RAJIV KUMAR JINDAL AND OTHERS versus BCI STAFF COLONY RESIDENTIAL WELFARE ASSOCIATION AND OTHERS on 27 April 2023

[2023] 4 S.C.R. 79

RAJIV KUMAR JINDAL AND OTHERS

v.

BCI STAFF COLONY RESIDENTIAL WELFARE ASSOCIATIONAND OTHERS

(Civil Appeal No(s). 10127–28 of 2011)

APRIL 27, 2023

[AJAY RASTOGI AND BELA M. TRIVEDI, JJ.]

Sick Industrial Companies (Special Provisions) Act, 1985 :ss. 20(4), 21(c) – Winding up of sick industrial company – Operatingagency to prepare complete inventory – On facts, Operating Agency-IDBI initiated process to sell the subject assets of the sick industrialcompany-BCI in terms of the order passed by the BIFR – Submissionof solitary bid by the appellant – Operating authority accepted thesame – However, the appellant did not adhere to the terms andconditions of Asset Sale Committee (ASC) – In view thereof, BIFRdid not agree to the proposal to accept the bid – However, theAppellate Authority-AAIFR set aside the order of BIFR and issueddirections to confirm the sale in favour of the appellant – However,Division Bench holding that the appellants have not made paymentin terms of the guidelines of the ASC, they failed to furnish thebank guarantee and to deposit the purchase consideration, restoredthe order of the BIFR – On appeal, held : Operating Agency wasunder an obligation to obtain the valuation report of the subjectproperty and after due assessment has to arrive at the reserve price– Procedure adopted by the Operating Agency was defective –Appellants-auction bidder neither paid the sale consideration norfurnished the bank guarantee within 15 days of the acceptance ofthe bid in terms of the guidelines – Moreover, the Division Bench ofthe High Court holding that there was no competitive bidding whichis a sine qua non for public auction and the guidelines of the ASChave not been complied with, set aside the order of the AAIFR withthe direction to initiate the process afresh – No error in the view ofthe High Court – Appellant was under an obligation to comply withthe requirement and despite opportunity the appellant failed tocomply with the twin conditions – Thus, the High Court rightly setaside the order of AAIFR.

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[2023] 4 S.C.R.

AAuction: Object and purpose of – Process of auction/bidding– Explained.

Dismissing the appeals, the Court

HELD: 1.1 The Operating Agency was under an obligationto obtain the valuation report of the subject property and afterBdue assessment has to arrive at the reserve price for the sale ofthe property in terms of Section 21(c) of the Sick IndustrialCompanies (Special Provisions) Act, 1985 and thereafter has toproceed with a procedure known to law while adopting a methodfor sale of the assets by public auction or by inviting tenders or inCany other manner specified and for the manner of publicity thereforin terms of Section 18(2)(k) of the Act, 1985. [Para 22][89-D-E]

1.2 In the instant case, it has not been placed on record ifthere was any valuation report assessed by the Operating Agencyfrom the approved valuer of the subject property and, at the sameDtime, the reserve price of the subject property was neverdisclosed/indicated in the first place when the public notice cameto be notified inviting offers from the interested parties. Thus,the very procedure adopted by the Operating Agency appears tobe defective at its very inception. [Para 23][90-C-D]

E1.3 The object of the auction is to secure optimum realizablevalue of the property by giving opportunity to the potential buyersfacing competitive bids either in open or closed format. The terms‘auction’ or ‘bid’ are inter–related as both give the idea of sellingthe product to the public. Bidding involves the process where aperson offers a price which is known as a bid. The process ofFbidding takes place in a situation where large number of peopleshow their willingness to buy a particular product or a serviceand bidding in a sealed envelope is often used by variouscompanies, industries and small businesses for assessing theneeds of the public at large. On the other hand, auction is theGprocess that involves buying and selling goods and services byoffering them for bids, taking bids and selling the item to thehighest bidder and that is possible if there is a competitive biddingbetween the bidders. The purpose of auction (open or closeformat) is to get the most remunerative price and giving H

opportunity to the intending bidders to participate and fetch higherrealizable value of the property. If that path is cut down or closed,the possibility of fraud or to secure inadequate price orunderbidding would loom large. In the given circumstances, it isthe duty of the Court to exercise its discretion wisely and withcircumspection and keeping in view the facts and circumstancesin each case. [Paras 24, 25][90-E-H]

