Sunrise Textile Mills Ltd. Was ordered to be wound up on 3.7.1997. Consequently joint official liquidators were appointed to carry the winding up proceedings under Ordinance, 1984. Crescent Commercial Bank (decree-holder in COS No.4 of 2000) sought permission to participate in the bid, as decree-holder, which was accorded vide order dated 17.11.2003. The action of the assets of the company (in liquidation) was held on 29.5.2004, after publishing the proclamation of sale in daily "Business Recorder" Karachi in it's print dated 6.5.2004 and daily "Nawa-e-Waqat" Multan in its print dated 6.5.2004. Crescent Commercial Bank was declared as successful bidder, having offered the highest bid of Rs. 58 millions of the assets.
2. Applicants are the ex-Directors and shareholders of the company in liquidation, who have filed the instant application. Applicants seek setting aside the sale on the grounds that: (i) assets have been auctioned without fixing any reserve price, (ii) proclamation of sale does not meet the requirement of Order XXI, Rules 66 & 67, and (iv) the property had been sold without first attaching it under the law.
3. Respondents, on the other hand, have resisted the application, *filed reply and. Controverted the averments made in the application.
4. Learned counsel for the applicants while referring to the cases of "Mrs. Aziz Fatima and 3 others vs. Mrs. Rehana Chughtai and 3 others" (2000 CLC 863), "Brig. (Retd.) Mazharul Haq and another vs./M/s. Muslim Commercial Bank Limited, Islamabad and another" (PLD 1993 Lahore 706) and "Mohib Textile Mills Ltd vs. National Bank of Pakistan, Karachi and others" (2005 SCM R 1237), had contended that the assets have been sold without fixing the reserve price for throw away price.
Assets were sold for Rs.58 millions, which decree passed against the company for Rs.122 millions, lt was then contended that the assets were evaluated through Haseeb Associates, who assessed the value of the assets on 8.9.1994, to the tune of Rs.41,76,48,339/- for weaving unit and Rs36,68,31,750/- for spinning unit.
5. Learned counsel for the respondent on the other hand has submitted that the applicants have filed objection under Order XXI, Rule 90, without depositing 20% of. The amount which is mandatory requirement of law. The application merits dismissal on this score alone, lt was contended that the machinery of the project has become obsolete and evaluation report does not depict true picture.
Learned counsel added that various attempts were made but no serious buyer came forward to purchase the assets. Rule .237 of the Companies (Court) Rule, 1997 was referred to contend that reserve price in every sale is not necessary. Company Judge had vast powers under the above referred rule, to allow the sale of the property subject to such terms and conditions including fixation of the reserve price, if any; as the Court may approve. Learned counsel has then referred to Section 333 (f) of the Companies Ordinance, 1984 wherein Official Liquidator is empowered to sell movable and immovable property of the company by public auction or private contract with the power to transfer the whole thereof to any person or company or to sell the same in parcels.
Learned counsel has referred to the case of "Specialty Traders vs. Ferdous Textile Mills Limited" (1987 CLC 2109) to contend that provisions of Order XXI, Rules 64 to 73 are not applicable to the sale of assets of the company in the liquidation proceedings.
6. Heard learned counsel for the parties and perused the record.
7. The assets of the company (in liquidation) are being sold in the liquidation proceedings. The provisions of Companies Ordinance, (XLVII of 1984) govern such sales. Company law being a special Statute and provisions thereunder will supersede the general law. The reference in this respect can be made to the case of "Syed Matloob vs. Brook Bond Pakistan Limited Lahore" (1992 SCM R 227) and "Golden Ora phies (Pvt.) Ltd. And 12 others vs. Director of Vigilance, Central Exercise, Customs and Sales Tax and others" (1993 SCM R 1635). The relevant provisions of CPC pertaining to the Court's sales contained in Rules 64 to 73 and 89 to 92 of Order XXI, CPC have no application to the ' sales conducted under the provisions of Companies Ordinance, 1984. Such sales are governed under the terms and conditions as settled and approved by the Company Court. Rule 237 of Companies (Court) Rules, 1997 reads as under:- "Procedure at sale---Every sale shall be held by the official liquidator, or, if the Judge so directs, by an agent or an auctioneer approved by the Court and subject to such terms and condition including fixation of a reserve price, if any, as may be approved by the Court.
(2) XII sales shall be made by public auction or by inviting sealed tenders or in such manner as the judge may direct."
8. The auction conducted in the instant case was on the terms and conditions as approved by the Court, therefore, the sale is not liable to be set aside, merely on the pretext that the provisions of relevant rules of Order XXI governing the sale through court auction, were not adhered to.
Provisions of Order XXI, Rules, 64 to 73 and 89 to 92, CPC have no application in the instant case.
The case of Specialty Traders {supra) can be referred in this context. Official Liquidator with the sanction of the Court has the power, by virtue of Section 333 (f) to sell movable and ' immovable property either through public auction or through a private contract. While conducting the sate through public auction, the terms and conditions of the sale are settled not in terms of Order XXI, Rule 66 CPC but under Rule 237 of the Companies (Court) Rules, 1997.
9. There is another aspect of the impugned sale. The decree-holder with the leave of the Court was declared successful bidder, ln. The sale where the decree-holder participates as a bidder, it is the duty of the Court to ensure that highest bid will be obtained and decree holder's participation will not work disadvantageous to the judgment debtor. The rights of the judgment-debtors or of the company (in liquidation) can be protected in such circumstances by fixing a reserve price. The valuation of the assets, subject- matter of the sate, was appraised as far back as in the year, 1994.
Such appraisal does not depict current position of these assets. Fresh appraisal/evaluation was necessary, specially in the circumstances when decree-holder opted to participate in the bid. I am not persuaded to set aside the sate on the basis of the objection of the applicant that provisions of CPC as contained in Rules 64 to 73 of .Order XXI were not adhered to in the conduct of impugned sate. The impugned sale, however, at the same time cannot be confirmed/approved in terms of Rule 236 {ibid). Reserved price was a necessity in the circumstances to persuade the creditor to buy the property at a market compete able price. The participation of the decree-holder in the auction had worked disadvantageous to the rights of judgment-debtors, lt is thus in the interest of justice that fresh sale be conducted with a reserve price, on the basis of fresh appraisal/evaluation of the assets. Petitioner will get fresh appraisal of the assets subject-matter of sale through auction Dr. Sarshar Syed, Advocate, Al-Khair Chambers, Its Floor, 1-Turner Road, Lahore is appointed to make inventory and appraise he value of the assets and-thereafter a reserve price shall be fixed for the auction of these assets. His fee will be Rs.50,000/-. The applicant as well as the petitioner are directed to submit proposed terms of auction within a period of two weeks from today.
10. The other objections of the applicant raised through this application that Rules 66 & 67 have not been complied with and property is being sold without proper attachment, have no force and are as such rejected.
11. To come up for further proceedings on 22.5.2006.