V. K. Sharma Vs JVG Finance Limited (Delhi High Court)
Conclusion: Appellant had failed to establish locus standi to challenge orders relating to asset realisation in liquidation and the material on record clearly demonstrated that liabilities of the company far exceeded available funds, making sale of assets necessary.
Held: The company in liquidation (JVG Group) was subjected to regulatory action by the RBI in October 1997, restraining it from accepting deposits or alienating assets, followed by a compulsory winding-up petition in 1998 and appointment of a Provisional Official Liquidator (OL) on findings of large-scale financial impropriety. The subject property at Andheri, Mumbai was directed to be handed over to the OL in 2003; possession ultimately came to the OL (Delhi) in 2018. Upon valuation in 2023, the Company Judge permitted sale of the property by public auction at a reserve price of ₹88.90 crores to meet liquidation expenses and mounting liabilities. The e-auction conducted on 09.01.2024 resulted in a sole bid at the reserve price by Beekalene Fabrics Pvt. Ltd. (BFPL), which deposited 25% of the consideration. Two appeals followed—one by an ex-director/promoter challenging the permission to sell, and another by a subsequent bidder offering a higher price. The latter appeal was restored by the Supreme Court, which directed the Company Court to examine the adequacy of BFPL’s bid, subject to deposit by the subsequent bidder. The ex-director/appellant contended that the appeal was maintainable as he was a contributory and that sale of a valuable immovable asset was premature in the absence of crystallised liabilities. It was argued that available funds were sufficient to meet immediate expenses, that less intrusive alternatives such as sale of other assets were not explored, and that the Company Judge ignored material placed on record. Reliance was placed on precedent to submit that assets could not be sold to meet speculative or contingent liabilities. The OL and BFPL objected to maintainability, contending that the appellant lacked locus standi as a former director. On merits, they argued that liquidation was mandated by regulatory action, no stay operated against the process, and the company faced overwhelming statutory, depositor and creditor liabilities running into several hundred crores. Asset realisation, including sale of the subject property, was asserted to be imperative to protect public deposits and satisfy statutory dues. The Court held that the appellant had failed to establish locus standi to challenge orders relating to asset realisation in liquidation, particularly in light of earlier binding orders rejecting similar challenges. On merits, it was held that the material on record clearly demonstrated that liabilities of the company far exceeded available funds, making sale of assets necessary. The Company Judge had exercised jurisdiction properly in permitting auction of the subject property, and the appellant could not dictate the sequence or choice of assets to be sold. Alleged failure to consider a chart during arguments did not vitiate the decision, as the financial exigencies were duly examined. Revival-related contentions were held to be extraneous to liquidation proceedings.
