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BECHU KURIAN THOMAS
Annam Steels (P) Ltd. – Appellant
Versus
Canara Bank Ltd. – Respondent
JUDGMENT :
Can the earnest money deposited by the promoter of a company prior to its incorporation, be treated as an earnest money deposit made on behalf of a bidding company at an auction? The aforesaid question primarily arises for consideration in this writ petition under Article 226 of the Constitution of India. The challenge is against an auction sale held under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the Act').
2. Initially, the writ petition was filed, challenging the auction notice issued under the Act. During the pendency of the writ petition, since the auction took place, an amendment was effected assailing the auction sale itself.
3. The facts, in a nutshell, are as follows :
An amount of Rs.190 Crores was borrowed by the petitioners from a consortium of two banks comprising the first and second respondents. When repayment was defaulted, proceedings for recovery were initiated apart from filing an application under the Recovery of Debts and Bankruptcy Act, 1993, as O.A. No.147/2016. In the meantime, proceedings were initiated under the Act, which was challenged in S.A. No. 111/2017 before the DRT,
Suppression of pending litigation in the e-auction notice by a secured creditor is improper and violates the duty to disclose encumbrances and pending litigation as per the Securitization and Reconst....
Presence of an arbitration clause would oust jurisdiction under Article 226.
Rule 9(5) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is directory in nature, and forfeiture is justified only to compensate for the pa....
The court affirmed that banks must comply with statutory requirements and not engage in arbitrary actions against successful auction bidders, protecting rights under Article 14.
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