Madras High Court
Mohamed Fazal vs K.S.Palanisamy on 10 July, 2012
Bench: Elipe Dharma Rao, M.Venugopal
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10.7.2012 CORAM: THE HONOURABLE MR.JUSTICE ELIPE DHARMA RAO AND THE HONOURABLE MR.JUSTICE M.VENUGOPAL Writ Appeal No.2226 of 2011 and M.P.No.2 of 2011 Mohamed Fazal ... Petitioner Vs. 1.K.S.Palanisamy 2.The Regional Manager, Tamil Nadu Industrial Investment Corporation Limited, Regional Office, Sri Lakshmi Complex, No.4/22, Omalur Main Road, Swarnapuri, Salem-636004. ... Respondents * * * Writ Appeal preferred under clause 15 of the Letters Patent as against the order of the learned single Judge dated 16.9.2011 made in W.P.No.7440 of 2011. * * * For petitioner : Mr.Vijay Narayanan, Sr.Counsel for Mr.Kasikumar For R.1 : Mr.Jayesh Dolia for M/s.Aiyar and Dolia For R.2 : Mr.M.J.Jaseem Mohamed * * * JUDGMENT
ELIPE DHARMA RAO, J.
One B.Gowdappa, Proprietor of M/s.Sree Anand Mansion (Boarding & Lodging), Hosur, comprised in S.No.968/1A2, Sennathur Village, Krishnagiri Road, Hosur-635109, availed a loan of Rs.16.95 lakh out of the sanctioned loan amount of Rs.19.20 lakh for construction of a hotel at Sennathur village, Krishnagiri Road, by mortgaging the said property, measuring an extent of 2623 sq.ft. along with superstructure put up therein from Tamil Nadu Industrial Investment Corporation Limited (TIIC in short). Since he fell in default, TIIC foreclosed the loan account and took constructive possession of the property during 2002 and subsequently, brought the assets in public auction eight times between 2002 and 2011.
2. When the property was brought for auction sale for the seventh time on 30.12.2010, one sealed tender was received from one M.Sivakumar of Salem for Rs.30 lakh and in the open auction, there were two participants, viz. S.K.Senthil Kumar, Advocate, Salem and K.V.Sudanthiram of Dharmapuri. It is seen from the materials placed on record that the bid value quoted in open auction by the said S.K.Senthilkumar was Rs.25 lakh and the tender of the above said Sivakumar was higher and he had enhanced his offer from Rs.30 lakh to Rs.50 lakh on negotiation. It is also seen from the records that in the meantime, the appellant, had submitted a representation dated 3.2.2011 to TIIC head office, stating that he was willing to offer Rs.55 lakh for the said property by depositing Rs.12 lakh as EMD, to show his bona fide and hence TIIC had cancelled the auction conducted on 30.12.2010 and having decided to bring the property for re-auction, in order to fetch better price for the property, issued an auction notice in the Tamil Daily 'Dina Thanthi' on 17.2.2011. As scheduled, the auction was conducted on 2.3.2011 by the Branch Manager of TIIC, Hosur, wherein, according to TIIC, the appellant alone had participated and quoted the highest amount of Rs.56 lakhs and the said offer was enhanced to Rs.59 lakhs after negotiations. Accordingly, by the communication dated 3.3.2011, the appellant was issued with the Sale Confirmation letter, requiring him to remit the balance amount so as to execute the sale deed in his favour.
3. While things stood thus, the first respondent herein has initiated the present writ proceedings, praying to issue a Writ of Mandamus, directing TIIC to accept his offer amount of Rs.70,99,000/=. His case is that he was interested in participating the public auction and also obtained the tender form on 1.3.2011 and as per the notification, he had also drawn two Demand Drafts, totalling to Rs.7,10,000/= for payment towards 10% of bid amount and then went in person to submit the sealed tender form along with Demand Drafts. But, according to the first respondent/writ petitioner, TIIC has informed him that they have not taken possession of the property, since writ petition in respect of the property, which is to be auctioned, is pending in the High Court and that the borrower had fraudulently sold the property to the present appellant for which an FIR had been lodged. It is his further case that even according to the valuation report of the Engineer from whom the TIIC had obtained valuation report, the value of the property is more than Rs.65 lakhs and TIIC had conveniently omitted to state the upset price in the auction, which is always stated in all the auctions to ensure that the property fetches maximum price in the auction and that he reliably understand that TIIC, in order to ensure that the preset appellant succeeds in the auction, has given a false information to him and refused to receive the sealed tender. Further stating that his offer of Rs.70,99,000/= is much higher than the offer of Rs.59 lakhs of the present appellant, he had sought for the above said relief of Writ of Mandamus.
