Reserve price in SARFAESI auctions controls bidder participation; a bid below the notified floor cannot claim enforceable acceptance.

Under the SARFAESI auction rules, where the sale notice and conditions expressly fix a reserve price and prohibit sale below that figure, a bidder has no enforceable right to insist on participation in inter se bidding on the basis of a lower bid. Rule 8(5) requires fixation of reserve price, and Rule 9(2) generally bars confirmation of a sale below that price except within the limited proviso-based framework with the necessary consent. The Bombay HC held that accepting a bid at a fraction of the reserve price would undermine the auction process, and the bid rejection was therefore valid. The earnest money objection did not change the result.

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Issues: Whether a bidder could insist on participation in a public auction under the SARFAESI framework despite submitting a bid below the reserve price fixed in the sale notice, and whether the rejection of the bid was illegal.

Analysis: The sale notice and auction conditions specifically fixed a reserve price and stated that the property would not be sold below that figure. Rule 8(5) of the Security Interest (Enforcement) Rules, 2002 requires the authorised officer to fix the reserve price, and Rule 9(2) provides that a sale below the reserve price cannot ordinarily be confirmed, save in the limited situation contemplated by the second proviso where a higher price is not obtained and consent is secured. A bidder who knowingly offers a fraction of the reserve price despite an express stipulation to the contrary cannot claim a vested right to be included in inter se bidding. Accepting such a contention would undermine the sanctity of the auction process and make the tender exercise illusory. The challenge based on earnest money also did not assist the petitioner, since the bid was invalid on the reserve price issue itself and the factual controversy regarding the deposit did not alter the result.

Conclusion: The rejection of the petitioner's bid was valid, and the writ petition was liable to fail.

Ratio Decidendi: Where the auction notice expressly stipulates that the property will not be sold below the reserve price, a bidder has no enforceable right to participate on the basis of a bid below that price, except within the limited enabling framework of the rules and with the requisite consent.

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