Gujarat High Court
Snehalkumar Naranbhai ... vs Registrar, Cooperative ... on 4 August, 2023
Bench: Bhargav D. Karia
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C/SCA/15060/2022 CAV JUDGMENT DATED: 04/08/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 15060 of 2022
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2022
In R/SPECIAL CIVIL APPLICATION NO. 15060 of 2022
With
R/SPECIAL CIVIL APPLICATION NO. 18857 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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SNEHALKUMAR NARANBHAI RUPARELIYA
Versus
REGISTRAR, COOPERATIVE SOCIETIES
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Appearance:
MR BS PATEL, SENIOR ADVOCATE WITH MR BAIJU JOSHI(1207) for the
MR KK TRIVEDI(934) for the Respondent(s) No. 3,4,5
NOTICE SERVED BY DS for the Respondent(s) No. 1,10,11,12,14,2,9
UNSERVED REFUSED (N) for the Respondent(s) No. 13
MR MIHIR JOSHI, SENIOR ADVOCATE WITH MR VINAY D
BAIRAGAR(8360) for the Respondent(s) No. 6,7,8
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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Date : 04/08/2023
CAV JUDGMENT
1.Heard learned Senior Advocate Mr.B.S.Patel
with learned advocate Mr.Baiju Joshi for the
petitioners, learned Senior Advocate Mr.Mihir
Joshi with learned advocate Mr.Vinay Bairagar
for respondent nos. 6 to 8, learned advocate
Mr. Mr.K.K.Trivedi for respondent nos. 3 to 5
and learned AGP Ms.Dhwani R. Tripathi for
respondent State.
2.These petitions are filed challenging the
auction proceedings held on 09.05.2022 by
respondent no. 3 - Surat Mercantile
Cooperative Bank Ltd., respondent no.4-
Recovery Officer of the bank and respondent
no.5-Sales Officer of the bank. The
petitioners have further prayed for
cancelling the Sale Certificate issued in
favour of respondent nos. 6, 7 and 8 by the
respondent nos. 4 and 5 by finalising the bid
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in their favour.
3.The petitioners of both the petitions have
submitted their bids for purchase of property
being Industrial Plot No.C-1 having area of
450.24 sq. mtrs, Plot No.C-2 having area of
497.12 sq. mtrs and Plot No.C-3 having area
of 424.98 sq. mtrs. situated at Revenue
Survey No.352, T.P Scheme No.4, Final Plot
No.34 at Katargam, Surat in auction held by
respondent nos. 3 to 5 of the aforesaid
property belonging to the original borrower
namely, M/s. Suryanarayan Silk Mills, a
partnership firm and its partners.
4.The notice for auction was issued by
respondent no.3 bank to sell the property in
question on "As is where is basis" in
Gujarati Daily newspaper "Gujarat Mitra"-
Surat Edition on 05.03.2022 in the name of
respondent no.5. As per the said
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advertisement, person who is desirous to
participate in the auction proceedings was
directed to deposit/submit the Demand Draft
of 10% of the offer value by 05.05.2022 and
the auction was to be held on 06.05.2022 at
the head office of the respondent no.3 bank
at Surat.
5.The petitioners upon reading the notice for
auction approached the respondent no.3 bank
so as to understand the detailed procedure
and the petitioners were specifically told to
submit cheque of local bank or local cheque
of 10% of the bidding amount as per the
auction notice.
6.The petitioners were further instructed that
Demand Draft in place of cheque may be
submitted at the time of auction. The
petitioners of Special Civil Application No.
15060/2022 accordingly therefore, submitted
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cheque of Rs. 69 lakhs whereas the
petitioners of Special Civil Application
No.18857/2022 submitted a cheque of
Rs.85,10,000/- being 10% of the offer price.
7.On 06.05.2022, the petitioners were informed
by respondent nos. 3 to 5 that the auction
has been postponed as some close relatives of
the Sales Officer or the Recovery Officer had
passed away and auction was rescheduled on
09.05.2022. The cheques given by the
petitioners and other similarly situated
bidders were also returned on the ground that
instead of Demand Draft, cheque was deposited
and therefore, such bidders were not
permitted to take part in the auction
proceedings.
8.It is the case of the petitioners that on
09.05.2022 the petitioners remained present
along with the Demand Draft of Rs. 69 lakhs
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and Rs.85,10,000/- respectively and it was
learned by the petitioners that all the seven
bidders who had submitted their bids were
held to be not qualified and eligible as per
the remarks of Sales Officer. The petitioners
were disqualified on the ground that instead
of Demand Draft, the petitioners had
submitted cheque of 10% of the offer price.
However, the petitioners submitted the Demand
Draft on the date of auction which was
rescheduled on 09.05.2022.
9.It is the case of the petitioners that after
rejecting the bid of all the seven bidders,
respondent nos. 3 to 5 called just two of the
bidders who had submitted Demand Draft but
whose bids were also refused around 8:30 pm
or 9:30 pm on 09.05.2022 and bids of
respondent nos. 6 to 8 was accepted for Rs.
6,75,00,000/- which is admittedly less than
the bid amount of the petitioner of Special
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Civil Application No. No.18857/2022 of Rs.
8,51,00,000/-.
10. The petitioners on coming to know about
such action on part of respondent no.4 -
Recovery Officer, accepting the bids of
respondent nos. 6 to 8, submitted written
objections. The petitioners also made a
detailed complaint dated 02.07.2022 to the
District Registrar against respondent nos. 3
to 5 to have finalised the bid in favour of
respondent nos. 6 to 8 though their bids were
cancelled and they were also held
disqualified by the Sales Officer. It was
pointed out by the learned advocate for the
petitioners that the Sales Officer scored off
word "Nathi" and has written "che" to accept
the bids of respondent nos. 6 to 8.
11. Thereafter Special Civil Application
No.15060/2022 was filed on 20.07.2022 and
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Special Civil Application No.18857/2022 was
filed on 13.09.2022. The petitioners were
also not supplied with relevant documents by
respondent nos. 3 to 4.
12. This Court issued notice on 23.08.2022
in Special Civil Application No.15060/2022
directing the parties to maintain status-quo
with regard to the property in question as on
the date of order which has continued till
further orders.
13. During the pendency of the petition,
respondent nos. 3 and 4 issued Sale
Certificate on 05.08.2022 in favour of the
respondent nos. 6 to 8 and respondent nos. 6
to 8 have also filed Civil Application
No.1/2022 for vacating the interim relief
granted by this Court.
14. The petitioners thereafter amended the
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petitions by filing draft amendment which was
allowed by order dated 20.09.2022 by this
Court and both the petitions were ordered to
be heard together as the same pertained to
setting aside auction held on 09.05.2022 by
respondent nos. 3 to 5.
15. Learned advocates for the petitioners
were also provided with Pen-drive containing
the video recording of the auction
proceedings conducted by respondent nos. 3 to
5 on 09.05.2022 which is annexed in the draft
amendment filed by the petitioners and
allowed by this Court by order dated
20.12.2022 along with the bill for purchase
of such Pen-drive.
16. As per the say of the petitioners on
perusal of such auction proceedings provided
to the petitioners, though entire proceedings
have been recorded by a single movie camera
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through the professional, the recorded
version which is produced at Annexure-E which
runs into 33 different files, having
different length of videos, is not the
continuous process which is given to the
petitioners. It was therefore, prayed that
the complete recording of the auction held by
respondent no.3 bank be provided to the
petitioners. It was submitted that such
recording is about 26 GB and 3.30 hours of
length and it also appears that there are
sudden and abrupt disruption in all video
files. The petitioners therefore, submitted
that on perusal of the videos provided it
appears that when the auction started terms
and conditions were read out wherein there is
no mention of deposit of Demand Draft at all
and during the auction proceedings, it was
found that at certain crucial time, some of
the bank officials and participants of the
auction went out and came back after few
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minutes or in such case, after a period of
about 15 minutes. It was therefore, submitted
that respondent no.6 to 8 in whose favour
auction has been finalised are being favoured
by the bank officials as narrated by the
petitioners in detail in the amended petition
and the same is not reproduced for the sake
of brevity. It was therefore, submitted by
the learned advocates for the petitioners
that auction once cancelled on 09.05.2022,
respondent nos. 3 to 5 have no such power to
again continue with auction and accept the
offer of respondent nos. 6 to 8 who were not
the highest bidders to the auction and
therefore, the entire proceedings stand
vitiated.
17. Learned Senior Advocate Mr. B.S. Patel
for learned advocate Mr. Baiju Joshi for the
petitioners submitted that the petitioner of
Special Civil Application No. No.18857/2022
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is the highest bidder for offer price of
Rs.8,51,00,000/- and he remained present in
the auction proceedings along with Demand
Draft of Rs. 85,10,000/- being 10% of the
offer price and inspite of such fact the
offer of all the bidders was cancelled and
the same was not considered by respondent
nos. 3 to 5 and surreptitiously, after all
the bidders were asked to go, the bid of
respondent nos. 6 to 8 was accepted which is
illegal and contrary to the provisions of
Rule 120 and Rule 128 of the Gujarat
Cooperative Societies Rules, 1965 ( For short
"the Rules, 1965").
17.1) In support of his submissions,
learned Senior Advocate Mr. B.S. Patel
referred to and relied upon the following
decisions:
i) Ram and Shyam Company v. State of
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Supreme Court Cases 267, wherein the Apex
Court held as under:
"(11.) It was never disputed nor
could it have been disputed that
minerals vest in the State. The
minor minerals vest in the State
where the land from which they are
to be extracted is situated and
minerals other than minor minerals
vest in the Union. 'Minor minerals'
have been defined in The Mines and
Minerals (Regulation and Development
Act, 1957, to mean "building stones,
gravel, ordinary clay, ordinary sand
other than sand used for prescribed
purposes, and any other mineral
which the central government may, by
notification in the Official
Gazette, declare to be a minor
mineral". Minor minerals vest in the
State in which the land is situated.
The first respondent State of
Haryana notified that an auction
would be held for mineral quarries
of Faridabad District. The appellant
gave his bid at the auction so
notified. It is an admitted position
that his was the highest bid. Anyone
conversant with auction would not be
naive enough to believe that one can
go on raising his own bid. His was
the highest bid in the amount of Rs.
3,87,000.00 p.a. Though the
Presiding Officer accepted the bid
of the appellant, being the highest
bid at the auction, yet the State
government in exercise of the power
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conferred by clause (4) of sub-rule
(2) of Rule 30 declined to confirm
the same presumably under the belief
that the highest bid did not
represent the adequate lease rent
which the State government was
entitled to, get. The right of the
State government not to confirm the
bid as also its action of not
confirming the highest bid of the
appellant is not questioned.
Therefore, various decisions laying
down that the government is not
bound to accept the highest bid. to
which our attention was drawn by Mr.
P.P. Rao, learned counsel for the
fourth respondent are of no
relevance in this case. This court
in Trilochan Mishra V/s. State of
Orissa{(1971) 3 SCC 153], State of
Uttar Pradesh V/s. Vijay Bahadur
Singh[(1982)2 SCC 365] and State of
Orissa V/s. Harinarayan Jaiswal
[(1972) 2 SCC 36] held that the
government is under no obligation to
accept the highest bid and that no
rights accrue to the bidder merely
because his bid happened to be the
highest. The court also observed
that the government had the right,
for good and sufficient reason, not
to accept the highest bid but even
to prefer a tenderer other than the
highest bidder. In Vijay Bahadur
Singh case the court further
observed that the power conferred on
the government by the Act to refuse
to accept the highest bid, cannot be
confined to inadequacy of bid only.
