Lakhani Footcare (P) Ltd. v. Official Liquidator and Another

The High Court said: even if there is no fraud, the Company Court can order a re-auction when the earlier price looks too low. The Official Liquidator needs the court’s sanction to sell (Rules 272/273). Here, a later, much higher offer showed the earlier accepted price might be inadequate.

• Core idea: Court polices adequacy of price, not just procedure.
• Result: Fresh e-auction at not less than ₹30.69 crore.

1. Can the Company Court order a re-auction if the price received is insufficient?

• Rule 272 & Rule 273 (Company Court Rules): OL needs court’s sanction before auctioning assets.
• Even without fraud, the court must check if the price is adequate. If not, it can order a re-auction.

The court’s goal is fair value for the company under winding up.

Held: Order a fresh e-auction within 60 days for not less than ₹30.69 crore. Lakhani Footcare to bear re-auction costs.

• Company Judge erred in ignoring the higher bid (₹30.69 cr) by Om Gurudev Enterprises.
• Gap of about ₹2.79 cr over Seabright’s ₹28.15 cr is significant.

In winding up sales, the court must look beyond clean procedure to price adequacy. A clearly better offer justifies a re-auction, even without proof of fraud.

• Protects creditors & stakeholders by chasing fair value.
• Reinforces OL’s duty + court’s oversight on sales.
• Signals that higher post-auction offers can’t be ignored when they expose inadequacy.

• OL needs sanction under Rules 272/273 to sell.
• Adequacy of price is central; not just absence of fraud.
• Re-auction is proper if a later credible offer shows earlier price too low.

Mnemonic: “PRICE-FIRST COURT”

1. PRICE — check if value is fair.
2. FIRST — fairness beats speed.
3. COURT — may order re-auction to protect stakeholders.

Official Liquidator (OL)

Court-supervised officer who sells assets of a company in winding up.

Reserve Price

Minimum price fixed for auction; bids below may be rejected.

Re-Auction

A fresh sale process ordered to secure a better, fairer price.