TMI Blog2023 (4) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and for the manner of publicity therefor in terms of Section 18(2)(k) of the Act, 1985. Indisputedly, in the instant case, it has not been placed on record if there was any valuation report assessed by the Operating Agency from the approved valuer of the subject property and, at the same time, the reserve price of the subject property was never disclosed/indicated in the first place when the public notice came to be notified on 24th May, 2004 inviting offers from the interested parties for Block IV. Thus, the very procedure adopted by the Operating Agency appears to be defective at its very inception - The purpose of auction (open or close format) is to get the most remunerative price and giving opportunity to the intending bidders to participate and fetch higher realizable value of the property. If that path is cut down or closed, the possibility of fraud or to secure inadequate price or underbidding would loom large. In the given circumstances, it is the duty of the Court to exercise its discretion wisely and with circumspection and keeping in view the facts and circumstances in each case. The question of locus was never raised by the appellants before the High Court and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 21(c) of the Act, 1985, and that indeed was not indicated in the auction notice and the solitary bid submitted by the appellants in Civil Appeal No. 10128 of 2011 of Rs.2,84,00,000/- on 22nd June, 2004 was accepted by the authority. 4. On being examined by the ASC although nothing came forward as to why in the absence of a competitive bidding, the solitary bid of the present appellants was processed, be that as it may, the bid of the appellants in reference to Unit Block IV for the captioned assets was accepted as it reveals from the communication dated 12th August, 2004 with a rider that the same shall be confirmed as per the terms and conditions of ASC advised to all the bidders on 8th August, 2004 for which the bidder may be required to execute a tripartite Memorandum of Understanding (MOU) with IDBI. 5. The record indicates that the appellants were asked to furnish a bank guarantee for a bid value of Rs.2,84,00,000/- by 27th August, 2004 for a period of one year and required to deposit payment in instalments. The appellants from the day one were reluctant in furnishing the bank guarantee of Rs.2,84,00,000/, however, shown their alleged willingness to pay the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law under its judgment dated 5th February, 2010. 10. That became the subject matter of challenge in the instant appeals on behalf of the appellants and this Court while issuing notice under order dated 8th July, 2010 directed the parties to maintain the status-quo. 11. The original petitioners before the High Court had also challenged the self-same judgment of the Division Bench of the High Court in Civil Appeal No.10127 of 2011. 12. Mr. Jaideep Gupta, learned senior counsel appearing for the appellants, submits that while the advertisement came to be published by the IDBI (Operating Agency), the guidelines of ASC were not appended thereto and it was not made known to the parties that they are required to furnish a bank guarantee as a security to the bid amount and calling upon the appellants at the stage of acceptance of the bid to act upon the guidelines and to furnish a bank guarantee was not justified and this was considered by the AAIFR under its order dated 1st April, 2005 and which has not been appreciated by the High Court in the right earnest. 13. Learned counsel further submits that the appellants had paid the entire sale consideration on 3rd June, 2005 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 SCC 243 . 17. Learned senior counsel, Shri Ravi Prakash Mehrotra, appearing for the appellants in Civil Appeal No.10127 of 2011 submits that the auction bid of the appellants in Civil Appeal No.10128 of 2011 has been rightly set aside by the Division Bench of the High Court but they are aggrieved only where the Division Bench has directed that the subject property be sold, if need be, as per the provisions of law. 18. Learned counsel submits that since the appellants have made an offer of Rs.3 crores which was higher than the bid furnished by the appellants in Civil Appeal No.10128 of 2011 and they being residing for sufficiently long time over the property in question put to auction, at least they seek an indulgence of this Court that their offer may be accepted and the authorities may be directed to execute the sale certificate in their favour. Learned counsel has placed reliance on the judgments of this Court in Navalkha and Sons v. Sri Ramanya Das and Others (1969) 3 SCC 537 and Divya Manufacturing Company (P) Ltd. Tirupati Woollen Mills Shramik Sangharsha Samity and Another v. Union Bank of India and Others Official Liquidator and Others (2000) 6 SCC 69 . 