2007 (11) TMI 423 - HC - Companies Law

Condition of deposit - legal right accrued to the writ petitioner to get the confirmation of sale and the stand taken by the Bank that the authorized Officer is different from the secured creditor and subject to the confirmation of the secured creditor only, the sale had been conducted cannot be said to be a sustainable contention - Held that - Here is a case where the secured creditor on verification found the defect and was not inclined to confirm the same. This action of the secured creditor cannot be said to be not in accordance with law, since the publication made and also the Rules governing the field would clarify the situation. It is no doubt true that in a particular given case, the Court may arrive at a conclusion that the action is arbitrary, when the Banking Institution is going back on totally untenable and unsustainable ground. When a particular confirmation may result in certain other ancillary litigations and when the secured creditor is not inclined to confirm the sale, the same cannot be found fault. Even otherwise, this Court is of the considered opinion that positive directions as prayed for normally cannot be issued by a writ Court, especially when the Banking Institution had taken such a stand in the counter affidavit filed specifying the Rules and also the conditions made in the publication in this regard. Hence, this Court is thoroughly satisfied that the writ petition is devoid of merit.

Issues Involved:
1. Confirmation of sale under Rule 9(6) of the Security Interest (Enforcement) Rules, 2002.
2. Compliance with notice requirements under Rule 8(6) of the Rules.
3. Authority of the secured creditor versus the authorized officer.
4. Allegations of arbitrariness and violation of Article 14 of the Constitution of India.
5. Availability of alternative remedy under Section 17 of the Act.

Issue-wise Detailed Analysis:

1. Confirmation of Sale under Rule 9(6) of the Security Interest (Enforcement) Rules, 2002:
The petitioner sought a Writ of Mandamus to compel the respondents to issue a sale certificate after accepting the balance bid price, citing Rule 9(6) of the Security Interest (Enforcement) Rules, 2002. The petitioner argued that the auction sale was confirmed in his favor and that the respondents' refusal to issue a sale certificate was arbitrary and illegal. The petitioner emphasized that the 2nd respondent, as the authorized officer, had the power to confirm the sale and that the higher authorities' refusal was unjustified.

2. Compliance with Notice Requirements under Rule 8(6) of the Rules:
The respondents contended that the sale could not be confirmed because the notice required under Rule 8(6) of the Rules was not served to all the guarantors. They argued that this procedural defect justified the decision not to confirm the sale. The court noted that the secured creditor, upon verification, found this defect and decided against confirming the sale, which was deemed a valid action under the circumstances.

3. Authority of the Secured Creditor versus the Authorized Officer:
The respondents argued that the authorized officer and the secured creditor are distinct entities, and the sale is subject to the secured creditor's confirmation. The court agreed, stating that the authorized officer initiates and conducts the sale, but the final confirmation rests with the secured creditor. The court emphasized that the sale notice explicitly stated that the sale was subject to the bank's confirmation.

4. Allegations of Arbitrariness and Violation of Article 14 of the Constitution of India:
The petitioner claimed that the respondents' actions were arbitrary, illegal, and violated Article 14 of the Constitution of India. The court, however, found that the respondents' decision was based on legitimate procedural concerns and was not arbitrary. The court held that the secured creditor's action was in accordance with the Rules and the terms of the sale notice.

5. Availability of Alternative Remedy under Section 17 of the Act:
The respondents argued that the petitioner had an alternative remedy under Section 17 of the Act, which allows aggrieved parties to approach the Debt Recovery Tribunal. The court acknowledged this argument, indicating that the petitioner could seek redress through this alternative legal avenue.

Conclusion:
The court concluded that the writ petition was devoid of merit. It held that the secured creditor's refusal to confirm the sale due to procedural defects was justified and in accordance with the law. The court emphasized that the authorized officer's role is distinct from that of the secured creditor, and the sale was subject to the latter's confirmation. The court dismissed the writ petition, stating that positive directions as prayed for by the petitioner could not be issued, especially given the procedural issues and the availability of an alternative remedy. No order as to costs was made.

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