IMPORTANT POINT
Purpose of auction (open or close format) is to get the most remunerative price and giving opportunity to intending bidders to participate and fetch higher realizable value of property – If that path is cut down or closed, possibility of fraud or to secure inadequate price or underbidding would loom large.

JUDGMENT :

Rastogi, J.

1. The instant appeals are directed against the judgment and order dated 5th February, 2010 passed by the Division Bench of the High Court of Punjab and Haryana at Chandigarh, setting aside the auction held pursuant to auction notice dated 24th May, 2004 by Industrial Development Bank of India (hereinafter referred to as “IDBI” – Operating Agency).

2. The facts in brief culled out from the record are that M/s Bharat Commerce & Industries Limited (hereinafter referred to as “BCI”) was declared a sick company and for disposal of assets of BCI pursuant to directions of Board for Industrial and Financial Reconstruction (BIFR) under Section 20(4) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter being referred to as the “Act 1985”) through IDBI - the Operating Agency, initiated the process of inviting offers in sealed cover for sale of assets of the captioned unit.

3. Pursuant to public notice dated 24th May, 2004, offers were invited for various blocks, calling upon the interested parties to deposit earnest money of Rs.6 lakhs for Block IV and submit their tenders in sealed cover within a period of 30 days from the date of advertisement and for further information, the interested parties may contact the office of Mr. P.M. Nair, DGM, IDBI, Mumbai, the office of the Assets Sale Committee constituted by the BIFR and the agency reserved the right to accept or reject any offer without assigning any reason therefor. It is pertinent to note that the Operating Agency was under obligation to evaluate the realizable value of the property from the approved valuer and thereafter to notify the reserve price in the auction notice in terms of Section 21(c) of the Act, 1985, and that indeed was not indicated in the auction notice and the solitary bid submitted by the appellants in Civil Appeal No. 10128 of 2011 of Rs.2,84,00,000/- on 22nd June, 2004 was accepted by the authority.

4. On being examined by the ASC although nothing came forward as to why in the absence of a competitive bidding, the solitary bid of the present appellants was processed, be that as it may, the bid of the appellants in reference to Unit Block IV for the captioned assets was accepted as it reveals from the communication dated 12th August, 2004 with a rider that the same shall be confirmed as per the terms and conditions of ASC advised to all the bidders on 8th August, 2004 for which the bidder may be required to execute a tripartite Memorandum of Understanding (MOU) with IDBI.

5. The record indicates that the appellants were asked to furnish a bank guarantee for a bid value of Rs.2,84,00,000/- by 27th August, 2004 for a period of one year and required to deposit payment in instalments. The appellants from the day one were reluctant in furnishing the bank guarantee of Rs.2,84,00,000/, however, shown their alleged willingness to pay the value of the assets in terms of the bid within a period of six months. But the fact is that the appellants neither offered bank guarantee of Rs.2,84,00,000/- nor deposited a penny after acceptance of the bid on approval of the ASC by communication dated 12th August, 2004.

6. The BIFR, pursuant to its order dated 24th November, 2004 observed that since the sole bidder for Block IV (the appellants herein) is not willing to adhere to the ASC guidelines as such the Bench did not agree to the proposal to accept the bid and left the sale of the assets of the unit for Block IV be taken over and be sold by the Official Liquidator of the concerned High Court.

7. The decision of BIFR dated 24th November, 2004 was challenged by the present appellants before the Appellate Authority for Industrial & Financial Reconstruction (AAIFR). The AAIFR under its order dated 1st April, 2005, while setting aside the order of the BIFR dated 24th November, 2004 directed the BIFR to confirm the sale of Unit Block IV in favour of the appellant and modalities for payment shall be in accordance with terms and conditions as approve