Salil K. Roy Chowdhury, J.
1. This matter involves a question of considerable public importance relating to the principle and procedure for the sale of the assets of a company in liquidation : Whether the only object of such sale is to fetch the maximum price or whether the court, at its discretion, having regard to the prevailing socio-economic questions, which are involved in a welfare State like India, should apply the law in a pragmatic manner having regard to the realities and interest of the public.
2. In this case, admittedly, due to mismanagement and misappropriation by the ex-management, the company was ultimately wound up by an order dated 20th of November, 1978, and the official liquidator took possession of the assets, books, papers and documents of the company, on the application of a partnership firm, M/s. Tea Land, of which one of the ex-directors of the company is a partner, for winding-up on a claim of Rs. 68,000, being Company Petition No. 389 of 1976. After the said winding-up petition was admitted, the company made an application for a scheme and obtained stay of the winding-up proceedings but, ultimately, the said scheme application was dismissed by an order dated 13th of June, 1978. Thereafter, the workers and employees of the company assisted the official liquidator to enable him to take possession of all the assets, books, papers and documents of the company but none of the ex-directors or the management assisted the official liquidator in doing so. It appears that a group of workers in order to revive the company formed a co-operative society and got it registered on the 17th of July, 1979, in the name of Elvoc Employees Co-operative Society Ltd., hereinafter referred to as ' the applicant-society ', and on the very same day they made an application before this court being Company Application No. 153 of 1979, for a lease or licence of the factory, godown as well as administrative and registered office of the company for a period of five years and also for other reliefs. The said application for grant of lease or licence of the applicant-society was resisted by the said petitioning-creditor, M/s. Tea Land, of which one of the ex-directors was a partner, and also Gurudev Industries Pvt. Ltd., a sister concern of the company (now in liquidation), Elvoc Pvt. Ltd., having common directors and ultimately, by an order dated 17th of September, 1979, made by me, a licence was granted in favour of the said applicant-society for a period of one year at the first instance with a clause for renewal of the same for a further one year until further orders of this court and the official liquidator was directed to execute a licence in a similar form as that of the licence which was granted in favour of a co-operative society in respect of running the Ganges Printing Ink Factory Ltd. (in liquidation) with necessary modifications. By an order dated 23rd of November, 1979, made by me, the said co-operative society was directed to pay a sum of Rs. 10,000 per annum or 50% of the profit, whichever was higher, to be paid in two instalments after the completion of the half yearly accounts, but, initially they had to advance Rs. 10,000. It is an admitted position that the said lease and/or licence was granted by the court solely for the purpose of the beneficial winding-up and to keep the company in a running condition so that it can be sold as such for the benefit of the creditors and contributories of the said Elvoc Pvt. Ltd. (in liquidation). It appears that the said applicant-society has very successfully, with proper expertise and assistance of the Chloride India Ltd. and financial help from the Govt. of West Bengal and other financial institutions, made tremendous progress and revived the company and secured orders from the Central Govt. and State Govt. concerns, including railways, and also export contracts. They mainly manufacture battery chargers, battery eliminators and industrial voltage stabilisers and other electrical equipments which are alleged to be of very high quality for which orders are placed by the said Govt. concerns and departments and, therefore, the applicant-co-operative society made this application either to renew the lease or licence for a further period of five years, and alternatively to sell the entire undertaking of the company including its assets according to the valuation made by the valuer appointed by this court by private treaty and for other reliefs.
3. Therefore, for practical purposes this application is for leave to purchase the entire assets, land, factory of the company (in liquidation) by private treaty at a reasonable price by the licensee, Elvoc Employees Co-operative Society Ltd. The licensee was granted licence solely on the ground of selling the properties and assets of the company as a going concern and for beneficial winding-up. An appeal was preferred by a group of ex-employees who appeared to have been set up by the ex-management which was dismissed and it also appears that the same group through one Sri Hridaya Das, an ex-employee of the Elvoc Pvt. Ltd., representing an alleged union, took proceedings under the writ jurisdiction challenging the formation of the applicant-co-operative society and also failed there. Mr. Som Nath Chatterjee, appearing with Mr. S.C. Ukil, for the applicant, submitted that the licensee has made enormous progress and with the help of Chloride India Ltd. has secured various orders, including orders from various departments of the Govt. of India, railways and State Govts. and it has modernised and developed the factory to enable it to produce export quality goods and quality goods and with the assistance of Chloride India Ltd. and the State Govt. has immense potentiality so as to keep the industry going and increase the production for the benefit of the public and as such, having regard to the facts of this case, the court should under the special circumstances and exceptional situation grant leave to the official liquidator to sell the assets to the applicant-co-operative society, by private treaty. He also referred to Rules 272 and 273 of the Companies (Court) Rules, 1959, and the Supreme Court decision in Navalkha & Sons v. Ramanya Das, : 3SCR1 , and submitted that in the facts and circumstances of a particular case the court is not only to look to the public interest and also the interest of the workers to avoid unemployment and the performance by the licensee who has very satisfactorily worked and made enormous progress and increased the profitability of the company and has secured large orders both from the Central Government concerns, statutory corporations and also from foreign buyers.
