Allahabad High Court
M/S Santkripa Trading Co. ... vs Bank Of Baroda, And Another on 11 September, 2013
Equivalent citations: AIR 2013 ALLAHABAD 177
Bench: Ashok Bhushan, Vipin Sinha
HIGH COURT OF JUDICATURE AT ALLAHABAD A.F.R. Court No. - 37 Case :- WRIT - C No. - 46955 of 2013 Petitioner :- M/S Santkripa Trading Co. Administrative Office & 3 Others Respondent :- Bank Of Baroda, And Another Counsel for Petitioner :- Ashok Pandey Counsel for Respondent :- Anand Krishna Malviya Hon'ble Ashok Bhushan,J.
Hon'ble Vipin Sinha,J.
(Delivered by Ashok Bhushan,J) Heard Shri Ashok Pandey, learned counsel for the petitioners and Shri Manish Mehrotra, learned counsel appearing for the respondents Bank.
The petitioners, by this writ petition have prayed for quashing the e-auction notice dated 25/8/2013, issued by the Bank for auction of the mortgaged assets in exercise of power under Section 13 (4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter called the "Act, 2002").
Brief facts giving rise to this writ petition are: On an application made by the petitioner no.1 through petitioner no.2 a Cash Credit Limit of an amount of Rs. 1.5 Crores was sanctioned by the Bank in favour of the petitioner no.1. Similarly, on an application made by the petitioner no.3, through petitioner no.4 a Cash Credit Limit of Rs. 1 Crore was sanctioned in favour of the petitioner no.3 by the Bank. The account of the petitioners no.1 and 3 were declared NPA on 28/9/2012. A demand notice dated 06/5/2013, under Section 13(2) of the Act, 2002 was issued calling the petitioner no.1 to pay an amount of Rs. 1,50,17,663.46 and the petitioner no.3 to pay an amount of Rs.1,00,11,977.88. Thereafter the Bank invoked power under Section 13(4) of the Act, 2002 and issued e-auction notice dated 25/8/2013 inviting online tenders for auction of the mortgaged assets. Copy of the e-auction notice dated 25/8/2013 has been filed as Annexure-2 to the writ petition which indicates that a detailed procedure for submitting the bid by electronic transaction has been provided for. Details of the properties to be auctioned has been mentioned in the notice with area and boundaries. Reserved price has also been mentioned in the notice dated 25/8/2013, 27/9/2013 has been fixed as the date and time as 11 A.M. to 12 Noon for e-auction.
Learned counsel for the petitioners in support of the writ petition contended that the sale of the mortgaged assets is to be conducted in accordance with the rules namely; The Security Interest (Enforcement) Rules, 2002 (hereinafter called the "Rules, 2002") which rules do not provide for e-auction for sale of the mortgaged assets, hence the e-auction notice dated 25/8/2013 is without jurisdiction. It is submitted that Rule 8 of the Rules, 2002 provides for sale of the immovable secured assets and under rule 8(5) of the Rules, 2002, the sale of e-auction is not provided for, hence the Bank transgressed its jurisdiction in issuing the notice for e-auction dated 25/8/2013. It is submitted that when the statutory rule provides for a particular method for sale of the mortgaged assets, no other procedure can be adopted by the Bank.
Shri Manish Mehrotra, learned counsel appearing for the Bank refuting the submissions of the learned counsel for the petitioners contended that the notice issued by the bank for e-auction dated 25/8/2013, is well within the powers of the Bank given under the Rules, 2002. It is submitted that the e-auction is nothing but a species of the auction and no exception can be taken by the petitioners to the sale of the mortgaged assets by e-auction. It is submitted that the petitioners had earlier filed writ petitions being Writ Petition Nos.38482/2013 and 38483/2013, challenging the notice given by the Bank under Section 13(2) of the Act, 2002 as well as the decision taken by the Bank deciding the objections filed by the petitioners under Section 13(3A) of the Act, 2002. Both the writ petitions were dismissed by this court on 18/7/2013 on the ground that the petitioners have a statutory remedy available under Section 17 of the Act, 2002 as and when the Bank invokes power under Section 13(4) of the Act, 2002. It is submitted that against the notice dated 25/8/2013, the remedy available to the petitioners is to file an appeal under Section 17 and this writ petition be not entertained.