There may be variety of other good
and sufficient reasons to reject the
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same. The appellant has no grievance
that even though his was the highest
bid, the same was not accepted nor
Mr. Sorabjee on his behalf contends
that the highest bid of the
appellant was rejected on grounds
which are either irrelevant or
extraneous. This aspect therefore
need not detain us any more.
(12.) Let us put into focus the
clearly demarcated approach that
distinguishes the use and disposal
of private property and socialist
property. Owner of private property
may deal with it in any manner he
likes without causing injury to any
one else. But the socialist or if
that word is jarring to some, the
community or further the public
property has to be dealt with for
public purpose and in public
interest. The marked difference lies
in this that while the owner of
private property may have a number
of considerations which may permit
him to dispose of his property for a
song. On the other hand, disposal of
public property partakes the
character of a trust in that in its
disposal there should be nothing
hanky panky and that it must be done
at the best price so that larger
revenue coming into the coffers of
the State administration would serve
public purpose viz. the welfare
State may be able to expand its
beneficent activities by the
availability of larger funds. This
is subject to one important
limitation that socialist property
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may be disposed at a price lower
than the market price or even for a
token price to achieve some defined
constitutionally recognised public
purpose, one such being to achieve
the goals set out in Part IV of the
Constitution. But where disposal is
for augmentation of revenue and
nothing else, the State is under an
oblation to secure the best market
price available in a market economy.
An owner of private property need
not auction it nor is he bound to
dispose it of at a current market
price. Factors such as personal
attachment, or affinity, kinship,
empathy, religious sentiment or
limiting the choice to whom he may
be willing to sell, may permit him
to sell the property at a song and
without demur. A welfare State as
the owner of the public property has
no such freedom while disposing of
the public property. A welfare State
exists for the largest good of the
largest number more so when it
proclaims to be a socialist State
dedicated to eradication of poverty.
All its attempt must be to obtain
the best available price while
disposing of its property because
the greater the revenue, the welfare
activities will get a fillip and
shot in the arm. Financial
constraint may weaken the tempo of
activities. Such an approach serves
the larger public purpose of
expanding welfare activities
primarily for which the Constitution
envisages the setting up of a
welfare State. In this connection we
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may profitably refer to Ramana
Dayaram Shetty V/s. International
Airport Authority of India [(1979) 3
SCC 489] in which Bhagwati, J.
speaking for the court observed :
It must, therefore, be taken to
be the law that where the
government is dealing with the
public, whether by way of giving
jobs or entering into contracts
or issuing quotas or licences or
granting other forms of
largesse, the government cannot
act arbitrarily at its sweet
will and, like a private
individual, deal with any person
it pleases, but its action must
be in conformity with standard
or norms which is not arbitrary,
irrational or irrelevant. The
power or discretion, of the
government in the matter of
grant of largesse including
award of jobs, contracts,
quotas, licences etc. must be
confined and structured by
rational, relevant and non-
discriminatory standard or norm
and if the government departs
from such standard or norm in
any particular case or cases,
the action of the government
would be liable to be struck
down, unless it can be shown by
the government that the
departure was not arbitrary, but
was based on some valid
principle which in itself was
not irrational, unreasonable or
discriminatory.
At another place it was observed
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that the government must act in
public interest, it cannot act
arbitrarily or without reason and if
it does so, its action would be
liable to be invalidated. It was
further observed that the object of
holding the auction is generally to
raise the highest revenue. The
government is entitled to reject the
highest bid if it thought that the
price offered was inadequate. But
after rejecting the offer, it is
obligatory upon the government to
act fairly and at any rate it cannot
act arbitrarily. Following this line
of thought, in Kasturi Lal Lakshmi
Reddy V/s. State of J & K [(1980) 4
SCC 1] while upholding the order of
the government of Jammu and Kashmir
dated 27.04.1979 allotting to the
second respondent 10 to 12 lacs
blazes annually for extraction of
resin from the inaccessible chir
forests in Poonch, Reasi and Ramban
Divisions of the State for a period
of 10 years on the terms and
conditions set out in the order,
observed as under:
Where any governmental action
fails to satisfy the test of
reasonableness and public
interest discussed above and is
found to be wanting in the
quality of reasonableness or
lacking in the element of public
interest, it would be liable to
be struck down as invalid. It
must follow as a necessary
corollary from this proposition
that the government cannot act
in a manner which would benefit
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a private party at the cost of
the State; such an action would
be both unreasonable and
contrary to public interest. The
government, therefore, cannot,
for example, give a contract or
sell or lease out its property
for a consideration less than
the highest that can be obtained
for it, unless of course there
are other considerations which
render it reasonable and in
public interest to do so.
(emphasis supplied)
At one stage, it was observed that
the government is not free like an
ordinary individual, in selecting
recipient for its largesse and it
cannot choose to deal with any
person it pleases in its absolute
and unfettered discretion. The law
is now well-settled that the
government need not deal with
anyone, but if it does so, it must
do so fairly and without discretion
and without unfair procedure. Let it
be made distinctly clear that
respondent 4 was not selected for
any special purpose or to satisfy
any Directive Principles of State
Policy. He surreptitiously
ingratiated himself by a back-door
entry giving a minor raise in the
bid and in the process usurped the
most undeserved benefit which was
exposed to the hilt in the court.
Only a blind can refuse to perceive
it.
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(14.) What happened in this case
must open the eyes both of the
government as well as the people at
large. How an uncontrolled exercise
of executive power to deal with
socialist property in which entire
community's interest was sacrificed
so as to cause huge loss to the
public exchequer would have gone
unnoticed but for the vigilance of
the appellant who no doubt is not
altruistic in its approach but its
business interests goaded it to
expose the unsavoury deal. Conceding
that on weighty and valid
considerations, the highest bid can
be rejected by the State, one such
consideration which can be foreseen
is that the highest bid does not
represent the adequate market price
of the concession, yet before giving
up the auction process and accepting
a private bid secretly offered, the
authority must be satisfied that
such an offer if given in open would
not be outmatched by the highest
bidder. In the absence of such
satisfaction, acceptance of an offer
secretly made and sought to be
substantiated on the allegations
without the verification of the
truth, which was not undertaken,
would certainly amount to arbitrary
action in the matter of distribution
of State largesse which by the
decisions of this court is
impermissible. Even though
repeatedly, this court has said that
the State is not bound to accept the
highest bid, this proposition of law
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has to be read subject to the
observation that it can be rejected
on relevant and valid
considerations, one such being that
the concession is to be given to a
weaker section of the society who
could not outbid the highest bidder.
In the absence of it the approach
must be as clearly laid down by the
Constitution bench of this court in
K.N. Guruswamy V/s. State of
Mysore[AIR 1954 SC 592]. In that
case, the appellant and the fourth
respondent were rival liquor
contractors for the sale of the
liquor contract for the year 1953-54
in the State of Mysore. The contract
was auctioned by the Deputy
Commissioner under the authority
conferred upon him by the Mysore
Excise Act, 1901. The appellant's
bid was the highest and the contract
was knocked down in his favour
subject to formal confirmation by
the Deputy Commissioner. The fourth
respondent was present at the
auction but did not bid. Instead of
that he went direct to the Excise
Commissioner and made a higher
offer. The Excise Commissioner
cancelled the sale in favour of the
appellant and directed the Deputy
Commissioner to take action under
the relevant rule. The latter
accepted the tender of the
respondent. The appellant moved the
High court for a writ of mandamus
which was dismissed. In appeal by
the certificate, it was urged on
behalf of the State that the Deputy
Commissioner acted within the ambit
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of his powers under the relevant
rule which gave him an absolute
discretion either to reauction or to
act otherwise and no fetters are
placed upon the 'other- wise'
method. The court negatived this
contention observing that arbitrary
improvisation of an ad hoc procedure
to meet the exigencies of a
particular case is ruled out.
Therefore, the grant of the contract
to the fourth respondent was wrong.
Repelling the contention that a writ
petition at the instance of the
appellant would not be maintain-
able, the Constitution bench
observed as under:
The next question is whether the
appellant can complain of this
by way of a writ. In our
opinion, he could have done so
in an ordinary case. The
appellant is interested in these
contracts and has a right under
the laws of the State to receive
the same treatment and be given
the same chance as anybody else.
Here we have Thimmappa who was
present at the auction and who
did not bid - not that it would
make any difference if he had,
for the fact remains that he
made no attempt to outbid the
appellant. If he had done so it
is evident that the appellant
would have raised his own bid.
The procedure of tender was not
open here because there was no
notification and the furtive
method adopted of setting a
matter of this moment behind the
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back of those interested and
anxious to compete is
unjustified. Apart from all
else, that in itself would in
this case have resulted in a
loss to the State because, as we
have said, the mere fact that
the appellant has pursued this
writ with such vigour shows that
he would have bid higher. But
deeper considerations are also
at stake, namely, the
elimination of favouritism and
nepotism and corruption: not
that we suggest that that
occurred here, but to permit
what has occurred in this case
would leave the door wide open
to the very evils which the
legislature in its wisdom has
endeavoured to avoid. All that
is part and parcel of the policy
of the legislature. None of it
can be ignored. We would
therefore in the ordinary course
have given the appellant the
writ he seeks. But, owing to the
time which this matter has taken
to reach us (a consequence for
which the appellant is in no way
to blame, for he has done all he
could to have an early
hearing ), there is barely a
fortnight of the contract left
to go. We were told that the
excise year for this contract
(1953-54) expires early in June.
A writ would therefore be
ineffective and as it is not our
practice to issue meaningless
writs we must dismiss this
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appeal and leave the appellant
content with an enunciation of
the law.
xxx
18.) The position that emerges is
this. Undoubtedly Rule 28 permits
contract for winning mineral to be
granted by the government by auction
or tender. It is true that auction
was held. It is equally true that
according to the State government,
the highest bid did not represent
the market price of the concession.
It is open to the State to dispose
of the contract by tender. Even here
the expression 'tender' does not
mean a private secret deal between
the Chief Minister and the offered.
Tender in the context in which the
expression is used in Rule 28, means
"tenders to be invited from
intending contractors". If it was
intended by the use of the
expression 'tender' in Rule 28 that
contract can be disposed of by
private negotiations with select
individual, its validity will be
open to serious question. The
language ordinarily used in such
rules is by public auction or
private negotiations. The meaning of
the expression 'private
negotiations' must take its colour
and prescribe its content by the
words which precede them. And at any
rate disposal of the State property
in public interest must be by such
method as would grant an opportunity
to the public at large to
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participate in it, the State
reserving to itself the right to
dispose it of as best subserve the
public weal. Viewed from this angle,
the disposal of the contract
pursuant to the letter by the fourth
respondent to the Chief Minister is
objectionable for more than one
reason. The writer has indulged into
allegations, the truth of which was
not verified or asserted. The
highest bidder whose bid was
rejected on the ground that the bid
did not represent the market price,
was not given an opportunity to
raise his own bid when privately a
higher offer was received. If the
allegations made in the letter
influenced the decision of the Chief
Minister, fair-play in action
demands that the appellant should
have been given an opportunity to
counter and correct the same.
