IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH WEDNESDAY, THE 11TH FEBRUARY 2009 / 22ND MAGHA 1930 WP(C).No. 34506 of 2008(G) ---------------------------------------------- PETITIONER(S): ---------------------- ABDUL SALAM, AGED 48 YEARS S/O.KOCHUKUNJU, VENGA P.O.,SASTHAMCOTTA, KOLLAM. BY ADV. SRI.V.ANIL RESPONDENT(S): ------------------------- 1. THE AUTHORIZED OFFICER, INDIAN BANK, KOLLAM BRANCH. 2. THE GENERAL MANAGER INDIAN BANK, KOLLAM BRANCH. 3. RAVI PILLAI, PROPRIETOR UPASANA HOSPITAL, KOLLAM. 4. MUNEER, S/O. SUBERKUTTY MUNEER MANZIL, PADAVADAKKU PO, KARUNAGAPPALLY, KOLLAM. 5. ABDUAL MAJEED HIBA ANNEX, PADAVADAKKU PO, KARUNAGAPPALLY, KOLLAM. ADV. SRI.S.EASWARAN FOR R1 & R2 THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 02/02/2009 ALONG WITH WPC NO. 36430 OF 2008, THE COURT ON 11/02/2009 DELIVERED THE FOLLOWING: K. M. JOSEPH, J. -------------------------------------- W.P.C. NOS. 34506/08G & 36430/08J -------------------------------------- Dated this the 11th February, 2009 JUDGMENT Since some common questions arise, these two Writ Petitions are disposed of by a common Judgment. 2. A sale was held by the respondent Authorized Officer under the provisions of the SARFAESI Act. The petitioners were bidders. The sale took place on 19.11.2008. The Authorized Officer of the respondent Bank had invited tenders through advertisement in the Mathrubhoomi and Hindu Dailies. The reserve price for the properties was fixed at Rs.178.84 Lakhs. The EMD for partaking the bid was fixed at Rs.8.95 Lakhs. Clause 29 of the Notification reads as follows: “29. After opening the tenders, the intending bidders who have submitted their bid for not less than the Reserve Price, will be given an opportunity, at the sole discretion of the Authorized Officer, to have an inter-se bidding among themselves, immediately on WPC.34506/08G&36430/08J 2 opening the tenders, on the same date and venue.” 3. It is the case of the petitioner in W.P.(C). No.34506/08 that he raised the amount upto Rs.2,84,00,000/= in the inter-se bidding. The fourth respondent, namely Shri S.K. Muneer raised the bid amount to Rs.3 Crores. Thereafter, the fifth respondent raised the bid amount to Rs.14 Crores. It is his case that thereafter, no-one offered any higher amount and the highest bidder was to remit 25% of the bid amount before 5 PM on the same day. But, at 1 PM, the Authorized Officer and the General Manager of the Bank, in violation of the Notification, confirmed the sale in favour of the third respondent for an amount of Rs.5,09,01,000/=. It is stated that respondents 1 and 2 ought to have waited till 5 PM, to know whether the fifth respondent would be remitting 25% of the bid amount or not. It is contended that immediately after the fifth respondent offered the bid amount of Rs.14 Crores, confirming the sale in favour of the third respondent without waiting to know whether the fifth respondent is remitting 25% of the bid amount upto 5 PM in the WPC.34506/08G&36430/08J 3 evening, is illegal. It is generally stated that acceptance is not empowered by the conditions in clauses 31 to 39 of the Notification. The prayers in W.P.(C). No.34506/08 are as follows: “i. Issue a writ of mandamus or any other appropriate writ or direction compelling and commanding the respondent Nos. 1 and 2 to conduct the re-tendering of the properties giving opportunity to the petitioner also to participate in it. ii. Declare that the conferring the sale of the properties in favour of the 3rd respondent on the same day itself without giving opportunities to the petitioner to participate in the bidding is illegal and against the provisions of Exhibit P1. iii. Cancel the sale of the properties by the respondents 1 and 2 in favour of the 3rd respondent. iv. Issue a writ of mandamus or any other appropriate writ or direction compelling and commanding the 1st respondent not to confirm the sale of the properties in favour of the 3rd respondent and give him possession of the same.” WPC.34506/08G&36430/08J 4 4. The petitioner thereafter filed an application to amend the Writ Petition and additional grounds 6 to 8 were included. Relying on Rule 9(3) of the Security Interest (Enforcement) Rules, 2002 under the Act (hereinafter referred to as the Rules), it is contended that there is an obligation to resell the property again the moment the highest bidder defaulted to pay 25% of Rs.14 Crores on the date of sale itself. It is contended that simultaneous auction for the first place and further bidding for the second place conducted by the Authorized Officer, violates the tender conditions and also the Rules. It is contended that Rule 29 uses the word “an” which is equivalent to “one” and that seldom denotes plurality. Further bidding for the second or third place is unheard of, it is contended. 