1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR :: ORDER :: (1)- S.B. CIVIL WRIT PETITION NO.3287/2010 Ashok Pittie & Ors. Vs. Dena Bank & Ors. (2)- S.B. CIVIL WRIT PETITION NO.3037/2010 Vivog Commercial Ltd. & Anr. Vs. Dena Bank & Ors. DATE OF ORDER :: 20.7.2010 PRESENT HON'BLE MR. GOVIND MATHUR ,J. Mr. Dinesh Mehta, for the petitioners. Mr. Rajesh Joshi ) for the respondents. Mr. P.P. Choudhary) Mr. Anjay Kothari) BY THE COURT : These two petitions for writ are preferred to assail validity of the letter dated 15.3.2010 addressed to Smt. Madhulika Mundra, Director, Vivog Commercial Limited by the Assistant General Manager, Dena Bank, Colaba, Mumbai. By the letter aforesaid the Bank informed Mrs. Madhulika Mundra that the offer submitted by her on 6.3.2010 to purchase assets of M/s Pittie Cement and Industries Limited is belated and is not in accordance with the terms and conditions of the public notice issued and the public auction taken place on 22.3.2010. 2 The factual matrix necessary to be noticed for adjudication of these petitions is that the petitioners No.1 and 2 in SBCWP No.3287/2010 are erstwhile Directors of M/s Pittie Cement and Industries Limited (petitioner No.3). The petitioner No.3, a Company, availed credit facilities from the respondent Bank, however, due to default in repayment, possession of it was taken over by the respondent Bank as per provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred as 'the Act of 2002'). A notice for sell of secured assets by way of auction was issued on 16.9.2009. The action as scheduled on 29.10.2009 under the notice dated 16.9.2009 was postponed and a fresh notice was subsequently published for auction on 17.2.2010. The date notified for auction was subsequently postponed for 2.3.2010. On 2.3.2010, auction proceedings were conducted and respondent No.5 was declared as a successful bidder having offered a sum of Rs.351 lacs. On the same day, one Mr. Ramesh Ashar made an offer of Rs.3.85 crores for purchase of the secured assets and just to establish his bonafide, tendered a bankers cheque of Rs.25 lacs to the General Manager, Recovery Management, Assets Recovery Branch, Dena Bank, Mumbai. One M/s Vivog Commercial Limited (petitioner in SBCWP No.3037/2010) also submitted its bid on 5.3.2010 for purchase 3 of the secured assets with the consideration of Rs.4,40,00,000/-. The respondent Bank under the letter dated 15.3.2010 rejected the offer made by M/s Vivog Commercial Limited, thus, these petitions for writ are preferred. In SBCWP No.3287/2010, contention of the petitioners is that the auction taken place on 2.3.2010 was not conducted in conducive environment and as a result of that, a valuable assets has been sold at a meager sum of Rs.351 lacs. It is asserted that once an offer of Rs.4.40 crores was made by M/s Vivog Commercial Limited, there was no just reason for authorised officer not to exercise discretion vested with him either to arrange auction of the property afresh or to arrange negotiations with M/s Vivog Commercial Limited for sell of the property on higher consideration. According to the petitioners, the attitude of the respondents is causing great loss to them. In SBCWP No.3037/2010, it is asserted on behalf of the petitioners that substantially a higher bid was offerred to purchase the secured assets and as such, the respondent Bank should have exercised discretion vested with it for reconsideration of the sale made as consequent to auction taken place on 2.3.2010. 4 Reply to the writ petitions have been filed on behalf of the respondent Bank and the auction purchasers. Several preliminary objections are raised including that the conduct of the petitioners dis-entitle them to avail the extra-ordinary remedy under Article 226 of the Constitution of India. It is submitted that in SBCWP No.3287/2010 the petitioners No.1 and 2 misrepresented before the Court for having authorisation to file writ petition on behalf of the respondent No.3 i.e. Pittie Cement and Industries Limited. As per the respondents, the respondent No.3 is suffering winding up proceedings and in pursuant to the order passed by this Court official liquidator has already been appointed, therefore, the petitioners No.1 and 2 are having no authority to file any petition for writ on behalf of Pittie Cement and Industries Limited. It is also submitted that as a matter of fact, M/s Vivog Commercial Limited is a sister concern of one Nitin Steels Trading Pvt. Ltd. that participated in the auction proceedings