4. The learned single Judge, by the order dated 16.9.2011 has allowed the writ petition and aggrieved by the same, the present writ appeal has been filed by the appellant.
5. Mr.Vijay Narayanan, the learned senior counsel appearing for the appellant would strenuously argue that the writ petitioner has not at all participated in the auction conducted and after the sale confirmation certificate has been issued in the name of the successful bidder/the appellant herein, the first respondent/writ petitioner has filed the present writ proceedings with an ulterior motive. The learned senior counsel would draw our attention to the grounds of appeal, wherein it has been stated that the High Court is not a tender issuing or accepting authority before whom such application for considering the tender can be made and the High Court cannot usurp the power under Section 29 of the State Finance Corporation Act, to accept an offer for participation in tender and allow the same and that the writ petitioner having failed to participate on the date of public auction, cannot use this Court as a forum to consider the acceptance of his application for tender on date other than the auction date fixed by the TIIC.
6. The learned senior counsel would further argue that the tender form was purchased by one S.K.Senthil Kumar, Advocate, at Salem Branch office of TIIC on 1.3.2011 in the name of the writ petitioner, but, however, the tender was not submitted at the Hosur branch within the time stipulated and even thereafter and hence public auction was conducted on 2.3.2011, wherein the appellant alone participated. The learned senior counsel would further argue that the learned single Judge has erred in ordering TIIC to execute the sale deed in favour of the writ petitioner, thus acting like a tender issuing and tender accepting authority, ignoring the fact that the sale has already been confirmed in favour of the appellant and that the writ petitioner never participated in the auction. In support of his arguments, the learned senior counsel would rely on a judgment of the Honourable Apex Court in Valji Khimji and Company vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and others [(2008) 9 SCC 299], wherein it has been held as follows:
"The auction-sale was done after adequate publicity in well-known newspapers. Hence, if anyone wanted to make a bid in the auction, he should have participated in the said auction and made his bid. Moreover, even after the auction, the sale was confirmed by the High Court only on 30.7.2003 (after three months), and any objection to the sale could have been filed prior to that date. However, entertaining objections after the sale is confirmed should not ordinarily be allowed, except on very limited grounds like fraud, otherwise no auction-sale will ever be complete."
"As the auction was an open auction after wide publicity in well known newspapers, there was nothing to prevent the objectors from participating in the auction, but they did not do so. There is no allegation of fraud either in this case. Hence, there was no justification to set aside the confirmation of the sale."
7. It has also been held in this judgment that 'once sale is confirmed by the authority, certain rights accrue in favour of the auction-purchaser, and these rights cannot be extinguished except in exceptional cases such as fraud or collusion.'
8. The learned standing counsel appearing for TIIC while endorsing the arguments advanced on the part of the appellant, would argue that the writ petitioner never participated in the auction and on the date of auction, the appellant alone had participated and in fact, the bid was knocked down in favour of the appellant and a sale certificate was also issued.
9. On the part of the second respondent/writ petitioner, it has been argued that the learned single Judge has analysed all the facts and circumstances of the case in a proper perspective and having applied correct principles of law, has allowed the writ petition and therefore, no interference of this Court is needed into the order of the learned single Judge.
10. This Writ Appeal was admitted on 21.11.2011 and an interim order was passed suspending the sale purported to be confirmed in favour of the writ petitioner until further orders. When we have taken up the matter for further hearing on 10.4.2012, we observed that following disputed questions of fact are involved in the matter:
"(a) while on the part of the appellant and also TIIC it has been contended that the writ petitioner has not at all participated in the auction held on 2.3.2011, on the part of the writ petitioner it has been stated that he was cheated by TIIC;
(b) while on the part of the appellant and also TIIC it has been contended that TIIC has fixed the outstanding loan amount of the subject concerned as starting price and no upset price was fixed and the appellant alone had participated in the sale and had quoted the highest amount of Rs.56 lakhs, which, after private negotiation, was increased to Rs.59 lakhs, on the part of the writ petitioner it was contended that as per the valuation report obtained by TIIC, the value of the property was assessed to Rs.65 lakhs and since he had quoted Rs.70,99,000/= his offer alone should have been accepted;
(c) while on the part of the writ petitioner, it is contended that the procedures for conducting auction of public properties were not followed by TIIC, the same is stiffly denied not only by TIIC but also by the appellant."