5. Contentions in W.P.(C).No.36430/08 J Petitioner quoted Rs.181 Lakhs and nineteen persons who quoted above the reserve price were notified for inter-se bid. It is stated that the petitioner did not participate in the inter-se bid or in the further bidding as the same was against the Rules. It is WPC.34506/08G&36430/08J 5 stated that M/s. M-Way Associates quoted Rs.14 Crores. The contentions raised are that there is violation of Rule 9(2) and Clause 29 emphasizing that the word “an” used therein permits only one inter-se bid, and that further bidding is unheard of. He did not participate in the further bidding for the second place. Reference is made to W.P.(C). No.34332/08 and the Minutes Book produced by the Authorized Officer therein to point out that the petitioner has not participated in the further bidding for the second place and, therefore, not guilty of any acquiescence. Petitioner seeks to quash Ext.P2 which is the proceedings of the Authorized Officer evidencing the sale proceedings. 6. A Counter Affidavit has been filed on behalf of respondents 1 and 2 in W.P.(C).No.36430/08. It is, inter alia, stated therein as follows: Petitioner has no vested right. There is delay and laches. The auction was held on 19.11.2008. The Writ Petition was filed only on 10.12.2008. The auction in favour of the third respondent was confirmed on 20.11.2008. The writ petitioner WPC.34506/08G&36430/08J 6 had submitted a Demand Draft towards the Earnest Money Deposit. After his unsuccessful participation, the petitioner on 21.11.2008 got the Demand Draft returned and there is considerable delay between 21.11.2008 and 10.12.2008. Petitioner participated in the entire auction proceedings without any demur or protest. Reference is placed on Clause 49 to contend that the tenderer or his representative should affix his signature at each page of the tender document for having accepted the terms and conditions of the tender. Ext.R2(b) is produced as the tender of the petitioner, to show that the petitioner had affixed his signature on all the sheets of the tender form. It is stated that the petitioner has deliberately suppressed this fact. He could not be permitted to turn round and challenge the same, citing violation of Rule 9(3) of the Rules. It is pointed out that Ext.P2 would reveal that the petitioner had not raised any objection during the inter-se bidding and he cannot maintain a challenge to the same proceedings. Petitioner has not challenged the tender conditions. It was also pointed out that WPC.34506/08G&36430/08J 7 one Shri S.K. Muneer along with M/s. M-Way Associates submitted tender. Enquiries made by the respondent revealed that there was an attempt on the part of Shri S.K. Muneer and M/s. M-Way Associates to defraud the Bank. There were two requests made for issuing the Demand Draft for Rs.8,95,000/=. It is contended that enquiries revealed that the amount for the two Demand Drafts for Rs.8.95 Lakhs each submitted as EMD by the petitioner as well as Shri S.K. Muneer were seen debited from the Account of Shri S.K. Muneer. It is stated that during the course of the inter- se bidding, Shri S.K. Muneer quoted Rs.3 Crores over Rs.264.40 Lakhs quoted by M/s. Vidhya International Charitable Trust. M/s. M-Way Associates quoted Rs.1400 Lakhs immediately without disclosing its name, when the Authorized Officer was about to permit other persons who were willing to quote more than Rs.300 Lakhs. On hearing the quote, he enquired the name of the person who quoted such an abnormal amount and his name was Shri P.V. Majeed. It is stated that the quote by Shri P.V. Majeed being an abnormal WPC.34506/08G&36430/08J 8 quote, the same was objected to by the remaining bidders who voiced their concern of not being able to quote above Rs.3 Crores. The petitioner did not raise any such objection, nor participated in the bidding. It was pointed out by the other bidders that if under any circumstance Rs.1400 Lakhs is not deposited, the Bank would confirm the auction in favour of Shri S.K. Muneer, which cannot be allowed. In the peculiar circumstances, it was stated that the Authorized Officer went for bidding for the second place, overruling the objections of Shri S.K. Muneer and in the second bidding the third respondent quoted the highest amount of Rs.5,09,01,000/=. The Minutes Book is produced as Ext.R2(h). Shri P.V. Majeed addressed Ext.R2(i) letter indicating that due to the closure of Banking hours, he could not remit the amount and he would be remitting it on 20.11.2008. By Ext.R2(j) letter, the Bank informed M/s. M-Way Associates that in terms of the tender documents, it was requested to pay 25% on 19.11.2008 itself and it is thereafter stated that the letter of acceptance dated 19.11.2008 accepting WPC.34506/08G&36430/08J 9 its bid for Rs.1440 Lakhs was cancelled. Thereafter, the bid in favour of the second successful bidder M/s. Ravigeeth Hightech Manufactures and Infrastructures (P) Limited was confirmed by Ext.R2(k) dated 20.11.2008. It is stated that the successful tenderer expressed its willingness for debiting an amount equivalent to 25% from their Account. Ext.R2(m) is produced to show that M/s. M-Way Associates expressed their willingness to remit 25% by way of Bank Guarantee. It is further stated that the whole action culminating in Ext.P2 were challenged by Shri S.K. Muneer in W.P.