1.4 The appellants (auction bidder) have neither paid thesale consideration in terms of clause (h) of the guidelines norfurnished the bank guarantee within 15 days of the acceptance ofthe bid in terms of clause (i) of the guidelines. [Para 29][92-F-G]

1.5 When the matter was placed before the BIFR, the Benchtook note of the fact that the appellants were the sole bidder forBlock IV and have not complied with the ASC guidelines. Takingboth the factors into consideration, the bid of the appellants wasnot confirmed but on appeal being preferred by the appellants,the AAIFR did not take into consideration that the guidelines ofthe ASC have not been followed and the appellant was the solebidder, as there was no competitive bidding which is always to betaken care of to secure the optimized value of the property. [Para30][92-G-H; 93-A]

1.6 The appellants have shown their willingness to depositthe bid amount in two instalments but the fact is that even beforethe order came to be passed by the BIFR, neither the bankguarantee was furnished nor a single instalment was depositedby the appellants and the AAIFR erred in setting aside the Orderof BIFR. [Para 31][93-B-C]

1.7 The Division Bench of the High Court had revisitedthe entire proceedings and taking into consideration the fact thatthere was no competitive bidding which is a sine qua non for publicauction and guidelines of the ASC have not been complied with,accordingly set aside the order of the AAIFR with a furtherdirection to initiate the process afresh in accordance with law.There is no error in the view expressed by the High Court whichmay call for interference. [Para 32][93-C-D]

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A1.8 The submission that the appellants in Civil Appeal No.10127 of 2011 have not participated in the bidding process andmade an offer at the later stage, have no locus standi to challengethe order of the AAIFR confirming the bid of the appellants. Inthe facts and circumstances of the case, it may not be of anyassistance for the reason that the appellants in Civil Appeal No.B10127 of 2011 indeed were not the bidders and have not tenderedany sealed bid, but at the same time, they have made an offer at alater stage and directly interested in the subject property inquestion as they are residing there for sufficiently long time, andnot the strangers to the proceedings, being the person aggrievedCtheir right to question invoking the jurisdiction of High Courtunder Article 226 of the Constitution cannot be ruled out. Theorder of the AAIFR confirming the bid pursuant to its orderimpugned dated 1st April, 2005 is not legally sustainable, thereis no justification at this stage to non-suit the claim of theappellants prayed for in Civil Appeal No. 10127 of 2011. [ParasD33, 34][93-E-H]

1.9 The submissions that the conditions of the ASC werescrupulously adhered to and the entire bid amount was depositedafter the order came to be passed by the AAIFR confirming thebid on 3rd June, 2005 and 7th June, 2005 and Tripartite MOUEwas executed is of no substance for the reason that the veryprocedure in the first instance initiated by the Operating Agencywas defective at its very inception and before initiation of theauction proceedings, neither the value of the property wasassessed through the approved valuer nor the reserve price wasFnotified in the auction notice and the solitary bid of the appellantwas accepted and confirmed by the AAIFR without taking noteof the fact that the appellant has failed to comply with theguidelines laid down by the ASC indicating that successfulpurchaser has to furnish a bank guarantee valid for a period of one year within 15 days of intimation regarding acceptance of theGbid and the balance of the purchase consideration has to be paidin two instalments in terms of clause (h) and (i) of the procedureand guidelines laid down by the ASC and that being a part of theauction notice, the appellant was under obligation to comply withand despite opportunity the appellant failed to comply with bothH

the twin conditions and, thus the Division Bench of the High Courtrightly set aside the order of AAIFR. [Para 35][94-A-E]

