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M/s. Tech Invest India (Pvt.) Ltd. Thr. Major Shareholder Rajiv Gosain v. M/s. Assam Power & Electricals Ltd. and Others

Civil Appeal · Neutral citation not assigned (Civil Appeal Nos. 6055-6056 of 2015)Decided 11 Aug 2015
Civil Appeal Nos. 6055-6056 of 2015
Justice M.Y. Eqbal · Justice Arun Mishra

Background

A company was ordered to be wound up after it failed to repay a loan, and the Official Liquidator took possession of its assets and arranged a public auction. The company objected that its assets, valued around Rs. 7 crores, were being auctioned without a fixed reserve price and after only a single advertisement, raising fears the property would be sold too cheaply. The Company Judge nonetheless allowed the sale to proceed and refused to interfere, and the High Court upheld that decision; the property was eventually sold for only Rs. 45.45 lakhs.

Decision Breakdown

The Supreme Court found the auction process illegal and irregular because the Official Liquidator sold valuable property without proper advertisement or a fixed reserve price, despite an earlier valuation showing it was worth far more. It held that the Company Judge failed to exercise proper judicial discretion to ensure a reasonable sale price, and that the valuation report should have been disclosed to secured creditors and other interested parties before the sale. The Court allowed the appeals, set aside both the Company Judge's order and the High Court's order, directed the Official Liquidator to recover possession of the properties, and ordered a fresh auction after obtaining a fresh valuation and fixing a reserve price.

Lesson Learnt

Court-supervised sales of company assets must be conducted transparently, with proper advertisement, a fixed reserve price, and disclosure of valuation to interested parties, and a sale that skips these safeguards can be undone even after it has been "confirmed."

Official source (sci.gov.in)View Judgment (PDF)

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