Learned counsel for the petitioners has placed reliance on the judgment of the Apex Court in Om Kumar Vs. Union of India, AIR 2000 SC 3689, Captain Sube Singh & Ors Vs. Lt. Governor of Delhi & Ors, (2004) 6 SCC, 440, Indian Banks Association, Bombay & Ors. Vs. M/s Devkala Consultancy Service & Ors, (2004) 11 SCC, 1 and a judgment of the Punjab and Haryana High Court in C.W.P. No.21862/2012, Dr. Mandeep Sethi Vs. Union Bank of India & Ors.
We have considered the submissions of the learned counsel for the parties and have perused the record.
The petitioners, by this writ petition have challenged the e-auction notice dated 25/8/2013, issued by the Bank exercising its power under Section 13 (4) of the Act, 2002. The petitioners as noted above, had earlier filed writ petitions being Writ Petition Nos.38482/2013 and 38483/2013,challenging the notice issued by the Bank under Section 13(2) of the Act, 2002 which writ petitions were dismissed by the Division Bench of this Court dated 18/7/2013. The writ petitions were dismissed with the following observation:
"By this petition, petitioners have prayed for quashing the demand notice dated 06/5/2013 issued by the Bank in exercise of power under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as well as the letter dated 08/7/2013, by which the objection filed by the petitioner under Section 13(3) (a) of the Act, 2002 has been decided.
Learned counsel for the Bank submitted that the Bank has not yet invoked power under Section 13 (4) of the Act, 2002.
We are of the view that the remedy available to the petitioners is to file an appeal under Section 17 of the Act, 2002, as and when the Bank invokes power under Section13 (4) of the Act, 2002.
With the aforesaid observation, the writ petition is dismissed."
The petitioners earlier writ petitions, having been dismissed with the observation that as and when the Bank invokes power under Section 13(4) of the Act, 2002, the petitioners have statutory remedy available under Section 17 of the Act, 2002, this writ petition is to be dismissed on the ground of availability of statutory remedy under Section 17 of the Act, 2002.
Learned counsel for the petitioners however, submits that since the e-auction notice issued by the Bank is without jurisdiction, petitioners need not be relegated to avail the statutory remedy. He has placed reliance on the Apex Court judgment in Whirlpool Corporation Vs. Registrar of Trade Marks Mumbai, (1998) 8 SCC, 1. The Apex Court in the aforesaid case had occasion to examine the jurisdiction of the High Court under Article 226 of the Constitution of India. The Apex Court in the said case noted the various judgments of the Apex Court wherein it was held that where the alternate remedy exists, it would be sound exercise of jurisdiction to refuse to interfere in a petition under Article 226 of the Constitution of India. However, to the above normal rule, certain exceptions were also noted by the Apex Court. One of the exception which was noted by the Apex Court was that the jurisdiction under Article 226 of the Constitution can be exercised inspite of alternative remedy available where the authority had no jurisdiction or had purported to usurp the jurisdiction without any legal foundation. It is useful to quote paragraphs 15 and 20 of the said judgment which are to the following effect:
"15.Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case-law on this point but to cut down this circle of forensic whirlpool, we would rely or some old decisions of the evolutionary era of the constitutional law as they still hold the field.
20.Much water has since flown under the bridge, but there has been no corrosive effect on these decisions which though old, continue to hold the field with the result that law as to the jurisdiction of the High Court in entertaining a Writ Petition under Article 226 of the Constitution, in spite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation."
In the present case, there is no lack of jurisdiction in the Bank to proceed to sell the mortgaged assets in exercise of its power under the Act, 2002. The Bank has invoked its power under Section 13(4) of the Act, 2002, hence the action of the Bank cannot be said to be without jurisdiction. Learned counsel for the petitioners having laid much emphasis on his submission that the e-auction is not permissible under the statutory rules and notice of e-auction dated 25/8/2013, is without jurisdiction, we have proceeded to examine the above contention on merits. As noted above, under the Act,2002, Rules have been framed as the Rules, 2002.
