State Bank of Indore vs Prashant Jhunjhunwala

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2011 Supreme(Raj) 114

[Citation : 2011(4) RLW 3379 (Raj.)]
(Rajasthan High Court)
Jaipur Bench
State Bank of Indore Vs. Prashant Jhunjhunwala (Rastogi, J.)
HON'BLE AJAY RASTOGI, J.
State Bank of Indore
Versus
Prashant Jhunjhunwala & Ors.
Misc. Application (Inward No.24680/dt.22.11.2010)
IN
Company Appeal No.1 of 2009, decided on 10.02.2011

Advocates Appeared
G.K. Garg & Ms. Anita Agrawal, for Appellant-Bank (SBI);
R.K. Salecha, for Respondent-1 (Applicant);
Ritesh Agarwal & Vijay Choudhary, for Respondents

Headnote:Security Interest (Enforcement) Rules, 2002, Rules 8, 17 and 9 — Holding auction proceedings afresh — Procedure provided under the law was not adopted — Requirement of serving 30 days clear notice — Held — When the statute provides a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention thereof — The object and legislative intent of the Rules is to fetch optimum price of the property under auction by fair, transparent and objective procedure — No wide publication was given, only three bidders could participate, who quoted marginal amount above the reserve price — Vast discrepancy in the two valuation Reports — No requirement under law to issue 30 days clear notice for every intended auction sale — Cancelled — Directed to get fresh valuation report and then proceed under the Scheme. (Paras 22, 24, 31 to 35)
       Application allowed.
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Hon'ble RASTOGI, J.—Matter has come upon misc. application (Inward-24680/dt.22.11.2010) filed by respondent-1 (Prakash Jhunjhunwala) in Company Appeal-1/2009 U/r 9 of Company (Court) Rules, 1959, assailing proceedings initiated by appellant Bank (secured creditor) regarding auction of immovable property (E-16, IPI Area, Electronics Complex, Kota) held on 22.9.2010; and seeking direction to the appellant-Bank to hold auction proceedings afresh in accordance with procedure under Security Interest (Enforcement) Rules, 2002 (“Rules, 2002”).

2. It is a matter of record that appellant-Bank preferred company appeal u/S. 10-F of Indian Companies Act, 1956 (“Co. Act”) against order dt.10.3.2009 of the Company Law Board and while admitting appeal, interim order was passed by Company Court on 24.7.2009 which was sought to be modified by appellant Bank by way of application, which was partly accepted vide order dt.15.4.2010 whereby liberty was granted to appellant Bank to dispose of imm-ovable assets in its possession by adopting the procedure provided under law.

3. However, it was further observed that amount of sale proceeds be kept in a separate fixed deposit account subject to final outcome of company appeal; and at the same time, liberty was also granted to respondent-1 (applicant) to participate in auction proceedings to be initiated by appellant Bank in terms of provisions contained under Rules, 2002 and after order of modification being passed, auction for immovable property in question was held by appellant Bank on 04.6.2010 keeping reserve price of the immovable property as Rs.7.75 Crores. It has come on record that only Two bids were received with the offer of Rs.7.81 Crores & Rs.7.75 Crores respectively and highest bidder (M/s Kavita Soap Industries) submitted cheque which was dishonoured while being deposited for its encashment for want of sufficient funds; whereas second bidder submitted in writing showing no interest in purchase of the auctioned property and accordingly, the auction failed.

4. Against order of modification dt. 15.4.2010, respondent-1 (applicant, herein) preferred Special Appeal (Civil) No.12/2010 before Division Bench but before it could be finally heard, auction proceedings held on 04.6.2010 failed for reasons aforesaid and fresh proceedings were initiated by appellant Bank and the auction was held on 22.9.2010.

5. However, objections were raised by respondent (applicant) before Division Bench and so also by appellant Bank regarding auction held on 22.9.2010. The Division Bench while disposing of Special Appeal vide judgment dt.16.1.2010 granted liberty to the applicant to move application before the Company court. It was further observed that auction shall not be finalized before objections are decided by Company Court.

6. Pursuant thereto and after liberty being granted by Division Bench, respondent-1 (applicant) filed instant misc application raising objections in regard to auction proceedings held on 22.9.2010. Objections were primarily related to public auction having been held by appellant-Bank in exercise of its powers under Rules, 2002 inter-alia that reserve price for auction of immovable secured assets was based on their valuation made by M/s Rakesh Chandwani holding him to be an approved valuer within the meaning in terms of R.2(d) of Rules 2002; but the very premises on which the reserve price of secured asset was fixed by appellant Bank was arbitrary.

7. Counsel for applicant contended that first auction was held on 4.6.2010 where reserve price was of Rs.7.75 Crores based on valuation report of Mr.Piyush Kumar Goyal Chartered Engineer of Akar Consultant, submitted on 15.4.2010 while at the same time, 2nd valuation report of Rakesh Chandwani having been taken note of the valuer regarding auction held on 22.9.2010 was submitted with a gap of 15 days, as per which reserve price of the secured asset was valued at Rs.6.10 Crores having difference of Rs.1.65 Crores than reserve price fixed based on earlie

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