Narendra Thakker & 6 Ors vs Canara Bank & 9 Ors

Ashok Menon, Chairperson

The Appeal is filed u/s 18 of the Recovery of Debts Due to Banks & Financial Institutions Act, 1993 (the RDDB&FI Act for short) by a third party challenging the impugned order dated 18. 02.2021 in Appeal No. 2 of 2021 on the files of the Debts Recovery Tribunal No. II, Mumbai (the D.R.T. for short) which was again an Appeal preferred over the impugned order dated 30.12.2020 passed by the Ld. Recovery Officer (‘the R.O.’ for short) with regard to an auction conducted by the R.O. under the provisions of the RDB Act,1993.

I.A. No. 165/2022 is an application for stay pending disposal of the Appeal. Since the determination of the stay application tantamounts to considering the Appeal itself on merits, with the consent of the parties, the Appeal itself is being disposed of by this order.

The facts can be summarized thus:

Respondent No.1 is Canara Bank, a secured creditor which obtained a Recovery Certificate in Original Application (O.A.) No. 226/2001 against the certified debtor to recover an amount of ₹456,26,64,246/-. Recovery Proceeding (R.P.) No. 551/2004 was filed to proceed against the secured assets. The Recovery Officer put up the secured assets for sale by way of public auction on 24.11.2020 and a sale notice was issued and published in the newspaper to conduct the sale on 30.12.2020. The reserve price was fixed at ₹21.84 Crores. The last date of submitting the online offer for participating in the sale was 28.12.2020 up to 04.30 p.m.

The  Appellants  intending  to  participate  in  the  E-Auction scheduled to be held on 30.12.2020 remitted the EMD amount of ₹5 Crores by RTGS on 28.12.2020. After that, the authorized representative of the Appellants attempted to upload the necessary documents to the port of the service provider, but due to an alleged ‘technical glitch’, the documents could not be uploaded. The Appellants are residing at Nasik and despite seeking help from technical experts, the PAN Card and other relevant documents of Appellants Nos.2 to 7 could not be uploaded. The Appellants, therefore, immediately sent an E-mail with the relevant documents to their Mumbai office. The clerk at the Mumbai office reached the office of the D.R.T. at about 05.20 p.m. on 28.12.2020, the last date for submitting the papers. Since the documents were not submitted by 04.30 p.m. as required, the Appellants were disqualified from participating in the E-auction and, an E-mail was sent to Appellant No.1 on 29.12.2020 from the office of the R.O. intimating him about the disqualification of the Appellants from participating in the bid. The attempts made by the Appellants to persuade the Ld. R.O. to permit them to rectify the mistake, if any, and permit them to participate in the bid failed, and their request was declined by the R.O. on 30.12.2020. On the date of the auction, Appellants represented by their counsel once again persuaded the Ld. R.O. to condone the irregularities explaining to him about the Appellants’ inability to upload the documents in the portal because of the technical glitch, and requested the R.O. to grant permission to the Appellants to participate in the auction proceedings. The Ld. R.O. refused to accept the request of the Appellants made through counsel. Thus, the Appellants were precluded from participating in the auction despite depositing the EMD and getting ready to bid. Thereafter, the auction proceeded, and the 2nd Respondent herein became the successful bidder.

The Appellants contend that the action of the Ld. R.O. declining permission to the Appellants to participate in the auction despite submitting all the documents is untenable in law, perverse, manifestly wrong, and incorrect. And, therefore, the Appellants who were illegally disqualified from participating in the auction process approached the Ld. Presiding Officer, D.R.T. and challenging the order of the Ld. R.O.

It is admitted that the last date of submitted documents as per the sale notice dated 24.11.2020 in clause No.5 was fixed as 04.30 p.m. on 28.12.2020, the clerk deputed by the Appellants viz. Mr Rahul Holkar inadvertently reached the office of the D.R.T. late and could submit the requisite documents only by 05.20 p.m.