(C).No.34332/08. Therein, the Bank had taken the contention that the petitioner was trying to defraud the Bank. During the pendency of the said Writ Petition, the present Writ Petition is filed seeking the very same relief and it is stated that there is every reason to believe that the present Writ Petition is filed only at the instigation of Shri S.K. Muneer who had filed the Writ Petition as stated and who later on, withdrew it. The petitioner has filed a Reply Affidavit. It is, inter alia, stated therein as follows: WPC.34506/08G&36430/08J 10 It is stated that the earnest demand deposit paid by all the unsuccessful tenderers were returned on the same day and there was no special haste on the part of the petitioner. Delay is only fifteen days, it is stated. Petitioner had to travel to Gulf to resolve an important issue regarding business. Petitioner has not waived away his statutory rights by signing the tender document and participating in the tender. The second respondent proceeded with the second bidding in spite of objections raised by others and there was no need for the petitioner to raise any additional objections. The case that the petitioner is working in hand with Shri S.K. Muneer, is denied. It is stated that there cannot be waiver of his statutory right. 7. I heard the learned counsel for the petitioners, Shri S. Easwaran, learned counsel appearing on behalf of the respondent Bank and also Shri Kurian George Kannanthanam, appearing for the successful bidder. Petitioners reiterate their contentions. Learned counsel for the petitioner in W.P.(C). No.36430/08 would contend that there cannot be any WPC.34506/08G&36430/08J 11 acquiescence when Rule 9(3) mandates that there should be a resale forthwith upon there being default in payment of 25% by the successful bidder. It is also contended that the word “an” in Clause 29 of the Notification would mean only “one” and there can be only one inter-se bidding thereunder and this has been violated, it is contended. He relied on the decision of the Apex Court in A.C. Jose v. Sivan Pillai And Others (1984 (2) SCC 656) to contend that there can be no estoppel against Statute. He also relied on the decision in State of Kerala And Others v. K. Prasad And Another (2007 (7) SCC 140) wherein the Court held as follows: “It needs little emphasis that the Rules are meant to be and have to be complied with and enforced scrupulously. Waiver or even relaxation of any rule, unless such power exists under the Rules, is bound to provide scope for discrimination, arbitrariness and favouritism, which is totally opposed to the rule of law and our constitutional values. It goes without saying that even an executive order is required to be made strictly in consonance with the rules. WPC.34506/08G&36430/08J 12 Therefore, when an executive order is called in question, while exercising the power of judicial review, the Court is required to see whether the Government has departed from such rules and if so, the action, of the Government is liable to be struck down.” In that case, Rules 2 and 2A of the Kerala Education Rules, 1959 which laid down a comprehensive procedure for opening of new Schools in particular areas and recognition and upgradation were sought to be waived by the Government. In the context of the plea by the sub-tenant that the landlord had acquiesced, this Court held in Kochu Thressia v. Albert (2007 (4) KLT 1 (at page 7) as follows: “Even the knowledge of the landlord that the premises was in occupation of the sub-tenants would not lead to any inference of implied consent of sublease of implied consent of sublease in favour of sub-tenants. In this connection, we may refer to Words and Phrases Legally Defined Vol.1 Third Edn. Page 27 where we may first see what has been said about acquiescence. It is as follows: “ Mere inactivity on the part of WPC.34506/08G&36430/08J 13 the defendant is not to be construed as acquiescence in delay by the plaintiff sleeping dogs, in the form of sleeping plaintiffs, need not be aroused by defendants from their slumbers” (per Roskil.J. in Compagnie Francaise de Television v. Thorn Consumer Electroncis Ltd. (1978) RCP 735 at 739), Bremer Vulkan Schiffbau and Maschinenfabrik v. South India Shipping Corporation (1979) 3 All ER 194 at 198, per Donaldson,J.).” It is, therefore, contended that there is no acquiescence on the part of the petitioner. He also sought to enlist the decision of the Supreme Court in Sha Mulchand and Co. Ltd. v. Jawahar Mills Ltd., Salem (AIR 1953 SC 98). 