IMPORTANT POINT
The statutory powers vested in the State Financial Corporation under the State Financial Corporation Act, must be exercised bona fide and in public auction adequate publicity must be given to ensure maximum participation of bidders in the sale.

Headnote:Constitution of India-Article 226 -Writ Petition-Suppression of material facts-Need of Courts to deter a litigant from abusing process of Court by deceiving it-Appellant had been sanctioned a sum of Rs. 70 lakhs by Bihar State Credit and Investment Corporation Ltd. (BICICO) for financing construction of a hotel-Hotel mortgaged by appellant to BICICO by way of security against the loan-Non payment of outstanding amount-Proceedings for sale of hotel-Suit filed by appellant challenging action of appellant-Next day writ petition was filed by appellant for same reliefs as had been prayed for in the suit-Appellant did not disclose tact of filing of the suit-Whether filing of the suit can be said to be a fact material to disposal of writ petition on merits-(No)-Appellant had withdrawn the suit two weeks after the suit had been filed-State Financial Corporation Act.
       Held : As a general rule, suppression of a material fact by a litigant disqualifies such litigant from obtaining any relief. This rule has been evolved out of the need of the Courts to deter a litigant from abusing the process of Court by deceiving it. But the suppressed fact must be a material one in the sense that had it not been suppressed it would have had an effect on the merits of the case. It must be a matter which was material for the consideration of the Court, whatever view the Court may have taken. (Para 13)
       Assuming that the explanation given by the appellant that the suit had been filed by one of the Directors of the Company without the knowledge of the Director who almost simultaneously approached the High Court under Article 226 is unbelievable, the question still remains whether the filing of the suit can be said to be a fact material to the disposal of the writ petition on merits. We think not. The existence of an adequate or suitable alternative remedy available to a litigant is merely a factor which a Court entertaining an application under Article 226 will consider for exercising the discretion to issue a writ under Article 226 [A.N. Venkateswaran v. R.S. Wadhwani, AIR 1961 SC 1507]. But the existence of such remedy does not impinge upon the jurisdiction of the High Court to deal with the matter itself if it is in a position to do so on the basis of the affidavits filed. If however a party has already availed of the alternative remedy while invoking the jurisdiction under Article 226, it would not be appropriate for the Court to entertain the writ petition. The Rule is based on public policy but the motivating factor is the existence of a parallel jurisdiction in another Court. (Para 14)
       In this case, admittedly the appellant has withdrawn the suit two weeks after the suit had been filed. In other words the appellant elected to pursue its remedies only under Article 226. The pleadings were also complete before the High Court. No doubt, the interim order which was passed by the High Court was obtained when the suit was pending. But by the time the writ petition was heard the suit had already been withdrawn a year earlier. Although the appellant could not, on the High Court s reasoning, take advantage of the interim order, it was not correct in rejecting the writ petition itself when the suit had admittedly been withdrawn, especially when the matter was ripe for hearing and all the facts necessary for determining the writ petition on merits were before the Court, and when the Court was not of the view that the writ petition was otherwise not maintainable. (Para 15)
       (ii) State Financial Corporation Act, 1951-Section 29-Proceedings for recovery of outstanding amount-Appellant had been sanctioned a sum of Rs. 70 lakhs by Bihar State Credit and Investment Corporation Ltd. (BICICO) for financing construction of a hotel-Appellant repaid about Rs. 14.23 lakh to BICICO-However, outstanding amount, due from appellant was Rs. 191.3 lakhs including interest -Proceedings commenced by BICICO for sale of hotel which had been mortgaged by appellant to BICICO by way of security against the loan-First notice of sale was given on 31.1.2002-A period of about four weeks was given to purchasers to submit their offers-Second notice of sale giving less than three days for the purchasers to inspect the premises-Respondent 6 submitted his offer on the day on which sale notice was published and made payment of entire consideration on same day-Deviations from the norm not accepted-Whether sale of hotel in favour of respondent 6 was valid-(No).
       Held : We are of the view that the sale effected in favour of respondent No.6 cannot be sustained. It is axiomatic that the statutory powers vested in the State Financial Corporation under the State Financial Corporation Act, must be exercised bonafide. The presumption that public officials will discharge their duties honestly and in accordance with the law may be rebutted by establishing circumstances which reasonably probabalize the abuse of that power. In such event it is for the concerned officer to explain the circumstances which are set up against him. If there is no credible explanation forthcoming the Court can assume that the impugned action was improper. (Para 17)
       Adequate publicity to ensure maximum participation of bidders in turn requires that a fair and practical period of time must be given to purchasers to effectively participate in the sale. Unless the subject matter of sale is of such a nature which requires immediate disposal, an opportunity must be given to the possible purchaser who is required to purchase the property on As is where is basis to inspect it and to give a considered offer with the necessary financial support to deposit the earnest money and pay the offered amount, if required. (Para 18)
       In this case, the first notice of sale was given on 31st January 2002. A period of about four weeks was given to the purchasers to submit their offers by 28th February 2002. The period of four weeks can therefore be taken to be the ordinary norm. But when the second impugned notice of sale was given on 26th March 2002, less than three days were given for the purchasers to inspect the premises, make necessary arrangements and submit their offers to BICICO. Of these three days, two were public holidays when banks would have also been shut. The period of notice was, in the circumstances, entirely inadequate. Besides, we have not been told the reason for this unusual haste. Such precipitate action was not called for unless there were some other considerations weighing with the authorities, considerations which have not been disclosed to the Court. The method in which the sale was conducted is also questionable. Three valuations were obtained between 3rd July 2001 to February 2002 before the property was sold to the respondent No.6. What was valued in July 2001 as worth Rs. 2.16 crores is valued at Rs. 94.81 about 10 months later, a fall of over Rs. 1.50 crores. The third extra ordinary circumstance is that the respondent No.6 had submitted his offer on the day on which the sale notice was published and made payment of the entire consideration on the same day before the last date for submission of tenders was over and even before its offer could have been accepted. It is unlikely that this would have been done unless the respondent No.6 knew (i) the valuation made and (ii) that its offer would be accepted. Indeed a portion of the respondent No.6 s offer had already been paid on 7th March 2002 i.e. prior to the sale notice itself. According to the Respondent No. 6 this was pursuant to the earlier infructuous sale notice, a payment which, again for some undisclosed reasons, had not been returned by BICICO to the respondent No.6. No satisfactory explanation is forthcoming from the authorities to explain these deviations from the norm. The concatenation of inexplicable and unexplained circumstances is sufficient for us to hold that the sale was unfair and consequently invalid. (Paras 19 to 22)

