The discretionary nature of the provisions in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, regarding auction procedures and reserve prices, and the bank's fair and reasonable conduct in the auction proceedings.

Petitioner has filed this petition challenging the notification of auction of a house, Annexure-P-1, which was mortgaged with the respondent No. 1, Bank.

2. Petitioner is a partner of a firm, named as 'M/s. Shridhar Radios'. The firm had been conducting business. In the year 1984 it had been provided facility of crash credit limit by the respondent-Bank and it was extended time to time upto Rs. 35 lakhs.

3. As per the petitioner in the month of August 2005 there was a theft in the shop of the firm amounting to Rs. 6,05,540/-. The theft amount could not be recovered and due to the aforesaid circumstances the firm could not continue its business and on account of this it could not pay cash credit limit which it had encashed from the Bank. Consequently, Bank issued a notice demanding an amount of Rs. 33,85,031/- failing to pay the amount Naib Tehsildar also issued a revenue recovery certificate of Rs. 30,56,371/- on 12-1-2006. The petitioner firm filed a petition before this Court challenging the notice. The petition was registered as W.P. No. 1256/2007. Initially, the Court granted stay in favour of the petitioner. Thereafter, vide order dated 13-8-2007 the Court disposed of the petition on the ground that there was a remedy available to the petitioner of filing appeal under Section 13 (4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Thereafter, the petitioner filed an appeal before the Tribunal. The Member of the Tribunal is not working at present, in the meanwhile, the respondent Bank issued a notification with regard to auction of the house of the petitioner, hence the petitioner has filed this petition.

4. The respondent-Bank in the return stated that the firm had taken a loan and thereafter the bank initiated proceedings with regard to recovery of loan because the firm had not deposited the amount of loan. The total loan amount Rs. 36,37,725/- had been due to the petitioner on 7-9-2007 when the notice to take possession of the house was issued to the petitioner. The house was mortgaged with the bank, hence the bank has power and authority to auction the house.

5. Learned Senior Counsel for the petitioner has submitted that the Bank itself valued the property, the house, at Rs. 60 lakhs, and it is auctioning the house at near about Rs. 50 lakhs. In view of the provisions of Rule 8(c) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Rules, 2000 (hereinafter referred to as the Rules of 2002) the property in question cannot be auctioned below the reserve price fixed by the Bank. Hence, the auction proceedings are contrary to law. Contrary to this, learned counsel for the respondent-Bank has submitted that Bank has tried its best to fetch higher rates, however, it could not receive bid of more than Rs. 50 lakhs. It is not mandatory for the bank to sell the house at more than Rs. 60 lakhs. Bank has also offered the petitioner to sell the house for more than Rs. 60 lakhs but the petitioner has not answered about the aforesaid proposal of the Bank. Hence, there is no merit in this petition.

6. From the facts of the case, it is clear that the firm had taken a loan and there was a liability on the firm to deposit the loa as crash credit. The house which is going to be auctioned was mortgaged with the Bank. An appeal is pending before the Tribunal. There is no stay with regard to recovery of loan by the Tribunal and also with regard to auction of the house.

7. As per Annexure P-1 the Bank fixed the reserve price of the house at Rs. 60 lakhs. As per the Bank, it has tried its best but there are no buyer of the house of more than Rs. 50 lakhs. The Bank received a highest bid of Rs. 50 lakhs. It also informed the petitioner that if there is buyer who can purchase the property for more than Rs. 50 lakhs then the petitioner can sell the house. The learned counsel for the respondent-Bank has also given an undertaking before th