Rule 8 of the Rules, 2002 deals with sale of immovable secured assets.
Rule 8 (5) and (6) of the Rules, 2002 which are relevant in the present case are quoted below:
" 8. Sale of immovable secured assets.-
(1).................
(2).................
(3)................
(4)...............
(5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:-
(a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or
(b) by inviting tenders from the public;
(c) by holding public auction; or
(d) by private treaty.
(6). The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule(5):
Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include,-
(a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor;
(b) the secured debt for recovery of which the property is to be sold;
(c) reserve price, below which the property may not be sold;
(d) time and place of public auction or the time after which sale by any other mode shall be completed;
(e) depositing earnest money as may be stipulated by the secured creditor;
(f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property."
Under sub-rule 5 of Rule 8 of the Rules, 2002, sale of the mortgaged assets is permissible by following methods also i.e. (i) by inviting tenders from the public and (ii) by holding public auction.
The notice dated 25/8/2013, (Annexure-2 to the writ petition) contemplates inviting tenders online for sale of the mortgaged assets. The date and time for e-auction has been fixed as 27/9/2013 between 11 A.M. to 12 Noon. Detailed procedure for conduct of e-auction has been provided for in the notice dated 25/8/2013. Whether the notice dated 25/8/2013, for e-auction of the mortgaged assets is permissible within Rule 8(5) of the Rules, 2002 is the question to be answered by us.
Auction and public auction has been defined in P. Ramanatha Aiyar's The Law Lexicon 3rd Edition 2012 in following words:
"Auction. A public sale of land, or goods by public outcry to the higher bidder. Auction is very generally defined as a sale to the highest bidder, and this is the usual meaning. There may, however be a sale to the lowest bidder, as where land is sold for non-payment of taxes to whomsoever will take it for the shortest term; or where a contract is offered to the one who will perform it at the lowest price. And these appear fairly included in the term "Auction" (Abbot;5 MIA 109) A public sale of property conducted by biddings; to make an auction.
PUBLIC AUCTION.A sale of property at auction, where any and all persons who choose are permitted to attend and offer bids. Though this phrase is frequently used, it is doubtful whether the word "public" adds anything to the force of the expression since "auction" itself imports publicity. If there can be such a thing as a private auction, it must be one where the property is sold to the highest bidder, but only certain persons, or a certain class of persons, are permitted to be present or to offer bids as in the case of an auction sale of property under the Partition Act, where the right to bid is confined to the co-sharers."
An auction is generally defined as a sale to the highest bidder. Auction is to be conducted after due publicity. Notice dated 25/8/2013, itself contemplate e-auction on the basis of the tenders received online in favour of the highest tenderer.
The Apex Court in Chairman and Managing Director, Sipcot, Madras & Ors Vs. Contromix Pvt Ltd. By Its Director (Finance) Seetharaman, Madras & Anr, (1995) 4 SCC, 595, has laid down that the dominant consideration in a sale is to secure the best price for the property to be sold. This can only be achieved when there is maximum public participation in the process of sale and everybody has an opportunity of making an offer. Following was laid down in paragraph 12 which is to the following effect:
"12.In the matter of sale of public property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and every body has an opportunity of making an offer. Public auction after adequate publicity ensures participation of every person who is interested in purchasing the property and generally secures the best price. But many times it may not be possible to secure the best price by public auction when the bidders join together so as to depress the bid or the nature of the property to be sold is such that suitable bid may not be received at public auction. In that event, the other suitable mode for selling of property can be by inviting tenders. In order to ensure that such sale by calling tenders does not escape attention of an intending participant, it is essential that every endeavour should be made to give wide publicity so as to get the maximum price. These considerations which govern the sale of public property have been held to be applicable to a sale of property by the State Financial Corporations under section 29 of the Act in Mahesh Chandra case. In that case this Court has held that sale by public auction is universally recognised to be the best and most fair method and is beyond reproach and, if it is not possible to adopt the said method, sale may be held by inviting tenders, but in that event every endeavour should be made to give wide publicity to get the maximum price. The said decision cannot, therefore, be construed as laying down that a sale by tender is impermissible and invalid. The learned judges, in that case, have referred to the decisions of this Court in Sachidananda Pandey v. State of West Bengal, 1987 (2) SCR 223 and Haji T.M. Hassan v. Kerala Financial Corporation, 1988 (1) SCR 1079, wherein it has been held that one of the modes of securing the public interest, when it is considered necessary to dispose of a property, is to sell the property by public auction or by inviting tenders. It cannot, therefore, be said that a sale by inviting tenders is ipso facto invalid. The validity of such a sale will have to be considered in the light of the facts and circumstances of the particular case."
