sale price and creditor interests. The judgment also clarified the court's jurisdiction in hearing appeals in company matters and the interpretation of relevant legal provisions.