1.10 The submission of the appellants in CA No. 10127 of2011 that the offer made by the appellants was higher than thesealed bid is concerned, has no substance for the reason that theappellants did not participate in the bidding process and it is notthe case of the appellants that the auction notice published wasnot in their knowledge. Later offer in the facts and circumstancesof the case tendered by the appellants was of no legal significanceand rightly not acknowledged by the authority. [Para 36][94-F-G]

1.11 The money deposited by the appellants in Civil AppealNo. 10128 of 2011 would be refunded in terms of the order of theHigh Court impugned. At the same time, the official liquidatormay take all reasonable steps to fetch the optimum value of theproperty in order to achieve the object of public auction. [Para37][94-H; 95-A]

Valji Khimji and Company v. Official Liquidator ofHindustan Nitro Product (Gujarat) Limited and Others(2008) 9 SCC 299 : [2008] 12 SCR 1; NationalHighways Authority of India v. Gwalior–JhansiExpressway Limited Through Director (2018) 8 SCC243 : [2018] 9 SCR 1024; Navalkha and Sons v. SriRamanya Das and Others (1969) 3 SCC 537 : [1970] 3SCR 1; Divya Manufacturing Company (P) Ltd. TirupatiWoollen Mills Shramik Sangharsha Samity and Anotherv. Union Bank of India and Others Official Liquidatorand Others (2000) 6 SCC 69 : [2000] 1 Suppl. SCR474; Lakshmanasami Gounder v. C.I.T., Selvamani andOthers (1992) 1 SCC 91 : [1991] 2 Suppl. SCR 181 –referred to.

Case Law Reference

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84SUPREME COURT REPORTS

[2023] 4 S.C.R.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 10128of 2011.

BFrom the Judgment and Order dated 05.02.2010 of the High Courtof Punjab & Haryana at Chandigarh in CWP No. 8234 of 2005.

With

Civil Appeal No.10127 of 2011.

CRavi Prakash Mehrotra, Jaideep Gupta, P. V. Surendranath, Sr.Advs., Apoorv Srivastava, Jogy Scaria, Sibo Sankar Mishra, UmakantMisra, Niranjan Sahu, Ms. Apoorva Sharma, Anindita Mitra, DebabrataDas, Biju P Raman, Sawan Kumar Shukla, Sarvan Kumar, Vipin KumarMishra, Ms. Lekha Sudhakaran, M/s. J S Wad and Co, Gagan Gupta,Rajive R Raj, Rajesh Kumar Chaurasia, Sujeet Kumar, Sushil Tekriwal,DDr. Mamta Tekriwal, Mrs. Soni, Uday Prakash Yadav, Mahesh Chaurasia,S. S. Ray, Vaibhav Gulia, Ms. Rakhi Ray, Advs. for the appearing parties.

The Judgment of the Court was delivered by RASTOGI, J.

E1. The instant appealsare directed against the judgment and orderdated 5[th] February, 2010 passed by the Division Bench of the High Courtof Punjab and Haryana at Chandigarh, setting aside the auction heldpursuant to auction notice dated 24[th] May, 2004 by Industrial DevelopmentBank of India (hereinafter referred to as “IDBI” – Operating Agency).F2. The facts in brief culled out from the record are that M/s Bharat E

F2. The facts in brief culled out from the record are that M/s BharatCommerce &Industries Limited (hereinafter referred to as “BCI”) wasdeclared a sick company and for disposal of assets of BCI pursuant todirections of Board for Industrial and Financial Reconstruction (BIFR)under Section 20(4) of the Sick Industrial Companies (Special Provisions)Act, 1985(hereinafter being referred to as the “Act 1985”) through IDBIG- the Operating Agency, initiated the process of inviting offers in sealedcover for sale of assets of the captioned unit.

3. Pursuant to public notice dated 24[th] May, 2004, offers wereinvited for various blocks, calling upon the interested parties to depositearnest money of Rs.6 lakhs for Block IV and submit their tenders inH

sealed cover within a period of 30 days from the date of advertisementand for further information, the interested parties may contact the officeof Mr. P.M. Nair, DGM, IDBI, Mumbai, the office of the Assets SaleCommittee constituted by the BIFR and the agency reserved the right toaccept or reject any offer without assigning any reason therefor. It ispertinent to note that the Operating Agency was under obligation toevaluate the realizable value of the property from the approved valuerand thereafter to notify the reserve price in the auction notice in termsof Section 21(c) of the Act, 1985, and that indeed was not indicated inthe auction notice and the solitary bid submitted by the appellants in CivilAppeal No. 10128 of 2011 of Rs.2,84,00,000/- on 22[nd] June, 2004 wasaccepted by the authority.

