Negotiated sale of secured assets upheld where bid terms allowed shortlist-based bidding and revised offers

An asset reconstruction company was entitled to shortlist the three highest bidders for a second round of negotiations and accept the highest revised offer where the bid conditions had reserved that power and the bidders had accepted those terms. The sale procedure by quotation from persons dealing with similar secured assets was treated as permissible under the Security Interest (Enforcement) Rules, 2002, including sale by a method other than public auction or public tender on terms settled in writing. No legal infirmity or unfairness was found in excluding the remaining qualified bidders from further negotiation, and the restricted negotiation process and resulting sale were upheld as valid in law.

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Issues: Whether the asset reconstruction company was justified in shortlisting the highest bidders for further negotiation and accepting the highest revised offer under the bid conditions framed for sale of secured assets.

Analysis: The sale procedure adopted through obtaining quotations from persons dealing with similar secured assets was held to be permissible under Rule 8(5)(a) of the Security Interest (Enforcement) Rules, 2002, which are framed under Sections 13 and 38 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Rule 8(8) was treated as permitting sale by a method other than public auction or public tender on terms settled in writing. The bid conditions reserved power to negotiate after initial offers were received, and the petitioners had accepted those conditions before bidding. The respondent was entitled to shortlist the three highest bidders for the second round of negotiations in order to secure the best price and recover the debt, and no legal infirmity or unfairness was found in excluding the remaining qualified bidders from further negotiation.

Conclusion: The restricted negotiation process and acceptance of the successful bid were valid in law, and the challenge failed.

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