4. Mr. Chatterjee placed the affidavit in support of his submissions and also the affidavit-in-opposition by the interested parties who are cone else than the ex-management, set up by the ex-worker, Hridaya Das, alleged to be representing a section of the ex-workers and giving a list of them Out of which several are dead and all of them are employed by the ex-management in their concerns. Mr. Chatterjee submitted that it is entirely the discretion of the court which is given for the purpose of exercising the same judicially and in the interest of the trade, commerce and industry and also for public interest. In the circumstances of this case, whether the same should be sold by public auction or by private treaty is a question to be decided by the court. In this case, it appears from the facts that the unit has been revived, giving immediate employment to 75 persons and orders secured from various reputable concerns and Govt. concerns within a period of one year and it has entered the foreign market. The applicant has already employed public money, capital and guarantee by I.R.C.I., S.S.I., nationalised banks and the United Industrial Bank Ltd. has granted a loan and the Chloride India Ltd. is extending all assistance to the company to expand and market its products. Therefore, the potentiality of the concern has greatly increased thereby giving rise to prospects of further employment and the spectacular progress in the volume of business from 2,000 to 1,00,000 within a short period of the licence granted to the applicant makes it quite clear that this is a special case where the court should exercise its discretion in favour of the private sale, whereas the persons who are objecting are none else but the alleged ex-employees, who are already employed by the ex-management who has ruined the company and as a result of which the company was wound up. They have initially appealed from the order by which the licence was granted to the applicant. Then, they have made an application under Article 226 of the Constitution of India challenging the formation of the applicant-co-operative society. They also objected to the I.R.C.I, not to grant any loan and their objection is quite clearly to prevent the industry to revive and run smoothly and progress, which appears to be phenomenal within the very short period, if possible. They allege to purchase the concern and must be supported by persons who were in the management of the company before the winding-up, by producing money from an undisclosed source. Therefore, interested persons are behind them, who are none else than the erstwhile management. The court should look into the creditors' interest and the public interest as the paramount concern. Sri Mahendra Mohan Shah, also one of the ex-directors, has set up the tenancy right of the company of which he is alleged to be the landlord and, therefore, he is interested to get the company and the benefit of the tenancy right. Mr. Chatterjee submitted that the past performance of the company is prejudicial and detrimental to the interests of the public and the creditors and, therefore, he submitted, relying on the principle of the said decision, that if the court finds in a particular case having regard to the special circumstances, a reasonable price can be obtained, it can deviate from the ordinary course of sale by public auction as laid down in the Rules and sell the same by private treaty. Therefore, the application should be granted and the court would fix the reasonable price according to the valuation made by the valuer as it thinks fit and sell the properties and assets of the company to the licensee, the applicant-society, which has made enormous progress and revived the company and has also a bright prospect and immense potentiality both in the home market and also in the foreign market for its products.
5. Mr. B. N. Sen, appearing with Mr. Dipak Basu and Mr. Ranjan Majumdar, for the said Sri Hridaya Das, pointed out that the said cooperative society has only a nominal capital of Rs. 800 but in violation of the West Bengal Co-operative - Societies Rules, being Rule 68, they have borrowed amounts, which is ultra vires. He referred to the balance-sheet and submitted that if a multi-national concern like Chloride India Ltd. is coming farward to help the applicant, there must be some motive behind it and, therefore, the court should not allow the present application. Mr. Sen referred to Rule 273 of the Companies (Court) Rules, 1959, and also to the said decision in Navalkha's case, : 3SCR1 , and submitted that the properties and assets of the company must be sold by public auction and not by private treaty such as the applicant has asked for. Therefore, the application should be dismissed.