Application of the minimum
principles of natural justice in
such a situation must be read in the
statute and held to be obligatory.
When it is said that even in
administrative action, the authority
must act fairly, it ordinarily means
in accordance with the principles of
natural justice variously described
as fair play in action. That having
not been done, the grant in favour
of the fourth respondent must be
quashed."
ii) Vadi and Patwa v. Union of India and
others reported in AIR 1993 Gujarat 100,
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wherein this Court held as under :
"12. However, the position of law as
it stands today is altogether
different. In the case of Srilekha
Vidyarthi v. State of U.P.s, the
question of applicability of Article
14 of the Constitution in the
matters of contract with the State
had arisen. It was a case in which
the action of the State Government
of U.P. was challenged whereby the
Government had terminated by a
general order the appointments of
all Government counsels (Civil,
Criminal Revenue) in all the
districts of the State of U.P.
Therein it was contended that the
matter was in the realm of contract
and it was not permissible to the
petitioners to invoke the provisions
of Article 14 of the Constitution.
Repelling the contention, the
Supreme Court observed that there
was difference in the contracts
between the private parties and
contracts to which the State is
party. Private parties are concerned
only with their personal interest
whereas the State while exercising
its power and discharging its
functions, acts indubitably, as is
expected of it, for public good and
in public interest. The impact of
every State action is also on public
interest. This factor alone is
sufficient to import at least the
minimal requirements of public law
obligations and impress with this
character the contracts made by the
State or its instrumentality. The
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Supreme Court further observed that
wherever a challenge is made on the
ground of violation of Article 14
alleging that the impugned act is
arbitrary, unfair or unreasonable,
the fact that the dispute also falls
within the domain of contractual
obligations would not relieve the
State of its obligation to comply
with the basic requirements of
Article 14. The Supreme Court held
that an additional contractual
obligation cannot divest the
claimant of the guarantee under
Article 14 of non-arbitrariness at
the hands of the State in any of is
actions.
13. In para 24 of the judgment, it
is further held that the requirement
of article 14 being the duty to act
fairly, justly and reasonably, there
is nothing which militates against
the concept of requiring the State
always to so act even in contractual
matters. There is a basic difference
between acts of the State which must
invariably be in public interest and
those of a private individual
engaged in similar activities being
primarily for personal gain, which
may or may not promote public
interest.
14. Thus the position of law laid
down by the Supreme Court is that
even in respect of contractual
rights and obligations of the
parties, the State is not relieved
of its obligations to comply with
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the provisions of Article 14 of the
Constitution of India i.e. to act
justly, fairly and reasonably. The
State action should be governed by
reason and should be free from
arbitrariness. It should be just and
reasonable whether the State action
is at the entering stage of the
contract or during its execution of
the contract or even at the
conclusion stage of the contract. At
all stages, State is bound by
Article 14 of the Constitution. In
this connection in para 22 of the
judgment, the Supreme Court has also
observed that the scope of judicial
review in respect of disputes
falling within the domain of
contractual obligations may be more
limited and in doubtful cases the
parties may be relegated to
adjudication of their rights by
resort to remedies provided for
adjudication of purely contractual
disputes. This being the position of
law, the contention that now when
the contract has been executed, the
petition under Article 226 of the
Constitution of India wherein the
provisions of article 14 of the
Constitution of India have been
invoked is not maintainable cannot
be accepted."
iii) Collector of Customs and Excise,
Cochin and others v. M/s. A.S. Bava reported
in AIR 1968 Supreme Court 13, wherein Apex
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Court held as under:
"4. There is no force in the first
point. First, the point was no taken
in the High Court. Secondly, it is
settled that the existence of a
remedy by way of revision does not
bar the jurisdiction of the High
Court to entertain a petition under
art. 226. Moreover the petitioner
had alleged that the Collector had
no jurisdiction to demand the
deposit or duty pending the appeals
as the notification dated May 4,
1963, was bad insofar as it applied
s. 129 of the Customs Act. In these
circumstances it was not necessary
for the petitioner to have filed
revisions."
iv) Mihan India Ltd. v.GMR Airports Ltd. &
Ors. reported in AIR 2022 Supreme Court 2745,
wherein the Apex Court held as under:
"46. In view of the above, it is
apparent that in government
contracts, if granted by the
government bodies, it is expected to
uphold fairness, equality and rule
of law while dealing with
contractual matters. Right to
equality under Article 14 of the
Constitution of India abhors
arbitrariness. The transparent
bidding process is favoured by the
Court to ensure that constitutional
requirements are satisfied. It is
said that the constitutional
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guarantee as provided under Article
14 of the Constitution of India
demands the State to act in a fair
and reasonable manner unless public
interest demands otherwise. It is
expedient that the degree of
compromise of any private legitimate
interest must correspond
proportionately to the public
interest. It is specified that using
a ground of public interest or loss
to the treasury cannot undo the work
already undertaken by the
authority."
v) Kalol Taluka Sales and Purchase Union
Limited v. State of Gujarat reported in AIR
2012 Guj 113, wherein this Court held as
under:
"11 As stated here-in-above, the
advertisement does not show the size
and area of the property which is to
be auctioned, date of the auction
and the amount, for recovery if
which sale is ordered. In absence of
these important information, the
public at large would not be in a
position to take part in the said
auction.
12 The Bank as well as the auction
purchasers could not satisfy us on
these mandatory provisions which
were not followed by the Bank. We
are also not satisfied with the
procedure undertaken by the Recovery
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Officer of the Bank in selling the
disputed property.
xxx
15 We have gone through the above
two judgments relied upon by the
auction purchasers. The facts of
said two cases are in no way
comparable with the facts of the
present case. In those two cases,
the auction took place before the
learned Company Judge in open court
in which the property was
transferred to the highest bidder
and subsequent to that some other
persons offered more amount than the
amount offered by the original
purchaser and in this context of the
factual aspect, the Apex Court has
held that once the 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.
16 The case on hand, in view of the
palpable breach of Rule 119 of the
said Rules committed by the
respondent No.2 Bank, we have no
other alternative but to quash and
set aside the auction which took
place on 26.9.2008 as the same
creates some doubts in the minds of
the Court."
vi) Jayantilal Nathubhai Jariwala v. Surat
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Peoples Co Op Bank Limited reported in 2012
JX(Guj) 1171, wherein this Court held as
under :
"11. We are not at all impressed by
such submission. It appears that
proclamation of sale has to be
published at least 30 days before
the date fixed for sale and the same
should be affixed not only in the
office of the Recovery Officer and
Taluka Office but the notice of the
same should also be given to the
decree holder and the defaulter
specifying the time and place of the
sale. The object of giving such
notice is to give 30 days' time as a
last chance to the defaulter to make
the payment so that he can deposit
that amount before the Sale.
12. In case before us, admittedly
such notice having been issued on
June 30, 2012 and the sale having
taken place on July 20, 2012, the
proclamation of sale was invalid and
consequently, the sale is also
invalid. Although Mr. Shah tried to
impress upon us that in that event,
the purchasers are necessary party
and in their absence, the writ
application is not maintainable, we
are not impressed by such
submission. It appears that the
purchaser deposited Rs. 6.00 Lac on
19th July, 2012 and further Rs. 3.00
Lac on 20th July, 2012. Thereafter,
he has further deposited Rs. 10.00
Lac on 13th August, 2012; further
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Rs. 10.00 Lac on the same day i.e.
on 13th August; Rs. 1.00 Lac on 17th
August, 2012; Rs.15.00 Lac on 17th
August and Rs.13.51 Lac on 18th
August, 2012. Thus, on the date of
filing of the writ-application, i.e.
30th July, 2012, no right accrued in
favour of the purchaser and the
position of the purchaser is that of
a "purchaser during the pendency of
the writ-application". Therefore, he
is bound by the decision that is
passed on the writ-application.
Moreover, according to Rule-122 of
the Rules, the balance payment
should be paid within 15 days from
the date of the sale and in this
case, it appears that the balance
amount has been paid on August 18,
2012, whereas the sale had taken
place on July 20, 2012. Therefore,
on that ground also, the sale is
liable to be set aside as the
balance amount has not been paid
within 15 days from the date of the
sale and in the rule discretion is
given for extension only for the
payment of cost of stamp and not for
the sale price.
13. On consideration of the entire
materials on record, we thus find
that the learned Single Judge erred
in law in overlooking the aforesaid
aspect that the mandatory provision
of giving proclamation notice has
not been complied with and on that
ground alone, the sale is liable to
be quashed as the appellant has not
got the opportunity of making
payment within 30 days from the date
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of such notice."
vii) Central Coalfields Limited and
another v. SLL-SML (Joint Venture Consortium)
and others reported in (2016) 8 Supreme Court
Cases 622, wherein the Apex Court held as
under :
"(45.) Rashmi Metaliks was a
comparatively different case
inasmuch as clause (j) of the NIT
was the subject matter of
consideration. This clause required
a bidder to submit "Valid PAN No.,
VAT No., copy of acknowledgment of
latest income tax return and
professional tax return." The
employer interpreted this to be an
essential term for qualifying in the
bidding process. This view was
upheld by a learned Single Judge and
the Division Bench of the Calcutta
High Court. This Court reversed in
the following words:
"We think that the income tax return
would have assumed the character of
an essential term if one of the
qualifications was either the gross
income or the net income on which
tax was attracted. In many cases
this is a salutary stipulation,
since it is indicative of the
commercial standing and reliability
of the tendering entity. This
feature being absent, we think that
the filing of the latest income tax
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return was a collateral term, and
accordingly the Tendering Authority
ought to have brought this
discrepancy to the notice of the
appellant Company and if even
thereafter no rectification had been
carried out, the position may have
been appreciably different."
Essentially therefore, this Court
substituted its view for that of the
employer who interpreted this term
of the NIT to be mandatory for
compliance. Rashmi Metaliks followed
Poddar Steel and apparently
overlooked the dictum laid down in
Ramana Dayaram Shetty, G. J.
Fernandez, Tata Cellular and Jagdish
Mandal and must be confined to its
own peculiar facts. In any event,
this decision does not advance the
case of any of the parties before
us.
(46.) It is true that in Poddar
Steel and in Rashmi Metaliks a
distinction has been drawn by this
Court between essential and
ancillary and subsidiary conditions
in the bid documents. A similar
distinction was adverted to more
recently in Bakshi Security and
Personnel Services Pvt. Ltd. v.
Devkishan Computed Pvt. Ltd. 2016
(7) SCALE 425 through a reference
made to Poddar Steel. In that case,
this Court held a particular term of
the NIT as essential (confirming the
view of the employer) and also
referred to the "admonition" given
in Jagdish Mandal followed in
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Michigan Rubber (India) Limited v.
State of Karnataka, (2012) 8 SCC
216. Thereafter, this Court rejected
the challenge to the employer's
decision holding Bakshi Security and
Personnel Services ineligible to
participate in the tender.
(47.) The result of this discussion
is that the issue of the acceptance
or rejection of a bid or a bidder
should be looked at not only from
the point of view of the
unsuccessful party but also from the
point of view of the employer. As
held in Ramana Dayaram Shetty the
terms of the NIT cannot be ignored
as being redundant or superfluous.
