Case: State Of U.P.  Vs. M/S. Swadeshi Plytex Ltd.

placed on State financial corporations exercising their powers under section 29 of the State Financial Corporations Act, as prescribed in Mahesh Chandra v. Regional Manager, U.P.Financial Corpn. Are no longer in place in view of the subsequent decision in Haryana Financial Corpn. Vs. Jagdamba Oil Mills. However, in overruling the decision in Mahesh Chandra this Court has affirmed the view taken in Chairman and managing Director, SIPCOT v. Contromic (P) Ltd. and said that in the matter of sale under section 29, State financial corporations must act in accordance with the statute and must not act unfairly i.e. unreasonably. If they do, their action can be called into question under Article 226. Reasonableness is to be tested against the dominant consideration to secure the best price for the property to be sold. "This can be achieved only when there is a maximum public participation in the process of sale and everybody has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price."Adequate publicity to ensure maximum participation of bidders in turn requires that a fair and practical period of time must be given to purchasers to effectively participate in the sale. Unless the subject-matter of sale is of such a nature which requires immediate disposal, an opportunity must be given to the possible purchaser who is required to purchase the property on "as-is-where-is basis" to inspect it and to give a considered offer with the necessary financial support to deposit the earnest money and pay the offered amount, if required." 15. We must, therefore, repel Mr. Dwivedis argument that as SPL had suffered no prejudice in the auction proceedings, the sale should not be interfered with. 16. There is yet another circumstance which vitiates sale. Rule 285-D of the Rules that 25% of the amount of the auction money shall be deposited at the fall of the hammer and the remaining 75% within 15 days. The case of the appellants is that the Bank draft for 7.80 Crores had been deposited by the auction purchasers on 2nd May 2005 i.e., the date of auction but the learned Single Judge has found that as the auction had been completed at 1.30 p.m., it would not have been possible to have received the Bank draft from Kanpur 460 km. away on that date. This finding appears to be correct. We also find that the balance 75% of the amount that had been deposited by various Bank drafts on 18th May 2005 was also beyond the 15 days permissible and the finding of the learned Single Judge based on the record is that though the drafts were dated 14th May 2005 but they had, in fact, had been handed over to the concerned authority only on the 18th May 2005. This Court in M.M.Shah vs. S.S.A.S.Mahamad & Anr. 1954 SCR 108 has held as under: "Having examined the language of the relevant rules and the judicial decisions bearing upon the subject we are of opinion that the provisions of the rules requiring the deposit of 25% of the purchase-money immediately on the person being declared as a purchaser and the payment of the balance within 15 days of the sale are mandatory and upon non-compliance with these provisions there is no sale at all. The rules do not contemplate that there can be any sale in favour of a purchaser without depositing 25% of the purchase-money in the first instance and the balance within 15 days. When there is no sale within the contemplation of these rules, there can be no question, of material irregularity in the conduct of the sale. Non-payment of the price on the part of the defaulting purchaser renders the sale proceedings as a complete nullity. The very fact that the Court is bound to re-sell the property in the event of a default shows that the previous proceedings for sale are completely wiped out as if they do not exist in the eye of law. We hold, therefore, that in the circumstances of the present case there was no sale and purchasers acquired no rights at all." 17. For this additional reason as well, the auction sale cannot be maintained. 18. In this view of the matter, we need not go into the argument raised by Mr. R.F. Nariman that in the facts of the case we should not entertain this matter in the exercise of the discretionary jurisdiction under Article 136 of the Constitution of India. 19. We also notice from the last paragraph of the judgment of the learned Single Judge appears to have been extremely annoyed with what he perceived to be gross irregularities on the part of the officers of the State Government connected with the sale of the property and he had accordingly directed as under: "Subject to above writ petition is allowed with cost quantifies to Rs.50,000/- Petitioner shall be entitled to withdraw Rs.25,000/- and rest of Rs.25,000/- shall be remitted to U.P. State Legal Services Authorities to utilize for providing legal aid to the litigants approaching Lucknow Bench of High Court. The cost shall be deposited within one month from today in this court by the District Magistrate, Ghaziabad. Registrar to ensure compliance. It shall be open for the State Government to recover the cost from the salary of the office/officers who are responsible to auction the property in question in such unruly manner by holding an inquiry.The Chief Secretary Government of U.P. is further directed to take appropriate action against the officers or employees who had acted in arbitrary manner while proceeding with the auction and sale of the property in question. Let a copy of the judgment be sent to the Chief Secretary, Govt. of U.P. by the office within a week for appropriate action." 20. We are of the opinion, however, that High Courts direction that action should be initiated against the concerned officers, is not justified and we

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]13. Shri Nariman, the learned senior counsel for the respondents, therefore, appears to be right in contending that the specific averments made by SPL in the writ petition have not been denied by the respondent and it was therefore open to SPL to contend that the property had not been properly valued and that the sum of Rs.27 crores represents not even half the market price.The question of valuation is to our mind of the utmost importance as it is designed to ensure the best price for the property and it is essential in this circumstance that wide publication and notice of the proposed sale should be given as per Rule 285-A which postulates a notice of 30 days between the date of issuance of the sale proclamation and the date of auction. It can hardly be over emphasized that the proper valuation of the property and wide publicity of the proposed auction is intimately linked with the price that the auction fetches. As already mentioned above, the auction had been held on 2nd May 2005. The sale proclamation had been issued on the 1st April 2005, and served on the Chowkidar on the 21st April 2005, the publication made in "Amar Ujala" on 22nd April 2005 whereas rule 285 itself postulates a notice period of 30 days to be counted from the date of issuance of the sale proclamation.There is yet another circumstance which vitiates sale. Rule 285-D of the Rules that 25% of the amount of the auction money shall be deposited at the fall of the hammer and the remaining 75% within 15 days. The case of the appellants is that the Bank draft for 7.80 Crores had been deposited by the auction purchasers on 2nd May 2005 i.e., the date of auction but the learned Single Judge has found that as the auction had been completed at 1.30 p.m., it would not have been possible to have received the Bank draft from Kanpur 460 km. away on that date. This finding appears to be correct. We also find that the balance 75% of the amount that had been deposited by various Bank drafts on 18th May 2005 was also beyond the 15 days permissible and the finding of the learned Single Judge based on the record is that though the drafts were dated 14th May 2005 but they had, in fact, had been handed over to the concerned authority only on the 18th. In this view of the matter, we need not go into the argument raised by Mr. R.F. Nariman that in the facts of the case we should not entertain this matter in the exercise of the discretionary jurisdiction under Article 136 of the Constitution of India.We are of the opinion, however, that High Courts direction that action should be initiated against the concerned officers, is not justified