11. Therefore, to get the true facts before us, we directed the Chief Secretary of the Government of Tamil Nadu to probe into the matter with regard to the above stated points and into all the aspects of the case and in case any foul play, illegality or irregularity is found during such enquiry, he shall fix responsibility on concerned person/s for such foul play etc. and file his report before us. Accordingly, the Chief Secretary, has submitted his report before us. For ready reference, we extract hereunder the said report:
"2. On perusal of the files, it is seen that M/s.Sree Anand Mansion, represented by its proprietor Thiru B.Gowdappa availed a sum of Rs.16.95 lakh out of the sanctioned loan amount of Rs.19.20 lakh from TIIC during 1996 for construction of a hotel at Sennathur Village, Krishnagiri Road, Hosur, by mortgaging the said property with TIIC.
3. Due to default in loan payment by the loanee, TIIC foreclosed the loan account and took constructive possession of the hotel during 2002, and subsequently brought the assets for sale in public auction eight times between 2002 and 2011.
4. It is seen from the records that when the property was brought for auction sale for the seventh time on 30.12.10, one sealed tender was received from Thiru M.Sivakumar of Salem for Rs.30.00 lakh. In the open auction, there were two participants, viz. Thiru S.K.Senthil Kumar, Salem and Thiru K.V.Sudanthiram of Dharmapuri. The bid value quoted in open auction by Thiru S.K.Senthilkumar was Rs.25.00 lakh. The tender of Thiru Sivakumar was higher and he had enhanced his offer from Rs.30.00 lakh to Rs.50.00 lakh on negotiation.
5. In the meantime, one Thiru Mohd.Fazal of Coimbatore had submitted a representation dt.3.2.11 to TIIC, Head Office, stating that he was willing to offer Rs.55.00 Lakh for the said property by depositing Rs.12.00 lakh as EMD to show his bona fide. Hence, TIIC had cancelled the auction conducted on 30.12.10 and decided to bring the property for re-auction in order to fetch better price for the property.
6. It is seen that the Hosur branch of TIIC brought the assets for re-auction of the eighth time on 2.3.11 by giving advertisement in 'Daily Thanthi' dt.17.2.11. In the auction notice, TIIC had indicated that the intending purchasers can inspect the property on 24.2.11 and the last date for submissionof tender was 2.3.11 (before 10.30 a.m.) and the public auctioon was to be held on 2.3.11 at 11.00 a.m. the auction notice was issued by the Regional Office, Salem of TIIC.
7. Further, it appears that one tender form was purchased by one Thiru S.K.Senthil Kumar, Advocate, at Salem branch office of TIIC on 1.3.11 in the name of Thiru K.s.Palanisamy. However, he did not submit any tender at Hosur branch within the time stipulated and even thereafter. Hence, as per the auction notice, public auction was conducted on 2.3.11 at 11.00 a.m. at Hosur branch and one Thiru Mohd.Fazal was the only person who participated in the public auction. He made a bid of Rs.55.00 lakh which was subsequently enhanced to Rs.59.00 lakh after negotiation.
8. It is seen from the records that Mohd.Fazal alone had taken part in the public auction. He had deposited an EMD of Rs.14.15 lakh including Rs.12.00 lakh remitted earlier. The Hosur branch office of TIIC had placed the proposal before the Branch Settlement Committee consisting of 1) Regional Manager, Salem, 2) Branch Manager, Hosur and 3) Branch Manager, Dharmapuri. The sale was confirmed in favour of Mohd.Fazal based on the norms fixed by the Corporation as per Circular No.TIIC/HO/14-Recovery/2006 dated 8.8.2006 which states that the bid amount shall be equal to or more than 50% of the assessed value in case of industrial units/land/land and building for the fourth and subsequent auctions. further, it is observed from the records furnished by TIIC that the guideline value of the property was assessed at Rs.45.30 lakh and the market value at Rs.78.09 lakh. The highest bid of Rs.59.00 lakh offered by Mohd.Fazal worked out to 130.24% of guideline value and 75.55% of market value and theefore TIIC confirmed the bid on 3.3.11.
9. As per the terms of the confirmation letter dt.3.3.11 issued by TIIC, Thiru Mohd.Fazal had to deposit the balance bid amount of Rs.44,85,000 on or before 31.3.11. But Thiru K.S.Palanisamy obtained an interim injunction on 24.3.11 restraining TIIC from proceeding further in the matter. Therefore, Thiru Mohd.Fazal did not pay the full amount and TIIC also did not execute the sale deed in his favour.
