TMI Blog1920 (8) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... he Official Liquidator wrote to the District Judge intimating that he had received an offer of 5 1/2 lacs for the mills as they stood and recommended its acceptance. After a personal interview with the Official Liquidator the same day, the District Judge passed an order permitting the Official Liquidator to sell at the price offered conditionally on the offer or giving a valid cheque for ₹ 50,000 by the 21st. The purport of this order was communicated to appellant the same day, apparently verbally; and formal communication in writing was made by a letter of the Official Liquidator dated 23rd February, 1920. The cheque for ₹ 50,000 was handed to the Official Liquidator on the 20th. A further cheque for ₹ 4,10,000 was given to him on the 24th and paid into Court in discharge of the mortgage-decree. The balance was paid on or before the 28th. 2. On 2nd March, 1920, first respondent, the former manager of the Company, presented a petition in the District Court objecting to the sale to appellant as being for an inadequate price, putting forward an offer from Mr. Ranchod Lal-Amratlall of Ahmedabad for ₹ 7,01,000 and asking that the latter should be accepted, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manded. Section 144 of the Companies Act makes the Official Liquidator's power to sell, whether by auction or private contract, conditional on the sanction of the Court; and this is obviously a sanction to be exercised with judicial discretion having regard to the interest of the Company and its creditors. Wherever property is authorised to be sold by private contract it is the duty of the Court to satisfy itself that the price fixed is the best that could in human probability be expected to be offered. Unless satisfied of this the only safe and proper course is an auction sale. We have been referred to certain of the rules under the Companies Act regarding the procedure to be adopted; in particular Rules 74 and 80. The former provides that the sanction of the Judge shall be obtained by the Official Liquidator upon application on affidavit and an order in a prescribed form shall be drawn up thereon unless the Judge otherwise directs. Rule 80 provides that no order to the prejudice of contributors or creditors shall be made ex parte on the application of the Official Liquidator. I do not-wish to press these rules unduly. Rule 74 was certainly broken and one is forced to the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the post-war demand for cotton goods and the practical impossibility of obtaining fresh machinery from England at any price at all. As the Judge says in his later order (page 28) I will freely admit that in passing my order of sanction I had no idea how entirely falsified this prophecy had been with regard to the machinery for spinning mills, and if I had known the real stage of the market in this respect, I should not have sanctioned the sale without further inquiry and notice. Speculations as to the probable market value of the mill machinery could furnish no excuse for failure to test their accuracy by the ordinary, process of an auction sale or at any rate public invitation of offers. As the Judge says up to that time the property had never been advertised, no offers had been invited, nor had there been any attempt to sell it by auction. The offers already received furnished, therefore, no reliable criterion of what might be obtained if proper steps were taken. 10. It will be seen, therefore, that a comparison of appellant's offer with previous offers and the original price paid by the mill furnished a very poor excuse for the Judge's hasty acceptance of appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy of the proceedings. He was successful in his application and at an early stage of the hearing before us filed his appeal petition with a separate petition asking for extension of time. I think this latter petition N should be granted and the appeal admitted. 13. Another objection taken by the learned Advocate-General is to the effect that in view of the communication of the District Judge's order and of the payment by appellant of a portion of the sale price as specified therein, the matter should be treated as a completed contract enforceable against the Official Liquidator, as against any private party in accordance with the provisions of the Contract Act. As regards this it is only necessary to remark that the Official Liquidator's offer is contingent on the sanction of the District Judge and that whatever view may be taken of the Judge's power to cancel his sanction, that sanction is certainly liable to appeal to this Court. If, therefore, we consider it as one which we should interfere with we need not be deterred from interfering by any theory of completed and irrevocable contract. 14. We have already discussed the merits of the case and I am clearly of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Krishnan, J. 17. These are appeals under Section 169 of the Indian Companies Act of 1882 against two orders of the District Judge of Tinnevelly dated 20th February and 11th April, 1920, passed in the course of the winding-up proceedings of the ; South Indian Mills Co. Ltd. The earlier order is one granting sanction to the Official Liquidator under Section 144(c) of the Act to accept a private offer, Ex. VI, made by Mr. Dakuwala the appellant in A.A.O. Nos. 127 and 128 of 1920, for the purchase of the Darragh Mills at Quilon owned by the Company subject to the condition that a valid cheque for ₹ 50,000 should be given by him by the 21st of February See Ex. VI(b). The appeal C.M.A. 199 of 1920 is against this order and is by two of the share-holders and contributories of the Company, the first appellant being also its Manager. That appeal was filed out of time but die appellants have prayed in C.M.P. No. 1846 of 1920 for excusing the delay. The later order is one by which the District Judge cancelled the sanction he had originally given and set aside the sale to Mr. Dakuwala and directed the sale of the Mill by public auction. Appeals Nos. 127 and 128 of 1920 are agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se direct . Rule 80 provides that no order to the prejudice of contributories or creditors shall be made ex parte on the application of the Official Liquidator. It is suggested that the Rule 80 does not apply to orders of sanction but only to orders which are ex facie to the prejudice of contributories such as orders to them to pay. I do not see why the rule should be read in this restricted manner, the words being wide enough to cover the present case. An order for sale of a Company's property and an order for the adoption of a particular mode of conducting that sale are both, to my mind orders which may work to the prejudice of the contributories and creditors as they may result in considerable loss to them. It stands to reason that such orders should not be made without notice and there is thus no valid ground to read the Rule 80 as not referring to them. There can be no practical difficulty in giving such notice as Rule 81 enables the Judge to appoint one or more contributories or creditors to represent the whole body of them. An order of sanction under Section 144 Clause (c) seems tome, therefore, to be one having a judicial rather than a purely administrative character ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aside for good cause shown and of his purchase failing in consequence. 21. In the present case briefly put, the sanction was granted by the District judge very hastily in ignorance of the real price of the mill and without a proper application as required by the rules being made for it and what is most important without any kind of notice to the respondents who are the persons interested as owners of the mill. When such a sanction is proved to work serious prejudice to those persons as has been amply proved in this case it seems clear to me that it cannot be supported. If the sanction and the sale to Mr. Dakuwala are confirmed the contributories and creditors of the Company stand to lose nearly 2 lacs of rupees and perhaps much more as the District Judge has found, a finding which is clearly correct. The principle contended for by the Advocate-General cannot be applied to a case where the sanction has been granted without notice to the parties interested and I am, therefore, not following him in his discussion of the English Law and referring to the cases he has referred to in support of it as all those cases refer to sales properly held after due notice. He has cited no case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, seem to point that there-hearing is 'a proceeding in appeal. Section 169 is repeated in the new Act as Section 202 without any further explanation. No authority has been cited to us on the construction of this section or of the corresponding English Section 124. As I have already pointed out it is not necessary for the disposal of the appeals before us to decide this difficult question what the term re hearing means and 1 am not, therefore, deciding it. I may, however, say that I am inclined to agree with Mr. Rangachariar that if the section does not apply to the present case we must hold on the principle stated in the case of The Bolivai 2 P. Cas. 175 above referred to, that the District Judge had an inherent power to recall his order passed without notice and without hearing parties, to correct the serious injustice done to them. The cases cited by the Advocate-General, viz., Ananthiraju Chetty v. Appu Hegade 53 Ind. Cas. 56 and Gadi Neelaveni v. Marappareddigari Narayana Reddi 53 Ind. Cas. 847 are not applicable. The former refers to review of an order or decree properly passed by the Court and the latter to the setting aside of an ex parte decree or order made under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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