2010 (5) TMI 793 - HC - Companies Law

Summary

Issues: Challenge to order of Debt Recovery Appellate Tribunal (DRAT) dismissing appeal of auction purchaser, legality of confirmation of auction sale, duty of Recovery Officer, collusion between parties, higher offer made after auction.

Summary:
1. The petition challenged the DRAT's order dismissing the appeal of the auction purchaser regarding the auction conducted for properties of the borrower. The DRAT's decision was upheld by the High Court, emphasizing that interference is only warranted in cases of clear illegality and grave injustice.

2. The DRAT's order highlighted the duty of the Recovery Officer to ensure the best price in auction proceedings. Legal principles dictate that a confirmed sale can be set aside if a higher offer is available before confirmation. The court cited relevant judgments emphasizing the importance of obtaining the most remunerative price in auctions.

3. The DRAT concluded that the auction purchaser does not have an inherent right to confirmation of sale if a higher offer is available before confirmation. In this case, there was collusion between the auction purchaser and the officer of the Financial Institution, resulting in a substantial amount not being considered. The respondent's increased offer was not matched by the petitioners.

4. The High Court agreed with the DRAT's findings, emphasizing the fiduciary duty of the Recovery Officer and the possibility of setting aside a confirmed sale. The petitioners' argument of entitlement to confirmation based on being the highest bidders was rejected.

5. The petitioners' claim of equity due to construction on the plots was refuted, as they were deemed trespassers on the auctioned properties. The court noted that the petitioners had no legal possession of the properties and constructed at their own risk.

6. Ultimately, the High Court dismissed the petition, finding no grounds for interference under Article 226 of the Constitution of India. The petitioners' lack of legal possession and the failure to match the higher offer were crucial factors in the decision.