Notice for e-auction is published in the newspapers and is put on the website by the Bank inviting tenders from the public at large on fulfilling conditions and process as mentioned therein. In the present day of technological advancement, inviting tenders by online is now an accepted mode for settlement of property. The concept of e-contract is now an accepted form of entering into contract.
Learned counsel for the petitioners has placed reliance on the judgment of the Apex Court in Captain Sube Singh (supra), for the proposition that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself. Following was laid down in paragraph 29 which is quoted below:
"29. In Anjum M.H. Ghaswala a Constitution Bench of this Court reaffirmed the general rule that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself. (See also in this connection Dhanajaya Reddy v. State of Karnataka). The statute in question requires the authority to act in accordance with the rules for variation of the conditions attached to the permit. In our view, it is not permissible to the State Government to purport to alter these conditions by issuing a notification under Section 67 (1) (d) read with sub-clause (i) thereof."
There cannot be any dispute to the above proposition which is well settled. However, in the present case, it is to be examined as to whether the e-auction falls within the ambit of Rule 8(5) of the Rules, 2002 or not. As noted above, Rule 8(5) of the Rules, 2002 contemplates sale of mortgaged assets by inviting tenders from the public or by holding public auction.
The notice dated 25/8/2013, is fully covered by the process of sale of the mortgaged assets by holding public auction. E-auction is nothing, but a public auction where there is participation of public in general in submitting the tenders online.
A Division Bench of this Court in Nar Narain Mishra Vs. State of U.P. & Ors, 2013 (2) ADJ, 166, in which one of us (Ashok Bhushan,J) was a member had occasion to consider a similar submission in context of e-tendering for grant of mining lease. Rule 27 of the U.P. Minor Mineral (Concession) Rules, 1963 provides for grant of lease by auction. Rule 27A of the Rules, 1963 provides procedure for grant of lease by tender. Rule 27 and 27A of the Rules, 1963 did not provide for e-auction or e-tender. The State Government decided to grant lease by e-tender which was challenged before the Division Bench. It was contended that the Rules, 1963 do not provide for e-tendering process, hence adopting e-tendering process is without jurisdiction. The argument of the learned counsel for the petitioners was rejected and e-tendering was upheld. Following was laid down in paragraph 47 which is quoted below:
"47. Learned Counsel for the petitioner submitted that e-tendering is not contemplated or permissible by 1963 Rules. Rule 27(a) provides procedure for grant of lease by tender. Rule 27- A is quoted as below:
"27. Procedure for grant of lease by auction.- In respect of an area or areas declared under Sub-rule (1) of Rule 23 as area for grant of lease by auction the following shall be the procedure:
(a) The District Officer or the Committee authorised by the State Government under Rule 71 hereinafter referred to as the Committee, shall at least thirty days before the date of auction, give notice in the manner given below indicating the date, time and place of auction:
Provided that where for any reason the auction is not completed a fresh auction may be held after giving a shorter notice of at least seven days:
Word "tender" is a wide word which shall include e-tendering also. The submission of the learned counsel for the petitioners cannot be accepted that e-tendering is not included within the concept of tendering as statutorily recognised under Rule 27-A. The submission of the learned counsel for the petitioner that e-tendering is against the statutory rules cannot be accepted. Learned counsel for the petitioners has also contended that several persons living in far off villages shall be deprived from participating in the process they being not well versed with the electronic modes. To develop the scientific temper is one of the fundamental duties as recognized by Article 51A(h) of the Constitution of India. Wide-spread use of computers and other modern gadgets is increasing day by day. The submission of learned counsel for the petitioners cannot be accepted that person living in the villages shall be deprived to participate in the process. E-tendering has been resorted to extend facility and opportunity to person situated at remote places to participate in the process. The contrary submission of the learned counsel for the petitioners does not appeal to the reason. Inviting tenders electronically is with purpose and object to provide facility to all interested person to participate in the process unhampered by any kind of threat and pressures which were being frequently noticed by the State Government in the process of grant of contract and the lease."
