2019 (11) TMI 1382 - HC - Indian Laws

Legality and propriety of the auction - challenge mainly on the grounds that the auction conditions were changed in the midst of the auction process, proper procedure was not adhered to, upset price fixed was highly inadequate, a fraud was committed in conduct of auction and there was collusion between the auction purchaser and auctioning authorities - HELD THAT - There is nothing to demonstrate that the property in question could have fetched ₹ 25 corers as claimed by the petitioners. Furthermore, the petitioners in the said writ petition neither raised objection to the Upset price on publication of auction notice, nor they brought any buyer before this Court, who is ready to pay ₹ 25 corers - In absence of any material to establish alleged inadequacy of upset price fixed, we have arrived at a conclusion that no illegality is committed by the Commissioner in fixing and granting approval to the upset price to the tune of ₹ 10,64,17,000/-, of the property in question. We, therefore, reject the challenge made to the upset price of the property in question. Whether to reopen the concluded auction proceeding for the reason higher offer is made by one of the petitioners, in respect of sale of property in question? - HELD THAT - In view of the fact that except allegation of fraud and collusion, no evidence in that regard brought on record by any of the petitioners, we are of the considered view that this is not a fit case to reopen the auction proceeding only because slightly higher offer is made by one of the petitioners than the auctioned price. Change of condition relating to negotiation - HELD THAT - It is clear from the facts that the objection was raised to the said condition. Accordingly the said condition was modified in view of Circular of the Central Vigilance Commission, dated 25.10.2005 which envisages that there should not be any negotiations. Negotiation if at all shall be an exception and only in the case of proprietary items or in case of items with limited source or supply. Negotiations shall be held with L-1 only. Counter offers tantamount to negotiations and should be treated at par with negotiations . Hence, there are no illegality in modification of condition of negotiation to the effect that to hold negotiation only with the highest bidder instead of with all the bidders. It is now well settled law that the conditions of tenders cannot be challenged once participated. The petitioners are miserably failed to establish and substantiate any of the points raised before this Court. This Court has, therefore, reached to the conclusion that no illegality has been committed by respondent authorities in the auction process assailed by way of present writ petitions, as such, the writ petitions are deserved to be dismissed - Petition dismissed.

Summary

Issues Involved:
1. Legality and propriety of the auction process.
2. Adequacy of the upset price fixed.
3. Allegations of fraud and collusion in the auction process.
4. Modification of auction conditions.
5. Presence of the Joint Registrar during the auction.
6. Shareholders' awareness of the auction.

Detailed Analysis:

1. Legality and Propriety of the Auction Process:
The petitioners challenged the auction of a plot and multi-storey building owned by Parbhani People's Cooperative Bank Ltd. on grounds that the auction conditions were altered mid-process, proper procedures were not followed, and there was collusion between the auction purchaser and authorities. The auction was conducted by the Liquidator, and the highest bid of ?12.06 crores was accepted. The court found no illegality in the auction process, as the Liquidator followed the prescribed procedures under the Maharashtra Cooperative Societies Act and Rules.

2. Adequacy of the Upset Price Fixed:
The upset price of ?10,64,97,000/- was based on valuation reports from two government-approved valuers and the government ready reckoner. The court reviewed the valuation reports and found that all relevant factors, including the property's commercial nature, location, and condition, were considered. The petitioners' claim that the property could fetch ?25 crores was unsupported by evidence. The court concluded that the upset price was adequate and no illegality was committed in fixing it.

3. Allegations of Fraud and Collusion:
The petitioners alleged fraud and collusion between the auction purchaser and authorities. However, the court found no evidence to support these allegations. The auction was widely publicized, and the highest bid was accepted after negotiations. The court referred to the principles laid down in Vedica Procon Private Ltd. and other judgments, emphasizing that a higher subsequent offer alone is insufficient to reopen concluded auction proceedings unless fraud or collusion is proven.

4. Modification of Auction Conditions:
The auction conditions were modified to hold negotiations only with the highest bidder, based on a Central Vigilance Commission circular. The court found no illegality in this modification, as it was done transparently and in response to objections. The petitioners were aware of the modified conditions and participated in the auction without raising objections.

5. Presence of the Joint Registrar During the Auction:
The petitioners contended that the auction was invalid because the Joint Registrar was not present. The court rejected this argument, noting the absence of any mandatory requirement for the Joint Registrar's presence during the auction.

6. Shareholders' Awareness of the Auction:
The petitioners claimed that the auction was conducted behind their backs. The court dismissed this claim, noting that the auction notice was published in widely circulated newspapers and posted at prominent locations. The petitioners' delayed challenge to the auction further weakened their case.

Conclusion:
The court concluded that the petitioners failed to substantiate their claims of illegality, inadequacy of the upset price, fraud, and collusion. The auction process was found to be proper, and the writ petitions were dismissed. The court also vacated the interim relief granted earlier and stayed the effect of the judgment for two weeks to allow the petitioners to seek further legal recourse.