8. On the other hand, learned counsel appearing on behalf of the respondent Bank would reiterate the allegations in the Counter Affidavit which I have referred to. It is also contended that having participated, under the Notification, it is not open to them to invoke Rule 9(3) of the Rules and contend that there should be a resale. It is pointed out that the price which was WPC.34506/08G&36430/08J 14 offered by the successful bidder is reasonable and if a resale is ordered, the interest of the Bank would be jeopardized. Learned counsel for the respondent Bank pointed out that under Rule 8 the Bank can provide for terms and conditions, and that the terms of Clause 38 provide for the situation when the highest bidder does not pay 25%. Learned counsel also relies on the decision of the Apex Court in Laxmikant And Others v. Satyawan And Others (1996 (4) SCC 208) to contend that having participated in terms of Ext.P1 Notification, it is not open to the petitioners to invoke Rule 9(2) of the Rules. In the said decision, the Apex Court proceeded to hold as follows: “The learned counsel appearing for the respondent urged that in view of the statutory provision of Rule 4(3) it was not open to the Trust to prescribe the conditions of auction referred to above. The respondent having participated in the said public auction on the basis of those conditions which were in the nature of supplementary provisions for holding the auction could not be questioned by the respondent.” WPC.34506/08G&36430/08J 15 That was a case where the allegation was that there was violation of Rule 4(3) of the Rules in the matter of not confirming the allotment in favour of the writ petitioner and that the conditions for the auction were not in conformity with the Rule. No doubt, the petitioner's counsel pointed out that the conditions were supplementary in nature. The Bank also relied on a decision of this Court in Asian Techs Ltd. v. State of Kerala (2001 (3) KLT 357) to contend that the delay on the part of the writ petitioner in W.P.(C).No.36430/08J is sufficient to discountenance his plea. It is stated that Clause 38 was incorporated to follow Rule 9(3). 9. The two common questions which arise in both the Writ Petitions are as follows: Firstly, whether there is violation of Clause 29 of the Notification. It reads as follows: “29. After opening the tenders, the intending bidders who have submitted their bid for not less than the Reserve Price, will be given an opportunity, at the sole discretion of the Authorized WPC.34506/08G&36430/08J 16 Officer, to have an inter-se bidding among themselves, immediately on opening the tenders, on the same date and venue.” The question is whether, in the matter of conducting an inter-se bid, there is a transgression in so far as more than one inter-se bidding was held. The second question is whether there is violation of Rule 9(3) of the Rules. 10. The writ jurisdiction is extraordinary, but it is also discretionary. The width of its powers enable the Court to strike at injustice in a jurisdiction whose width is only trimmed by considerations of self-restraint, besides certain Rules as evolved by Courts pertaining to the ambit of judicial review. An auction was held on 19.11.2008. It is done on the basis of Notification inviting tenders. It provides for fixation of a reserve price. It is further provided that there may be “an” inter-se bidding among the tenderers who had quoted above the reserve price. Clause 38 also being pertinent, is extracted below: “38. If the successful Tenderer does not deposit 25% of the purchase price immediately WPC.34506/08G&36430/08J 17 (on the same date), on conveyance of acceptance letter on the same date, it is open to the Seller to confer the sale on the second successful Tenderer.” It is to be noted that Ext.P2 which is the proceedings produced in W.P.