and Shri V.P. Mundra, who is having 50% share in Nitin Steels Trading Pvt. Ltd., is a Director with Vivog Commercial Limited. His wife Smt. Madhulika Mundra is also a Director with the petitioner Company, as such, on being failed in auction proceedings dated 2.3.2010, they approached with the Bank in the name of the present petitioner on 5.3.2010 for purchase of secured assets. It is also pointed out that as a matter of fact, the petitioners in both the petitions are hand with glove just to frustrate the sale already taken place in pursuant to 5 auction held on 2.3.2010. To substantiate the contention, it is urged that at the first instance SBCWP No.3037/2010 was filed on 23.10.2010 and subsequently, by availing the documents from M/s Vivog Commercial Limited, erstwhile Directors of Pittie Cement and Industries Limited filed SBCWP No.3287/2010 on 30.3.2010. According to the respondents, if the erstwhile Directors had any grievance with the auction taken place then they could have raised the entire issue before the Company Judge before whom liquidation and winding up proceedings are already pending. Certain factual details are also given by the respondents including that on 2.3.2010 three bidders namely Baheti Housing and Developments Pvt. Ltd., Nitin Steels Trading Pvt. Ltd. and Latiyal Handicrafts Pvt. Ltd. came forward but Baheti Housing and Developments Pvt. Ltd. was not permitted to participate in auction due to certain valid reasons. Nitin Steels Pvt. Ltd. and Latiyal Handicrafts Pvt. Ltd. submitted their bid in sealed cover for a sum of Rs.232.10 lacs and Rs.233 lacs respectively. The authorised officer then arranged inter-se bid between two bidders aforesaid and ultimately, the bid of Latiyal Handicrafts Pvt. Ltd. being highest i.e. of Rs.351 lacs was accepted. The bid then was confirmed by the competent authority at the spot and sum of Rs.64.75 lacs was deposited by the purchaser. The entire amount of sale was satisfied on 6 11.3.2010. The possession of the property was also handedover to the auction purchaser on 18.3.2010 and a sale certificate was also issued. The sale has already been registered on 22.3.2010 after paying requisite stamp duty of Rs.8,77,500/- with a registration fees of Rs.25,100/-. The auction purchaser also urged that after getting the sale registered he has also availed a loan to promote the business in a tune of Rs.720 lacs and also an outstanding amount of Rs.10,82,434/- has already been deposited with the Rajasthan State Industrial Development Investment Corporation Limited on 25.3.2010. According to the respondents, the entire process of sale has been finalised and as such, this court is not required to interfere in the matter at this stage. Besides above, learned counsel for the respondents emphasized that once M/s Vivog Commercial Limited did not choose to participate with the auction proceedings, it cannot be permitted to get a valid auction proceedings reopened. According to the respondents all necessary measures for a fair auction were adhered and as such, there is no wrong in the matter that may warrant interference of this Court. According to the respondent Bank a demand notice as per Section 13(2) of the Act of 2002 was issued on 28.5.2008 for recovery of a sum of Rs.1834.34 lacs plus interest, however, 7 because of failing to satisfy the demand, the Bank put up the secured assets for public auction on 29.10.2009 and 21.11.2009. The respondent Bank did not proceed with the auction proceedings in view of the fact that leave from the High Court was necessary as liquidation proceedings were also going on. The Bank in such circumstances submitted an application before the Company Judge and on 5.1.2010 permission for sale by way of auction was granted. Accordingly, a notice afresh was issued and that was published in various news-papers on 23.1.2010 including news-papers namely Maharashtra Times (Mumbai Edition), Economic Times (Mumbai Edition), The Times of India (Jaipur Edition) and Rajasthan Patrika (Jodhpur Edition). Under the notice aforesaid, auction was fixed on 17.2.2010, but due to a request made by official liquidator auction was postponed for 2.3.2010. The information regarding such postponement too was published on 19.2.2010 in Maharashtra Times (Mumbai Edition), Economic Times (Mumbai Edition), The Times of India (Jaipur Edition) and Rajasthan Patrika (Jodhpur Edition). As per the notice, the respondent to participate in auction proceedings was required to deposit an earnest money i.e. of