4. On being examined by the ASC although nothing came forwardas to why in the absence of a competitive bidding, the solitary bid of thepresent appellants was processed, be that as it may, the bid of theappellants in reference to Unit Block IV for the captioned assets wasaccepted as it reveals from the communication dated 12[th] August, 2004with a rider that the same shall be confirmed as per the terms andconditions of ASC advised to all the bidders on 8[th] August, 2004 forwhich the bidder may be required to execute a tripartite Memorandumof Understanding (MOU) with IDBI.

5. The record indicates that the appellants were asked to furnisha bank guarantee for a bid value of Rs.2,84,00,000/- by 27[th] August,2004 for a period of one year and required to deposit payment ininstalments. The appellants from the day one were reluctant in furnishingthe bank guarantee of Rs.2,84,00,000/, however, shown their allegedwillingness to pay the value of the assets in terms of the bid within aperiod of six months. But the fact is that the appellants neither offeredbank guarantee of Rs.2,84,00,000/- nor deposited a penny afteracceptance of the bid on approval of the ASC by communication dated12[th] August, 2004.

6. The BIFR, pursuant to its order dated 24[th] November, 2004observed that since the sole bidder for Block IV (the appellants herein)is not willing to adhere to the ASC guidelines as such the Bench did notagree to the proposal to accept the bid and left the sale of the assets ofthe unit for Block IV be taken over and be sold by the Official Liquidatorof the concerned High Court.

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A7. The decision of BIFR dated 24[th] November, 2004 was challengedby the present appellantsbefore the Appellate Authority for Industrial &Financial Reconstruction (AAIFR). The AAIFR under its order dated1[st] April, 2005, while setting aside the order of the BIFR dated 24[th]November, 2004 directed the BIFR to confirm the sale of Unit Block IVin favour of the appellant and modalities for payment shall be inBaccordance with terms and conditions as approved by the ASC andthereafter the appellants deposited the bid value in instalments.

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8. That became the subject matter of challenge by filing of a writpetition before the High Court of Punjab and Haryana at Chandigarh atthe instance of BCI Staff Colony, Residential Welfare Association andCits members under Article 226 of the Constitution.

9. The Division Bench of the High Court after revisiting the recordsof the bidding process and the procedure adopted by the OperatingAgency arrived to a conclusion that the appellants have not made paymentin terms of the guidelines of the ASC and failed to furnish the bankDguarantee and to deposit the purchase consideration at the relevant pointof time. The Division Bench also took note of the fact that solitary bidwas received by the ASC for the subject property and it was less thanthe circle rate fixed by the Collector of the property in question andwhile setting aside the order of the AAIFR dated 1[st]April, 2005, restoredEthe order of the BIFR dated 24[th] November, 2004 with a further directionthat the money which was deposited by the appellant, be returned withinterest @ 8% (simple) from the date of its deposit till the amount isrefunded with liberty to sell the property, if need be, as per the provisionsof law under its judgment dated 5[th] February, 2010.

F10. That became the subject matter of challenge in the instantappeals on behalf of the appellants and this Court while issuing noticeunder order dated 8[th] July, 2010 directed the parties to maintain the status-quo.

11. The original petitioners before the High Court had alsoGchallenged the self-same judgment of the Division Bench of the HighCourt in Civil Appeal No.10127 of 2011.

12. Mr. Jaideep Gupta, learned senior counsel appearing for theappellants, submits that while the advertisement came to be publishedby the IDBI (Operating Agency), the guidelines of ASC were notappended thereto and it was not made known to the parties that they areH

required to furnish a bank guarantee as a security to the bid amount andcalling upon the appellants at the stage of acceptance of the bid to actupon the guidelines and to furnish a bank guarantee was not justified andthis was considered by the AAIFR under its order dated 1[st]April, 2005and which has not been appreciated by the High Court in the right earnest.