They must be given a meaning and the
necessary significance. As pointed
out in Tata Cellular there must be
judicial restraint in interfering
with administrative action.
Ordinarily, the soundness of the
decision taken by the employer ought
not to be questioned but the
decision making process can
certainly be subject to judicial
review. The soundness of the
decision may be questioned if it is
irrational or mala fide or intended
to favour someone or a decision
"that no responsible authority
acting reasonably and in accordance
with relevant law could have
reached" as held in Jagdish Mandal
followed in Michigan Rubber.
(48.) Therefore, whether a term of
the NIT is essential or not is a
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decision taken by the employer which
should be respected. Even if the
term is essential, the employer has
the inherent authority to deviate
from it provided the deviation is
made applicable to all bidders and
potential bidders as held in Ramana
Dayaram Shetty. However, if the term
is held by the employer to be
ancillary or subsidiary, even that
decision should be respected. The
lawfulness of that decision can be
questioned on very limited grounds,
as mentioned in the various
decisions discussed above, but the
soundness of the decision cannot be
questioned, otherwise this Court
would be taking over the function of
the tender issuing authority, which
it cannot.
(49.) Again, looked at from the
point of view of the employer if the
Courts take over the decision-making
function of the employer and make a
distinction between essential and
non-essential terms contrary to the
intention of the employer and
thereby re-write the arrangement, it
could lead to all sorts of problems
including the one that we are
grappling with. For example, the GTC
that we are concerned with
specifically states in Clause 15.2
that "Any Bid not accompanied by an
acceptable Bid Security/EMD shall be
rejected by the employer as non-
responsive." Surely, CCL ex facie
intended this term to be mandatory,
yet the High Court held that the
bank guarantee in a format not
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prescribed by it ought to be
accepted since that requirement was
a non-essential term of the GTC.
From the point of view of CCL the
GTC has been impermissibly re-
written by the High Court.
(50.) Yet another problem could be
faced by an employer (such as CCL)
if the language used in the terms of
the NIT or the GTC is not adhered to
and its plain meaning discarded. A
problem could be faced by an
employer if every bidder furnishes a
bank guarantee in a different format
or one that it is comfortable with.
In such a situation, CCL would have
to scrutinize each bank guarantee to
ascertain whether it meets with its
requirements and the NIT and the
GTC. Apart from the text of the bank
guarantee, minor changes could be
made by a bidder such as
enforceability in a place other than
Ranchi (but in Jharkhand) etc. This
would place an avoidable and undue
burden on the employer particularly
if there are a large number of
bidders.
(51.) Not only this, any decision
taken by the employer in accepting
or rejecting a particular bank
guarantee in a format not prescribed
by it could lead to (avoidable)
litigation requiring the employer to
justify the rejection or acceptance
of each bank guarantee. This is
hardly conducive to a smooth and
hassle-free bidding process.
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(52.) There is a wholesome principle
that the Courts have been following
for a very long time and which was
articulated in Nazir Ahmad v. King
Emperor AIR 1936 PC 253 namely
"Where a power is given to do a
certain thing in a certain way the
thing must be done in that way or
not at all. Other methods of
performance are necessarily
forbidden." There is no valid reason
to give up this salutary principle
or not to apply it mutatis mutandis
to bid documents. This principle
deserves to be applied in
contractual disputes, particularly
in commercial contracts or bids
leading up to commercial contracts,
where there is stiff competition. It
must follow from the application of
the principle laid down in Nazir
Ahmed that if the employer
prescribes a particular format of
the bank guarantee to be furnished,
then a bidder ought to submit the
bank guarantee in that particular
format only and not in any other
format. However, as mentioned above,
there is no inflexibility in this
regard and an employer could deviate
from the terms of the bid document
but only within the parameters
mentioned above.
(53.) Nazir Ahmed has been followed
in dozens of decisions rendered by
this Court and by other
constitutional Courts in the
country. The Central Vigilance
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Commission has accepted this
principle in a modified form as a
guiding principle in its circular
dated 31st December, 2007 wherein it
is mentioned that all organizations
ought to evolve a procedure for
acceptance of bank guarantees that
is compatible with the guidelines of
banks and the Reserve Bank of India.
One such requirement is that the
bank guarantee should be in a proper
prescribed format and should be
verified verbatim on receipt with
the original. Adherence to this
principle of verbatim verification
would not only avoid undue problems
for the employer but would also
virtually eliminate subjectivity on
the part of the employer.
(54.) In this context, and in the
present times, it is important to
note that the World Bank has ranked
India extremely low in matters
relating to enforcement of contracts
and ease of doing business. Out of
189 countries worldwide, India is
ranked 178 in the matter of
enforcement of contracts and 130 in
the matter of ease of doing business
[11*]. One of the possible reasons
for this extremely low ranking given
to our country is the failure of all
parties concerned in strictly
adhering to the terms of documents
such as the NIT and the GTC. In so
far as the present case is
concerned, the NIT was floated on
5th August, 2015 and one year later,
we are still struggling with the
issue of acceptance of a bank
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guarantee for a contract of about
Rs.2000 crores - certainly not a
small sum.
Conclusion
(55.) On the basis of the available
case law, we are of the view that
since CCL had not relaxed or
deviated from the requirement of
furnishing a bank guarantee in the
prescribed format, in so far as the
present appeals are concerned every
bidder was obliged to adhere to the
prescribed format of the bank
guarantee. Consequently, the failure
of JVC to furnish the bank guarantee
in the prescribed format was
sufficient reason for CCL to reject
its bid.
(56.) There is nothing to indicate
that the process by which the
decision was taken by CCL that the
bank guarantee furnished by JVC
ought to be rejected was flawed in
any manner whatsoever. Similarly,
there is nothing to indicate that
the decision taken by CCL to reject
the bank guarantee furnished by JVC
and to adhere to the requirements of
the NIT and the GTC was arbitrary or
unreasonable or perverse in any
manner whatsoever."
viii) Manager, Adarsh Mahila Nagri
Sahakari Bank Ltd. & Anr. v. State of
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Maharashtra & Ors. reported in (2012) 2 Bom
CR 163, wherein Bombay High Court held as
under:
"8. It is pertinent to note that the
revision is possible either sue motu
or on application in respect of only
an order passed in a inquiry or
proceeding by a subordinate officer
of the revisional authority. Since
respondent No.4 did not avail
opportunity under sub rule 13 and
did not avail remedy available to
her under sub rule 14, the order
confirming the sale was mere
formality. He was not asked by
respondent No.4 not to pass such a
order. Thus, it was not an order in
real sense. Order is also an
expression of opinion by judicial or
quasi judicial authority after
hearing the parties and after
recording reasons for the same.
Before an order is passed a judicial
or quasi judicial authority hears
submissions made by rival parties,
applies his mind to the facts and
law and then it comes to a
conclusion forming an opinion as to
what ultimate action is required to
be taken in the case. In view of
this, the order confirming the sale
can not be said to be an order
contemplated under section 154. On
the other hand, learned counsel
appearing for respondent No. 4 Shri
R.T. Nagargoje asserted that his
client did not challenge the order
of Recovery Officer confirming the
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sale as contemplated under sub-rule
14 (v). He said that as per a
'direction' of the Registrar
Cooperative Societies, Recovery
Officer was required to send the
proposal of sale for confirmation to
the District Deputy Registrar. He
said that such direction is given to
each Recovery Officer by the
Registrar vide his order dated 19th
January, 2005. This order is issued
in the form of Circular, a copy of
which shown to this Court today. He
said that as per this direction, the
Recovery Officer in this case also
sent the proposal of sale for
confirmation to the District Deputy
Registrar and the District Deputy
Registrar thereafter passed an order
for confirmation of the sale. He
suggested that when District Deputy
Registrar examined the proposal for
confirmation of an auction sale, he
is supposed to examine all the pros
and cons of such proposal. He said
that the District Deputy Registrar
then had an ample power to set aside
the proposed sale. He said that in
this case, the District Deputy
Registrar has passed the order
confirming the sale on 18th July,
2009. He said that this order was
passed without giving notice and
hearing to his client, respondent
No. 4. He said, it is this order he
had challenged before respondent No.
2 - Divisional Joint Registrar. He,
therefore, asserted that the
revision was maintainable. I am
afraid, this submission is
completely devoid of merit. The
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Circular, referred to above, issued
by the Registrar Cooperative
Societies on 19th January, 2005 has
no basis in law, it has no legal
sanctity in law. As said above, the
Recovery Officer was appointed as
per the provisions of Rule 2 (h) of
the Rules. Once a person is
appointed as Recovery Officer, he
becomes the representative of the
Registrar having all the powers to
do whatever is required to be done
under the Rules. He wields all the
powers given to him by the Rules.
So, if clause (v) of sub-rule 14
empowers him to confirm the sale,
such power cannot be diluted or
diverted by issuing a Circular. Even
the Registrar cannot do so. Sub-rule
14 does not require the Recovery
Officer to send the proposal for
confirmation to either District
Deputy Registrar or the Registrar
himself. So, by sending Circular,
the Registrar could not have limited
the powers of the Recovery Officer,
lawfully appointed under the
provisions of the Act and Rules. So,
the procedure adopted by the
Recovery Officer in this case for
sending the proposal for
confirmation to the District Deputy
Registrar was unnecessary and had no
basis in law. If such step taken by
the Recovery Officer was
unnecessary, then the order passed
pursuant to such unnecessary step
has no legal sanctity. The order
passed by the District Deputy
Registrar confirming the sale is not
an order in the eye of law and has
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no sanctity of law. If such an order
was no order in the eye of law,
there was no possibility of
challenging it before the revisional
authority under Section 154 of the
Act. In view of this discussion, I
hold that the revision filed by
respondent No. 4 before respondent
No. 2 was not maintainable and the
order passed by respondent No. 2 on
such revision has no legal sanctity
and cannot be upheld. So, apparently
since there was no order which was
capable of being examined before the
revisional court, the revisional
authority could not have entertained
the revision."
17.2) It was further submitted that in
view of the above settled legal position when
the auction proceedings are conducted
arbitrarily, the same is required to be
quashed and set aside and highest bidder
should be declared as successful bidder.
18. On the other hand learned Senior
Advocate Mr. Mihir Joshi for respondent nos.
6 to 8 at the outset submitted that the
auction conducted by the Bank is not amenable
to the writ jurisdiction of this Court,
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inasmuch as, admittedly the Bank being a Co-
operative Bank, is also not falling within
the purview of "State" under Article 12 of
the Constitution of India and more
particularly, in case where no public duty is
discharged by the Bank. It was submitted that
even though the Bank has exercised the powers
conferred under Section 159 of the Gujarat
Cooperative Societies Act, 1961 vested with
the Registrar, the same is only for
recovering the dues of the Bank by auctioning
the mortgaged property of the defaulter and
hence, there is no public law element
involved in such exercise. In support of such
contention, reliance was placed on the
following decisions:
i) S.S. Rana v. Registrar Coop. Societies
and another reported in (2006) 11 Supreme
Court Cases 634, wherein the Apex Court held
as under:
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"(12.) It is well settled that
general regulations under an Act,
like Companies Act or the
Cooperative Societies Act, would not
render the activities of a company
or a society as subject to control
of the State. Such control in terms
of the provisions of the Act are
meant to ensure proper functioning
of the society and the State or
statutory authorities would have
nothing to do with its day-to-day
functions.