10. Further, Thiru S.K.Senthilkumar issued a legal notice on behalf of his client Thiru K.S.Palanisamy, dt.3.3.11 to which TIIC has sent a detailed reply on 15.3.11. Regarding the allegation of Thiru K.S.Palanisamy that he was misguided, the Branch Manager informed me that it is the duty of the auctioning Officer to give prior information about the litigations, etc. pertaining to a property which is brought for auction to the prospective bidders. Actually, not informing such details will amount to suppression of facts. In light of the above, there appears to be no basis for the allegation that Thiru K.S.Palanisamy was cheated by TIIC.
11. Subsequently, Thiru K.S.Palanisamy filed a writ petition No.7440/11 in the Ho'ble High Court against TIIC and Mohd.Fazal for a direction to accept his offer of Rs.70.99 lakh and obtained interim stay. The Corporation had also filed the counter affidavit stating that Thiru K.S.Palanisamy did not participate in the public auction conducted by TIIC.
12. The writ petition was allowed on 16.9.11 by the learned single Judge who recorded findings taht the sale made in favour of Thiru Mohd.Fazal for Rs.59.00 lakh was far below the value found in the valuation report. The Learned Single Judge also found that the Corporation has not adopted the guidelines issued by Supreme Court in the matter of sale and that no publicity was made with regard to upset price. The Learned Judge also recorded the finding that the attempt of the Corporation to peg the starting price for the loan received by the borrower is against the decision of Supreme Court. the Learned Judge further directed that since during the pendency of writ petition, the TIIC was already paid Rs.71.00 lakh in open court, TIIC was entitled to encash the same and execute a sale deed in favour of Thiru K.S.Palanisamy.
Subsequently, TIIC has accepted the order of the Hon'ble High Court in WP No.7440/11 dt.16.9.11 and executed a sale deed in favour of Thiru K.S.Palanisamy.
13. As observed by the Hon'ble High Court, it is seen that no upset price was fixed by TIIC in the auction notice. However, as per the then prevailing procedure and practice of the Corporation, the outstanding loan amount was fixed as the starting bid price as was done in all the cases of auction. TIIC would reduce the minimum bid value, if there were no bids and raise it when there is a counter bid which is higher and ultimately confirm the sale to the highest bidder, after evaluating the bid vis-a-vis the value of the property as per Circular No.TIIC/HO/14-Recovery/2006 dated 08.08.2006. The highest bid used to be confirmed/rejected based on the above norms and procedure followed by the TIIC. However, it is informed that presently TIIC is indicating the upset price based on the value of the property in the auction notice with effect from 15.2.12 as per the procedures laid down by the Hon'ble Supreme Court.
On perusal of all the connected records submitted by TIIC and upon enquiry with the official concerned, I am of the view that there was no foul play, illegality or irregularity in the conduct of auction sale. TIIC has followed the due procedures and guidelines prevailing then in the auction sale of assets pertaining to M/s.Sree Anand Mansion, Hosur and that sale deed was executed by TIIC in favour of Thiru K.S.Palanisamy as per the orders of the Learned Single Judge. Incidentally by doing so, TIIC has also financially gained." (emphasis by us)
12. This report of the Chief Secretary, makes it crystal clear that there was no foul play, illegality or irregularity in the conduct of auction sale and that TIIC has followed the due procedures and guidelines prevailing then in the auction sale of assets.
13. Along with the report, the Chief Secretary has also produced the original records of TIIC. In the said file, we find the Minutes of the Branch Settlement Committee meeting held at Hosur Branch Office on 3.3.2011. The Committee, consisting of the Branch Manager, Hosur; Branch Manager, Dharmapuri and Regional Manager, Salem, in the said minutes have noted the entire background of the auction. For better understanding, we shall now extract hereunder the minutes of the said meeting:
"The Committee perused the Office Note and observed the following points:
1. This loan account is 14 years old is classified under Doubtful-IV category.
2. The concern is a Chronic defaulter since inception due to various reasons viz., poor occupancy, lack of managerial capacity of the promoter etc.,
3. The concern was granted waiver of Penal and Compound Interest to the extent of Rs.10.79 lakhs during 2003 towards One time settlement o loan account. However the concern did not avail the opportunity.
4. The Primacy assets now under auction are under Constructive Possession and the same is intimated to the bidders/Tenderer who participated the public auction sale held on 02.03.2011.
5. The Primary property (Hotel Building) was brought for public auction sale 7 times including the present auction. There were no bidders in the 1st, 2nd, 4th and 5th auction sale. The offer of Rs.17.00 lakhs received in the 3rd auction sale held on 28.11.2003 was confirmed. However, the highest bidder failed to remit the balance bid amount on the contention that the stay granted by the Hon'ble High Court in W.P.No.4005/2004 filed by the promoter was in force. In the 6th auction sale held on 30.12.2010 a bid of Rs.30.00 lakhs was received s the bidder Mr.Shivakumar, Salem has been called for negotiation at Chennai whereas he has enhanced the bid to Rs.50.00 lakhs.
