New Horizon Educational And ... vs The Federal Bank Limited
2023 Latest Caselaw 4006 Kant

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                                              NC: 2023:KHC:23107-DB
                                                    WA No. 397 of 2023




                  IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                       DATED THIS THE 5TH DAY OF JULY, 2023

                                     PRESENT
              THE HON'BLE MR PRASANNA B. VARALE, CHIEF JUSTICE
                                       AND
                       THE HON'BLE MR JUSTICE M.G.S. KAMAL
                      WRIT APPEAL NO. 397 OF 2023 (GM-RES)


             BETWEEN:

                   NEW HORIZON EDUCATIONAL
                   AND CULTURAL TRUST,
                   100 FEET ROAD, INDIRANAGARA,
                   BENGALURU - 560 038.
                   REPRESENTED BY ITS MANAGING TRUSTEE
                   DR MOHAN MANGNANI

                                                          ...APPELLANT
             (BY SRI. UDAYA HOLLA. SR. ADVOCATE FOR
Digitally        SRI. VIVEK HOLLA, ADVOCATE)
signed by
SUMA B N      AND:
Location:
High Court of 1. THE FEDERAL BANK LIMITED
Karnataka
                   No.13, CHURCH STREET,
                   II FLOOR, MSR WEST PARK,
                   BENGALURU - 560 001
                   REPRESENTED BY ITS MANAGER.

             2.    THE SOUTH INDIAN BANK
                   SIB ARCADE, No.61,
                   WHEELER ROAD, COX TOWN,
                   BENGALURU - 560 005.
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                                 NC: 2023:KHC:23107-DB
                                       WA No. 397 of 2023




     REPRESENTED BY ITS
     JOINT GENERAL MANAGER

3.   AUTHORISED OFFICER UNDER SARFAESI ACT
     AND ASST. VICE PRESIDENT,
     FEDERAL BANK, No.3,
     CHURCH STREET, II FLOOR,
     MSR WEST PARK,
     BENGALURU - 560 001.

4.   THE RESERVE BANK OF INDIA
     NRUPATHUNGA ROAD,
     BENGALURU - 560 001,
     REP. BY ITS CHIEF MANAGER.

5.   SRI. B V SADANAND
     S/O VENKATASWAMY REDDY,

6.   MRS. S L MANJULA
     W/O B V SADANANDA,

7.   Ms.SAHANA REDDY
     D/O B V SADANANDA,

8.   Ms.SANJANA REDDY
     D/O B V SADANANDA,

     RESPONDENT Nos.5 TO 8 ARE
     RESIDING AT No.801, MVR NILAYA,
     9TH MAIN ROAD, 3RD BLOCK,
     KORAMANGALA,
     BENGALURU - 560 034.

9.   KLSR INFRATECH LIMITED
     HN NO 2-56/D/213/9A AND 9B
     FLAT No.4B, KLSR TOWERS,
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                                    NC: 2023:KHC:23107-DB
                                              WA No. 397 of 2023




    NEAR YSR STATUTE,
    AYYAPPA SOCIETY,
    MADHAVPUR,
    HYDERABAD - 500 081
    REPRESENTED BY ITS MANAGING DIRECTOR

                                                 ...RESPONDENTS

(BY SRI. D.R. RAVISHANKAR SR. ADVOCATE FOR
    SRI. B.R. VISWANATH, ADVOCATE FOR C/R3;
    SRI. ASHOK HARANAHALLI, SR. ADVOCATE FOR
    SRI. SUSHEEL KUMAR HALDI, ADVOCATE FOR C/R9)

     THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO CALL FOR THE
RECORDS OF THE CASE W.P. NO. 5145/2023 AND FURTHER BE
PLEASED TO SET ASIDE THE ORDER DATED 28.03.2023
PASSED BY THE LEARNED SINGLE JUDGE OF THIS HON'BLE
COURT IN W.P. NO.5145/2023 AND GRANT SUCH OTHER AND
FURTHER RELIEFS AS ARE JUST INCLUDING THE COST OF
THIS APPEAL.


