*THE HON'BLE SRI JUSTICE P.S.NARAYANA +W.P.No.8223 of 2007 % 23-1-2008 # Ghanta Infrastructures Ltd., A company incorporated under the Provisions of Companies Act, having its Registered Office at No.8-2-293/82/A, Plot No.176, Road No.72, Prashashannagar, Jubilee Hills, Hyderabad-33, being represented by its Director M.Raghuveer .. Petitioner And $ Asset Reconstruction Company (India) Ltd.,(ARCIL), A company incorporated under the Companies Act, 1956 Having its registered office at Express Towers, 17th Floor, Nariman Point, Mumbai-400021, represented by its Chairman and Managing Director, Mr.S.Khasnobis and 5 others .. Respondents <GIST: >HEAD NOTE : ! Counsel for petitioner : Sri Uday Lalit ^ Counsel for 1st respondent : Sri S.R. Ashok Counsel for 2nd respondent : Sri Ranjeet Kumar Counsel for 3rd respondent : Sri S.Ravi Counsel for 5th respondent : Sri C.V. Mohan Reddy, Advocate General Counsel for 6th respondent : Sri E.Manohar ?CASES REFERRED: 1 (2005(4) SCC 649 2 (1989) 2 SCC 691 3 (1969) 1 SCC 585 4 2004(4) SCC 311 5 AIR 2005 S.C. 3202 6 2003(10) SCC 733=AIR 2003 S.C. 4325 7 (1994) 3 SCC 552 8 (1994) 4 SCC 104 9 (1996) 6 S.C.C. 22 10 AIR 1979 S.C. 1628 11 1986(1) SCC 264 12 AIR 1990 S.C. 958 13 AIR 1970 S.C. 1041 = 1970(1) C.L.J. 151 14 AIR 1970 S.C. 1973 = 1970(40) Comp. Cases 927 15 AIR 1986 S.C. 1571 16 AIR 1970 S.C. 82 17 AIR 1988 S.C. 1274 18 1999(7) SCC 435 19 (AIR 1979 S.C.1628) 20 2001(2) SCC 451 21 2007(6) SCC 81 22 2007(8) SCC 1 23 1995(6) SCC 289=AIR 1995 S.C. 1770 24 1996(3) SCC 709=AIR 1996 S.C. 1627 25 A.I.R. 1989 S.C. 157 26 (AIR 1989 S.C. 1642) 27 AIR 2007 S.C. 3014. 28 2006(5) SCC 702 = AIR 2006 S.C. 2652 29 AIR 2007 S.C. 3079 30 (2001(8) SCC 491) 31 1997(1) SCC 579=AIR 1997 S.C. 506 32 (1993(1) SCC 445 33 (2005) 6 SCC 138 34 2006(10) SCC 236 35 2007(1) SCC 477 THE HON'BLE SRI JUSTICE P.S.NARAYANA W.P.No.8223 of 2007 Date : 23-1-2008 Between : Ghanta Infrastructures Ltd., A company incorporated under the Provisions of Companies Act, having its Registered Office at No.8-2-293/82/A, Plot No.176, Road No.72, Prashashannagar, Jubilee Hills, Hyderabad-33, being represented by its Director M.Raghuveer .. Petitioner And Asset Reconstruction Company (India) Ltd.,(ARCIL), A company incorporated under the Companies Act, 1956 Having its registered office at Express Towers, 17th Floor, Nariman Point, Mumbai-400021, represented by its Chairman and Managing Director, Mr.S.Khasnobis and 5 others .. Respondents THE HON'BLE SRI JUSTICE P.S.NARAYANA W.No.8223 of 2007 ORDER: 1. This Court issued rule nisi on 19-4-2007. 2. Counter affidavits, additional affidavits and reply affidavits were filed and written arguments also were submitted in addition to the submissions made by the respective Counsel in open Court. Certain subsequent events also were brought to the notice of the Court and apart from the material papers initially placed, additional material papers as well had been placed before this Court. 3. M/s.Ghanta Infrastructure Limited, a Company incorporated under the provisions of the Companies Act, represented by its Director Sri M.Raghuveer, filed the present Writ Petition for a Writ of Mandamus declaring the proceedings ARG-II/PJ/FY07/04568 dated 12-12-2006 and the consequential proceedings ARG 1/PJ/FY07/04730 dated 22-12-2006 of the 1st respondent as illegal, arbitrary and violative of Article 14 of the Constitution of India and consequently to direct the 1st respondent to accept the bid of the petitioner in respect of the business and assets of the 3rd respondent and to pass such other suitable orders. 4. The 1st respondent is Asset Reconstruction Company (India) Ltd., (in short hereinafter referred to as “ACRIL”). The 2nd respondent is Mr.S.Khasnobis and 3rd respondent is Spectrum Power Generation Limited. The 4th respondent is Dr.A.V. Mohan Rao, 5th respondent is Pinnacle Overseas Assets Ltd., represented by its Managing Director. 6th respondent is Lehman Brothers Commercial Corporation Asia Limited, Hong Kong. 5. The stand taken by the respondents 1 and 2 virtually is the same. The 3rd respondent also had taken similar stand just akin to the stand taken by respondents 1 and 2. The 4th respondent is not contesting the matter. Respondents 5 and 6, though represented by different Counsel, in substance, the stand taken by them appears to be the same. No doubt it is contended on behalf of the 6th respondent that the 6th respondent in fact is an unnecessary party. 