6. The auction bid on 30.12.10 of Rs.50.00 lakhs was rejected since the prime offer of Rs.55.00 lakhs received and assets were refer for re-auction on 02.3.2011.
7. The latest Encumbrance Certificate in respect of the primary assets obtained from the Sub-Registrar Office, Hosur reveals that the property was illegally sold to Shri Ismail Haji during the year 2007 who in turn sold the same to Tvl.Beeran Koya, Suresh Babu, C.K. And Sunil Kumar during 2009.
8. The illegal purchasers reported to have spent about Rs.10.00 lakhs towards renovation of the existing building
9. In the meantime Thiru Mohammed Fazal, MPK Hotel, Coimbatore represented that he is interested in purchase of the assets on the auction sale and to show his bonafide he remitted Rs.12.00 lakhs on 04.02.2011 and indicated his offer as Rs.55.00 lakhs.
10. Branch has sent auction sale notice to promoters of the unit and intending bidders.
11. Only one person participated in the present auction. The highest offer received in the present public auction is Rs.55.00 lakhs from Thiru Mohammed Fazal, Coimbatore. No tender is received.
12. The highest bidder has subsequently increased his offer to Rs.59.00 lakhs on negotiation.
13.The loan outstanding as on 28.02.2011 is Rs.16.94 lakhs in Principal Account and Rs.26.87 lakhs in Interest Account and Rs.100.90 lakhs in Memorandum of Interest Account and Rs.0.20 lakhs in other dues, aggregating to Rs.144.90 lakhs.
14. The Primary Land, Building and Furniture and Fittings were valued by our Panel Surveyor/Panel Valuer on 24.12.2010 and details of the valuation as under:
Description Land Building and Furniture & Fittings Total G.V. 6.56 38.74 45.3O M.V. 39.35 38.74 78.09
15. As per HO Circular No.9, TIIC/ho/14-recovery/2006 dated 08.08.2006, the norms or confirmation of auction sale is that the bid amount shall be equal to or more than 50% of the assessed value in case of Industrial Units/Land/Land and Building for the fourth and subsequent auctions.
16. The coverge of the highest offer of Rs.59.00 lakhs works out to % of coverage To the outstanding(Rs.144,90 lakhs) 0.41 To the valuation Guideline value 1.30 Market value 0.76 As per HO Circular No.2 TIIC/HO/REC/2009-10 dated 11.6.2009, if the auction sale proposals involving land/lnd nd buildig (Primary/collateral) which confirms to our norms to our norms in the third or subsequent auction sale shall be sent to Head Office for approval by MD/CMD if the bid amount is less than 75% of the value of the assets.
The present highest offer of Rs.59.00 lakhs conforms to the norms for confirmation and also the bid amount coves 75.55% of the assessed value.
Hence, the committee resolved to confirm the auction sale in favour of Mr.Mohammed Fazal, Coimbatore-18 for a sale consideration of Rs.59,00 lakhs subject to our usual Terms and conditions."
17. The above minutes of the Committee clearly show that the bid offer of Rs.59 lakhs of the appellant works out to 75.55% of the market value, and the said bid of the appellant has been accepted by the Committee duly following the terms and conditions of the circular. No malafides or ill-intentions could be imparted to the Committee Members, who have strictly followed the rules and regulations then prevailing. Therefore, we are not able to accept the contra reasonings offered by the learned single Judge.
18. One of the contentions on the part of the writ petitioner before the learned single Judge was that even though they have sent a legal notice on 3.3.2011, no reply was emanated from TIIC. But, as could be seen from the typed set of papers submitted on the part of TIIC, for the notice issued by the writ petitioner through his advocate Mr.S.K.Senthilkumar, a reply notice was sent by TIIC on 15.3.2011 itself. W.P.No.7440 of 2011 was filed on 19.3.2011. Therefore, even by the time the writ petition was being filed, the reply notice sent by TIIC was within the knowledge of the second respondent. Further, from this reply notice, it is seen that on the date of public auction, the advocate of the writ petitioner (by name S.K.Senthil Kumar) went to the Hosur Branch office of TIIC along with three others and had an interaction with the Branch Manager, Hosur with regard to the auction sale property and the nature of court cases relevant to the auction sale property, and the Branch Manager has briefed him about the various legal proceedings. However, the writ petitioner did not participate in the auction.
