TaxTMI 
TaxTMI 
2023 (4) TMI 1189
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Sick Industrial Companies (Special Provisions) Act, 1985(hereinafter being referred to as the "Act 1985") through IDBI - the Operating Agency, initiated the process of inviting offers in sealed cover for sale of assets of the captioned unit. 3. Pursuant to public notice dated 24th May, 2004, offers were invited for various blocks, calling upon the interested parties to deposit earnest money of Rs.6 lakhs for Block IV and submit their tenders in sealed cover within a period of 30 days from the date of advertisement and for further information, the interested parties may contact the office of Mr. P.M. Nair, DGM, IDBI, Mumbai, the office of the Assets Sale Committee constituted by the BIFR and the agency reserved the right to accept or reject any offer without assigning any reason therefor. It is pertinent to note that the Operating Agency was under obligation to evaluate the realizable value of the property from the approved valuer and thereafter to notify the reserve price in the auction notice in terms of 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Residential Welfare Association and its members under Article 226 of the Constitution. 9. The Division Bench of the High Court after revisiting the records of the bidding process and the procedure adopted by the Operating Agency arrived to a conclusion that the appellants have not made payment in terms of the guidelines of the ASC and failed to furnish the bank guarantee and to deposit the purchase consideration at the relevant point of time. The Division Bench also took note of the fact that solitary bid was received by the ASC for the subject property and it was less than the circle rate fixed by the Collector of the property in question and while setting aside the order of the AAIFR dated 1^st April, 2005, restored the order of the BIFR dated 24th November, 2004 with a further direction that the money which was deposited by the appellant, be returned with interest @ 8% (simple) from the date of its deposit till the amount is refunded with liberty to sell the property, if need be, as per the provisions of 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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hence there was no violation of any terms and conditions of the sale of assets. 16. To buttress further, learned counsel submits that once the auction sale stands approved, at least the employees who were residing in the property in question and who had never participated in the bidding process, have no locus to question the order passed by the AAIFR confirming the auction bid under its order dated 1st April, 2005 and the offer made by the respondent/original petitioner (BCI Staff Colony) was of no substance and if such practice is being permitted, then such of the applicants who have not participated in the bidding process would make an offer at a later stage, no auction bid at any given point of time could be finalized and it will never fetch the value of the asset and the transaction can never attain finality. In support of his submissions, the counsel has placed reliance on the judgment of this Court in National Highways Authority of India v. Gwalior-Jhansi Expressway Limited Through Director (2018) 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eard learned counsel for the parties and with their assistance perused the material on record. 22. The process was initiated by the Operating Agency (IDBI) to sell the subject assets of the sick industrial company (BCI) in terms of the order passed by the BIFR in exercise of its power under Section 20(4) of the Act, 1985. Pursuant thereto, the Operating Agency was under an obligation to obtain the valuation report of the subject property and after due assessment has to arrive at the reserve price for the sale of the property in terms of Section 21(c) of the Act, 1985 and thereafter has to proceed with a procedure known to law while adopting a method for sale of the assets by public auction or by inviting tenders or in any other manner specified and for the manner of publicity therefor in terms of Section 18(2)(k) of the Act, 1985. Sections 18(2)(k) and 21(c) are relevant for the purpose and are reproduced hereinbelow: "18. Preparation and sanction of Schemes. - (1) xxx xxx xxx (2) The 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut 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. 26. The object of auction has been considered by this Court in Lakshmanasami Gounder v. C.I.T., Selvamani and Others (1992) 1 SCC 91 as under:- ".......The object of the sale is to secure the maximum price and to avoid arbitrariness in the procedure adopted before sale and to prevent underhand dealings in effecting sale and purchase of the debtor's property. Public auction is one of the modes of sale intending to get highest competitive price for the property. Public auction also ensures fairness in actions of the public authorities or the sale officers who should act fairly and objectively. Their action should be legitimate. Their dealing should be free from suspicion. Nothing should be suggestive of bias, favouritism, nepotism or beset with suspicious features of underbidding detrimental to the legitimate interest of the debtor..." 27. Before we proceed to consider the submissions made,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k guarantee, valid for one year, as many as considered satisfactory by the OA/MA, to secure full and timely payment of consideration for the assets purchased." (j) to (r) xxx xxx xxx." 29. Indisputedly, the appellants (auction bidder) have neither paid the sale consideration in terms of clause (h) of the guidelines nor furnished the bank guarantee within 15 days of the acceptance of the bid in terms of clause (i) of the guidelines. 30. When the matter was placed before the BIFR, the Bench took note of the fact that the appellants, viz., M/s Rajiv Kumar Jindal and others, were the sole bidder for Block IV of Rajpura Unit and have not complied with the ASC guidelines. Taking both the factors into consideration; (i) the appellant being the sole bidder; and (ii) guidelines of ASC have not been complied with, the bid of the appellants was not confirmed but on appeal being preferred by the appellants, the AAIFR has not taken into consideration that the guidelines of the ASC have not been followed and the appellant was the sole bidder, as there was no competitive bidding which is always to be taken care of to secure the optimized value of the property. 31. The appellants....
X X X X Extracts X X X X
X X X X Extracts X X X X
....posited after the order came to be passed by the AAIFR confirming the bid on 3rd June, 2005 and 7th June, 2005 and Tripartite MOU was executed is of no substance for the reason that the very procedure in the first instance initiated by the Operating Agency was defective at its very inception and before initiation of the auction proceedings, neither the value of the property was assessed through the approved valuer nor the reserve price was notified in the auction notice dated 24th May, 2004 and the solitary bid of the appellant for Rs.2,84,00,000/- was accepted and confirmed by the AAIFR without taking note of the fact that the appellant has failed to comply with the guidelines laid down by the ASC indicating that successful purchaser has to furnish a bank guarantee valid for a period of one year within 15 days of intimation regarding acceptance of the bid and the balance of the purchase consideration has to be paid in two instalments of 50% and 48% of the total selling price payable respectively before the end of 45 days and 90 days from the date of intimation of final acceptance of the bid is dispatched at his notified address which is the requirement in terms of clause (h) and (....