13. Learned counsel further submits that the appellants had paidthe entire sale consideration on 3[rd] June, 2005 and 7[th] June, 2005 andpursuant thereto the tripartite Memorandum of Understanding had beenexecuted between the concerned parties on 18[th] July, 2005 and this wasnot considered by the High Court while setting aside the bid under theimpugned judgment.

14. Learned counsel further submits that the High Court hascommitted a manifest error and has failed to take into consideration thatonce the auction sale is confirmed, the objections to the said auction canonly be entertained if there are material irregularities and fraud.Furthermore, the process of auction sale would forever remain incompletebecause somebody may always come up after the confirmation of thesale with an offer for higher value and that conduct has always beendeprecated by this Court in Valji Khimjiand Company v. OfficialLiquidator of Hindustan Nitro Product (Gujarat) Limited andOthers[1].

15. Learned counsel further submits that the appellants hadscrupulously adhered to the conditions of the ASC and were ready tomake payment of the entire sale consideration and till September, 2004,the appellants were never made aware that the bank guarantee equivalentto the bid amount would have to be furnished and immediately on theirappeal being allowed by the AAIFR, the appellants herein made overthe bid amount of Rs.2,84,00,000/- on 3[rd] June, 2005 and 7[th] June, 2005and hence there was no violation of any terms and conditions of the saleof assets.

16. To buttress further, learned counsel submits that once theauction sale stands approved, at least the employees who were residingin the property in question and who had never participated in the biddingprocess, have no locus to question the order passed by the AAIFRconfirming the auction bid under its order dated 1[st] April, 2005 and theoffer made by the respondent/original petitioner (BCI Staff Colony) was A

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Aof no substance and if such practice is being permitted, then such of theapplicants who have not participated in the bidding process would makean offer at a later stage, no auction bid at any given point of time couldbe finalized and it will never fetch the value of the asset and thetransaction can never attain finality. In support of his submissions, thecounsel has placed reliance on the judgment of this Court in NationalBHighways Authority of India v. Gwalior-Jhansi ExpresswayLimitedThrough Director[2].

17. Learned senior counsel, Shri Ravi Prakash Mehrotra, appearingfor the appellants in Civil Appeal No.10127 of 2011 submits that theauction bid of the appellants in Civil Appeal No.10128 of 2011 has beenCrightly set aside by the Division Bench of the High Court but they areaggrieved only where the Division Bench has directed that the subjectproperty be sold, if need be, as per the provisions of law.

18. Learned counsel submits that since the appellants have madean offer of Rs.3 crores which was higher than the bid furnished by theDappellants in Civil Appeal No.10128 of 2011 and they being residing forsufficiently long time over the property in question put to auction, at leastthey seek an indulgence of this Court that their offer may be acceptedand the authorities may be directed to execute the sale certificate intheir favour. Learned counsel has placed reliance on the judgments ofEthis Court in Navalkha and Sons v. Sri Ramanya Das and Others[3]and Divya Manufacturing Company (P) Ltd. Tirupati Woollen MillsShramik Sangharsha Samity and Another v. Union Bank of Indiaand Others Official Liquidator and Others[4].

19. Per contra, learned counsel for the intervenors, while supportingFthe finding of the High Court, submits that the employees of the companyin liquidation have not participated in the proceedings but their dues arestill outstanding and which could not have been made over in absence ofthe funds available with the Official Liquidator and they being thesufferers for a long time, at least while upholding the judgment of theDivision Bench of the High Court, the BIFR or the Official LiquidatorGmay be called upon to initiate a fresh bidding process to fetch themaximized value of the property which may at least bring some solace 2 (2018) 8 SCC 2433 (1969) 3 SCC 537H4 (2000) 6 SCC 69

to the employees whose dues are outstanding for a long time and theyhave a superior claim over the financial creditors of the company inliquidation.

