The Court emphasized the importance of just and fair actions by the Corporation in accepting offers and highlighted the significance of timely payments in auction proceedings.

ORDER :

The appellant – M/s Chem Solar Energy System Private Limited (hereinafter referred to as “the borrower”) in Civil Appeal No. 9593 of 2010 is the borrower whereas the appellant in Civil Appeal No. 9594 of 2010 is the Karnataka State Financial Corporation (hereinafter referred to as “the Corporation”). Both the appellants are aggrieved by the order dated 9th January, 2009 passed by the Division Bench of the High Court of Karnataka in Writ Appeal No. 679 of 2008. The Division Bench of the High Court, by the impugned judgment and order, has set aside the order of the learned single judge of the High Court dismissing the writ petition filed by the purchaser – respondent No. 3 – M/s Sri Lakshminarayana (hereinafter referred to as “the third respondent”) seeking interference with the actions of the Corporation in cancelling the sale made in favour of the purchaser and ordering a fresh auction. The core facts which are required to be noticed may be briefly enumerated hereunder.

2. In respect of unpaid dues of the borrower (appellant in Civil Appeal No. 9593 of 2010) the secured properties were put up for auction. Three earlier auctions did not yield any positive result. In the fourth auction, one Mr. Sanjay Goel offered an amount of Rs. 50,00,000/- (Rupees Fifty lakh) after negotiations were held with all the bidders. When it came to payment, the aforesaid bidder (Mr. Sanjay Goel) failed to make any payment and, therefore, the offer was cancelled and the earnest money was forfeited. At this stage, it appears that the third respondent appeared in the scene and offered a sum of Rs. 50,00,000/- (Rupees Fifty lakh) for the property as offered by the highest bidder Sanjay Goel. It also appears from the records placed before us by the Corporation that the authorities in the Corporation took two different views of the matter; one favouring a fresh auction and the other favouring acceptance of the offer made by the third respondent. The Managing Director, as it appears from the Note-sheets placed before the Court, though initially was in favour of a fresh auction, subsequently, thought it proper to seek the opinion of the Legal Officers of the Corporation and, in principle, accepted the offer of the third respondent subject to the legal opinion which was sought for. The legal opinion was to the effect that there is no bar for acceptance of the offer made by the third respondent. Consequently, an acceptance letter dated 28th May, 2005 was issued intimating the third respondent that the offer made by it has been accepted and it was required to deposit the sum of Rs. 50,00,000 (Rupees Fifty lakh) in two instalments, namely, Rs. 27.00 lakhs on or before 31st May, 2005 and balance payment on or before 15th June, 2005. Both the payments/instalments were made by the third respondent within the time frame fixed in the aforesaid letter dated 28th May, 2005. As the sale deed was not being executed, the third respondent moved the High Court. During the pendency of the writ proceedings in question, the Corporation, on the basis of the decision of the Managing Director, cancelled the sale made in favour of the third respondent and proceeded to issue a fresh auction notice. The aforesaid actions of the Corporation were without any prior notice to the third respondent. It, therefore, sought an amendment of the writ petition to challenge the said actions of the Corporation which was allowed. Pursuant to the auction notice which was issued, several bidders participated and an offer of Rs.1.06 crore was received as the highest offer.

3. The learned single judge of the High Court dismissed the writ petition primarily on the ground that the matter pertained to the realm of contract and exercise of the discretionary jurisdiction under Article 226 of the Constitution of India would not be proper. Aggrieved, the third respondent moved the High Court by way of a Writ Appeal which having been answered in its favour, the borrower and the Corporation have institut