6. Sri Uday Lalit, the learned senior Counsel representing the writ petitioner while making elaborate submissions had taken this Court through the affidavits, counter affidavits, reply affidavit and also the relevant material papers placed before this Court. The learned Counsel also had taken this Court through different provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter in short referred to as “Act” for the purpose of convenience). While making elaborate submissions, the learned senior Counsel would maintain that the stand taken by the respondents that the Writ Petition is not maintainable on the ground that the 1st respondent is neither an authority nor a State within the meaning of Article 12 of the Constitution of India, cannot be a sustainable ground since if the functions, obligations and the powers of the 1st respondent, if carefully examined, these being powers flowing out of the statutory provisions conferred by different provisions of the statute, this lis would fall within the realm of Public Law and hence the writ petitioner is entitled to invoke Article 226 of the Constitution of India. The learned senior Counsel also would maintain that the 1st respondent is bound to follow the provisions of the Act and also the guidelines of the Reserve Bank of India. The learned senior Counsel while further elaborating his submissions had specifically pointed out to Sections 9 and 13 of the Act and also placed strong reliance on several decisions to substantiate his stand that the Writ Petition is maintainable. The learned Counsel also pointed out to the relevant definitions, viz., Section 2(a), 2(b), 2(c) and 2(d) and also Sections 3 and 5 of the Act. The learned Counsel also made elaborate submissions relating to source test, functional test and off-set test and would maintain that a Private Authority discharging Public functions, also is amenable to writ jurisdiction and the best test would be the ‘functional test’. Incidentally, the learned senior Counsel laid emphasis on the ‘off set test’ as well. These may be cases of the lenders and borrowers and contractual obligations, but there is departure from normal Law. The learned senior Counsel also explained the object of the reconstruction companies and the statutory mechanisms and also explained how this entity should not have been brought into existence at all, but for the statute. The Counsel also laid stress on the aspect that it may not be the character of the body which may be relevant but the character of the duties, functions and obligations of a particular entity which may have to be carefully examined. The learned senior Counsel laid all emphasis on the public interest and the depositors interest involved in such matters. The learned Counsel also explained how the decision of the Five Judge Bench approving a particular view to be preferred in preference to the Judgments of the Benches of lesser strength. The learned senior Counsel also distinguished the decisions on which reliance was placed by the Counsel representing the respondents. While further proceeding with his submissions, the learned Counsel also would maintain that Reserve Bank of India had not issued any guidelines for sale of the business of the borrowers under Section 9(b) of the Act and under Clause 7(2) of the Securitisation Companies and Reconstruction of Companies (Reserve Bank) Guidelines and Directions 2003, only the Reserve Bank of India issues such guidelines, the measures under Section 9(b) of the Act not to be taken and hence in the absence of the same, any proceeding or any action taken by the 1st respondent to be held to be illegal and even in the light of the same, the learned Counsel would maintain that the Writ Petition is perfectly maintainable. The learned senior Counsel also explained the unreported decision of the Mumbai High Court in W.P.No.417/2005. While touching the other merits of the matter, the learned senior Counsel repeatedly laid emphasis that on a comparative basis, the offer made by the writ petitioner is a better offer at any stretch of imagination and pointed out several arithmetic calculations and made an attempt to demonstrate before this Court that on a comparison of the offers of the writ petitioner and the respondents 5 and 6 as well, which offer can be said to be a better offer. In all fairness, the learned senior Counsel would maintain that in the realm of contractual field, when a writ Court is called upon to decide the relative merits and demerits relating to the offers, the power of judicial review is no doubt very limited, but however the learned senior Counsel would stress upon that what is being called in question is the decision making process and no general proposition as such can be laid down that in relation to contractual field what ever may be the illegalities pointed out, a Writ Petition is not maintainable. The learned senior Counsel pointed out that accepting the 5th respondent as a successful bidder despite the fact that the 5th respondent was not a bidder at all initially is an incurable illegality. The learned senior Counsel also pointed out to the relevant portions of the proceedings and how