19. The report of the Chief Secretary also makes it clear that the above referred S.K.Senthilkumar has purchased the auction form and in the present auction also, the form purchased by S.K.Senthilkumar was presented by the writ petitioner. From the narration of events in the reply notice of the TIIC, a legal presumption would arise that the writ petitioner, at the advice of his advocate Mr.S.K.Senthilkumar stayed away from participating in the auction, owing to some other legal disputes with regard to the very same property, probably considering them as 'risk factors'. The advocate of the writ petitioner, viz. Mr.S.K.Senthilkumar himself has participated in the auction sale on the earlier occasion and he is quite aware of all the legal proceedings pertaining to the auctioned property. It is seen from the materials placed on record that the bid value quoted in open auction by the said S.K.Senthilkumar was Rs.25 lakh and the tender of the above said Sivakumar was higher and he had enhanced his offer from Rs.30 lakh to Rs.50 lakh on negotiation. It is also seen from the records that in the meantime, the appellant, had submitted a representation dated 3.2.2011 to TIIC head office, stating that he was willing to offer Rs.55 lakh for the said property by depositing Rs.12 lakh as EMD, to show his bona fide and hence TIIC had cancelled the auction conducted on 30.12.2010. Ultimately, in the auction conducted on 2.3.2011 by the Branch Manager of TIIC, Hosur, the appellant alone had participated and quoted the highest amount of Rs.56 lakhs and the said offer was enhanced to Rs.59 lakhs after negotiations. Accordingly, by the communication dated 3.3.2011, the appellant was issued with the Sale Confirmation letter, requiring him to remit the balance amount.
20. Only after issuance of this sale confirmation certificate in favour of the appellant, the writ petitioner, through his advocate Mr.S.K.Senthilkumar has issued a legal notice to TIIC.
21. At this juncture, it is also to be pointed out that in the 'legal notice' dated 3.3.2011 sent by the writ petitioner, a prayer was made to conduct 're-auction' at the earliest, after issue of due notice to the writ petitioner. But, however, in W.P.No.7440 of 2011, the writ petitioner has prayed to direct TIIC to accept his offer of Rs.70,99,000/=, thus distancing himself from his own request of 're-auction'. The above scrutiny of the documents on record would prompt us to draw a legal inference that the writ petitioner and his advocate Mr.S.K.Senthilkumar were hand-in-glove with each other and are jointly pitted against the appellant. Even though Mr.S.K.Senthilkumar was very well aware of the ongoing auction on 2.3.2011, neither himself nor his 'client' the writ petitioner participated in the auction and only after the sale confirmation letter was issued in favour of the appellant, they have initiated the present proceedings with the sole aim of protracting the proceedings and defeating the interest of the auction purchaser/appellant. From the report of the Chief Secretary and from the original records produced before us by TIIC, nothing adverse has been found against the authorities who conducted the auction since they have followed the procedure then prevailing. The writ petitioner was guided, throughout, by his Advocate Mr.S.K.Senthilkumar, who is very familiar with the auction proceedings, himself being a participant in such auctions. Therefore, it cannot also be said that they are not aware of the Circular No.TIIC/HO/14-Recovery/2006 dated 08.08.2006, which prescribed the methodology. The said circular, which has prescribed the methodology, was never challenged by the writ petitioner. Therefore, the action of the TIIC, in accepting the offer made by the appellant, in due compliance of the terms and conditions of the said circular, cannot be challenged by the writ petitioner.
22. As stated above, the writ petitioner has not participated in the auction, even though wide publicity has been given about the date of auction and in fact, his mentor Mr.S.K.Senthilkumar was present when the auction was going on. Therefore, he has no locus standi to challenge the auction, that too after issuance of the sale certificate in favour of the successful bidder/the appellant as held by the Honourable Apex Court in Valji Khimji and Company vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Limited and others [(2008) 9 SCC 299], relied on by the learned senior counsel for the appellant.
23. Hue and cry has been raised on the part of the writ petitioner that his offer is more than the offer of the appellant and hence, there is nothing wrong in the learned single Judge ordering execution of sale deed in his favour.
