1998 (9) TMI 477 - HC - Companies Law

Summary

Issues Involved:

1. Impleading of prospective buyers as parties or interveners.
2. Validity and enforceability of the agreement to sell dated 14-4-1981.
3. Applicability of sections 448, 457, and 536(2) of the Companies Act, 1956.
4. Consideration of market value versus pre-existing agreement price.
5. Role and obligations of the official liquidator.
6. Precedence of creditors' interests and equitable distribution.

Issue-wise Detailed Analysis:

1. Impleading of prospective buyers as parties or interveners:
The court dealt with Civil Application Nos. 157 and 158 of 1998, where prospective buyers sought to be impleaded as parties or interveners. The court found that these applicants had no direct lis with the appellants and no locus standi, as observed by the learned Company Judge. They could make offers when the property was subjected to sale. Consequently, the applications were rejected at the threshold.

2. Validity and enforceability of the agreement to sell dated 14-4-1981:
The appellants challenged the impugned order dated 12-8-1998, based on an agreement with the company from 1981 to sell land at Rs. 54 per sq. yard. The court noted that no steps were taken to enforce this agreement even after the company was wound up in 1983. Under section 54 of the Transfer of Property Act, a mere agreement to sell does not create any interest in the property. Therefore, the appellants could not claim the disposition of the property based on this agreement in the present proceedings.

3. Applicability of sections 448, 457, and 536(2) of the Companies Act, 1956:
The appellants contended that the learned Company Judge wrongly invoked section 536(2) instead of sections 448 and 457. The court clarified that the provisions are not mutually exclusive and must be read together. The liquidator must adhere to all relevant provisions, including section 536(2), which deals with the avoidance of transfers after the commencement of winding up. The appellants' reliance on the agreement of 1981 did not grant them any exclusive right to purchase the property.

4. Consideration of market value versus pre-existing agreement price:
The appellants argued for the purchase of the property at the market value assessed by the court, despite their pre-existing agreement price of Rs. 54 per sq. yard. The court emphasized that the objective is to realize the best price for the property, ensuring equitable distribution among all claimants. The court found that the property could fetch a much higher price in the open market than the valuer's report suggested. The learned Company Judge rightly observed that public sale or auction would achieve the best price, and the appellants could not claim preference based on an outdated agreement.

5. Role and obligations of the official liquidator:
The court highlighted that the official liquidator acts as a trustee to protect and optimize the realization of assets, ensuring equitable distribution among all claimants. The liquidator must realize the maximum possible price for the company's assets. The appellants' claim based on the pre-existing agreement was not justified, as it would prejudice the interests of unsecured creditors and the equitable distribution of assets.

6. Precedence of creditors' interests and equitable distribution:
The court reiterated that the winding up of the company aims to protect and ensure the optimum realization of assets for equitable distribution among all claimants. The official liquidator must act in the best interest of realizing this objective. The appellants' reliance on previous court orders (dated 12-9-1990 and 9-4-1992) was dismissed, as those orders were based on the material available at that time and did not establish a principle of universal application.

Conclusion:
The appeal was dismissed, and the court upheld the learned Company Judge's findings. The appellants' claims based on the agreement of 1981 were not accepted, and the property was to be disposed of in a manner that ensured the best possible price, protecting the interests of all creditors and claimants. Civil Application No. 154 of 1998 regarding stay was disposed of in view of the dismissal of the appeal, and Civil Application Nos. 157 and 158 of 1998 were also disposed of as mentioned.