2011 (1) TMI 1591 - HC - Indian Laws

Summary

Issues Involved:
1. Legality of the public auction conducted on 15 September 2010.
2. Jurisdiction under Article 226 of the Constitution.
3. Efficacy of the remedy under Section 17 of the SARFAESI Act.
4. Validity of the Petitioner's exclusion from the bidding process.
5. Requirement of earnest money deposit.
6. Conduct and bonafides of the Petitioner.

Detailed Analysis:

1. Legality of the Public Auction Conducted on 15 September 2010:
The Petitioner challenged the legality of the auction conducted by the First Respondent for the property situated on Plot No. 494, Linking Road, Bandra, Mumbai. The auction was held on 15 September 2010, where the Petitioner submitted a bid of Rs. 5 crores, well below the reserve price of Rs. 14.62 crores. The highest bid was Rs. 14.77 crores by the Third Respondent. The Petitioner's bid was rejected for being below the reserve price and for not furnishing the earnest money deposit. The sale was confirmed in favor of the Third Respondent, and possession was handed over on an "as is where is basis."

2. Jurisdiction Under Article 226 of the Constitution:
The Petitioner argued that the jurisdiction under Article 226 is discretionary and should not be ousted even if an alternate remedy under Section 17 of the SARFAESI Act is available. The Court, considering the joint request from both parties, decided to entertain the Petition on merits to render finality.

3. Efficacy of the Remedy Under Section 17 of the SARFAESI Act:
The Petitioner contended that the remedy under Section 17 of the SARFAESI Act was not efficacious. However, the Court did not find this argument sufficient to oust the jurisdiction under Article 226, especially given the joint request to consider the case on merits.

4. Validity of the Petitioner's Exclusion from the Bidding Process:
The Petitioner claimed wrongful exclusion from the bidding process due to submitting a bid below the reserve price. The Court noted that the terms and conditions of the auction explicitly stated that the property would not be sold below the reserve price of Rs. 14.62 crores. The Petitioner's bid of Rs. 5 crores was deemed not bonafide, especially since he had previously bid Rs. 15.05 crores in the first auction. The Court held that no bidder could assume that a bid below the reserve price would be accepted, and accepting such a bid would undermine the sanctity of the auction process.

5. Requirement of Earnest Money Deposit:
The Petitioner's bid was also rejected for failing to deposit the earnest money of Rs. 14.62 crores. A crumpled demand draft for Rs. 1,46,20,000 was found on the floor, which the Petitioner claimed might be his. However, he refused to incorporate the draft details in his bid form. The Court found that even if the Petitioner had submitted the earnest money, his bid below the reserve price was invalid.

6. Conduct and Bonafides of the Petitioner:
The Court emphasized that equitable relief under Article 226 requires bonafide conduct. The Petitioner's actions, including failing to settle dues after securing a stay and submitting a speculative bid of Rs. 5 crores despite knowing the reserve price, demonstrated a lack of bonafides. The Petitioner's conduct was deemed not honest, and his strategy to bid below the reserve price was speculative.

Conclusion:
The Court dismissed the Petition, finding no merit in the Petitioner's grievances. The Petitioner's bid was not bonafide, and his conduct did not warrant equitable relief. The auction process was upheld, and the sale in favor of the Third Respondent was confirmed. The Notice of Motion No. 634 of 2010 was also disposed of accordingly.