the 1st respondent in a way was anxious to help the respondents 5 and 6. The learned senior Counsel also laid emphasis on the aspect that the bid of the respondents 5 and 6 is a conditional one and the same is contrary to the terms and conditions. There is no final bid offer or bid submitted either by the 5th respondent or the 6th respondent. The Wednesbury’s principle had been elaborated and several decisions governing the field also had been cited. The learned senior Counsel in a meticulous way had taken this Court through the relevant proceedings, the relevant dates and also how with a view to help the 5th respondent, there had been delay in communication. The Invitation for Expression of Interest (hereinafter in short referred to as “I.E.I.”) and the treatment given to the petitioner in this regard, is unjust and unfair. The contents of the initial offer and the revised offer and the news item in Economic Times also had been pointed out. The learned senior Counsel also made an attempt to demonstrate how the 1st respondent acted beyond the terms of the invitation and would maintain that when the basic tenet of the initial offer is not conditional, the approval of a conditional offer in relation to the additional capacity, especially when such offer is contingent upon getting approval for expansion of the project, preferring such offer ignoring the offer of the writ petitioner cannot be sustained. The learned senior Counsel also pointed out how there are no approvals to the agreement and no acceptable material is placed to show how the 3rd respondent-Spectrum Power Generation Ltd., (in short hereinafter referred to as “SPGL”) in performing these obligations and unfortunately these form part and parcel of the definitive agreement. The learned senior Counsel also explained the time which may be taken in the event the offer of the petitioner being accepted or the offer of the 5th respondent being accepted. For reasons best known, the five years period had been given a go-bye in the case of the 5th respondent. The decision to be within the prescribed norms and parameters and when the decision making authority had transgressed the said limits, the decision making process is vitiated and the same to be declared as unfair and irrational. The learned senior Counsel also explained that in the initial bidding process, there were four parties and the 6th respondent also was one of them and no one knows at what stage the 5th respondent had intervened and why such favouritism had been shown in favour of the 5th respondent and this action does not stand to any reason or convincing rationale. The learned senior Counsel also specifically pointed out to the words “any other law for the time being in force…” in Section 9 of the Act. While commenting on the aspect of delay, the learned senior Counsel pointed out that if the dates are carefully scrutinized and the events are followed, there is no delay in approaching this Court and even otherwise, the delay is not so inordinate so as to throw out the Writ Petition on the ground of laches. While further commenting on the fait accompli test the learned senior Counsel explained that the subsequent actions after filing of the Writ Petition cannot be taken as a protective umbrella to ward off the attack of the writ petitioner when the grounds raised are sustainable grounds. The learned senior Counsel also explained the relationship between Kishan Rao and Raghuveer and also had taken this Court through the relevant portion of the order of the Company Court and would maintain that the dispute before the Company Court would stand totally on a different footing and the question to be decided by the writ Court being totally different, the adverse observations, if any of the learned Company Judge may not have any impact while deciding the present Writ Petition. Even otherwise, the learned senior Counsel would contend there are no observations made by the Company Judge in relation to the questions raised in the present Writ Petition. The learned senior Counsel also pointed out that the offer is not segregable and further pointed out the default clauses and also laid emphasis on the aspect that as can be seen from the proceedings, it is clear that the bidder is not making any payment to ARCIL and the 5th respondent to give corporate guarantee and also explained relating to the primary liability and the secondary liability as guarantor and the role of the 5th respondent and the 3rd respondent as well in this regard and would maintain that this would definitely go to show that the offer of the writ petitioner is a better offer. While concluding, the learned senior Counsel commented that the writ petitioner approached the Court at the earliest point of time and prayed for an interim order and while issuing rule nisi, notice had been ordered and the Writ Petition has been pending and this act of the Court i.e., pendency of the Writ Petition, not to cause prejudice to the petitioner and if otherwise the Court is satisfied that the writ petitioner is entitled for the reliefs prayed for, the Writ Petition to be allowed. 