(14.) As the respondent no.1 does
not satisfy any of the tests laid
down in Pradeep Kumar Biswas
(supra), we are of the opinion that
the High Court cannot be said to
have committed any error in arriving
at a finding that the respondent-
Bank is not a State within the
meaning of Art. 12 of the
Constitution of India."
ii) Arvindbhai M. Bhutiya & Ors. v. Amreli
District Central Cooperative Bank Ltd &
another reported in (1998) 1 GLH 846, wherein
this Court held as under:
"27. I have considered the aforesaid
submissions. I find that even with
the aid of the submissions, as
aforesaid, it is not possible to
hold that the functions, as
aforesaid, discharged by the
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respondent - Bank are of public
importance closely related to
Governmental functions. In such
matters, when a Co-operative Society
is working as a Banking Society, it
may have to conform to the Scheme,
which may be evolved by the agencies
like NABARD or the Scheme such as
the Comprehensive Crop Insurance
Scheme by the Central Government and
the Societies like the respondent -
Bank may be used for the purpose of
implementation of such Scheme as a
part of the Co-operative movement.
However, it cannot be said that they
are essentially Governmental
functions nor it can be said that by
seeking implementation of this
Scheme through the Society like the
respondent - bank, the Government or
other bodies like NABARD or the
Gujarat State Co-operative Bank
acquires any control over the
respondent - Bank merely because a
Society like the respondent - Bank
is financed for the purpose of
distributing the finance to the
primary level Co-operative
Societies. Similarly, there is
nothing in the Scheme of the Gujarat
Co-operative Societies Act or the
Rules made thereunder and the bye-
laws of the respondent - Bank, to
which reference has been made herein
above, to indicate or show either
the holding of the substantial share
capital by the State Government or
the deep and pervasive control by
the State Government or any monopoly
rights have been conferred by the
State or protected by the State or
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that the functions are of public
importance closely related to
Governmental functions and,
therefore, on consideration of all
the aspects in entirety, it cannot
be held that the respondent - Bank
is an 'authority' within the meaning
of Article 12 of the Constitution of
India or an 'agency' or
'instrumentality' of the State.
Thus, the conclusion is that in a
given case, a Co-operative Society,
whether created by the Statute or
not or even a Limited Company for
that purpose may be an 'authority'
under Article 12 or an 'agency' or
'instrumentality' of the State but
it will depend upon the nature of
functions and duties, which it seeks
to discharge under the provisions of
the Act under which it was
registered, Rules made thereunder
and its own bye-laws and that would
also depend upon the question as to
how much finance is shared by the
Government, what is the extent of
the control over the management and
functions of such Society, whether
the functions discharged by the
Society are of public importance
closely related to Governmental
functions, whether any monopoly
rights have been conferred by the
State or protected by the State, but
on consideration of the various
submissions, which have been made by
the parties in the present case,
this Court is of the considered
opinion that the respondent - Bank
does not withstand the touchstone
laid down by the Supreme Court and
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our own High Court and it does not
meet the test so as to come within
the ambit of 'other authorities' or
'agency' or 'instrumentality' of the
State within the meaning of Article
12 of the Constitution of India. 22.
However, the matter does not end
here. The question still remains as
to whether in the facts and
circumstances of the case, any
writ,order or direction can be
issued against the respondent - Bank
under Article 226 of the
Constitution of India. Mr. Jayant
Patel appearing on behalf of the
petitioners has resolutely argued
that the scope of Article 226 is
wider than that of Article 32 of the
Constitution of India. The
jurisdiction of the Supreme Court
under Article 32 can be invoked only
in cases where there is a breach of
the fundamental right and
fundamental rights can be enforced
only against those bodies which are
covered by Article 12 of the
Constitution of India. But so far as
Article 226 is concerned, the writ
can be issued even for the purpose
of rights, which are not
fundamental, and as has been
provided in Article 226 it is to any
person and for any other purpose.
Therefore, Article 226 is couched in
a large and wider terminology and it
has been so considered, construed
and explained in various decisions
and even after holding that a
particular body is not covered by
the term 'State' or 'other
authority' or an 'agency' or
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'instrumentality' within the scope
of Article 12,the writs have been
issued when the Court has found that
such body has failed to discharge
the duty cast upon it under any
statute and such writs, orders or
directions in the nature of writ
have been issued by this Court
itself. Mr. Patel has placed strong
reliance on the five decisions;
three of which have been rendered by
the Supreme Court, one by Andhra
Pradesh High Court and one by our
own High Court. Reference has
already been made to the aforesaid
decisions in the earlier part of
this order. I have considered the
aforesaid submissions made by Mr.
Patel on the question of the scope
of Article 226 and find that this
submission made by Mr. Patel is not
without force. In Shri Anadi Mukta's
case (Supra), the case went to the
Supreme Court from our own High
Court. It has been clearly ruled by
the Supreme Court that the issue of
the writ of mandamus under Article
226 is not confined to statutory
authorities and instrumentalities of
the State only and further that it
can be issued to any other person or
authority performing public duty and
that such duty need not be imposed
by the State Government. Para 19 of
Shri Anadi Mukta's case (Supra) is
reproduced as under:-
"The term "authority" used in
Article 226, in the context, must
receive a liberal meaning unlike the
term in Article 12. Article 12 is
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relevant only for the purpose of
enforcement of fundamental rights
under Art.32. Article 226 confers
power on the High Courts to issue
writs for enforcement of the
fundamental rights as well as non-
fundamental rights. The words "Any
person or authority" used in Article
226 are, therefore, not to be
confined only to statutory
authorities and instrumentalities of
the State. They may cover any other
person or body performing public
duty. The form of the body concerned
is not very much relevant. What is
relevant is the nature of the duty
imposed on the body. The duty must
be judged in the light of positive
obligation owed by the person or
authority to the affected party. No
matter by what means the duty is
imposed. If a positive obligation
exists mandamus cannot be denied."
18.1) Learned Senior Advocate Mr. Joshi
further submitted that even assuming without
admitting that the writ petition is
maintainable, then in that eventuality also,
the same cannot be used to expand the scope
of challenge which is already prescribed
under the relevant provisions of the Act and
the Rules framed thereunder. It was submitted
that as per the Rules of 1965, more
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particularly, Rule 120 to Rule 128 thereof,
all immovable properties are to be sold in
public auction, the successful purchaser has
to deposit the sum within the prescribed time
limit, the sale can be within a period of 30
days by those persons whose interest are
affected, where substantial injury is shown
to have been caused by any material
irregularity, mistake or fraud and after the
expiry of 30 days, confirmation of sale is to
be made, which is the conclusive evidence of
purchase of the auction property.
18.2) It was submitted that in auction
proceedings, there is no question of
affecting the rights of a bidder, as the same
does not have ratable interest in the auction
property. It was submitted that the
petitioners have neither made any application
for setting aside the auction sale nor shown
as to what substantial injury have been cause
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to the petitioners by reasons of such
material irregularity, fraud or mistake.
18.3) It was submitted that the reliance
placed by the petitioners on the letters
dated 10.05.2022 and 18.05.2022 is totally
misplaced inasmuch as, the same are merely
requesting for copies of the auction papers,
which in any case, would not extend/save the
mandatory time period of 30 days, as
prescribed under Rule 128 of the Rules, 1965.
It was submitted that the aspect of the said
period of 30 days in challenging the auction
sale has been interpreted by this Court in
case of Patel Dwarkadas K. and others v.
State of Gujarat and others reported in
(2001) 42 (3) GLR 2488, wherein it is held as
under:
"5. A bare reading of section 178 of
the Code makes it clear that the
objections are required to be filed
within 30 days from the date of sale
of immovable property. Here in the
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present case, it is an admitted
position that the auction was
confirmed by the appropriate
authority on 1.4.1981 as per order
at annexure 'A' at page 18 to the
petition. There is no dispute on the
said fact between the parties.
Therefore, it is an admitted
position that the sale was confirmed
on 1.4.1981. The sale in question
was held on 27.6.1980 which can be
gathered from the confirmation order
dated 1.4.1981. Therefore, the
objection was required to be filed
within one month from the said date
i.e. 27.6.1980. In other words, the
objection was required to be filed
on or before 26.7.1980. It is
further an admitted fact that
objector-respondent no.5 had not
come out with objections within a
period of thirty days from the date
of sale i.e. from 27.6.1980. It
appears from the order of the Dy.
Collector at page 24 that respondent
no.5 had submitted objections before
the learned Collector, Mehsana dated
23.4.1981. This would clearly mean
that the objections were not filed
within one month from the date of
sale i.e. 27.6.1980 and as such the
objection was clearly time barred.
6. It is to be seen that even before
the objections were filed on
23.9.1981, the sale was confirmed by
the appropriate authority on
1.4.1981 which can be gathered from
Annexure 'A' at page 18 to the
petition. It is, therefore, clear
that the sale was confirmed before
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the objections were filed. The Code
does not envisage any power,
function or jurisdiction with any
authority to set aside the sale
which has already been confirmed.
So, on the one hand, the objection
was not filed by respondent no.5
within thirty days from the date of
sale of the immovable property in
accordance with section 178 of the
Code. On the other hand, the
objection was received subsequent to
the confirmation of sale. There is
no provision providing for
entertaining any objection
subsequent to the confirmation of
sale. Therefore, on going through
the scheme of the Code, it is very
clear that the Dy. Collector was not
required, authorized or competent to
consider the objection of the
objector-respondent no.5 herein
after a passage of 30 days from the
date of sale and after the
confirmation of the sale in
question. In other words, the order
of the learned Dy. Collector,
setting aside the sale ignoring the
provisions of section 178 is ex-
facie illegal."
18.4) Learned Senior Advocate Mr. Joshi
submitted that even in any case, because of
the delay on the part of the petitioners, as
aforesaid, the auction purchaser has made the
entire payment of Rs.6,75,00,000/- to the
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Bank, as well as, incurred expenses towards
Stamp duty of Rs.33,07,500/- and Registration
fee of Rs.6,77,000/- and consequently, rights
have been crystalized in favour of the
auction purchaser, while the petitioners have
remained indolent. It was submitted that
after confirmation of sale on 14.06.2022 and
issuance of certificate of sale dated
05.08.2022 in favour of the auction
purchaser, it would not be open for the
petitioners to challenge the alleged
irregularity for setting aside the auction
sale, as such rights created in favour of the
auction purchaser cannot be extinguished
except in exceptional cases such as fraud or
collusion, which is not established in the
present writ petition.
