M/S. NGEF LTD. versus M/S. CHANDRA DEVELOPERS PVT. LTD. AND ANR.

Citation: [2005] SUPP. 3 S.C.R. 747 · Decided: 29-09-2005 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

MIS. NGEF LTD. 
A 
v. 
MIS. CHANDRA DEVELOPERS PVT. LTD. AND ANR. 
SEPTEMBER 29, 2005 
(S.B. SINHA AND C.K. THAKKER, JJ.] 
B 
Sick Industrial Companies (Special Provisions) Act, 1985 (SICA)-
Section 20(4)-Companies Act, 1956-Sections 443, 446, 447, 529-A, 536-
Recommendation by Board of industrial and Financial Reconstruction (BIFR) C 
to High Court to wind up a sick industrial company. 
Observation of BIFR that direction of sale of its assets should also be 
sought from High Court-legality of-Held: BJFR and High Court do not 
· have concurrent jurisdiction to sell the assets-BIFR alone controlled the 
assets and had power to dispose them till winding up order was passed by D 
High Court, and for this purpose leave of latter was not required-BIFR 
being a statutory authority, in absence of any empowering statutory provision, 
could not delegate its power to any other authority-The power to dispose 
of the assets had to be exercised subject to provisions of SICA which was 
special statute governing the field whose provisions prevail over those of 
Companies Act.-This was despite the fact that procedures laid down in E 
Companies Act were applicable therefor, but those were to be read with 
. Section 20(4) of SICA. 
Sale of assets-Sanction for-Held: High Court/BI FR sanctioning the 
sale has to ensure that disposition of assets is in interest of creditors of the F 
company and satisfj; itself that price offered is reasonable having regard to 
market value of property-It is especially so when company is not an applicant 
before them, had resisted claim to dispose of its assets, order admitting 
winding up petition was passed after much delay, and no provisional 
liquidator was appointed 
Sale of assets-Jurisdiction-Held: Company Judge of High Court, in 
exercise of its inherent jurisdiction to pass interim order, cannot direct 
execution of sale deed-However, disposition of assets during interregnum 
may not be irretrievably void but the courts are required to exercise power 
with circumspection and caution-An equitable order passed by a Company 
G 
747 
II 
748 
SUPREME COURT REPORTS (2005) SUPP. 3 S.C.R. 
A Judge in exercise of its inherent jurisdiction or otherwise must coriform to 
requirements of relevant statutes-Companies (Court) Rules, I 959, Rules 7 
and 9. 
Procedure for winding up-Held: High Court would initiate proceeding 
for winding up under Section 433 of the Companies Act without any formal 
B application and same would be deemed to have commenced from date on 
which it applied its mind relying on the recommendation. 
Joint venture company (JVC) formed by State Government and another 
company-Becoming sick-State Government's advertisement for selling of 
C its share in the JVC-one of the bids accepted by resolution of Board of 
Directors of JVC-State Government deciding to close down the JVC subject 
to approval of BIFR-Winding up of JVC recommended by BlFR to High 
Court and proceedings for same pending-Sale of assets of JVC-Held: State 
Government decision did not suggest that ii had granted its approval for 
sale, and in absence of that there was no concluded contract for sale of 
D assets-ft was especially so as the bid was made in terms of advertisement 
wherein State reserved for itself right to accept/reject any offer-Company 
will not be acting as an appellate authority over the High Court if its 
approval was sought. 
Maxim- 'Delegatus non potest delegare '-ft means a delegate cannot 
E sub-delegate its power unless expressly authorized 
NGEF Ltd. was a joint venture company of a State Government and 
GMBH. It became sick, whereupon a reference was made to the Board for 
Industrial and Financial Reconstruction (BIFR) in terms of the Sick Industrial 
F Companies (Special Provisions) Act, 1985 (SICA). All its assets had been 
placed as collateral security to various financial institutions amongst which 
SBM was the lead Bank. From time to time NGEF Ltd, with the permission of 
BIFR and its secured creditors, had been selling it surplus lands for the 
purpose of paying wages to its workers and refund of loans to financial 
institutions. However, State Government decided to disinvest its shares in 
G NGEF Ltd in furtherance whereof global tenders were invited in terms of an 
advertisement CD Pvt Ltd, respondent, bid for purchase a part ofland of NGEF 
Ltd, and same was allegedly accepted by a resolution of Board of Directors. 
NGEF Ltd submitted an application to BIFR praying for direction to financ

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