     THIS APPEAL COMING ON FOR PRELIMINARY HEARING,
THIS DAY, M.G.S.KAMAL J., DELIVERED THE FOLLOWING:



                        JUDGMENT

This writ appeal is against the order dated

28.03.2023 passed in W.P.No.5145/2023 rejecting the writ

petition filed by the appellant seeking relief of declaration

to declare that the E-auction held by respondents 1 to 3

for the sale of schedule property to be illegal and void and

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for a further direction to the respondents 1 to 3 to conduct

a fresh auction sale.

2. The case of the appellant is that respondents 5 to

8 being borrowers from respondents 1 and 2 defaulted in

repayment resulting in respondents 1 and 2 initiating

action against them under the provisions of Securitization

and Reconstruction of Financial Assets and Enforcement of

Securities Interest Act, 2002 (SARFAESI Act for short),

which eventually resulted in conducting of E-auction of the

secured asset namely schedule property. That the

respondent-bank had notified the date of conducting E-

auction to be on 28.02.2023 in which appellant and

respondent No.9 were the participants. Respondent No.9

was declared to be the successful bidder.

3. The only contention of the appellant is that the

appellant was the highest bidder at Rs.52 crores at

03:54:21 hours. However, thereafter respondent No.9

had been declared as successful bidder at Rs.52.10 crores.

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That the declaration of respondent No.9 as a successful

bidder is fraudulent, arbitrary and illegal inasmuch as

according to the appellant his was the last bid that was

placed at 15:54:21 hours and according to the details at

his screen the closing hour of the auction was just about a

second away and there was no other bid placed by any

one much less the respondent No.9. That after the end of

bid process as indicated in the screen shot produced at

Annexure-A the screen did not show hour, minutes and

seconds and it was blank. Thus, it is contended that the

entire process of E-auction is vitiated warranting

interference.

4. The case of the respondent-bank is that E-

auction was conducted in accordance with terms and

conditions of the sale as set out in the sale notice. The E-

auction was conducted by an external agency namely

M/s.4 Closure following all the due process. That the

registration of appellant at the portal and submission of all

relevant particulars, obtaining user ID and Password to

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participate in the E-auction and all incidental aspects were

monitored and controlled by the said E-auction agency.

That failure to access the portal due to technical reasons if

any will not amount to irregularity. That the final bid of

respondent No.9 was accepted at 15:57 hours and

thereafter there was no bid on behalf of the appellant. As

such, respondent No.9 was declared as highest bidder

automatically.

5. Along with the statement of objections

respondent produced bid summary regarding conducting

of E-auction by M/s.4 Closure as per Annexure-R-1 and a

certificate under Section 65B of Evidence Act as per

Annexure-R-3.

6. Learned Single Judge after hearing the learned

counsel appearing for the parties, dismissed the writ

petition by the impugned order as the appellant had not

demonstrated any arbitrariness in the auction process

NC: 2023:KHC:23107-DB WA No. 397 of 2023

warranting judicial review. Aggrieved by the same,

present appeal.

7. Sri.Udaya Holla, learned Senior counsel

appearing for the appellant vehemently submitted that the

auction had not been conducted properly inasmuch as

though the appellant was the highest bidder, respondent

No.9 was shown to be highest bidder even after the end of

bidding time. Thus, he submits that a fraud has been

played upon the appellant vitiating the entire process of E-

auction. The appellant who was the highest bidder at

Rs.52.10 crores the time when the bidding time ended

given an opportunity, is still willing to bid for higher

amount upto 60 Crores. But since the screen shot after 4

P.M. went blank indicating end of the auction, appellant

could not offer any higher bid. That the entire auction is

contrary to the spirit and mandate of SARFAESI Act and

the law governing the public auction, in that he submits

that the object ought to be to achieve the highest sale

consideration in the interest of securing the public money

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and also benefiting the borrower whose property is put to

auction. He insists that a fresh auction be conducted

providing the appellant an opportunity to bid higher

amount. He relied upon the following decisions in support

of his submissions:

"1. SCANIA COMMERCIAL VEHICLES INDIA PRIVATE LIMITED VS GOVERNMENT OF KARNATAKA AND OTHERS reported in 2016 SCC online Kar 6744.

