Case: M/S. S.J.S. Business Enterprises(P)Ltd Vs. State Of Bihar

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 only be achieved when there is a maximum 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 interesting in purchasing the property and generally secures the best price". 17. 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. 18. In this case, the first notice of sale was given on 31st January 2002. A period of about four weeks was given to the purchasers to submit their offers by 28th February 2002. The period of four weeks can therefore be taken to be the ordinary norm. But when the second impugned notice of sale was given on 26th March 2002, less than three days were given for the purchasers to inspect the premises, make necessary arrangements and submit their offers to BICICO. Of these three days, two were public holidays when banks would have also been shut. The period of notice was, in the circumstances, entirely inadequate. Besides, we have not been told the reason for this unusual haste. Such precipitate action was not called for unless there were some other considerations weighing with the authorities, considerations which have not been disclosed to the Court. 19. The method in which the sale was conducted is also questionable. Three valuations were obtained between 3rd July 2001 to February 2002 before the property was sold to the respondent No. 6. What was valued in July 2001 as worth Rs. 2.16 crores is valued at Rs. 94.81 about 10 months later, a fall of over Rs. 1.50 crores. 20. The third extra ordinary circumstance is that the respondent No. 6 had submitted his offer on the day on which the sale notice was published and made payment of the entire consideration on the same day before the last date for submission of tenders was over and even before its offer could been accepted. It is unlikely that this would have been done unless the respondent No. 6 knew (i) the valuation made and (ii) that its offer would be accepted. Indeed a portion of the respondent No. 6s offer had already been paid on 7th March 2002 i.e. prior to the sale notice itself. According to the Respondent No. 6 this was pursuant to the earlier infructuous sale notice, a payment which, again for some undisclosed reasons, had not been returned by BICICO to the respondent No. 6.21. No satisfactory explanation is forthcoming from the authorities to explain these deviations from the norm. The concatenation of inexplicable and unexplained circumstances is sufficient for us to hold that the sale was unfair and consequently invalid. 22. In Jagdamba Oils Mills Ltd. (supra), it was observed that, "the Court may assist the borrower who has intention to repay but is prevented by insurmountable difficulties in meeting the commitment". The borrower in that case had made no payment whatsoever to the State Financial Corporation of its outstanding loan. As not even "a minimal portion of the amount borrowed had been paid the Court refused to help the defaulter. The borrower, in this case had paid over Rs. 14 lakhs as against the principal amount of Rs. 44.56 lakhs. A further amount of Rs. 10 lakhs was paid on 27th March 2002 by the appellant to ICICO i.e. the day after the impugned sale notice was published. Before the High Court a sum of Rs. 10 lakhs was paid pursuant to the interim order. In addition, the appellant had approached the BICICO to settle its outstanding dues under the one time settlement policy. As we have already recorded, we entertained the special petition on the condition that the appellant would deposit a sum of Rs. 1 crore over the above the amount already paid by it to BICICO. This the appellant has also done. All this shows that the appellant could not be termed to be such a defaulter who deserved no sympathy or assistance by the Court. 23. The respondent No. 6 has pleaded that it has been deprived of Rs. 1 crore, had been kept out of the possession for 14 months and has, after taking possession, made substantial investments in the property. As far as the first factor is concerned, the appellant has offered to pay interest on the amount of Rs. 1 crore to the respondent Rs. 6. On the second, we have not been told whether any formal agreement has been concluded between BICICO and the respondent No. 6 or whether any conveyance has been executed or any other formalities completed by BICICO to transfer the title in the hotel in favour of the respondent no. 6. It appears to have handed over possession to the Respondent No. 6 only upon the direction of the High Court. As far as the third ground is concerned, the appellant was fully aware that the appellant was fighting tooth and nail to redeem its property and that the sale was the subject matter of scrutiny by Court. If it has chosen to make renovation or investment in the hotel, it has done so despite the knowledge of the precarious nature of its possession. The investments, if any, were a calculated risk taken by the respondent No. 6 itself the consequence of which cannot be foisted on the appellant.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]15. In this case, admittedly the appellant has withdrawn the suit two weeks after the suit had been filed. In other words the appellant elected to pursue its remedies only under Article 226. The pleadings were also complete before the High Court. No. doubt, the interim order which was passed by the High Court was obtained when the suit was pending. But by the time the writ petition was heard the suit had already been withdrawn a year earlier. Although the appellant could not, on the High Courts reasoning, take advantage of the interim order, it was not correct in rejecting the writ petition itself when the suit had admittedly been withdrawn, especially when the matter was ripe for hearing and all the facts necessary for determining the writ petition on merits were before the Court, and when the Court was not of the view that the writ petition was otherwise not maintainable.16. As the issue of suppression was the only ground on which the High Court has rejected the appellants plea for relief, we would ordinarily have set aside the order of the High Court in view of our finding and remanded back to the High Court for decision of the matter on merits. But the matter has been argued on merits before us and we are in a position to dispose of the matter which we accordingly proceed tois unlikely that this would have been done unless the respondent No. 6 knew (i) the valuation made and (ii) that its offer would be accepted. Indeed a portion of the respondent No. 6s offer had already been paid on 7th March 2002 i.e. prior to the sale notice itself. According to the Respondent No. 6 this was pursuant to the earlier infructuous sale notice, a payment which, again for some undisclosed reasons, had not been returned by BICICO to the respondent No. 6.21. No satisfactory explanation is forthcoming from the authorities to explain these deviations from the norm. The concatenation of inexplicable and unexplained circumstances is sufficient for us to hold that the sale was unfair and consequently invalid.The respondent No. 6 has pleaded that it has been deprived of Rs. 1 crore, had been kept out of the possession for 14 months and has, after taking possession, made substantial investments in the property. As far as the first factor is concerned, the appellant has offered to pay interest on the amount of Rs. 1 crore to the respondent Rs. 6. On the second, we have not been told whether any formal agreement has been concluded between BICICO and the respondent No. 6 or whether any conveyance has been executed or any other formalities completed by BICICO to transfer the title in the hotel in favour of the respondent no. 6. It appears to have handed over possession to the Respondent No. 6 only upon the direction of the High Court. As far as the third ground is concerned, the appellant was fully aware that the appellant was fighting tooth and nail to redeem its property and that the sale was the subject matter of scrutiny by Court. If it has chosen to make renovation or investment in the hotel, it has done so despite the knowledge of the precarious nature of its possession. The investments, if any, were a calculated risk taken by the respondent No. 6 itself the consequence of which cannot be foisted on the appellant.