7. Sri S.R. Ashok, the learned senior Counsel representing the 1st respondent had explained paid up capital, accumulated losses and the secured share holders interest not to be paid and how there is total raising of equity loans and the secured creditors. The learned senior Counsel would maintain that this is a commercial transaction and the 1st respondent would be the best judge to decide in between the bidding bidders as to which offer is proper and it is not for the parties to dictate the terms. The learned senior Counsel also demonstrated how auctions can be made without interest and how auctions were made with interest and how the amounts under A, B, C not to go into D at all. The relevant Clauses also had been explained. The learned senior Counsel also pointed out to the relevant paras of the counter affidavit and also the relevant paras of the affidavit filed in support of the Writ Petition. While comparing the conditions and also the offers, the learned senior Counsel would contend that there is sufficient assurance from the 5th respondent when compared to the writ petitioner. The learned Counsel also pointed out to the relevant paras of the order made by the learned Company Judge and had pointed out the observation that even before the Company Judge, no better offer had been made by the writ petitioner. This is simply a matter relating to the creditor and debtor relationship and the remedy if any, can be only under the Private Law and this dispute would not fall under the Public Law domain. The learned Counsel also explained several factual issues and further placed reliance on certain decisions. 8. Sri Ranjeet Kumar, the Senior learned Counsel representing the 2nd respondent virtually adopting the submissions of the 1st respondent as well, further made elaborate submissions. The learned senior Counsel explained that the relief prayed for in the present Writ Petition is a discretionary relief and the credentials of the 3rd respondent and the credentials of the writ petitioner had been considered and the said credentials also had been taken into consideration. The learned senior Counsel also had explained the relationship between Kishan Rao and Raghuveer and would maintain that this would be a old wine in new bottle and ARCIL may not be getting any money. Further the proceedings also had been pointed out. The learned senior Counsel pointed out that the petitioners Company is concerned with a special purpose vehicle and Kishan Rao and sons being erstwhile promoters, they cannot be made responsible again. The learned senior Counsel also pointed out that the petitioner did not make a better offer even before the Company. Further, the petitioner did not approach the Court immediately. There is acquiescing of a n d fait accompli also would come into place. The learned senior Counsel also had given the relevant dates in relation to the Board Meeting, Extraordinary General Body Meeting, filing of the suit and the granting of the interim order and the vacation thereof and how the decision had been taken. While further elaborating his submissions, the learned senior Counsel pointed out that Raghuveer is the son of Kishan Rao and similar objections were raised in the Company Petition and the learned Company Judge in fact decided the matter under Section 91 of the Indian Companies Act 1956. In elaboration, the learned senior Counsel had taken this Court through the relevant portions of the order and would maintain that the Writ Petition in a way became infructuous since the Scheme had been approved by the learned Company Judge though the very same objections had been raised. The learned senior Counsel also compared the offers and explained how the offer made by the 5th respondent would be a better offer. The subsequent events which had taken place even thereafter had been explained in elaboration. The learned senior Counsel also pointed out the requirements – the Company to be a debt-free Company, zero equity Company and there must be complete control over the Company. The preference shares would carry interest of 5% which would be payable to the share holders. Further, restructuring of the capital would be a better bid. The learned senior Counsel demonstrated the final offer made by the petitioner and how no interest is being added and how the offer made by the 5th respondent stands on a better footing where interest is payable. The learned senior Counsel also explained that ARCIL had been registered under the Indian Companies