20. The final arguments were concluded on 19[th] April, 2023 andwecalled upon the appellants, if they are interested, may give their revisedoffer of the subject property. Both the appellants have submitted theirrevised offer. Appellants in Civil Appeal No. 10128 of 2011 have tenderedtheir offer of Rs.23,09,00,000/-. At the same time, the appellants in CivilAppeal No. 10127 of 2011 have given their offer of Rs.14 crores sincein the absence of valuation of the subject property from the approvedvaluer, it may not have been possible to assess the fair value of theproperty.

21. We have heard learned counsel for the parties and with theirassistance perused the material on record.

22. The process was initiated by the Operating Agency (IDBI) tosell the subject assets of the sick industrial company (BCI) in terms ofthe order passed by the BIFR in exercise of its power under Section20(4) of the Act, 1985. Pursuant thereto, the Operating Agency wasunder an obligation to obtain the valuation report of the subject propertyand after due assessment has to arrive at the reserve price for the saleof the property in terms of Section 21(c) of the Act, 1985 and thereafterhas to proceed with a procedure known to law while adopting a methodfor sale of the assets by public auction or by inviting tenders or in anyother manner specified and for the manner of publicity therefor in termsof Section 18(2)(k) of the Act, 1985. Sections 18(2)(k) and 21(c) arerelevant for the purpose and are reproduced hereinbelow:

“18. Preparation and sanction of Schemes. -

(1) xxxxxxxxx

(2) The scheme referred to in sub-section (1) may provide forany one or more of the following, namely:- (k) method of sale of the assets of the industrial undertakingof the sick industrial company such as by public auction or byinviting tenders or in any other manner as may be specifiedand for the manner of publicity therefor;”

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A“21. Operating agency to prepare complete inventory, etc. -Wherefor the proper discharge of the functions of the Board underthis Act the circumstances so require, the Board may, throughany operating agency, cause to be prepared- (a) to (b)xxxxxxxxx B(c) a valuation report in respect of the shares and assets inorder to arrive at the reserve price for the sale of a part orwhole of the industrial undertaking of the company or for fixationof the lease rent or share exchange ratio;”

23. Indisputedly, in the instant case, it has not been placed onCrecord if there was any valuation report assessed by the Operating Agencyfrom the approved valuer of the subject property and, at the same time,the reserve price of the subject property was never disclosed/indicatedin the first place when the public notice came to be notified on 24[th] May,2004 inviting offers from the interested parties for Block IV. Thus, theDvery procedure adopted by the Operating Agency appears to be defectiveat its very inception.

24. The object of the auction is to secure optimum realizable valueof the property by giving opportunity to the potential buyers facingcompetitive bids either in open or closed format. The terms ‘auction’ orE‘bid’ are inter-related as both give the idea of selling the product to thepublic. Bidding involves the process where a person offers a price whichis known as a bid. The process of bidding takes place in a situationwhere large number of people show their willingness to buy a particularproduct or a service and bidding in a sealed envelope is often used byvarious companies, industries and small businesses for assessing theFneeds of the public at large. On the other hand, auction is the processthat involves buying and selling goods and services by offering them forbids, taking bids and selling the item to the highest bidder and that ispossible if there is a competitive bidding between the bidders.

25. The purpose of auction (open or close format) is to get theGmost remunerative price and giving opportunity to the intending bidders toparticipate and fetch higher realizable value of the property. If that path iscut down or closed, the possibility of fraud or to secure inadequate priceor underbidding would loom large. In the given circumstances, it is theduty of the Court to exercise its discretion wisely and with circumspectionand keeping in view the facts and circumstances in each case.H

26. The object of auction has been considered by this Court inLakshmanasami Gounder v. C.I.T., Selvamani and Others[5] as under:- A

“…….The object of the sale is to secure the maximum price andto avoid arbitrariness in the procedure adopted before sale and toprevent underhand dealings in effecting sale and purchase of thedebtor’s property. Public auction is one of the modes of saleintending to get highest competitive price for the property. Publicauction also ensures fairness in actions of the public authorities orthe sale officers who should act fairly and objectively. Their actionshould be legitimate. Their dealing should be free from suspicion.Nothing should be suggestive of bias, favouritism, nepotism orbeset with suspicious features of underbidding detrimental to thelegitimate interest of the debtor…”

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27. Before we proceed to consider the submissions made, it willbe apposite to summarize the admitted facts for better appreciation ofthe submissions made.