19. Per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scheme referred to in sub-section (1) may provide for any one or more of the following, namely:- (a) to (j) xxx xxx xxx (k) method of sale of the assets of the industrial undertaking of the sick industrial company such as by public auction or by inviting tenders or in any other manner as may be specified and for the manner of publicity therefor; 21. Operating agency to prepare complete inventory, etc. Where for the proper discharge of the functions of the Board under this Act the circumstances so require, the Board may, through any operating agency, cause to be prepared- (a) to (b) xxx xxx xxx (c) a valuation report in respect of the shares and assets in order to arrive at the reserve price for the sale of a part or whole of the industrial undertaking of the company or for fixation of the lease rent or share exchange ratio; 23. Indisputedly, in the instant case, it has not been placed on record if there was any valuation report assessed by the Operating Agency from the approved valuer of the subject property and, at the same time, the reserve price of the subject property was never disclosed/indicated in the first place when the publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icious features of underbidding detrimental to the legitimate interest of the debtor 27. Before we proceed to consider the submissions made, it will be apposite to summarize the admitted facts for better appreciation of the submissions made. (i). M/s Bharat Commerce Industries Limited (BCI) was established in 1964. However, it later became sick and by an order dated 22nd January, 2004 passed by the BIFR in case HP/2000, IDBI was directed to become the Operating Agency to take up sale of assets of BCI under Section 20(4) of SICA in terms of ASC guidelines. (ii). Advertisement came to be published by IDBI (Operating Agency) for sale of land of Block IV Staff Colony of Rajpura unit of BCI admeasuring 26,750 sq. meters (approx. 5 acres) on 24th May, 2004. (iii). The appellant (Rajiv Kumar Jindal and others) was the solitary bidder who submitted their bid for purchase of Block IV for Rs.2,84,00,000/- on 22nd June, 2004 and paid earnest money of Rs.6 lakhs. (iv). The Operating Agency accepted the bid by letter dated 12th August, 2004, subject to the condition that the successful bidder has to comply with the terms and conditions of the ASC, as advised to all the bidde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is always to be taken care of to secure the optimized value of the property. 31. The appellants have shown their willingness to deposit the bid amount in two instalments on 20th September, 2004 and 10th November, 2004 but the fact is that even before the order came to be passed by the BIFR, neither the bank guarantee was furnished nor a single instalment was deposited by the appellants and here, in our view, the AAIFR has went wrong in setting aside the Order of BIFR. 32. The Division Bench of the High Court had revisited the entire proceedings and taking into consideration the fact that there was no competitive bidding which is a sine qua non for public auction and guidelines of the ASC have not been complied with, accordingly set aside the order of the AAIFR with a further direction to initiate the process afresh in accordance with law and we do not find any error in the view expressed by the High Court which may call for our interference. 33. The submission of Mr. Gupta, learned senior counsel, that the appellants in Civil Appeal No.10127 of 2011 have not participated in the bidding process and made an offer at the later stage, have no locus standi to challenge the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bid is dispatched at his notified address which is the requirement in terms of clause (h) and (i) of the procedure and guidelines laid down by the ASC and that being a part of the auction notice, the appellant was under obligation to comply with and despite opportunity the appellant has failed to comply with both the twin conditions and, thus in the facts and circumstance, the Division Bench of the High Court has rightly set aside the order of AAIFR dated 1st April, 2005. 36. So far as the submission made by learned counsel for the appellants in Civil Appeal No. 10127 of 2011 that the offer made by the appellants was higher than the sealed bid is concerned, it has no substance for the reason that the appellants have not participated in the bidding process and it is not the case of the appellants that the auction notice published on 24th May, 2004 was not in their knowledge. In our considered view, later offer in the facts and circumstances of the case tendered by the appellants was of no legal significance and rightly not acknowledged by the authority. 37. Before we conclude, we would like to observe that the money deposited by the appellants in Civil Appeal No. 10128 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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