24. At this juncture, the legal questions that would arise for consideration are:
1. Whether it is always incumbent on the part of the Courts to accept the highest bid amount?
2. Whether the writ Court can sit and act like a tender issuing or accepting authority?
25. With regard to the first point, we feel it apt to quote a recent decision of the Honourable Apex Court. Holding that it was not obligatory on the part of a Government Department to accept the highest bid in a tender in all cases, the Supreme Court in Himachal Pradesh Housing and Urban Development Authority v. Universal Estate [2010 (12) SCALE 389] declared that in public interest the authorities can decline to award the tender to the highest bidder. In this judgment, justifying the action of the Himachal Pradesh Housing and Urban Development Authority in rejecting the highest bid as being in public interest and thus not being an arbitrary exercise of power, the Honourable Apex Court declared the law in the following terms;
16. We shall now consider whether the action of the Chief Executive Officer to reject the bid of respondent No.1 was arbitrary, unfair, unreasonable and amounted to violation of Article 14 of the Constitution, but before doing that we deem it proper to observe that the scope of judicial review in such matters is very limited and the Court will exercise its discretion only when it is satisfied that the action of the public authority is detrimental to public interest. In Air India Ltd. v. Cochin International Airport Ltd. (2000) 2 SCC 617, the Court while dealing with a matter involving award of contract, made it clear that the public authority is free not to accept the highest or the lowest offer and the scope of judicial review is confined to the scrutiny of decision making process, which can be annulled if the same is found to be vitiated by malafides, arbitrariness or total unreasonableness. Some of the observations made in the judgment are extracted below:
The award of a contract, whether it is by a private party or by a public body or the State, is essentially a commercial transaction. In arriving at a commercial decision considerations which are paramount are commercial considerations. The State can choose its own method to arrive at a decision. It can fix its own terms of invitation to tender and that is not open to judicial scrutiny. It can enter into negotiations before finally deciding to accept one of the offers made to it. Price need not always be the sole criterion for awarding a contract. It is free to grant any relaxation, for bona fide reasons, if the tender conditions permit such a relaxation. It may not accept the offer even though it happens to be the highest or the lowest. But the State, its corporations, instrumentalities and agencies are bound to adhere to the norms, standards and procedures laid down by them and cannot depart from them arbitrarily. Though that decision is not amenable to judicial review, the court can examine the decision-making process and interfere if it is found vitiated by mala fides, unreasonableness and arbitrariness. The State, its corporations, instrumentalities and agencies have the public duty to be fair to all concerned. Even when some defect is found in the decision-making process the court must exercise its discretionary power under Article 226 with great caution and should exercise it only in furtherance of public interest and not merely on the making out of a legal point. The court should always keep the larger public interest in mind in order to decide whether its intervention is called for or not. Only when it comes to a conclusion that overwhelming public interest requires interference, the court should intervene.
26. Further, In Jagdish Mandal v. State of Orissa [(2007) 14 SCC 517], the Honourable Apex Court, after taking note of the propositions laid down in Sterling Computers Ltd. v. M & N Publications Ltd. (1993) 1 SCC 445, Tata Cellular v. Union of India (1994) 6 SCC 651, Air India Ltd. v. Cochin International Airport Ltd. (supra) and B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. (2006) 11 SCC 548 observed:
Judicial review of administrative action is intended to prevent arbitrariness, irrationality, unreasonableness, bias and mala fides. Its purpose is to check whether choice or decision is made lawfully and not to check whether choice or decision is sound. When the power of judicial review is invoked in matters relating to tenders or award of contracts, certain special features should be borne in mind. A contract is a commercial transaction. Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance. If the decision relating to award of contract is bona fide and is in public interest, courts will not, in exercise of power of judicial review, interfere even if a procedural aberration or error in assessment or prejudice to a tenderer, is made out. The power of judicial review will not be permitted to be invoked to protect private interest at the cost of public interest, or to decide contractual disputes. The tenderer or contractor with a grievance can always seek damages in a civil court. Attempts by unsuccessful tenderers with imaginary grievances, wounded pride and business rivalry, to make mountains out of molehills of some technical/procedural violation or some prejudice to self, and persuade courts to interfere by exercising power of judicial review, should be resisted. Such interferences, either interim or final, may hold up public works for years, or delay relief and succour to thousands and millions and may increase the project cost manifold. Therefore, a court before interfering in tender or contractual matters in exercise of power of judicial review, should pose to itself the following questions:
(i) Whether the process adopted or decision made by the authority is mala fide or intended to favour someone;
OR Whether the process adopted or decision made is so arbitrary and irrational that the court can say: the decision is such that no responsible authority acting reasonably and in accordance with relevant law could have reached;
(ii) Whether public interest is affected.
If the answers are in the negative, there should be no interference under Article 226. Cases involving blacklisting or imposition of penal consequences on a tenderer/contractor or distribution of State largesse (allotment of sites/shops, grant of licences, dealerships and franchises) stand on a different footing as they may require a higher degree of fairness in action.
27. In the case on hand, as has already been discussed supra, there is not even a scrap of material to say that the decision making authorities, i.e. the auctioning authorities have acted either in a manner unknown to law or with a mala fide intention to favour someone. In that view of the matter, there is no material to cause interference into the auctioning process of the authorities concerned, including confirmation of sale in favour of the appellant.
