TaxTMI 
TaxTMI 
2007 (8) TMI 448
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecting winding up of the company, viz., M/s. Sree Srinivasa Spun Silk (India) Ltd., situate at Bandar-manahalli, Chickballapur Taluk, Kolar District. The official liquidator attached to this court was directed to take over the assets of the company under liquidation. By the order dated September 25, 2002, this court permitted the official liquidator to sell assets of the company in terms of the said order. According to the valuation report the assets of the company was valued at Rs. 165.13 lakhs. Thereafter, the official liquidator got sale proclamation duly advertised in the daily newspaper, viz., "The Economic Times" and "Prajavani". The second respondent herein offered the highest bid of Rs. 80.45 lakhs. However, the court rejected the said offer and directed the official liquidator to advertise the sale afresh. Again it was advertised. During the second sale, the very purchaser, viz., the second respondent offered a highest bid of Rs. 1,24,54,000 and deposited 25 per cent, of the said sale consideration with the official liquidator. On April 10, 2003, the learned single judge accepted the said offer and directed the second respondent/auction purchaser to deposit the balance s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rea was covered by weeds and shrubs. This court acceded to such request and granted further time to take intending purchasers to factory premises after removing the weeds and shrubs and a direction was given that inspection should be conducted on October 15, 2003. On October 17, 2003, the case was adjourned at the request of the applicant. The applicant went on pleading time to bring better offers which did not materialise till October 22, 2003. In the meanwhile, the appellant herein filed an application requesting the learned single judge not to confirm the sale for the lower amount of Rs. 1.65 crores and requested the court to re-tender once again. The appellant was also granted sufficient opportunity to bring better offer for the assets of the company under liquidation. However, neither the ex-director nor the appellant was able to bring better offer; on the other hand, a submission was made by the appellant, that the sale could be confirmed in favour of the second respondent, on the condition that on such purchase the second respondent should re-employ all the ex-employees of the company under liquidation. The learned single judge turned down the contention of the appellant th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of these machinery. (iii)The official liquidator in the advertisement for sale did not give the full and correct description of the properties to attract the intending purchasers. No reserve price was mentioned in the public notice which was published in the newspapers. The public notice was advertised by publishing in the "The Economic Times" from Bombay and "Prajavani" from Bangalore, which would demonstrate that there was not enough publicity in the State of Karnataka to attract more prospective buyers and the time gap between the date of publication and sale was hardly sufficient for the prospective buyers to inspect the factory premises. The learned single judge has not considered the inadequacy of value arrived at in the valuation report submitted by the official liquidator more particularly when the assets were valued at Rs. 750 lakhs. The reasons given by the learned single judge for confirming the sale are erroneous and unsustainable. The learned single judge has failed to notice that the second respondent-auction purchaser, at the first instance offered Rs. 80.45 lakhs, which was rejected. Thereafter, within a span of few months he raised the offer to Rs. 124.50 lakhs ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder passed by the learned single judge does not call for interference in this appeal. Learned counsel appearing for the official liquidator has submitted that the sale was held in accordance with law and the offer procured during the sale held on March 6, 2003, was the best offer and was in the interest of the company. The non-mention of reserve price of sale publication has not resulted in any loss to the company under liquidation. The second respondent has raised his highest offer to reserve price of Rs. 165.13 lakhs which is also the valuation mentioned in the valuation report. Therefore, learned counsel has submitted that the impugned order does not call for any interference. Before adverting to the submissions made by learned counsel for the parties, it is necessary to refer to certain decisions cited by learned counsel for the appellant. In a decision reported in Allahabad Bank v. Bengal Paper Mills Co. Ltd. [1999] 96 Comp. Cas. 804 ; [1999] 4 SCC 383, at relevant page 384, the Supreme Court has held (pages 814 and 815 of 96 Comp. Cas.) : "Upon liquidation, the assets and properties of the company in liquidation vest in the official liquidator for the benefit of its credi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roperty, the price offered is reasonable. Unless the court is satisfied about the adequacy of the price the act of confirmation of the sale would not be a proper exercise of judicial discretion." In the said decision it is further held (headnote of AIR 1970 SC 2037) : "Rule 273 of the Companies (Court) Rules provides that all sales shall be made by public auction or by inviting sealed tenders or in such manner as the judge may direct. Where the auction in question no doubt was conducted in a public place but it was not a public auction inasmuch as it was not open to the general public but was confined to two named persons/and secondly it was not held after due publicity, but immediately after it was decided upon, the sale in question was not a public sale which implies sale after giving notice to the public wherein every member of the public is at liberty to participate. The denial of opportunity to purchase the property by persons who would have taken part in the auction bid but for want of notice is a serious matter." Learned counsel appearing for the parties have taken us through the impugned judgment and relevant material on record. The first ground urged is regarding non-me....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the meeting held on June 10, 2005, in the office of the official liquidator, the land available is only 9.3 acres in the name of the company under liquidation and not 18.5 acres as mentioned in the advertisement. In the said meeting it was resolved to return to the second respondent a sum of Rs. 5,93,953 paid as excess amount. Thus, from these documents we find that there has been lot of variance regarding the actual valuation of assets of the company. We also find from the proceedings of the meeting held on June 10, 2005, that the land available in the name of the company was 9.3 acres, as against this the extent of land was mentioned as 18.5 acres in the advertisement. Under these confused state of affairs, it was very much essential for the official liquidator to have mentioned the correct extent, survey number and boundaries in the paper publication for the benefit of prospective buyers. Therefore, we hold the improper description of the land in lot No. I is one of the material irregularity and illegality vitiating the sale. According to the valuation report, we find the total plinth area of the building is 8,316 sq. meters. The paper publication does not contain the plinth ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... offer from Rs. 80.45 lakhs to Rs. 165.13 lakhs. The highest offer made by the second respondent at the first instance was one-third of the reserve price. Within a few months thereafter the second respondent offered the price at Rs. 124.5 lakhs. During the pendency of the proceedings before the learned single judge, the second respondent raised his offer from Rs. 124.5 lakhs to Rs. 165.13 lakhs. Thus, offers made by the second respondent during the period between September 25, 2002, and July 3, 2003, would clearly demonstrate that the price offered by the second respondent is not the reasonable and market price. It cannot not clear as to what made the second respondent to raise the highest offer of Rs. 124.5 lakhs to Rs. 165.13 lakhs, within a period of three months. It cannot be said that the second respondent had raised the offer of July 3, 2003, to stand to lose. Therefore, it is clear that the highest offer made by the second respondent during the sale held on July 3, 2003, did not reflect the reasonable price by his own conduct. The learned single judge having declined to consider the highest offer of Rs. 124.5 lakhs as the best price should have directed the official liquidat....