E-auction sale procedures followed by banks are not arbitrary or invalid in the eye of law if there is no specific prohibition in the relevant statutes or rules.

M. Jaichandren J.

1. Since the issues involved in all the writ petitions are similar in nature, they have been taken up together and a common order is being passed.

2. Heard the learned counsels appearing for the parties concerned.

3. The learned counsels appearing for the petitioners had submitted that the impugned e-auction sale notices, issued by the authorised officers of the respondent banks concerned, are arbitrary, illegal and void. The terms and conditions prescribed in the e-auction sale notices in question are not in tune with the Security Interest (Enforcement) Rules, 2002. The procedures prescribed under the Rules, especially, those which are enshrined in Rule 8 of the said Rules, have not been followed by the authorised officers of the respondent banks concerned, while issuing the impugned e-auction sale notices.

4. It had been further submitted that a number of onerous terms have been incorporated in the impugned e-auction sale notices, including the requirement of digital signatures. It had also been stipulated that the respondent banks and the authorities concerned cannot be held liable for the discrepancies or irregularities, if any, that may occur during the process of e-auction sales. In fact, it could be noted that the requirement of the digital signature owes its origin to the Information Technology Act, 2000. The definition of “Digital Signature” is found in Section 2 (p) of the said Act. Clause (q) of Section 2 of the Act, states that a "Digital Signature Certificate" means a Digital Signature Certificate issued under sub Section (4) of Section 35 of the Act. Section 3 of the Act, provides the procedure for the authentication of electronic records.

5. The learned counsels appearing for the petitioners had also pointed out that Section 1(4) of the Information Technology Act, 2000, states that nothing in the Act shall apply to the documents or transactions specified in the First Schedule, provided that the Central Government may, by notification in the Official Gazette, amend the First Schedule, by way of addition or deletion of the entries therein.

6. It had also been pointed out that the First Schedule of the Information Technology Act, 2000, describes the documents or transactions to which the Act shall not apply. In the item 5 of the First Schedule, it has been stated, specifically, that the Act shall not apply to any contract for the sale or conveyance of an immovable property or any interest in such property. While so, the transactions that would take place, as per the terms and conditions prescribed in the impugned e-auction sale notices, cannot be sustained in the eye of law, as an e-auction cannot be conducted with regard to a contract for the sale or conveyance of an immovable property, as per the provisions of the Information Technology Act, 2000.

7. It had been further stated that there is no specific provision, either in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or in the Security Interest (Enforcement) Rules, 2002, permitting the respondent Banks to bring the mortgaged properties for sale, by way of e-auction.

8. It had been further submitted that an e-auction is different from that of a public auction. When the procedures to be followed by the respondent banks and the authorised officers concerned fall under the public law domain, they should act only in the manner prescribed by the law and in no other manner. There is no doubt that an e-auction can only be held, as provided under the relevant provisions of the Information Technology Act, 2000, and in no other manner. Authentication of the procedures, while conducting an auction, by using the electronic mode, can only be by the use of the digital signature. Such a procedure had not been contemplated, either under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, or in the Security Interest (Enforcement)