6. Mr. S. B. Mukherjee, appearing with Mr. Sibaji Sen for Ram Chandra Manmohan, submitted that the licence was granted solely for the purpose of selling the company's assets as a going concern and for a beneficial winding-up and as such the sale must be by public action and the Rules are mandatory and the Supreme Court decision has also laid down' the principle by which the court will conduct the sale of assets of a company, and, therefore, in the interests of the creditors and public interest, the properties and assets of the company should be sold by public auction. Mr. P. K. Mallick, appearing with Mr. A. C, Law, for Gurudeb Industries, adopted the arguments of Mr. Sen and Mr; Mukherjee and it may be pointed out that there is none else, who has objected at every stage to the licence granted to the applicant, and also made applications, which were rejected for the purpose of taking possession of the properties and assets of the company claiming them to be their properties. Therefore, all the objectors are interested parties and the only question the court has to decide in this case is whether the discretion should be exercised in favour of the applicant having regard to the special facts and circumstances of this case where the licensee, the applicant, has revived a sick company with the resources of finance and expertise from the government financial institutions, banks and also government concerns and a multinational concern like Chloride India Limited, and as to what is the public interest which is paramount including the prospect of employment and increase in production of various types of electrical equipments and products, which the company is now producing and which also appears to have immense prospects and profitability.
7. Pending the hearing of this application, I gave leave to the applicant-society to file supplementary affidavit and also directed the official liquidator to file a report as to the performance of the applicant-society after the licence was granted and in reply to that supplementary affidavit, counter-affidavits were filed by the parties opposing the application, and, from the materials placed before me after carefully considering the same as disclosed in the said pleadings and annexures I am satisfied that this is a fit case where the court should exercise its discretion for public interest, so as to allow the application of the applicant-society, who has revived the industry and brought life to it, having immense prospects and profitability and also having regard to the larger interest of the nation and the public interest, I accept the contentions of Mr. Som Nath Chatterjee that the sale should be made by private treaty to the applicant-society, which is responsible for reviving the industry and making it stand on its own feet and progress immensely with great potentiality and profitability, giving employment to existing employees and giving scope for further employment to many persons as and when the said applicant-society would progress with its business after its purchase at the reasonable price. In my view, the Supreme Court decision has clearly laid down that the court is to see that a reasonable price is obtained and the rule is not so rigid that in every case it must be sold by public auction and fetch the highest price. The industry, commerce, commercial morality and public interest should also be taken into account before making any order and in this particular case I am satisfied that the ex-management with a view to frustrate the achievement of the applicant-society is opposing this application and the same is not bona fide but purely motivated and particularly the said Sri Hridaya Das, an ex-employee, has been set up by the ex-management alleging to represent some of the ex-workers and I am also satisfied that the statements made by him are not correct as all the ex-employees of the company whom he alleges to represent are not alive and those are engaged in the sister concerns of the ex-management. So the ex-management is interested by money power to get back the said assets of the company and destroy the achievement and progress the applicant-co-operative society has made with great labour with assistance of I.R.C.I. and the Govt. of West Bengal, Chloride India Ltd. and other government concerns both Central and State.
8. The court cannot by its order destroy an industry which has been built up by the industry, labour, application and mobilisation of resources by the applicant-society after the lease was granted. As a special case having regard to the peculiar circumstances in this particular matter the court should exercise its discretion in favour of granting the application in a modified form to sell the assets of the company to the applicant-society by private treaty at the best reasonable price as the court thinks fit, but this cannot be treated as a precedent, as the order is to be made on the peculiar circumstances of this particular case when it has got certain exceptional features. The parties objecting seem to be purely motivated to destroy the industry, if possible.
9. In these circumstances, in my view, the appliant-society should be granted leave to make an offer to the official liquidator for purchase of the entire assets which has been run by them under a licence granted by this court by the order referred to above and if the price is reasonable, the same to be sold by private treaty to the applicant-society, as to be determined by this court. The applicant-society is directed to make their offer to the official liquidator within a week from date in a sealed cover and the official liquidator to place the same before the court for consideration and the matter to be fixed up administratively in chamber on Friday week lor final order.
10. The official liquidator and the applicant-society to act on a signed copy of the minute.