- (1.) Some seemingly unsavoury matters have come to light upon the second highest bidder at a court sale of the assets of a company in liquidation alleging that the offer ascribed to him in the order confirming the sale was not at his bidding.
(2.) The assets of AOP (India) Limited (in liquidation) were sold at an open auction held in court on March 2, 2012. The company in liquidation has a manufacturing facility in Maniktala with substantial machinery and equipment in the line of printing business. The company is also a tenant at a building in the Sealdah area. The Sealdah tenancy covered five rooms spread over the second and third floors of the building at 127/1 AJC Bose Road. At the time that the sale of the company in liquidation was taken up, the owners of the Sealdah property presented an application in the nature of disclaimer by way of CA No. 169 of 2012. The owners of the Maniktala property at 237 A & C Maniktala Main Road, whereat the company in liquidation is a tenant, were also represented. There were two principal bidders in the fray who lasted the distance. Rabindranath Saha bid Rs.4.50 crore over and above the liability of the company in liquidation. On the same terms, the next highest offer was of Gulshan Sony of Rs.4.20 crore. Both offers were considerably higher than the valuation of the assets of the company in liquidation. The sale was on the basis of the company being taken over by the highest bidder as a going concern. The order of March 2, 2012 in its opening paragraph indicated that the implication of the sale of a company in liquidation as a going concern was that the purchaser would have to take over all liabilities of the company in liquidation and the purchase price would be retained by the official liquidator, first to meet the liquidation expenses and then to proportionately distribute the balance among the contributories of the company in liquidation. The appearing parties, particularly the bidders or counsel representing them, were made aware of the rules of the game at the outset and reminded of them continually in course of the substantially long period spent in conducting the sale and dealing with the connected matters.
(3.) There is a background to the matter that needs to be narrated for it to be appreciated in the proper perspective. Over the years, a practice had developed in this court under which the business of several companies in liquidation had been permitted to be carried on under the official liquidator. The legitimacy of such practice does not appear to have been conclusively pronounced upon, but the practice started with the most pious of intentions and did seem to have the constitutional mandate in the prevailing social context. Oftentimes, the promoters of companies would allow the business of the companies to go to seed and throw the book at the hapless workers clamouring for payment for services rendered. After all, the word "limited" appearing in the names of all limited liability companies is a warning to all: that the liability of the shareholders of the company is limited to the value of their shareholding therein. The practice that started in this court several decades ago was, in most cases, to allow the workers or employees to continue the business of the company is in liquidation under the ultimate supervision of the official liquidator. It offered some solace to the workers in their being able to sustain themselves with the nominal income generated from the business. In course of time, the practice degenerated to the workers being put up as fronts for some other sponsors to continue the business without having to take over the liability that had been run up by the previous management. There have been several cases of the assets of the companies in liquidation being plundered by fly-by-night operators in course of the business being run under committees of management appointed by the court. In most cases it would be the banks as secured creditors, in whose favour the plant and machinery were hypothecated, that would suffer. The practice has been arrested in recent years and is only allowed with stricter controls and more as an exception than the rule.;