2014 (9) TMI 468 - HC - Customs

Action of confiscated goods - Rejection of successful bid in auction - deception to the prospective purchaser - It is the say of the petitioner that the bid made by the petitioner had been approved for the lots in question by R-3 subject to final approval of R-2 and the petitioner had already deposited the sum of ₹ 64,50,000/- - Held that - The first aspect which we fail to appreciate is the lowering of the reserve price when the reason for the failure of the auction was not that the bid received was below the reserve price, but on account of non-deposit of EMD. In such a situation, we are of the view that there can be hardly any reason for lowering the reserve price. We fail to see any reason for giving description of the goods as per import as prospective purchaser is not interested in a theoretical analysis of papers, but only what goods had to be bid for. No doubt, this can create an element of confusion as in the bold letters it is mentioned as TEXTILE GOODS while in the small print a description is given of the electrical goods under the heading Commodity as per physical examination . Vast vacillation which has taken place in the price despite the goods not being perishable. No doubt, there has been inordinate delay in rejection of the bid of the petitioner. However, given the situation, it would be appropriate if the goods are put to proper auction post necessary remedial measures before they are sold off. - The amount deposited by the petitioner be returned. We call upon R-3 to stop this practice which is capable of causing deception to the prospective purchaser who is only interested in knowing what the goods are which are sought to be auctioned. Both R-2 and R-3 should interact and frame better guidelines for disposal of the goods which are not capable of causing any confusion and which achieve the purpose in view of our aforesaid observations. Needful be done within four weeks from today.

Issues:
Challenge to rejection of bid in auction by Commissioner of Customs without reasons, release of goods sought, lowering of reserve price in subsequent auctions, compliance with CVC guidelines, confusion in goods description in auction, role of R-2 and R-3, delay in decision-making, need for clearer guidelines for goods disposal.

Detailed Analysis:

Issue 1: Challenge to rejection of bid without reasons
The petitioner challenged the rejection of their bid in an auction by the Commissioner of Customs without any reasons provided, despite the bid being provisionally approved earlier. The rejection occurred after a significant delay, raising concerns about the lack of transparency in decision-making.

Issue 2: Lowering of reserve price in subsequent auctions
The High Court noted a pattern of lowering the reserve price in subsequent auctions, even when the reason for bid failure was not due to bids being below the reserve price but rather the non-deposit of Earnest Money Deposit (EMD). This practice was deemed questionable as it could potentially impact the fairness of the auction process.

Issue 3: Compliance with CVC guidelines
The Court raised questions regarding compliance with Central Vigilance Commission (CVC) guidelines, particularly concerning the offer to the second-highest bidder when the highest bidder failed to deposit the EMD. The need for clarity on whether negotiations with the second-highest bidder were permissible in such circumstances was emphasized.

Issue 4: Confusion in goods description in auction
There was a discrepancy noted in the description of goods in the auction, with the advertisement mentioning "TEXTILE GOODS" while the physical examination revealed cables. The Court highlighted the importance of accurate and clear descriptions to avoid confusion among potential buyers and called for an end to such misleading practices.

Issue 5: Role of R-2 and R-3
The judgment clarified the advisory role of R-2 in relation to R-3 but questioned the rejection of the bid by R-3 citing lack of approval from R-2. The need for better coordination and guidelines between the two entities for efficient goods disposal was emphasized to prevent confusion and delays in decision-making.

Issue 6: Delay in decision-making
The Court expressed concern over the significant delay in resolving the bid rejection issue, especially considering the non-perishable nature of the goods involved. It recommended prompt remedial measures and a proper auction process to ensure transparency and fairness in the sale of goods.

Issue 7: Need for clearer guidelines for goods disposal
In light of the observed discrepancies and confusion in the auction process, the Court directed both R-2 and R-3 to collaborate and establish clearer guidelines for goods disposal to avoid future misunderstandings and ensure a smoother auction process. The directive aimed to enhance transparency and efficiency in handling similar cases in the future.

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