18.5) It was submitted that even
otherwise, Rule 128 of the Rules of 1965,
contemplates twin conditions namely, (i) only
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the decree holder or a person whose interests
are effected by sale may challenge the
auction proceedings for the material
irregularity and (ii) no sale can be set
aside unless it is proved that the applicant
has sustained substantial injury. In the
present case, neither there is any material
irregularity nor the petitioners are able to
show and/or prove that they have sustained
any injury, much less, substantial injury, by
reason of such irregularity and therefore,
there is no locus of the petitioners to
challenge the same as neither their rights
are affected nor any substantial injury is
caused to the petitioners. In support of such
contention, reliance was placed on decision
of Apex Court in case of Deenadayal Nagari
Sahakari Bank Limited and another v. Munjaji
and others reported in (2022) 7 Supreme Court
Cases 594, wherein it is held as under:
"1. Feeling aggrieved and
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dissatisfied and order dated
30.07.2021 passed by the High Court
of Judicature at Bombay, Bench at
of 2012, by which the High Court has
allowed the said writ petition
preferred by respondent no.1 herein
and has set aside the auction sale
in respect of the lands in question
and also ordered that the Sale
Certificate dated 19.01.2011
executed by the appellant-bank in
Civil Appeal No. 818/2022 in favour
of the auction purchaser stands
cancelled, both, the Bank as well as
the auction purchaser have preferred
the present appeals.
xxx
2.5 A Sale Certificate was issued in
favour of the auction purchaser on
17.01.2011 and the sale deed was
also executed in favour of the
auction purchaser on 19.01.2011. No
further steps were taken by
respondent no.1 immediately. He also
did not come forward to deposit 5%
of the amount equal to the purchase
money within 30 days from the date
of the sale so as to seek setting
aside of the sale in terms of Rule
107(13) of the MCS Rules, 1961. No
objection was raised before the
Recovery Officer about any
irregularity or fraud as required
under Rule 107(14) of the MCS Rules,
1961. It appears that the officers
of the bank went to take possession
of the property, they were attacked
and therefore the officers of the
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bank lodged an FIR on 24.02.2011 for
an attack on them while acquiring
possession of the property.
xxx
4. By the impugned judgment and
order dated 30.07.2021, the High
Court has allowed Writ Petition No.
570/2012 challenging order dated
13.04.2011 passed by the Divisional
Joint Registrar in Revision
Application No. 11/2011 upholding
the auction proceedings and
consequently has set aside the
auction sale in respect of lands
survey nos. 440, 437 and 102 dated
29.11.2010. By the impugned judgment
and order, the High Court has also
set aside the Sale Certificate in
favour of the auction purchaser
dated 19.01.2011. The High Court has
directed the appellant-bank to
refund the sale price to the auction
purchaser along with interest @ 10%
per annum from the date of deposit
till payment. From the impugned
judgment and order passed by the
High Court, it appears that the High
Court has allowed the writ petition
and set aside the auction sale on
the ground that there was a non-
compliance of mandatory provisions
of Rule 107(11) (e) (f) and Rule
107(11)(h) of the MCS Rules, 1961.
xxx
9. We have heard the learned counsel
for the respective parties at
length.
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10. By the impugned judgment and
order, the High Court has set aside
the auction sale conducted on
29.11.2010 and has cancelled the
Sale Certificate dated 19.01.2011 in
favour of the auction purchaser on
the ground that the auction
sale/sale was in breach of Rules
107(11) (e), (f),(g) & (h) of the
MCS Rules, 1961.
11. What was challenged before the
High Court was the order passed by
the Divisional Joint Registrar
passed in Revision Application No.
11/2011 under Section 154 of the MCS
Act, 1960. However, it is required
to be noted that even the High Court
in the impugned judgment and order
has specifically observed in
paragraph 31 that as the borrower
did not exercise the right under
Rule 107(13) of the MCS Rules, it
was not competent for the borrower
to prefer revision before the
Divisional Joint Registrar under
Section 154 of the MCS Act, 1960.
Therefore, once the revision
application before the Divisional
Joint Registrar under Section 154 of
the MCS Act, 1960 was held to be not
maintainable and/or competent at the
instance of the borrower -
respondent no.1 herein, thereafter
the High Court ought not to have
considered the writ petition on
merits.
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12 Even otherwise on merits also,
the High Court has erred in
entertaining the writ petition filed
by the borrower and quashing and
setting aside the auction sale/sale
by not bearing in mind the following
aspects:
12.1 Firstly, that after conducting
the auction sale and sale of the
property in favour of the auction
purchaser, the borrower never
applied to the Recovery Officer to
set aside the sale on the grounds of
material irregularity, mistake or
fraud in publishing or conducting
it;
12.2 secondly, as per proviso to
Rule 107(14)(i) of the MCS Rules, no
sale shall be set aside on the
ground of irregularity or fraud
unless the Recovery Officer is
satisfied that the applicant has
sustained substantial injury by
reason of such irregularity, mistake
or fraud;
12.3 Thirdly, as per Rule 107(14)
(iii), on the expiration of thirty
days from the date of sale, if no
application to have the sale set
aside is made or if such application
has been made and rejected, the
Recovery Officer shall make an order
confirming the sale. Rule 107(14)
reads as under:
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"(14)(i) At any time within
thirty days from the date of the
sale of immovable property, the
applicant or any person entitled
to share in a rateable
distribution of the assets or
whose interests are affected by
the sale, may apply to the
[District Deputy Registrar] to
set aside the sale on the ground
of a material irregularity or
mistake or fraud in publishing
or conducing it:
Provided that no sale shall be set
aside on the ground of irregularity
or fraud unless the [District Deputy
Registrar] is satisfied that the
applicant has sustained substantial
injury by reason of such
irregularity, mistake or fraud.
(ii) If the application be allowed,
the Recovery shall set aside the
sale and may direct a fresh one
(iii) On the expiration of thirty
days from the date of sale, if no
application to have the sale set
aside is made or if such application
has been made and rejected, the
[District Deputy Registrar] shall
make an order confirming the sale;
Provided that if he shall have
reason to believe that the sale
ought to be set aside
notwithstanding that no such
application has been made or on
grounds other than those alleged in
any application which has been made
and rejected, he may, after
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recording his reasons in writing,
set aside the sale.
(iv) Whenever the sale of any
immovable property is not so
confirmed or is set aside, the
deposit or the purchase money, as
the case may be, shall be returned
to the purchaser.
(v) After the confirmation of any
such sale, the [District Deputy
Registrar] shall grant a certificate
of sale bearing his seal and
signature to the purchaser, and such
certificate shall state the property
sold and the name of the purchaser."
13. In the present case, Sale
Certificate was issued in favour of
the auction purchaser on 19.01.2011
after a period of thirty days from
holding the auction sale. At this
stage, it is required to be noted
that even the Sale Certificate was
issued by the Bank/Recovery Officer
only after the receipt of the
approval of the District Deputy
Registrar. While approving the sale,
the District Deputy Registrar noted
in the approval dated 29.11.2010
that the valuation of the land was
determined at Rs. 98,10,000/-
according to the letter issued by
the Government approved Valuer dated
10.06.2010 which was the upset price
and the amount realised was
Rs.1,26,00,000/-, which is higher
than the upset price. Therefore, as
such, even the District Deputy
Registrar also did not doubt the
valuation and the amount realised,
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i.e., Rs. 1,26,00,000/- against the
upset price of Rs.98,10,000/-.
Therefore, once the borrower failed
to apply to the Recovery Officer to
set aside the auction sale on the
grounds of material irregularity,
mistake or fraud in publishing or
conducting the auction sale within a
period of thirty days from the date
of sale of immovable property,
thereafter it was not open for the
borrower to challenge the sale on
the ground of material irregularity.
All the grounds on which the High
Court has set aside the auction
sale/sale were available with the
borrower and the borrower did not
apply to set aside the sale on the
said grounds of material
irregularity, mistake or fraud.
Therefore, once the borrower failed
to apply to the Recovery Officer to
set aside the sale on the ground of
material irregularity within a
period of thirty days from the date
of sale of the immovable property
and thereafter the Sale Certificate
has been issued, normally the
borrower cannot be permitted to
challenge the same subsequently,
having not raised any objection at
the appropriate time and stage as
per the statute, otherwise the
statutory provisions would become
nugatory and unworkable.
14. It is also required to be noted
that even under Rule 107(14)(i) of
the MCS Rules, 1961, no sale shall
be set aside on the ground of
material irregularity, mistake or
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fraud unless the Recovery Officer is
satisfied that the applicant had
sustained substantial injury by
reason of such irregularity, mistake
or fraud. In the present case, there
is no finding recorded by the High
Court that the borrower had
sustained substantial injury and by
reason of such irregularity the
auction sale had to be set aside.
Under the above circumstances also,
setting aside of auction sale/sale
by the High Court is just contrary
to the proviso to Rule 107(14)(i) of
the MCS Rules, 1961."
18.6) It was further submitted that the
disputed question of facts giving rise to
filing of this petition cannot be decided
under the writ petition filed under Article
226 of the Constitution of India and even
otherwise, the challenge to the auction
proceedings cannot be made at the behest of
the petitioners, inasmuch as, the auction
notice dated 05.04.2022 specifically provides
that all bidders are required to submit
Demand Draft to the tune of 10% of the offer
amount latest by 05.05.2022. However,
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undisputedly both the petitioners have not
complied with the said mandatory condition
and consequently, they are unsuccessful, who
are otherwise not eligible to challenge the
auction proceedings. In support of such
contention reliance is placed on the decision
in case of Runaq International Ltd. v. I.V.R.
Construction Ltd. and others reported in
(1999) 1 Supreme Court Cases 492, wherein the
Apex Court has held as under:
"(27.) In the present case, however,
the relaxation was permissible under
the terms of the tender. The
relaxation which the Board has
granted to M/s. Raunaq International
Ltd. is on valid principles looking
to the expertise of the tenderer and
his past experience although it does
not exactly tally with the
prescribed criteria. What is more
relevant, M/s. IVR Construction Ltd.
who have challenged this award of
tender themselves do not fulfil the
requisite criteria. They do not
possess the prescribed experience
qualification. Therefore, any
judicial relief at the instance of a
party which does not fulfil the
requisite criteria, seems to be
misplaced. Even if criteria can be
relaxed both for M/s. Raunaq
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International Ltd. and M/s. IVR
Construction Ltd., it is clear that
the offer of M/s. Raunaq
International Ltd. is lower and it
is on this ground that the Board has
accepted the offer of M/s. Raunaq
International Ltd. We fail to see
how the award of tender can be
stayed at the instance of a party
which does not fulfil the requisite
criteria itself and whose offer is
higher than the offer which has been
accepted. It is also obvious that by
stopping the performance of the
contract so awarded, there is a
major detriment to the public
because the construction of two
thermal power units, each of 210
MWs., is held up on account of this
dispute. Shortages of power have
become notorious. They also
seriously affect industrial
development and the resulting job
opportunities for a large number of
people. In the present case there is
no overwhelming public interest in
stopping the project. There is no
allegation whatsoever of any mala
fides or collateral reasons for
granting the contract to M/s. Raunaq
International Ltd."