Learned counsel for the petitioners has placed reliance on the Division Bench judgment of Punjab and Haryana High Court in Dr. Mandeep Sethi (supra). In the case before the Punjab and Haryana High Court, the process of e-auction for sale by Presiding Officers of the Debt Recovery Tribunals was under challenge. Instructions were issued by the Government of India, Ministry of Finance to the Presiding Officers of the Debt Recovery Tribunal to conduct all auctions electronically (E-auction). The said instructions were challenged. The sale by Presiding Officers of the Debt Recovery Tribunal is to be conducted in accordance with the Income Tax Act, 1961 and also Income Tax (Certificate Proceedings) Rules, 1962. Rule 56 of the Rules contemplates sale by public auction. The Division Bench of the Punjab and Haryana High Court noted the facts of the case and Rule 56 in following words.
" Challenge in the present writ petition is to the instructions dated 13.06.2012 (Annexure P-13) issued by the Government of India, Ministry of Finance directing the Presiding Officers of the Debt Recovery Tribunals to conduct all auctions electronically (for short "the e-auction"). Though the petitioner has also challenged the orders passed by the Debt Recovery Tribunal in the matter of attachment and sale, but we leave that question open to the petitioner to seek their adjudication before the appropriate forum. In the present writ petition, we restrict ourselves to examine the challenge to the conduct of e-auction.
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short 'the Act') confers power under Section 29 of the said Act with the Debt Recovery Tribunal to sell the property of the certificate debtors in terms of 2nd and 3rd Schedules to the Income Tax Act, 1961 and C.W.P. No.21862 of 2012 2 also Income Tax (Certificate Proceedings) Rules, 1962 (for short 'the Rules') Part-III of 2nd Schedule to the Income Tax Act deals with attachment and sale of immovable property. Rule 56 of the Rules contemplates sale by public auction. The said Rule reads as under:
"56.Sale to be by auction. The sale shall be by public auction to the highest bidder and shall be subject to confirmation by the Tax Recovery Officer: Provided that no sale under this Rule shall be made if the amount bid by the highest bidder is less than the reserve price, if any, specified under clause (cc) of rule 53."
The Division Bench while considering the above submission held that the e-auction is another form of public auction however, the Central Government could not have issued direction to the Debt Recovery Tribunals in discharge of its quasi judicial functions. Following was laid down by the Division Bench in the above case:
"By the process of e-auction, intending bidder is forbidden to participate in the process of sale. Instead of a physical auction at the spot, it is virtual auction in the electronic format. The advantage of e-auction is that every bid is recorded within a specified slot and is free from the errors, which may be committed by the court auctioneer. Therefore, we find that e-auction is another form of the public auction, which is deemed to be included in Rule 56 of the Rules. Having said so, the question required to be examined is; whether the Central Government could direct the Debt Recovery Tribunals to conduct auctions only through e-auction. The argument of Mr. Singh is meritorious that there cannot be any direction by the Central Government to the Debt Recovery Tribunals, in discharge of its quasi judicial functions."
Thus, the above judgment of the Punjab and Haryana High Court in the case of Dr. Mandeep Sethi (supra) does not support the submissions raised by the learned counsel for the petitioners, rather it lays down that e-auction is a form of public auction and was well within Rule 56 as quoted above.
In view of the foregoing discussions, we are of the view that the Bank has rightly resorted to e-auction which is well within its power under Rule 8(5) of the Rules, 2002 and the notice dated 25/8/2013 issued by the Bank for e-auction is well within its jurisdiction and cannot be said to be beyond the Rules, 2002. None of the submissions raised by the learned counsel for the petitioners has any substance.
The writ petition is dismissed. However, the dismissal of the writ petition shall not preclude the petitioners to avail the statutory remedy as provided under Section 17 of the Act, 2002.
Order Date :- 11.9.2013 SB