Rs.23 lacs. M/s Vivog Commercial Ltd. neither deposited earnest money nor participated in auction proceedings and as such, whatever claim made is absolutely ill-founded. While placing reliance upon the Division Bench judgment 8 of this Court M/s Ridhi Sidhi Associates Vs. State of Rajasthan and Ors. DBSAW No.389/2009, it is contended that once the tender of the other persons are opened and their bids are known to one and all it would be very easy to make a higher bid but this court is not required to interfere with the bid opened, if there are no substantial allegations for intentional causing loss or substantial illegalities in auction proceedings. In the instant case, as per the respondents there is no allegation even by the petitioners for any wrong in auction proceedings. I have considered the rival contentions. At the threshold, suffice it to note that, in general, a valid offer should not be cancelled only on the count that some higher offer is received at a later stage. Such cancellation can be resorted if the power to accept or reject a tender is exercised for a collateral purpose and larger public interest also demand so. In Master Marine Services (P) Ltd. Vs. Metcalfe & Hodgkinson (P) Ltd. and Anr., [(2005) 6 SCC 138] the Supreme Court held that the right to choose cannot be considered to be an arbitrary power. Of course, if the said power is exercised for any collateral purpose the exercise of that power will be struck down. The right to refuse the lowest or any other tender is always available to the Government, but the principles laid down in Article 14 of the Constitution have to be kept in view while 9 accepting or refusing a tender. In Air India Ltd. Vs. Cochin International Airport Ltd. and Ors. [(2000) 2 SCC 617], the Supreme Court also pointed out the limitations of this Court while exercising power under Article 226 of the Constitution by holding that “Even when some defect is found in the decision- making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene.” Keeping the dictum rendered by the Supreme Court in mind, facts of the instant case are required to be examined. It is not in dispute that wide publicity was given for auction by the respondent Bank and before doing so necessary sanction was also availed under the liquidation proceedings. An established fact is that two bidders submitted their bids under sealed cover and thereafter, inter-se bids were arranged, wherein a substantial amount was enhanced and ultimately the sale was finalised at Rs.351 lacs. I do not find any wrong with the auction proceedings or any act on part of the respondent Bank to deprive erstwhile directors of Pittie Cement and Industries 10 Limited from getting a fair price of the secured assets. True it is, on 5.3.2010, M/s Vivog Commercial Limited offered a sum of Rs.4.40 crores for purchase of assets those were already sold on 2.3.2010. The authorised officer certainly had a discretion to reconsider the sale and what appears from examination of all the circumstances that the same was adequately exercised also. The authorised officer has taken into consideration all the facts including that the Directors of M/s Vivog Commercial Limited are also Directors of Nitin Steel Trading Pvt. Ltd. that participated in auction proceedings. On being failed and also being having knowledge of the bids given by the successful bidder, they subsequently offered a higher amount. This fact clearly establishes that the offer made on 5.3.2010 was not a bonafide one. If M/s Vivog Commercial Limited in any manner was interested in purchase of secured assets, it could have participated in auction proceedings taken place on 2.3.2010, but instead of doing so it waited till finalisation of sale and only after knowing the bid submitted by successful bidder the offer was made. This clearly establishes that offer was just to frustrate the sale made in favour of Latiyal Handicrafts Pvt. Ltd. In such circumstances, the Bank rightly rejected the offer made by M/s Vivog Commercial Limited. On narration of the facts above no collateral purpose of the respondent Bank appears in accepting offer of the 11 respondent Latiyal Handicrafts Pvt. Ltd. and in rejecting the offer made by M/s Vivog Commercial Ltd. The larger public interest is also in no manner defeated in the instant matter that may warrant interference of this Court by invoking powers under Article 226 of the Constitution of India. The petitions for writ are having no merit, thus, are dismissed. (GOVIND MATHUR)J. Rm/