TMI BlogSALE OF PROPERTY THROUGH PUBLIC ACTION IN LIQUIDATION PROCEEDINGS – SOME ISSUESX X X X Extracts X X X X X X X X Extracts X X X X ..... SALE OF PROPERTY THROUGH PUBLIC ACTION IN LIQUIDATION PROCEEDINGS – SOME ISSUES - By: - Mr. M. GOVINDARAJAN - Corporate Laws / IBC / SEBI - Dated:- 15-10-2015 - - In liquidation proceedings Official liquidator is appointed for performing the winding up procedure. The Official liquidators are appointed by the Central Government and are attached to the various High Courts. The Official Liquidators act under the directions of the High Court. The primary function of the Official Liquidator is to administer the assets of the company under company, sale of assets and realization of all debts of companies in liquidation for the purpose of distributing the same among the various creditors and other shareholders of the companies and to finall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y dissolve such companies after the affairs are completely concluded. In this article some issues involved in sale of properties of the company in liquidation through public auction are discussed with reference to the decided case laws. In Tech Invest India Private Limited V. Assam Power and Electricals Limited and others 2015 (8) TMI 890 - SUPREME COURT (decided on 11.08.2015) the respondent had filed a winding up petition against the appellant company alleging the appellant company had failed to repay a loan of ₹ 6 lakhs. The company instead of repaying the dues initiated for the closure of the company and to sell its assets. It also issued closure notice. The Company Court appointed an official liquidator. The O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficial liquidator took over the assets of the company. In the first round valuation of the assets was estimated as ₹ 6.25 crore. The said report has not been submitted. In the second round the assets were valued at ₹ 76.80 lakhs. No minimum reserve price was fixed for public auction. However the Company court allowed the auction and the property was sold to the third respondent in this case. The appellant company objected the sales and appealed to the Division Bench which also rejected the appeal. The appellant company approached the Supreme Court. The Supreme Court found that the objections raised by the appellant were not considered and heard on merit. The auction sale was confirmed without observing the required f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormalities. The conduct of the Official Liquidator in selling the property at a price of ₹ 45.45 lakhs without proper publicity through advertisement or fixing any reserve price for the assets cannot be sustained in law, particularly when the predecessor Official Liquidator reported that the property put in auction is of much higher valuation. The Supreme Court held the entire process is vitiated. The Supreme Court was of the view that the Company Judge also failed to exercise judicial discretion to see that the properties are sold at a reasonable price. When the valuation report was submitted before the Company Judge, it ought to have been disclosed the secured creditors and other interested persons in order to ascertain the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket value of the property before property was auction sold. Since the same has not been done the auction sale and the order confirming the sale are liable to be set aside. The Supreme Court directed the Official Liquidator to recover the possession of the properties and proceed with a fresh auction after obtaining the fresh valuation report and fixing the reserve bid. In Pravin Gada and another V. Central Bank of India and others 2012 (12) TMI 393 - SUPREME COURT the auction of the assets of the company in liquidation was conducted. The auction sale was confirmed in favor of the appellants of ₹ 2.50 crores. On challenge the said auction sale was set aside. Further auction fetching ₹ 6.45 crores was also set a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side. On appeal the Supreme Court passed order for fresh auction. In that auction the highest bid was ₹ 5.04 crores. The Supreme Court held that the appellant had deposited ₹ 2.50 crores 6 years back and already invested substantial amount in the property. The highest offer came up to ₹ 5.04 crores at such a distance of time. Including the interest component on the amount deposited by the appellants the sum would come to ₹ 4.75 crores. The Supreme Court confirmed the sale in favor of the appellant subject to their depositing a further sum of ₹ 50 lakhs In Vedica Procon Private Limited V. Balleswar Greens Private Limited others 2015 (8) TMI 933 - SUPREME COURT (decided on 13.08.2015) M/s Om ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Investors Limited was ordered to be wound up. The Official Liquidator attached to the Gujarat High Court was appointed as the Liquidator of the said company. By order dated 26.03.2013, the Official Liquidator was directed to put the freehold land of the company measuring 13895 sq. meter to auction for sale by inviting offers from the intending purchasers in sealed covers. An auction was held in the open court. The appellant became the highest bidder with an offer of ₹ 148 crores. The High Court accepted the bid of the appellant. The deposited the entire amount in two installments. The first respondent in this case is the second highest bidder. He filed an appeal before the Division Bench expressing his willingness to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aise its offer to an amount of ₹ 160 crores for the land in question and offered to deposit the amount within 72 hours. The Division Bench directed the first respondent to the Company Judge. The Company Judge allowed the application. The appeal of the appellant against the order of Company Judge before the Division Bench was dismissed. Hence he approached the Supreme Court for redressal. The first respondent relied on many a judgment of Supreme Court. The Supreme Court found that the first respondent did not indicate that the Supreme Court has ever laid down a principle that whenever a higher offer is received in respect of the sale of the property of a company in liquidation, the Court would be justified in re-opening the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded proceedings. The highest bid of the appellant was accepted by the Company court and all the stake holders of the company in liquidation were heard before such an acceptance. Nobody ever objected including the first respondent at that stage. As such there was no fraud or irregularity in the sale or was there any objection from any one of them that the price offered by the appellant was inadequate. The property became more valuable in view of the subsequent development. It is not a relevant consideration in determining the legality of the order of the Company court. The first respondent also contended that the sale has not been confirmed and therefore the Court is at liberty to decline confirmation of the sale in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsequent developments. The Supreme Court rejected this contention because there is no specific format in which a sale conducted by the Official Liquidator is to be confirmed by the Company Court. There mere absence of the expression that the sale is confirmed is not the determination of the question. The Supreme Court allowed the appeal and set aside the order of the lower authority. The above case laws are only examples. There are so many issues involved in this regard which may vary from case to case based on the facts and circumstances of the case. - Reply By kailash singhal as = dear sir, on subject matter , i would like to suggest that RBI or Ministry of Finance to clarify about the central excise liability , vat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CST liability and Provident fund liability and electricity department liability --- who will bear and what should be draft of sale deed format regards ca kc singhal , silvassa 9824102121 Dated: 18-10-2015 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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