2. RAM AND SHYAM COMPANY VS. STATE OF HARYANA AND OTHERS reported in (1985) 3 SCC 267.

3. MANOJ I NAIK AND ASSOCIATES VS. OFFICIAL LIQUIDATOR reported in (2015) 3 SCC 112.

4. J. RAJIV SUBRAMANIYAN AND ANOTHER VS. PANDIYAS AND OTHERS reported in (2014) 5 SCC 651.

5. SHRADHHA AROMATICS PRIVATE LIMITED VS. OFFICIAL LIQUIDATOR FOR GLOBAL ARYA INDUSTRIES LIMITED AND OTHERS reported in (2011) 6 SCC 207.

6. STATE OF PUNJAB AND OTHERS VS. MEHAR DIN reported in (2022) 5 SCC 648

7. SHANKERAPPA VS. SUSHILABAI reported in AIR 1984 KAR 112".

8. Sri.D.R.Ravishankar, learned Senior counsel

appearing for respondent-Bank submitted that there has

been no fraud of any nature in the process of conducting

E-auction. Referring to letter issued by the appellant

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produced at Annexure-F at 6.10 P.M. of 28.02.2023,

learned Senior counsel submitted that the appellant was

aware that before the closing of time for bidding his timer

went blank. He also referred to a letter dated 06.03.2023

Annexure-R-1, along with E-auction report issued by M/s.4

Closure India Ltd., E-auction agency wherein it is pointed

out that the appellant had accessed the website from two

different IP addresses on the date of auction. The first IP

address was used to access between 11:00:09 a.m. and

03:54:21 P.M. and the second IP address has been used

between 04:07:35 P.M. and 04:19:07 P.M. Thus he

submits that the technical error if any was at the

appellant's end even before the closure of bidding time.

Further referring to enclosure to Annexure-R-1 namely E-

auction report learned Senior counsel pointed out the time

snaps of the appellant and respondent No.9 right upto the

end of the highest bid amount quoted by them. In that

the last bidding time of the appellant is shown as

03:54:21 P.M. and the last bidding time of the respondent

No.9 is shown as 03:57:00 p.m. He also referred to a

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document at Annexure -R-3 namely certificate issued by

said E-auctioning agency certifying the authenticity of the

E-auction documents produced at Annexure-R-1 and its

enclosures. He submits that since the appellant has

neither denied nor rebutted the said documents, the same

deemed to have been admitted by the appellant. As

regards the contention of the appellant for conducting the

fresh auction, learned Senior counsel relies upon the

Judgment of the Apex Court in the case of Pegasus

Assets Reconstruction Pvt. Ltd., Vs Haryana Concast

Limited and anr reported in (2016) 4 SCC 47. Hence,

he seeks for dismissal of the appeal.

9. Sri.Ashok Haranahalli, learned Senior counsel

appearing for respondent No.9 drawing attention of this

Court to the terms of auction notice submitted that clause

5 specifically provides that the auction sale would be

through online electronic bidding process between 11 a.m.

- 1 p.m. (IST) with unlimited extension of five minutes

each commencing at the reserve price with the bidder to

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improve offer in multiples of 10 lakhs. That bank or the

auction conducting agency would not be liable towards the

bidders for any interruption or delay in accessing the site

irrespective of cause. He further submits that appellant

having participated in the bidding process, accepting the

terms of the sale notice cannot be permitted to challenge

the same after being unsuccessful in the process. He

submits that the appellant's offer to pay 60 crores is an

after thought since he has commenced bidding by quoting

Rs.44.10 crores and ended with 52 crores. He submits

that the judicial review in cases involving tender for

contracts shall be restricted unless arbitrariness and

malafides are established. He relied upon Judgments of

Apex Court in the case of National High Speed Rail

Corporation Limited Vs Montecarlo Limited and anr

reported in (2022) 6 SCC 401, N.G.Projects Ltd., Vs Vinod

Kumar Jain and others reported in (2022)6 SCC 127 and

Central CoalFields Ltd., and anr Vs SLL-SML (Joint Venture

Consortium) and others reported in (2016) 8 SCC 622.

