Auction Sale--A conditional acceptance of bid does not lead to a concluded contract in the absence of confirmation.

1. This writ petition under Articles 226/227 of the Constitution prays for quashing of order dated 14-3-2007 (P-11)rejecting the auction of the property styled as SCO No.183, Sector 37-C, Chandigarh which was conducted on 7-3-2007. The petitioners who were the highest bidders in the auction were required to deposit 25% of the bid amount which they deposited amounting to rs.43,75,000/-. The rest of the amount was required to be deposited within 15 days of the confirmation of the auction.

2. Facts in brief are that on 30-11-2006, the respondent-bank by invoking Section 13 (4) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security interest Act, 2002 (for brevity, sarfaesi Act) took possession of the secured/mortgaged property in dispute after following due procedure. The total demand raised by the respondent-bank from its borrower is Rs.4,42,37,665/- plus interest and cost. In order to sell the property to satisfy the demand, the respondent-bank issued public notices through newspapers on 3-1-2007 and 1-2-2007. The reserve price of rs.1,70,00,000/- was fixed and 7-3-2007 was the date of auction.

3. The petitioners are stated to be tenants in the building along with some other tenants. They were the highest bidder for rs.1.75 crore in the auction held on 7-3-2007. After deposit of 25% of the bid amounting to Rs.43,75,000/- (Rs.8,50,000 + Rs.35,25,000/-) the petitioners were asked by the respondent-bank in terms of rule 9 of the Security Interest (Enforcement)Rules, 2002, to pay the balance amount of 75% within 15 days so that the sale may be got confirmed in their favour and possession be delivered to them (P-8 ). However, on 14-3-2007 the respondent-bank cancelled the auction by addressing a letter (P-11) to the petitioners, which reads as under :-

"the secured creditor has observed that there were certain irregularities in conducting the auction of the aforesaid property. The property could also not fetch the expected price prevalent in the market. The secured creditor has also received certain objections from third party regarding the auction of the property. Thus, keeping in view of all facts and circumstances, the secured creditor has declined to confirm this sale in terms of Rule 9 of the Security Interest (Enforcement)Rules, 2002. In view of above 25% of the Sale amount tendered by you is being refunded to you by banker Cheque No.660625, dated 14-3-2007 for Rs.43,75,000/- (Rs. Forty three lacs seventy five thousand only ). Thus the auction of the above property conducted on 7-3-2007 stand cancelled. "

4 On 14 3-2007, itself the petitioners deposited a sum of Rs.1,31,25,000/- vide pay order/bank drafts with the respondent-bank. The bank also returned their bank drafts on 15-3-2007 (P-12 ).

5. The petitioners then sent legal notice/ letter on 16-3-2007 (P-13 and P-14 ). Even letter dated 20-3-2007 was sent to the police against the Authorised Officer (P-15 ). The respondent-bank on 21-3-2007 sent a reply to the legal notice by stating that auction had started at 11.00 a. m. and was concluded within 45 minutes at 11.45 a. m. The secured creditor was satisfied that auction was conducted hastily and a large number of bidders, who could participate in the auction, were deprived of the opportunity. It was claimed that by cancelling the auction sale the respondent-bank was adhering to norms and well settled principles of law because no legal or vested right has accrued in favour of the petitioners. The balance 75% of the auction price was received after passing of order of cancellation which was also returned to the petitioners. The Authorised officer in his reply to the police has submitted that there were merely three bidders who participated in the auction. According to a complaint sent by Shri R. K. Arora through the General Manager of the respondentbank, the market price of the property in dispute with tenants was Rs.2.25 crores and that auction should have continued for at least four hour