(C).No.36430/08 would show that the bid commenced at 11 AM. Nineteen bidders quoted above the reserve price which was fixed as Rs.178.84 Lakhs. Both the petitioners were among the nineteen bidders. Ext.P2 would further show that inter-se bidding was commenced, apparently in terms of Clause 29. It started with Rs.264.40 Lakhs. After some quotes, the next highest quote was by Shri S.K. Muneer for Rs.300 Lakhs. Immediately thereafter, one M/s. M-Way Associates quoted Rs.1400 Lakhs. It is further noted in Ext.P2 that the Authorized Officer as well as the participants felt that the quote of Rs.1400 Lakhs was an abnormal quote and the Authorized Officer decided that there will be a bidding for the second highest bidder to take care of the eventuality of failure on the part of the highest bidder to deposit 25% by the evening of 19.11.2008. WPC.34506/08G&36430/08J 18 The second highest bidder, namely Shri S.K. Muneer objected to the conduct of bidding for the second place. It is stated that on the basis of the further bidding, the third respondent who quoted Rs.5,09,01000/= was declared as the second highest bidder. Shri S.K. Muneer, apparently would have been the second highest bidder, had the person who bid Rs.14 Crores defaulted in payment of 25%. He filed a Writ Petition before this Court. As stated in the Counter Affidavit of the Bank, it had filed Counter Affidavit therein. It is the case of the Bank that enquiries revealed that there was an attempt on the part of Shri S.K. Muneer as well as M/s. M-Way Associates to defraud the Bank as well as the borrowers. It is not in dispute that Shri S.K. Muneer who was a person who protested at the auction against the further bidding on the same day has withdrawn the Writ Petition. It is the case of the Bank that when the inter-se bid was progressing, some persons offered their bids and it reached Shri S.K. Muneer who bid Rs.3 Crores and immediately thereafter M/s. M-Way Associates put up a bid of Rs. 14 Crores WPC.34506/08G&36430/08J 19 which was found to be totally abnormal. Genuineness was suspected. Apparently, the other bidders had not been able to bid amounts higher than Rs.3 Crores by virtue of the bid of Rs.14 Crores put up by M/s. M-Way Associates and in the light of their common feeling that the bid of M/s. M-Way Associates was an abnormal bid, the further bidding progressed and the participants put up various bids ascending up to the finally accepted bid of Rs.5,09,01,000/=. No doubt, in the Bank's Counter Affidavit it is, inter alia, stated as follows: “The aforesaid concern raised by the other bidders were found to be genuine since the bank as well as the borrowers stand to lose if the auction is required to be confirmed in favour of Mr. Muneer for 300 lakhs. It was under these peculiar circumstances that I went for the bidding for the second place overruling the objections of Mr. S.K. Muneer and in the second bidding the third respondent quoted the highest amount of Rs.5,09,01,000/=.” WPC.34506/08G&36430/08J 20 It is also stated therein as follows: “As narrated earlier in this counter affidavit only when it was found that there was an abnormal quote during the inter-se bidding and there was no opportunity for the other participants to bid in the inter-se bidding this respondent extended the opportunity for the bidding and such auction cannot be found to be illegal.” 11. It is clear that there were persons who wanted to bid amounts above Rs.3 Crores, but would have been denied their right, if the Officer had stopped with the offer of Rs.14 Crores. It is not to be overlooked that as expected, the person who quoted Rs.14 Crores expressed its inability to raise 25% on the same day. It later sought permission to give 25% by way of Bank Guarantee. All this will probabilise the case that the bid of Rs.14 Crores was indeed abnormal and was not actually meant to be acted upon. I cannot entirely overlook the fact that Shri S.K. Muneer who filed the Writ Petition could have possibly gained by invoking Clause 38 by the bid of Rs.14 Crores, if the WPC.34506/08G&36430/08J 21 bidding was stopped at the moment the bid of Rs.14 Crores was made. Most importantly, it is to be noted that neither petitioners raised any protests at the bidding done after Rs.14 Crores was offered unlike Shri S.K. Muneer. There is no case as such which is credible of malafides against the Bank. There is no acceptable case of collusion between the Bank and the highest bidder. I cannot possibly render a finding that the action of the Bank is not bonafide. Obviously, in an auction, purpose must be to get the highest price so as to liquidate the liability and if any excess remains, to pay it over to the borrower. 12. The further common question is whether there is violation of Rule 9(3) of the Rules. Rule 9(3) undoubtedly mandates that there must be a resale forthwith, should the highest bidder default in paying 25% immediately. Clause 38 of the Notification in fact enables the accepting of the bid of the second highest bidder in such a situation. Rule 9(1) provides for the issuance of appropriate notice before a sale is held. On the one hand, under Rule 9(3), the sale must be held forthwith. WPC.34506/08G&36430/08J 22 Under Rule 9(5) of the Rules, in a case where the successful bidder does not remit the balance amount, the sale has to be held after complying with the requirement of Rule 9(1) of