Hence, seeks for dismissal of the appeal.

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10. Heard and perused the records.

11. As already noted above, the only contention

being raised and the legal arguments built around it by the

appellant is, that at 3:54 p.m. appellant bid amount at

Rs.52 crores was the highest and E-auction portal

extended the time by five more minutes and even at last

01 second of the closing of the bid time appellant

remained the highest bidder. That the screen shot

produced by him at Annexure-A indicated that

Rs.52 crores was the highest bid and being the last bid

amount appellant ought to have been declared as the

highest bidder. That since he did not receive the

confirmation he approached the bank and only then it was

informed that appellant was not the highest bidder and

someone else had quoted the final bid amount at Rs.52.10

crores. That the appellant was willing to bid higher

amount than the said 52.10 crores, and since the screen

shot after 4 P.M. went blank indicating that the auction

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had ended, the appellant could not offer any higher bid.

Hence, it is alleged that fraud has been played.

12. As already noted above and even as rightly

taken note of by learned Single Judge the auction process

has been conducted by a third party agency namely M/s.4

Closure. Document at Annexure-R-1 along with

enclosures would categorically indicate that the appellant

had used two IP addresses namely (1) 14.99.188.242

between 11:00:09 a.m. and 03:54:21 p.m. and (2)

202.62.95.70 between 04:07:35 p.m. and 04:19:07 p.m.

A certificate as required under Section 65B of the Evidence

Act at Annexure-R-3 is produced. The contents of the

aforesaid documents would reveal that the appellant had

access to the website from his first IP address upto

03:54:21 P.M. and he logged in thereafter through his

second IP address only at 04:07:35 P.M. and remained

upto 04:19:07 P.M. Whereas respondent No.9 had placed

his final bid of Rs.52.10 crores at 03:57:00 P.M. Indicating

technical snag at the appellant's end.

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13. Clause 5 of the sale notice produced at

Annexure-B provides that date and time of auction on

28.02.2023 between 11 a.m. and 1 p.m.(IST) with

unlimited extension of 5 minutes each and the bidders to

improve their offers in multiples of 10 lakhs. Clause 9 of

the sale notice also provides that bank/M/s.4 Closure shall

not have any liability towards bidders for any interruption

or delay in access to the site irrespective of the cause.

14. The aforesaid aspects of the matter have been

brought on record by respondents 1 and 3 in their

statement of objections more particularly at paragraphs 4,

6, 9, 10 and 13. There has been no denial or rebuttal by

the appellant either to the averments made in these

paragraphs or to the Annexures enclosed therewith. Thus,

as rightly contended by Sri.D.R.Ravishankar, learned

Senior counsel for respondent -bank appellant cannot be

heard to say that a fraud has been played in the auction

process to eschew the appellant and to favour the

respondent No.9.

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15. The offer being made by the appellant now

before the Court by quoting Rs.60 crores as the bid

amount on the premise of he having been deprived of

opportunity to place his highest bid and reliance placed on

by learned Senior counsel Sri.Udaya Holla on the

Judgments of this Courts and Apex Court referred to above

is of no consequences as the facts and circumstances

involved in the present case are completely different and

distinct from the one involved in the said Judgments. In

the absence of any specific denial by the appellant with

regard to he logging into the auction website through two

different IP addresses at different times mentioned

hereinabove and in the absence of any contra material

being placed for consideration, the submission on

arbitrariness, unreasonableness or on fraud as sought to

be made out cannot be countenanced. Besides, as held by

the Apex Court in the case of Pegasus Assets Pvt. Ltd.,

supra that if every confirmed sale is to be set aside there

will be no auction-sale would ever be complete as always

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somebody can come after the auction or its confirmation

offering higher amount.

16. Learned Single Judge having taken note of the

factual and legal aspect of the matter in detail, in our

considered opinion has come to just conclusion warranting

no interference in the matter.

For the aforesaid reasons and analysis, appeal is

dismissed.

Sd/-

CHIEF JUSTICE

Sd/-

JUDGE

SBN