18.7) Insofar as the aspect of providing
cheque by the petitioners against the
requirement of providing Demand Draft is
concerned, it was submitted that the said
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condition of the auction notice of providing
Demand Draft on or before 05.05.2022 is a
mandatory condition and that, the decision
thereupon is vested with the Respondent Bank,
who has considered the petitioners as
ineligible. Consequently, the bids of
petitioners are rightly been considered as
not eligible. It was further submitted that
providing Demand Draft after the last date of
submission cannot be considered by the Bank,
which would amount to deviating the mandatory
condition and would be against the principle
of 'privilege-of-participation principle". In
support of such contention, reliance was
placed on the decision in the following
cases:
i) Central Coalfieds Limited and another
v. SLL-SML (Joint Venture Consourtium) and
others reported in (2016) 8 Supreme Court
Cases 622, wherein the Apex Court held as
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under:
"39. Poddar Steel [(1991) 3 SCC 273]
was a rather interesting case and
added a new dimension to the
discourse. The decision of the
Allahabad High Court records that
the relevant clause in the NIT gave
the bidder the option of depositing
the earnest money in cash or by a
"demand draft drawn on DLW Branch of
SBI in favour of Assistant Chief
Cashier, DLW/- Varanasi. As many as
21 parties had responded to the NIT,
but 8 of them had not deposited any
earnest money at all and the
remaining 13 bidders had "deposited
the earnest money by one mode or the
other but not necessarily in the
manner provided in the NIT except
perhaps a few." The Tender Committee
deviated from the terms of the NIT
and considered the bids of these 13
bidders and accepted the bid of
Poddar Steel, who had given the
earnest money not by cash or a
demand draft but by "a loose cheque
drawn on its C/D account in the
Union Bank of India, Sonarpura,
Varanasi." On the issue of
discriminatory treatment, the
contention of the employer was that
since all the 13 bidders who had
made the earnest money deposit were
treated equally, there was no issue
of any discriminatory treatment.
(40.) However, the High Court took
the view, following Ramana Dayaram
Shetty[[(1979) 3 SCC 489] and the
privilege of participation
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principle, that it was possible that
if those who did not deposit any
earnest money had known that a
crossed cheque (drawn on a bank
other than SBI) towards earnest
money was acceptable to the
employer, they too could have been
in the fray. Under these
circumstances, the High Court held
that excluding them from
competition, through this
unannounced deviation affecting
bidders and potential bidders alike,
rendered the bidding process unfair.
The High Court introduced an
"essential term" concept and held
that the clause in the NIT relating
to deposit of earnest money was an
essential term thereof and could not
be deviated from. The Allahabad High
Court held:
"The mere fact that all the
tenderers who had deposited the
earnest money, whether in terms
of Clause 6 or not had been
treated alike cannot make any
difference. It is quite possible
to visualise that the parties
who had failed to deposit the
earnest money may also have been
in the fray had they known that
earnest money through cheque was
also acceptable. Thus they have
obviously been deprived from
competing with others and this
makes the action of Respondents
1 to 5 unfair when condition No.
6 of the NIT so specifically
points out that deposit of
earnest money in any other mode
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except in cash or by demand
draft would not be acceptable.
It leads us to think that this
was an essential precondition
for submitting tenders and the
Respondents were not entitled to
deviate from this. All tenders
which were not accompanied by
deposit of earnest money
strictly in the manner indicated
in the NIT deserved to be
rejected. We reject the
contention of the Respondents
that the earnest money could be
accepted even when it was
deposited by some mode other
than those in NIT. We also hold
that Clause 6 of NIT is not
merely ancillary or subordinate
condition but in view of the
language in which is couched the
same was a crucial and essential
terms of the tender which could
not be deviated from."
(41.) In appeal, this Court accepted
the theory of essential and non-
essential or ancillary or subsidiary
terms of an NIT. It was held that
the cheque of the Union Bank of
India issued by Poddar Steel (though
a deviation from the terms of the
NIT) was sufficient for meeting the
conditions of the NIT, the condition
being ancillary or subsidiary to the
main object to be achieved by the
condition and that the employer
could waive the "technical literal
compliance" of the earnest money
clause of the NIT "specially when it
was in its interest not to reject
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the said bid which was the highest."
In other words, this Court concluded
that an essential term of the tender
document could not be deviated from
but an ancillary or subsidiary or
non-essential term could be deviated
from, and that the deviation could
be without any reference to
potential bidders.
(42.) Unfortunately, this Court did
not at all advert to the privilege-
of-participation principle laid down
in Ramana Dayaram Shetty and
accepted in G. J. Fernandez. In
other words, this Court did not
consider whether, as a result of the
deviation, others could also have
become eligible to participate in
the bidding process. This principle
was ignored in Poddar Steel."
18.8) Insofar as bids submitted by the
successful auction purchaser i.e. respondent
Nos.6 to 8 as well as one M/s.Vavya
Associates is concerned, it was submitted
that they were rightly considered to be
qualified by the Bank, inasmuch as,
admittedly and undisputedly both the said
bidders had submitted their earnest money
(i.e. 10% of the offer amount) by way of
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Demand Draft before the Bank on or before
05.05.2022 and hence, there was no question
of rejecting the bids submitted by the said
two bidders. It was further submitted that
insofar as the aspect of non-mentioning the
offer amount in the bids is concerned, the
same is totally misconceived inasmuch as, as
per the public auction notice, a bidder was
required to deposit 10% of the offer amount
as earnest money. In compliance of the said
condition, the auction purchaser vide letter
dated 05.05.2022, had deposited 10% of the
offer amount towards earnest money i.e.
Rs.67,00,000/- (10% of Rs.6,70,00,000/-) by
way of Demand Draft bearing No.188320 drawn
on Standard Chartered Bank, before the Bank.
It was submitted that the decision of
interpreting the said condition is vested
upon the respondent Bank, who has considered
the aforesaid bidders as eligible.
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18.9) It was therefore, submitted that the
petitioners have not complied with the
mandatory conditions of the auction notice,
and hence, the same cannot be equated with
the mere fact of not mentioning of the offer
amount in the bid, more particularly, where
the bid contains the details with respect to
the earnest money, which is 10% of the offer
amount.
18.10) Insofar as the alleged violation of
Rule 120 of the Rules, 1965 is concerned, it
was submitted that there is no pleadings in
that regard in either of the writ petitions
and hence, in absence of any pleadings, it
would not be open for the petitioners to
contend about there being no order of
postponing the auction from 06.05.2022 to
09.05.2022, albeit without reasons. It was
further submitted that the said contention
has been raised directly for the first time
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before this Court during the oral arguments
and was never questioned prior thereto and
hence, on that sole ground, the same deserves
to be rejected. It was further submitted that
even otherwise, assuming without admitting
that there is a violation of Rule 120 of the
Rules, 1965 of not adjourning the auction
sale to any other date by recording reasons,
then in that eventuality also, it is not open
for the petitioners to challenge/question the
same, more particularly, when the petitioners
have themselves participated in the auction
proceedings conducted on 9th May, 2022, i.e.
on the adjourned date, without any protest or
demur. Hence, in any event, no prejudice/
injury has been caused to the petitioners by
reasons of such alleged irregularity. It was
submitted that even otherwise, after
completion of the hearing, the advocate
appearing on behalf of the Bank submitted the
order dated 06.05.2022 passed by the Bank for
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adjourning the auction to 09.05.2022.
Therefore, in any event, the said contention
of the petitioners is also baseless and
totally misconceived.
18.11) It was submitted that even
otherwise, the valuation of the auction
property is also fair, correct and reasonable
inasmuch as, at the time of first auction,
which was fixed at Rs.7.60 Crores, there was
no bidder and only at the time of second
auction, the respondent Bank got bidders. It
was further submitted that it is settled
principle of law that mere providing the
higher value would not make the auction
proceedings invalid or should not be the
ground to re-auction the same, which is even
otherwise valid and proper, more
particularly, in view of the fact that the
public auction proceedings have sanctity in
the eyes of law. In support of such
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contention, reliance was placed on the
following decisions of Apex Court:
i) Vedica Procon Private Limited v.
Balleshwar Greens Private Limited and others
reported in (2015) 10 Supreme Court Cases 94,
wherein the Apex Court has held as under:
"40. In other words, in Navalkha
case[(1969) 3 SCC 537], this Court
only recognized the existence of the
discretion in the Company Court
either to accept or reject the
highest bid before an order of
confirmation of the sale is made.
This Court also emphasized that it
is equally a well-settled principle
that once the Company Court recorded
its conclusion that the price is
adequate, subsequent higher offer
cannot be a ground for refusing
confirmation.
xxx
47. A survey of the abovementioned
judgments relied upon by the first
respondent does not indicate that
this Court has ever laid down a
principle that whenever a higher
offer is received in respect of the
sale of the property of a company in
liquidation, the Court would be
justified in reopening the concluded
proceedings. The earliest judgment
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relied upon by the first respondent
in Navalkha & Sons (supra) laid down
the legal position very clearly that
a subsequent higher offer is no
valid ground for refusing
confirmation of a sale or offer
already made. Unfortunately, in
Divya Manufacturing Company (supra)
this Court departed from the
principle laid down in Navalkha &
Sons (supra). We have already
explained what exactly is the
departure and how such a departure
was not justified."
ii) K. Kumar Gupta v. Sri. Markendaya and
Sri Omkareswara Swamy Temple and others
reported in (2022) 5 Supreme Court Cases 710,
wherein the Apex Court held as under:
"16. It is also required to be noted
that the sale was confirmed in
favour of the appellant by the
Commissioner, Endowments Department
after obtaining the report of the
Assistant Commissioner. Therefore,
we are of the opinion that in the
aforesaid facts and circumstances of
the case, the High Court ought not
to have ordered re-auction of the
land in question after a period of
23 years of confirmation of the sale
and execution of the sale deed in
favour of the auction purchaser by
observing that the value of the
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property might have been much more,
otherwise, the object and purpose of
holding the public auction and the
sanctity of the public auction will
be frustrated. Unless there is
concrete material and it is
established that there was any fraud
and/or collusion or the land in
question was sold at a throw away
price, the sale pursuant to the
public auction cannot be set aside
at the instance of strangers to the
auction proceeding.
xxx
18. Further, the Division Bench of
the High Court ought to have
appreciated that the objector - Shri
L. Kantha Rao, who did not
participate in the auction
proceedings and submit any bid can
be said to be a fence sitter having
no stakes on his shoulder and had
simply come forward just to nullify
the registered sale deed executed in
favour of the appellant by adopting
an indirect method of making a
public offer by way of filing a
"Public Interest Litigation" before
the High Court. The so-called
lucrative offer initially made by
Shri Jagat Kumar and the subsequent
offer made by Shri L. Kantha Rao
appears to be made only to frustrate
the auction proceedings with a mala
fide intent. As observed
hereinabove, if there was any error
in the decision-making process
adopted by the authority, the remedy
available was to question the sale
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deed in an appropriate proceeding
available under the law and not by
filing a petition under Article 226
of the Constitution of India."
18.12) Learned Senior Advocate Mr. Joshi
submitted that the judgments cited by the
petitioners are not applicable to the facts
of the present case, as the facts of the
present case are entirely different than the
judgments cited by the petitioners. It was
therefore, submitted that no interference is
warranted by this Court in writ jurisdiction
and the writ petitions therefore, may be
dismissed.
19. Learned advocate Mr. K.K. Trivedi
appearing for the respondent nos. 3 to 5
submitted that no reasons are recorded to
adjourn the auction on 06.05.2022 by
respondent no.5-Sales Officer. It was further
submitted that now Sale Certificate is
already issued and therefore, auction is
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complete and no interference is required to
be made in the impugned action of respondent
nos. 3 to 5 for recovery of its outstanding
dues.
