Reinz Talbros Limited vs Kostub Investments Limited & Ors
2009 Latest Caselaw 878 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                           Date of decision : 18.03.2009

+                          Co.Appeal 21 of 2008


REINZ TALBROS LIMITED                                  ...APPELLANT
                     Through:          Mr.Arjun Mahajan, Mr.Bhuwan
                                       Gugnani and Mr. Rajesh K.Singh,
                                       Advocates.

                                   Versus


KOSTUB INVESTMENTS LIMITED & ORS                        ...RESPONDENTS

                           Through:    None for R-1.
                                       Mr.R.P.Aggrawal and Mr.Arvind
                                       Kumar Singh Advocates for R-2.
                                       Mr. S.K.Luthra, Advocate for R-3.
                                       Mr.H.G.R.Khattar, Advocate for
                                       R-4.

CORAM:
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON'BLE MR. JUSTICE SUDERSHAN KUMAR MISRA

1.        Whether the Reporters of local papers
          may be allowed to see the judgment?             No

2.        To be referred to Reporter or not?              No

3.        Whether the judgment should be
          reported in the Digest?                         No

SANJAY KISHAN KAUL, J. (Oral)

1. A winding up petition was filed against the appellant by

respondent no.1 on account of non payment of the amount

due with interest at the time of redemption of fully paid up

debentures. The appellant did not even care to file a reply

and subsequently the petition for winding up was admitted

and an official liquidator was appointed as the provisional

liquidator.

2. The learned company Judge in terms of the Order dated

25.01.2007 directed valuation of the properties of the

appellant.

3. It is the grievance of the appellant that the valuer

appointed to carry out the task undervalued the properties.

The appellant filed an application CA 666/2007 before the

learned Company Judge inter alia challenging the valuation

report and seeking to keep in abeyance the auction of the

assets of the company. However, learned Company Judge

acted in pursuance to the report of the valuer and directed

auction of the property in open court on 12.07.2007 and

finalized the auction of the property for Rs. 5.5 crores. CA

666/2007 having become infructuous was withdrawn by the

appellant and the appellant filed another CA 79/2008

challenging the auction of the Surajpur property. This

application was dismissed by the impugned order dated

31.01.2008. The appellant aggrieved by this Order has

filed the present appeal.

4. We have heard learned counsel for the parties and perused

the impugned order.

5. The submission of the learned counsel for the appellant is

three fold in terms of what was urged before the learned

Single Judge.

6. The learned Single Judge in terms of the impugned order

has noted that it did not agree to postponement of auction

since no steps had been taken by the owners, directors or

any other person for settlement of the dues of the creditors

nor any details of payment or any proposal for settlement

furnished by them. The reserve price was Rs.3,29,78,400/-

while the highest bid was Rs.5.5 crores. The secured

creditor, Bank of Baroda, did not dispute the reserve price.

The highest bid, being well above the reserve price, was

accepted. The auction purchaser deposited the entire

amount on 10.09.2007 and possession was delivered on

14.09.2007. The sale was confirmed in favour of the

auction purchaser on 29.11.2007.

7. The first plea of learned counsel for the appellant is that the

valuation report is below the market price. The learned

Company Judge, in our view, rightly found that there was no

such material to arrive at the conclusion. It was taken note

of that in such auctions, the value achieved is normally less

than the true market value. The payment to be realized by

auction is utilized to settle the claims of the creditors and

the appellant-company could not in this manner indefinitely

postpone its obligations while giving no alternative solution.

Thus, there is no infirmity in the impugned order in this

behalf.

8. The second submission is predicated on the plea of absence

of authority in the provisional liquidator to sell the property.

Learned counsel for the appellant submits that the powers

of the official liquidator acting as a provisional liquidator are

not the same as the powers to be exercised by the official

liquidator and this is apparent from the distinction between

the Sections 450 and 457 of the Companies Act, 1956

(hereinafter referred to as the 'said Act'). Section 450 of

the said Act reads as under:

450. Appointment and powers of provisional liquidator.

(1) At any time after the presentation of a winding up petition and before the making of a winding up order, the Tribunal may appoint the Official Liquidator to be liquidator provisionally.

(2) Before appointing a provisional Liquidator, the Tribunal shall give notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing, the Tribunal thinks fit to dispense with such notice.

(3) Where a provisional liquidator is appointed by the Tribunal, the Tribunal may limit and restrict his powers by the order appointing him or by a subsequent order, but otherwise he shall have the same powers as a liquidator.

(4) The Official Liquidator shall cease to hold office as provisional liquidator, and shall become the liquidator, of the company, on a winding up order being made.

9. We are unable to accept the plea as urged by learned

counsel for the appellant for the reason that the plea

cannot be analyzed in vacuum and has to be considered in

the facts and circumstances of the case. Section 450 (3) of

the said Act provides that the powers of the provisional

liquidator may be limited or restricted by the Company

Court while making his appointment. In the present case,

the sale was directed by the Company Court and in fact the

auction was finalized before the Court. Thus, the sale has

taken place in pursuance to the specific authority and

sanction of the Court and it certainly is not the plea that the

Company Court cannot authorize the provisional liquidator

to do the needful. This aspect has been considered in para

8 of the impugned order and we find no reason to differ

from the same.

10. The last aspect urged is that there is an interim stay

granted by the Allahabad High Court against the disposal of

assets of the appellant-company. In this behalf, the learned

Company Judge has taken note of the fact that this order

was never brought to the notice of the official liquidator or

to the Court. The order is stated to be passed on

23.08.2002 but was not even brought to the notice of the

Court when the earlier CA 666/2007 was filed. The official

liquidator is not even a party in those proceedings. Thus,

the sale could not be said to be in violation of that order.

11. We are of the view that the learned Company Judge has

rightly found that there was no infirmity in the sale of the

assets. We find that the appellant is only seeking to evade

the inevitable consequence of its inability to meet its

financial obligations to the respondent no.1/company.

12. We may notice that in the appeal while challenging the

Order dated 31.01.2008, the challenge was also laid to the

Order dated 12.07.2007, but at the stage of decision of the

application for condonation of delay, learned counsel for

the appellant confined the challenge only to the Order

dated 31.01.2008.

13. Dismissed.

SANJAY KISHAN KAUL, J.

MARCH 18, 2009 SUDERSHAN KUMAR MISRA, J. dm