Judgement Key Points

Certainly. Based on the provided legal document, here are the key points:

The statutory powers vested in the State Financial Corporation under the relevant Act must be exercised bona fide, and adequate publicity must be given in public auctions to ensure maximum participation of bidders. (!) (!)
The suppression of a material fact by a litigant generally disqualifies them from obtaining relief, especially if the suppressed fact would have influenced the case's merits. However, the fact that a litigant has already pursued an alternative remedy does not bar the High Court from exercising its jurisdiction under Article 226 if the facts are otherwise ripe for consideration. (!) (!) (!) (!)
When a party has withdrawn a suit before the Court, and the matter is fully ripe for adjudication on its merits, the Court may still consider the case if it is otherwise maintainable, particularly when the party has elected to pursue relief under extraordinary jurisdiction. (!) (!)
The exercise of statutory powers must be in good faith; any circumstances indicating abuse or irregularity can lead the Court to assume improper conduct, especially if explanations are lacking or unconvincing. (!)
Adequate and reasonable notice periods are essential for fair participation in sale proceedings. Short notice periods, especially when they coincide with public holidays, are inadequate and can render the sale process unfair. (!) (!)
The method of sale must be transparent and fair, with proper valuation and equal opportunity for bidders. Deviations from norms, such as unusually short notice or suspiciously rapid payment and offer submissions, undermine the sale's validity. (!) (!) (!) (!)
The sale process must adhere to principles of fairness, including giving bidders sufficient time to inspect and consider the property, and ensuring valuations are credible and consistent. Unexplained deviations or suspicious circumstances can invalidate the sale. (!) (!) (!) (!)
If a party has made substantial payments, shown genuine intent to settle debts, and acted in good faith, they may be entitled to relief, especially when the other party's conduct appears questionable. (!) (!)
When a sale is challenged on grounds of irregularity or unfairness, the Court can set aside the sale if it finds that procedural lapses or irregular conduct occurred, and direct the property to be handed back to the original owner or their representative. (!) (!)
The Court emphasizes that suppression of material facts, especially when such facts would influence the outcome, can lead to disqualification of the litigant from relief. However, if the facts are not material or do not impact the case's merits, the Court may proceed with the adjudication. (!) (!)
The Court may also consider the conduct of parties, including whether they have acted in a manner consistent with good faith and whether procedural safeguards were followed, in determining the validity of sale or other proceedings. (!) (!)
Overall, the principles of fairness, transparency, and bona fide exercise of statutory authority are central to the validity of proceedings related to the sale of property under statutory powers. (!) (!)