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(i) .M/s Bharat Commerce &Industries Limited (BCI) wasestablished in 1964. However, it later became sick and byan order dated 22[nd] January, 2004 passed by the BIFR incase HP/2000, IDBI was directed to become the OperatingAgency to take up sale of assets of BCI under Section20(4) of SICA in terms of ASC guidelines.

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(ii) .Advertisement came to be published by IDBI (OperatingAgency) for sale of land of Block IV Staff Colony ofRajpura unit of BCI admeasuring 26,750 sq. meters (approx.5 acres) on 24[th]May, 2004.

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(iii) .The appellant (Rajiv Kumar Jindal and others) was thesolitary bidder who submitted their bid for purchase of BlockIV for Rs.2,84,00,000/- on 22[nd] June, 2004 and paid earnestmoney of Rs.6 lakhs.

(iv) .The Operating Agency accepted the bid by letter dated 12[th]August, 2004, subject to the condition that the successfulGbidder has to comply with the terms and conditions of theASC, as advised to all the bidders on 8[th] August, 2004. Theextract of the acceptance of the bid by the Appellants isreproduced hereunder:

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“The above sale is on the terms and conditions of AssetSale Committee (ASC) advised to all the bidders by theASC on August 08, 2004 for which you may be requiredto execute a tripartite Memorandum of Understanding(MOU) with IDBI, Selling Agency & BCIL, the draftof which would be sent to you shortly.”

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28. It will be apposite at this stage to refer to the relevant termsand conditions of the ASC which the bidder was supposed to complyand the same are referred hereunder:

“Procedure and Guidelines to be followed by Asset SaleCCommittee (ASC) appointed by BIFR for sale of assets ofsick companies –

(a) to (g) xxx xxx xxx

(h) Where a bid has been finally accepted the purchaser shallbe required to pay the balance of the purchase considerationDin two installments of 50% and 48% of the total selling price,payable respectively, before the end of 45 days and 90 daysfrom the date on which intimation regarding the finalacceptance of t.he bid is dispatched to him by registeredPost (A.D.)/Special Post at his notified address.

E(i)The successful purchaser shall within 15 days of the receiptof intimation regarding the acceptance of his bid, furnish abank guarantee, valid for one year, as many as consideredsatisfactory by the OA/MA, to secure full and timelypayment of consideration for the assets purchased.”

F(j) to (r) xxx xxx xxx.”

29. Indisputedly, the appellants (auction bidder) have neither paidthe sale consideration in terms of clause (h) of the guidelines nor furnishedthe bank guarantee within 15 days of the acceptance of the bid in termsof clause (i) of the guidelines.

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30. When the matter was placed before the BIFR, the Benchtook note of the fact that the appellants, viz., M/s Rajiv Kumar Jindaland others, were the sole bidder for Block IV of Rajpura Unit and havenot complied with the ASC guidelines. Taking both the factors intoconsideration; (i) the appellant being the sole bidder; and (ii) guidelinesHof ASC have not been complied with, the bid of the appellants was not confirmed but on appeal being preferred by the appellants, the AAIFRhas not taken into consideration that the guidelines of the ASC have notbeen followed and the appellant was the sole bidder, as there was nocompetitive bidding which is always to be taken care of to secure theoptimized value of the property.

31. The appellants have shown their willingness to deposit the bidamount in two instalments on 20[th] September, 2004 and 10[th] November,2004 but the fact is that even before the order came to be passed by theBIFR,neither the bank guarantee was furnished nor a single instalmentwas deposited by the appellants and here, in our view, the AAIFR haswent wrong in setting aside the Order of BIFR.