Act 1956. Section 9 of the Act is an enabling provision and by virtue of Section 37 of the Act, the application of other Laws is not barred. Sections 9 and 37 of the Act are to be read together. The 1st respondent is neither a State nor an Authority since it is not even a Government Company within the meaning of Section 617 of the Indian Companies Act 1956. It is in relation to the enforcement of the contractual obligations and nothing beyond. This is concerned with the restructuring of the loans, capital or debts and absolutely no public function is involved. The learned senior Counsel also had drawn the attention of this Court to different provisions of the Act and also different provisions of the Indian Companies Act 1956 and further explained the remedies available under the Company Law Board. The learned senior Counsel while laying emphasis on the aspect of the maintainability of the Writ Petition on the ground that the same is not maintainable, placed strong reliance on certain decisions and would conclude that in any event of the matter, such simultaneous proceedings, father raising certain objections in one proceeding and the son proceeding with yet another proceeding raising similar objections, definitely cannot be sustained and at any rate, the best judge would be the 1st and the 2nd respondents and it is not for the bidders to say which would be a better offer commercially and at any rate since this lis is concerned with bidding in relation to the contractual obligations, normally the writ Court not to interfere, especially with the 1st respondent, on application of mind exercised the discretion taking into consideration the relative merits and demerits of the offers made by the bidders. Thus, the learned senior Counsel would conclude that the Writ Petition to be dismissed. 9. Sri S.Ravi, the learned Counsel representing the 3rd respondent had taken this Court through the respective stands taken by the parties and the historical background and the health of the Company and the serious allegations of mismanagement made by the 4th respondent against Kishan Rao and family and would maintain that in the present situation it is beneficial to a share holder as well since the share holder would get some money. The Scheme of the 5th respondent had been explained in detail. The learned Counsel pointed out that no doubt the 4th respondent had not filed any counter affidavit whatsoever. However, the share holders had approved the Scheme and in the light of the facts and circumstances and also the specific stand taken by the respondents 1, 2 and 5 as well, the Writ Petition being devoid of merit, the same is liable to be dismissed. 10. Sri C.V. Mohan Reddy, the learned Advocate General representing the 5th respondent made elaborate submissions on the scope of judicial review in the realm of contracts and further in addition to the submissions made by the other Counsel on record representing the respondents would demonstrate how substantially the offer made by the 6th respondent/5th respondent would be a better offer. The I.E.I. does not prohibit the understanding between the 5th and the 6th respondents. There is no allegation by the petitioner how he is aggrieved of the same. The Certificates which had been already issued are practically irredeemable and it may not be in public interest to interfere at this stage. There is no offer of interest by the petitioner in any of the offers. In this way, the offer of the 5th respondent would be a better offer. The relevant portions of the pleadings also had been pointed out. The learned Advocate General also would contend that the entire share capital being redeemable shares, these transactions being just commercial transactions, this lis is not maintainable to writ jurisdiction. The Writ Petition is not maintainable since there is no violation of any statutory provision as such. The learned Advocate General also placed reliance on certain decisions. 11. Sri E.Manohar, the learned senior Counsel representing the 6th respondent would maintain that the 5th respondent being a Company, the 6th respondent is not a necessary party. The learned senior Counsel pointed out to W.P.M.P.No.14890/2007 wherein deletion of the 6th respondent had been prayed for. The 6th respondent only being a tenderer, ought not to have been impleaded. The 5th respondent’s tender had been accepted. Further, all tenderers need not be impleaded and in the light of the same, the Writ Petition to be dismissed as against the 6th respondent with exemplary costs. 12. Sri M.Raghuveer, s/o.Sri M.Kishan Rao, the Director of the petitioner-Company had sworn to the affidavit filed in support of the Writ Petition, wherein it is stated that the petitioner-Company is a special investment vehicle floated by M.Raghuveer and his other