TaxTMI 
TaxTMI 
TaxTMI 
1993 (2) TMI 228
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....d borrowed huge amounts from several financial institutions including the Industrial Finance Corporation of India, ICICI, WBIDC and IDBI on the security of its assets. In view of the default committed by it in repayment, the financial institutions recalled their loans in April, 1988, with the result that all the loans in their entirety became due at once. On August 8, 1988, the financial institutions were granted leave to file a suit under section 446 of the Companies Act. A suit was filed by them in September, 1990, in the Calcutta High Court wherein a direction was given to the official liquidator to function as a receiver too. In January, 1990, the company court directed the sale of the assets of the company in liquidation. Before making the said order the court had obtained a valuation of the said assets. The valuation was at Rs. 4 crores. Sale notices were published from time to time in response to which certain offers were received, the highest of them being Rs. 6.90 crores. For one or the other reason, no offer was accepted and sale notice published again. It would be appropriate at this stage to notice the terms of the sale notice, which led to the sale in favour of the re....
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....ertain offers were received including the one by Buxa. Its offer was in a sum of Rs. 6 crores subject to certain terms and conditions stipulated therein. In short, it proposed to pay the said amount in instalments at Rs. 45 lakhs per annum with a moratorium of one year immediately following the confirmation of sale. When the matter was. taken up by the learned company judge on September 17, 1990, only two parties remained in the field. They were asked to raise their bids. Buxa raised its offer to Rs. 8 crores, the higher of the two. The learned judge accepted its offer subject to the condition that the balance consideration (after deducting 10 per cent. earnest money which was to be deposited immediately) shall be paid in instalments prescribed by him. The learned judge directed that for the first two years following the sale, Rs. 60 lakhs shall be paid each year. Thereafter, half-yearly instalments of Rs. 30 lakhs shall be paid until the entire earnest money is paid off. No interest was stipulated. It was provided that on default of payment of any one instalment-yearly or half-yearly-the official liquidator shall forthwith take possession of the assets and the earnest money paid s....
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.... dealt with by the High Court in case the High Court is moved again but at present we do not think it would be advisable to interfere with the order of the High Court. We gather that today is fixed as the date on which the possession of property would be transferred from the official liquidator to the purchaser. To secure the interest of the financial institutions, the petitioner, we are of the view that until the High Court makes its order the purchaser shall be taken to be the receiver and shall be accountable as a receiver." Accordingly the financial institutions filed an application before the Division Bench requesting it to reconsider its order. In this application, the financial institutions prayed that the order dated November 13, 1990, be recalled, the sale in favour of Buxa be set aside or in the alternative Buxa be directed to deposit the entire balance consideration of Rs. 7.2 crores at once. It was submitted by the financial institutions that the company in liquidation has been directed to be sold by the company court free from all encumbrances, that the financial institutions have a charge for Rs. 8 crores on the assets of the company in liquidation and that granting ....
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....way of interest. (e)The purchaser shall not encumber, alienate or transfer assets purchased by him so long as the entire consideration is not paid. This does not, however, prevent it from raising monies by hypothecation, mortgage or by creating charge on the said assets. (f)In default of payment in any two of the bi-monthly instalments, the official liquidator shall take possession of the assets sold and all the amounts paid till then shall stand forfeited. A few other directions were made which, not being relevant herein, need not be noticed. In this appeal it is contended by Sri Salve, learned counsel for the appellants that the procedure followed by the High Court for selling the assets of the company in liquidation is not fair and proper and that it has caused grave prejudice to the interest of financial institutions. He submitted that by granting such liberal instalments, the "present price" of the assets sold is no more than Rs. 4 crores, whereas the total amount due to the financial institutions is more than Rs. 12 crores. He submitted that either the sale should be set aside and a fresh sale be held or the instalments prescribed should be drastically reduced coupled wit....
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....ourt thought it appropriate, it could also allow the bidders to submit revised offers and then have them evaluated. We are not saying that these are the only two methods. There may be others. Our object is only to emphasise that any method devised should be such as to obviate the necessity or occasion for the court to negotiate the teams and conditions of sale with the party or parties. The sale notice in this case merely stated that the balance consideration may be paid in instalments as would be fixed by the court. The number and duration of instalments and other allied terms like bank guarantee, nature and terms of default clause, payment of interest on instalments were all left to be determined by the court. It is true that in this case the bid of Rs. 6 crores was got enhanced Tons. 8 crores, with lesser number of instalments than offered by the purchaser-all as a result of persuasive efforts by the company judge. Even so it has given room for the argument that had it been known beforehand that so many instalments would be granted without stipulation of interest, several higher offers could have been received. We are not prepared to agree with Mr. Chidambaram, learned counsel ....
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....e which was free from encumbrances should be subject to this that his clients should approach the financial institutions for further financial help . . ." Even before the second Division Bench which passed the impugned order, the purchaser did not take up the stand that the court has no power to modify the terms and conditions of sale. All that its counsel submitted was that having regard to the facts and circumstances of the case, the instalments should not be reduced. The impugned order records the contention of the purchaser's counsel in the following words : "It is submitted by Mr. Mukherjee, learned counsel for the purchaser that having regard to the commitments of the company and the fact that former employees have been re-employed and the company has to consistently run on a profitable basis, it would not be possible to reduce the instalments any further." Having considered and taken into account all the relevant facts and circumstances of the case including the interest of the financial institutions, the interest of the workers who have since been re-employed by the purchaser and the fact that the purchaser has already invested substantial amounts to revive the company, we....