19.1) It was submitted that Public Notice
was issued in the local daily newspaper,
namely, "Gujarat Mitra" in its edition dated
05.04.2022 fixing the date of public auction
on 06.05.2022 of the attached properties on
"As is where is" basis. The public auction
was however, postponed to 09.05.2022. The
Sale Officer received total seven bids from
the bidders. The public auction started at
5.00 pm on 09.05.2022. The Public Notice was,
once again read by the Sale Officer in
presence of all the bidders and their
representatives who remained present. The
sealed covers of all the bidders were opened
in presence of all the bidders and their
representatives by the Sale Officer. During
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the auction proceedings, the bidders and
their representatives raised their voices and
loudly argued with regard to the auction
proceedings. At one point of time, due to
commotion amongst the bidders and exchange of
hot words /arguments going on amongst the
Bidders, the Sale Officer announced to stop/
cancel the Public Auction. However, as the
Bidders who have deposited the Demand Drafts
in time represented that they have followed
the condition of the Public Auction and,
therefore, it was decided that the bidders
who deposited Demand Draft in time were
allowed to participate in the auction. The
bidders who produced Cheques on or before
05.05.2022 were not entitled to participate
in the auction proceedings. The bidders, who
have submitted Demand Draft on or after
06.05.2022 also were not entitled to
participate in the auction.
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19.2) It was submitted that the respondent
no.5 Sale Officer has reviewed and changed
his decision of stopping the Public Auction
of the properties within a period of 5
minutes on the spot in presence of all the
bidders and continued the auction because the
bidders who have submitted Demand Drafts on
or before 05.05.2022 have valid claims in
participating in the auction proceedings.
That is why there are deletions and
corrections in the record of the bidders who
have deposited Demand Draft but not quoted
offers. It was submitted that though the
offered price has not been quoted, it is to
be considered in proportion to the Demand
Draft amount. It was submitted that the
decision was taken by the Sale Officer
openly, fairly, and immediately. It was
submitted that the petitioners have filed the
petitions after the period of limitation
prescribed under the law.
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19.3) It was submitted that the Sale
Officer has taken the aforesaid decision with
absolute bona fide intention, he has kept in
mind that it was the second attempt to sell
the property by way of public auction on
behalf of the Bank. As respondent nos. 6.
7and 8 offered the highest amount, they were
declared successful bidders by the Sale
Officer and the sale was confirmed in their
favour.
19.4) It was submitted that the video
recording of the auction proceeding of the
properties is also preserved by the bank.
19.5) It was submitted that after auction,
the Sale Officer intimated respondent nos. 6,
7 and 8 by the letter dated 10.05.2022 to pay
the remaining amount of the purchase price of
the property within a period of 15 days. The
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Sale Officer even issued notice dated
10.05.2022, as per Rule 128(3) of the Rules,
1965 to the original borrower - Suryanarayan
Silk Mills Pvt. Ltd and its partners
intimating them that the respondent nos.6, 7
and 8 are declared as the purchasers of the
properties in question as they have offered
the highest amount, further asking them to
pay the bank dues within a period of 30 days.
It is intimated in the notice that if they
would pay the dues, the auction proceedings
shall stand canceled.
19.6) In response to such letter, one
Rameshchandra Ishwarlal Gandhi, the partner
of the said firm, wrote a letter dated
29.06.2022, inter-alia stating that he is not
able to pay the entire outstanding dues of
Bank and so whatever the amount received by
the Bank through the Public Auction is
reasonable and acceptable to him.
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19.7) It was submitted that the auction
purchaser has made the payment of the entire
amount on 20.05.2022 and the consent letter
dated 29.06.2022 issued by the original
borrower was recorded in the Board Meeting of
the Bank convened on 18.07.2022. The Sale
Certificate was also executed by the Recovery
Officer in favor of respondent nos.6, 7, and
8 on 05.08.2022, as per rule 128(5) of the
Rules, 1965.
19.8) It was submitted that the Sales
Officer and Recovery Officer and the Bank
have taken the decision to confirm the sale
of the properties in question in favor of the
respondent nos. 6, 7 and 8 with absolute bona
fide intention and there is no mala fide
intention on the part of any of the officials
of the Bank.
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19.9) It was further submitted that the
present petitioners does not have any locus
standi to question the price of the
properties in question. It was submitted that
the petitioners has not shown his bona fide
by way of depositing the entire amount
offered by him. The Bank is in need of funds
so that the Bank can grant loans to other
needy persons and the bank needs liquidity.
The Bank is not in business of property
dealing. If the auction would be cancelled,
the liquidity of the Bank's money would be
considerably reduced. Therefore, the
cancellation of the public auction is not in
the interest of the business of the Bank.
19.10) It was submitted that there are all
chances that there may be collusion between
the petitioners and the respondent nos.6, 7
and 8, as the land/property in question is
sold on "As is where is" basis. It was
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therefore, submitted that the petition
deserves to be dismissed.
20. Having heard the learned advocates for
the respective parties and having considered
the factual matrix in which these petitions
are filed it is clear that respondent nos.3
to 5 have acted arbitrarily on 09.05.2022 in
accepting the bid offer of respondent nos. 6
to 8 though the petitioner of Special Civil
Application No.18857/2022 had offered highest
bid of Rs.8,51,00,000/-.
21. It is also pertinent to note that
auction once postponed on 06.05.2022 without
recording any reason, then fresh auction
proceedings ought to have been initiated as
per the provisions of Rules 119 and 120 of
the Rules, 1965 which read as under:
"119. Proclamation before sale.-
Proclamation of sale shall be
published by affixing a notice in
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the office of the Recovery Officer
and the Taluka Office atleast thirty
days before the date fixed for the
sale and [the Recovery Officer shall
cause the publication of the
proclamation regarding the time and
place of intended sale to be made by
beat of drum in the village on the
day prior to a fortnight and on two
consecutive day previous to the date
fixed for sale and on the date of
sale prior to the commencement of
the sale]. Such proclamation shall
where attachment is required before
sale, be made after the attachment
has been effected. Notice shall also
be given to the decree-holder and
the defaulter. The proclamation
shall state the time and place of
sale and specify as fairly and
accurately as possible:
(i) The property to be sold,
(ii) any encumbrance to which the
property is liable,
(iii) the amount, for the recovery
of which sale is ordered, and
(iv) every other matter which the
Sale Officer considers material for
a purchaser to know in order to
judge the nature and value of the
property.
120. Sale by public auction. When
any immovable property is sold under
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these rules the sale shall be
subject to the prior encumbrances on
the property, if any. The decree-
holder shall, when the amount for
the realisation of which sale is
held exceeds Rs. 100 furnish to the
Sale Officer within such time as may
be fixed by him or by the Recovery
Officer, an encumbrance certificate
from the Registration Department for
the period of not less than twelve
years prior to the date of
attachment of the property sought to
be sold, or in a case falling under
the proviso to Rule 114 prior to the
date of attachment of the
application for execution. The time
for production of the encumbrance
certificate may be extended at the
discretion of the Sale Officer or
the Recovery Officer as the case may
be. The sale shall be by public
auction to the highest bidder,
provided that it shall be open to
the Sale Officer to decline to
accept the highest bid where the
price offered appears to be unduly
low or for other reasons and
provided also that the Recovery
Officer or the Sale Officer may in
his discretion, adjourn the sale to
a specified day and hour, recording
his reasons for such adjournment.
Where a sale is so adjourned for a
longer period than 7 days, a fresh
proclamation shall be made, unless
the judgment debtor consents to
waive it. The sale shall be held
after the expiry of not less than
thirty days calculated from the date
on which notice of the proclamation
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was affixed in the office of the
Recovery Officer. The time and place
of sale shall be fixed by the
Recovery Officer and the place of
sale shall be the village where the
property to be sold is situated or
such adjoining prominent place of
public resort as may be fixed by the
said Recovery Officer:
Provided that in cases where an
encumbrance certificate is not
obtainable owing to the destruction
of the connected records, and
affidavit from the village Patwari
in regard to the encumbrances known
to him supported by a certificate
from the Registration Department
that the encumbrance certificate
cannot be granted owing to the
destruction of the connected
records, shall be accepted in the
place, of an encumbrance
certificate."
22. On perusal of the above Rules, it is
clear that once the auction is postponed,
then respondent bank is required to issue
fresh auction notice inviting the offers as
per the prescribed procedure. However, the
auction was adjourned to 09.05.2022 without
recording any reason by respondent nos. 4 and
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5. Therefore, auction proceedings which were
held on 09.05.2022 was without any authority
and contrary to the Rules. Even otherwise it
is emerging from the record that at first
instance respondent nos. 4 and 5 rejected the
bids of all the seven bidders who remained
present on 09.05.2022 and in the late night
at around 8:30 pm to 9:30 pm, respondent nos.
6 to 8 were called and their offer was
accepted by respondent nos. 3 to 5. Moreover,
during pendency of Special Civil Application
No.15060/2022, Sale Certificate was issued in
favour of respondent nos. 6 to 8 though
respondent nos. 3 to 5 were aware with regard
to pendency of the petition and merely
because no interim relief was granted,
respondent nos. 3 to 5 should not have issued
the Sale Certificate in favour of respondent
nos. 6 to 8 so as to see that petition
becomes infructuous.
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23. The Apex Court as well as this Court
have time and again held to the effect that
this Court can exercise the writ jurisdiction
invoking Article 226 in facts of the case
when it is revealed that the conduct of
auction for recovery proceedings of the bank
which is a public money has resulted into a
loss by such auction to the financial
institution and therefore, the writ
jurisdiction is available to see that the
maximum amount is recovered by the financial
institutions.
24. In facts of the case admittedly there
was a highest offer of Rs.8,51,00,000/- but
for the reasons best known to respondent nos.
3 to 5, offer of respondent nos. 6 to 8 was
accepted for Rs. 6,75,00,000/- less than the
offer made by petitioner of Special Civil
Application No.15060/2022 for Rs.
6,90,00,000/-. This fact only shows that
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respondent nos. 3 to 5 wanted to favour
respondent nos. 6 to 8 and therefore, auction
held on 09.05.2022 is nothing but an
arbitrary exercise of power contrary to the
Rules and therefore, the same is liable to be
quashed and set aside.
25. Accordingly, the petition succeeds and
the impugned auction held on 09.05.2022 is
quashed and set aside and as a consequence
thereof, Sale Certificate dated 05.08.2022
also stands cancelled. Respondent no.3 shall
refund the amount of consideration of Rs.
6,75,00,000/- lakhs received from respondent
nos. 6 to 8 within a period of four weeks
from the date of receipt of this order and
thereafter hold fresh auction in accordance
with the Rules after following the prescribed
procedure in accordance with law.
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26. Petitions are accordingly disposed of.
Rule is made absolute to the aforesaid extent
with no order as to costs. Civil Application
also stands disposed of accordingly.
(BHARGAV D. KARIA, J)
After prononcement of the Judgment and Order,
learned advocate Mr.Vinay D. Bairagar for
respondent nos.6, 7 and 8 prayed for stay of the
implementation of the same.
Considering the fact that the Sale
Certificate was issued in the month of August,
2022, the implementation of this Judgment and
Order shall remain stayed for a period of four
weeks from today.
(BHARGAV D. KARIA, J)
RAGHUNATH R NAIR