32. The Division Bench of the High Court had revisited the entireproceedings and taking into consideration the fact that there was nocompetitive bidding which is a sine qua non for public auction andguidelines of the ASC have not been complied with, accordingly setaside the order of the AAIFR with a further direction to initiate theprocess afresh in accordance with law and we do not find any error inthe view expressed by the High Court which may call for our interference.

33. The submission of Mr. Gupta, learned senior counsel, that theappellants in Civil Appeal No.10127 of 2011 have not participated in thebidding process and made an offer at the later stage, have no locusstandi to challenge the order of the AAIFR confirming the bid of theappellants. In the facts and circumstances of the case, it may not be ofany assistance for the reason that the appellants in Civil Appeal No.10127of 2011 (BCI Staff Colony, Residential Welfare Association and Others)indeed were not the bidders and have not tendered any sealed bid, but atthe same time, they have made an offer at a later stage and directlyinterested in the subject property in question as they are residing therefor sufficiently long time, and not the strangers to the proceedings, beingthe person aggrieved their right to question invoking the jurisdiction ofHigh Court under Article 226 of the Constitution cannot be ruled out.

34. That apart, the question of locus was never raised by theappellants before the High Court and once the subject issue has beenlooked into by the High Court on merits and we too are persuaded thatorder of the AAIFR confirming the bid pursuant to its order impugneddated 1[st] April, 2005 is not legally sustainable, we do not find anyjustification at this stage to non-suit the claim of the appellants prayedfor in Civil Appeal No.10127 of 2011.

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A35. Further submissions made by the learned counsel that theconditions of the ASC were scrupulously adhered to and the entire bidamount was deposited after the order came to be passed by the AAIFRconfirming the bid on 3[rd] June, 2005 and 7[th] June, 2005 and TripartiteMOU was executed is of no substance for the reason that the veryprocedure in the first instance initiated by the Operating Agency wasBdefective at its very inception and before initiation of theauctionproceedings, neither the value of the property was assessed through theapproved valuer nor the reserve price was notified in the auction noticedated 24[th] May, 2004 and the solitary bid of the appellant forRs.2,84,00,000/- was accepted and confirmed by the AAIFR withoutCtaking note of the fact that the appellant has failed to comply with theguidelines laid down by the ASC indicating that successful purchaserhas to furnish a bank guarantee valid for a period of one year within 15days of intimation regarding acceptance of the bid and the balance ofthe purchase consideration has to be paid in two instalments of 50% and48% of the total selling price payable respectively before the end of 45Ddays and 90 days from the date of intimation of final acceptance of thebid is dispatched at his notified address which is the requirement in termsof clause (h) and (i) of the procedure and guidelines laid down by theASC and that being a part of the auction notice, the appellant was underobligation to comply with and despite opportunity the appellant has failedEto comply with both the twin conditions and, thus in the facts andcircumstance, the Division Bench of the High Court has rightly set asidethe order of AAIFR dated 1[st] April, 2005.

36. So far as the submission made by learned counsel for theappellants in Civil Appeal No. 10127 of 2011 that the offer made by theFappellants was higher than the sealed bid is concerned, it has no substancefor the reason that the appellants have not participated in the biddingprocess and it is not the case of the appellants that the auction noticepublished on 24[th] May, 2004 was not in their knowledge. In our consideredview, later offer in the facts and circumstances of the case tendered bythe appellants was of no legal significance and rightly not acknowledgedGby the authority.

37. Before we conclude, we would like to observe that the moneydeposited by the appellants in Civil Appeal No. 10128 of 2011 shall berefunded in terms of the order of the High Court impugned dated 5[th]February, 2010. At the same time, the official liquidator may take allH

RAJIV KUMAR JINDAL v. BCI STAFF COLONYRESIDENTIAL WELFARE ASSOCIATION [AJAY RASTOGI, J.]

reasonable steps to fetch the optimum value of the property in order toachieve the object of public auction.

38. Consequently, both the appeals are without substance andaccordingly dismissed. No costs.

39. Pending applications, if any, shall stand disposed of.

Nidhi Jain(Assisted by : Lavam Tyagi and Tamana, LCRAs)

Appeals dismissed.

A

B

C

D

E

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H