Please let me know if you need further elaboration or specific legal advice based on these points.

JUDGMENT

Ruma Pal, J.-Leave granted.

2. The appellant had been sanctioned a sum of Rs. 70 lakhs by the Bihar State Credit and Investment Corporation Ltd. (hereinafter referred to as BICICO ) in April 1992 for financing the construction of a hotel. According to the appellant, BICICO only disbursed a sum of Rs. 44.56 lakhs in instalments as a result of which the appellant could not complete the project without a huge cost overrun. From time to time upto 2001-2002, the appellant repaid about Rs. 14.23 lakh to BICICO. However, the outstanding amount, due from the appellant according to BICICO as on March 2002, was Rs. 191.3 lakhs including interest. Proceedings were therefore commenced by BICICO under Section 29 of the State Financial Corporations Act, 1951 for sale of the hotel which had been mortgaged by the appellant to BICICO by way of security against the loan.

3. The hotel was valued on 3rd July 2001 by BICICO through its valuer. According to this valuation, the property was worth Rs. 2.16 crore. After this, a publication was made on 31st January 2002 offering the hotel for sale on an "As is where is basis". Offers were required to be made by 28th February 2002. The respondent No.6 offered to purchase the hotel for Rs. 41 lakhs. The offer was rejected by BICICO because the bid was too low.

4. The property was again re-valued on 24th January 2002 by BICICO. By what, according to BICICO, was only an "in - house assessment", the value of the hotel was estimated at Rs. 1.58 crores. But when a third valuation was again made at the instance of BICICO in February 2002, the total value of the property including of the building and land was only Rs. 94.81 lakhs. On 26th March 2002, a second sale notice was published by BICICO in respect of the hotel on "As is where is basis". This notice has been impugned before us. Under this notice offers were to be given by way of a sealed cover by 29th March 2002 i.e. within three days. Of these three days 28th March 2002 was `Holi and 29th March 2002 was `Good Friday .

5. It appears from the records that on the same day the second sale notice was published, the respondent No.6 made an offer to purchase the hotel for Rs. 95.50 lakhs and in fact paid Rs. 95.50 lakhs to BICICO. On 30th March 2002, which was a Saturday, the offer of the respondent No.6 was negotiated and the consideration was finalised at Rs. 1 crore. The difference between Rs. 94.50 lakhs and Rs. 1 crore had already been paid to BICICO by the respondent No.6 on 7th March, 2002. Therefore by the 26th March, 2002, before the last date for receiving offers was over and the tenders were opened, the Respondent No.6 had deposited the entire consideration of Rs. 1 Crore. Nevertheless a letter accepting the respondent No.6 s offer was issued by BICICO on 31st March 2002 (which was a Sunday) asking the respondent No. 6 to pay the amount of Rs. 1 crore by 31st March 2002 failing which its offer would stand rejected. The respondent No.6 apparently received the letter on the same day from BICICO and also replied on that day stating that the amount of Rs. 1 crore had already been paid. After this, a letter was written again on the same day by BICICO to the appellant and its two Directors asking them to match the offer of respondent No.6 within 10 days from the date of the issue of the letter, failing which the sale would be concluded in favour of the respondent No.6.

6. On 4th April 2002, a suit was filed by the appellant before the Court of the Sub-Judge, Patna, inter-alia, challenging the action of BICICO. An application for interim relief was made to restrain BICICO from selling the hotel. The prayer for interim injunction was refused by the Sub Judge on 8th April 2002 and notice was directed to be issued to BICICO. The next day, a writ petition was filed by the appellant for the same reliefs as had been prayed for in the suit. An interim order was passed by the learned Single Judge on 9th April 2002 after hearing counsel for the appellant as w

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2004 Supreme(SC) 333

IMPORTANT POINTThe statutory powers vested in the State Financial Corporation under the State Financial Corporation Act, must be exercised bona fide and in public auction adequate publicity must be given to ensure maximum participation of bidders in the sale.

Cases Referred (6)

IMPORTANT POINT
The statutory powers vested in the State Financial Corporation under the State Financial Corporation Act, must be exercised bona fide and in public auction adequate publicity must be given to ensure maximum participation of bidders in the sale.