28. But, unfortunately, the learned single Judge, has ignored the fact that the writ petitioner never participated in the auction conducted and the present proceedings were initiated only after issuance of the sale confirmation certificate in favour of the auction purchaser/the appellant. Further, the learned single Judge, having directed the learned counsel appearing for the writ petitioner to inform the Court as to whether his client was willing to buy the property and whether he was willing to offer the entire sale price as quoted by him, has adjourned the matter to different dates and ultimately, on 16.9.2011, the learned counsel for the writ petitioner had produced ten demand drafts, drawn between 27.8.2011 to 14.9.2011 on various dates by the writ petitioner, for a total sum of Rs.71 lakhs and the said demand drafts were handed over to the Deputy Manager, TIIC in the Court itself. In this connection, we endorse the view of the learned senior counsel appearing for the appellant, that the Court cannot sit and act either like a tender issuing authority or a tender accepting authority. Of course, there was no representation for the auction purchaser/writ appellant before the learned single Judge. But, the case was stiffly contested on behalf of TIIC on the ground that the writ petitioner never participated in the auction and therefore, he has no locus standi to challenge the auction. But, this has not been taken into consideration by the learned single Judge. The learned single Judge has proceeded on the basis that the 'offer' made by the writ petitioner is higher than the 'offer' made by the appellant, which, as per the above judgment of the Honourable Apex Court, cannot be a ground to nullify a legally valid auction. Therefore, for the second point framed above, we have no hesitation to hold that the writ Court cannot sit and act like a tender issuing or accepting authority, since it would amount to intruding and usurping into the powers of the auctioning authorities.
29. On a thorough analysis of the entire materials placed on record, we have no hesitation to hold that the writ petitioner has twisted the facts before the learned single Judge in order to obtain favourable orders from the Court, screening the background of sale confirmation in favour of the appellant. Therefore, such an order obtained by the writ petitioner, by playing fraud on the Court and by misrepresenting the facts, cannot be allowed to sustain.
30. In pursuance of the directions of the learned single Judge, a sale deed was executed by TIIC in favour of the writ petitioner on 16.11.2011. An extraordinary situation like the one in hand, always requires an extraordinary relief. As has been discussed supra, since the writ petitioner obtained the order by playing fraud on the Court and by misrepresenting the facts and further since no illegality or irregularity could be attributed to the auction conducted by TIIC, which was knocked down in favour of the writ appellant, while setting aside the order of the learned single Judge, it is but imperative to nullify the said sale deed executed by TIIC in favour of the writ petitioner on 16.11.2011, since has no legal sanction.
31. In the result,
(i) This writ appeal is allowed.
(ii) The sale deed dated 16.11.2011, executed by TIIC in favour of the writ petitioner K.S.Palanisamy stands cancelled. Even if the said document is registered, since it is obtained by way of fraud and misrepresentation before the Court of law, the Sub Registrar, Hosur and all other connected authorities and the public in general are directed to treat the said sale deed cancelled, as allowing it on record would amount to causing aberration of justice.
(iii) TIIC is directed to execute a sale deed in favour of the writ appellant, after receiving the balance consideration from him, as per the Sale confirmation Certificate dated 3.3.2011. The writ appellant is directed to remit the balance bid amount within a period of one week from the date of receipt of a copy of this order and TIIC is directed to execute the sale deed in favour of the writ appellant within a period of one week thereafter.
(iv) TIIC is also directed to refund the eligible amount to the writ petitioner.
(iv) To be an eye-opener for the fraudulent clients like the writ petitioner, who misrepresent the facts before the Courts to get favourable orders, we impose a cost of Rs.10,000/= (Rupees Ten Thousand Only) on the writ petitioner/first respondent (K.S.Palanisamy) to be paid by him in favour of the Tamil Nadu State Legal Services Authority, High Court campus, Chennai-104 within a period of one week from the date of receipt of a copy of this judgment, failing which the Member Secretary, Tamil Nadu State Legal Services Authority is directed to initiate all necessary legal proceedings against the writ petitioner/first respondent (K.S.Palanisamy).
Consequently, connected M.P.is closed.
Rao To
1.The Regional Manager, Tamil Nadu Industrial Investment Corporation Limited, Regional Office, Sri Lakshmi Complex, No.4/22, Omalur Main Road, Swarnapuri, Salem-636004.
2.The Sub Registrar, Hosur.
3.The Chief Secretary, Government of Tamil Nadu, Chennai