According to the Appellants, the Ld. R.O. did not exercise his jurisdiction and discretion judiciously. He should have realized that just because of a technical glitch, the Appellants were not able to upload the requisite documents for participating in the auction. It is also stated that it was in the best interest of the 1st Respondent Bank as also the borrower to conduct the auction which would have fetched the best price for the auctioned property. The failure on the part of the Appellants to upload the documents was not due to their own fault, but it was due to a technical glitch which had occurred in the said auction portal. Under the circumstances, the principle of natural justice demanded that the Appellants be permitted to take part in the auction and thus depriving them of their invaluable right to bid for the property. Under the circumstances, the Appellants approached the D.R.T. with Appeal No.2/2021 seeking to quash the bidding process that had taken place and to set aside the impugned order of the Ld. R.O. and to order a fresh E-auction of the subject properties. It is 4 stated that the bonafides of the Appellants to participate in the auction are manifested by their depositing ₹5 Crores as EMD. The documents also were furnished by 05.20 p.m. The delay of only 50 minutes in submitting the documents could very well have been condoned by the Ld. R.O. which is in the public interest as also in the interest of the Bank and the borrower. The Appellants would contend that they were willing to offer ₹10 Crores more than the prices for which the 2nd Respondent had bid and purchased the subject property.

Respondents Nos.1 and 2 opposed the application with equal vehemence stating that the Appellants did not comply with the directions in the auction notice. The 2nd Respondent is also a resident of Nasik and had participated in the auction by responding to the advertisement that appeared in the newspapers circulated in Nasik. A sum of ₹5 Crores was deposited as EMD by the 2nd Respondent on 28.11.2020 and simultaneously uploaded the KYC and all supporting documents on the portal of M/s. CI India Pvt. Ltd. In addition thereto the documents were all hand-delivered in an envelope containing the hard copies of the documents well before the stipulated time and he also received a confirmation e-mail sent by the 1st Respondent acknowledging the receipt of the requisite documents along with the Login Credentials so as to enable him to participate in an online auction scheduled on 30.12.2020. It is contended by the Respondents that on opening the bids on 29.12.2020, the Appellants were found to be disqualified for the reason of not submitting the requisite papers on time. The PAN Card, Identity Proof, Address Proof, Mobile numbers, and e-mail IDs of Appellants Nos.2 to 7 were not furnished, and moreover, the Appellants also did not properly authorize the 1st Appellant in this regard. The Respondents also relied on the provision of Rule 59 (2) of the Second Schedule to the Income Tax Act in support of their contentions that the Appellants were rightly disqualified from participating in the E-auction. The allegation that there was a technical glitch in the portal is denied by the Respondents. The allegation that the Appellants were not heard by the Ld. R.O. is also denied by the Respondents. It is stated that the request made by the Appellants was considered on its merits and rightly rejected by the Ld. R.O.

After considering the contentions raised by the Appellants and the Respondents and after perusal of the document and upon hearing the arguments advanced by both sides, the Ld. P.O., D.R.T., dismissed Appeal No. 2/2021 finding that the Ld. R.O. had no authority to waive any condition on the incomplete bid and that there was no arbitrariness or irrationality in disqualifying the Appellants. It was also observed that the act of the appellants violates the provisions of Rule 59 (2) of the second schedule to the Income Tax Act, wherein there is no provision to condone the delay in tendering the bid beyond the stipulated time and date. The Ld. P.O. found that there was no justification for the delay caused by the Appellants in submitting their bids and under the circumstances dismissed the Appeal.

Aggrieved by the impugned order of the Ld. P.O., D.R.T.-II, Mumbai, the Appellants have approached this Tribunal with this 6 Appeal. The stay application seeks to restrain the Respondents from creating any further third party rights/interests over the subject property and also to stay all further actions pertaining to the property to give effect to the sale in favour of the 2nd Respondent, pending Appeal.

Heard Mr Nitin Thakkar, Sr. Counsel, instructed by Advocates M/s Rohit Gupta, Harshad Bhabhade & Bhausaheb Ingle, for the Appellants, Ms Vaishali R. Bhilare, the learned counsel for Respondent No.1, Mr G.R. Kinkhabwala along with Mr Nishant Rana, and Ms Chinmayee Ghag, the learned counsel for Respondent No.2 and Mr Manmohan Rao, the learned counsel for the Official Liquidator, and Mr Kushal Sawant for Respondent No. 7. Records perused.

The subject property put up for sale was the secured asset in the O.A. No. 226/2001 on the files of D.R.T.-II, Mumbai. The learned counsel appearing for Respondent No. 1 Bank Ms Vaishaili Bhilare points out that despite litigating for more than two decades for the realization of the amount due to the Bank from the borrower, the huge amount of debt could not be realized in full. The subject property was put up for sale a number of times earlier, but all those attempts to auction failed. Ultimately the Sale Proclamation was issued by the Ld. R.O. on 24.11.2020, setting forth the terms and conditions of the sale and the sale notice was published in two newspapers more than 30 days prior to the date of auction. The last date of submission of the bid was fixed at 04.30 p.m. on 28.12.2020 and the E-Auction 7 was scheduled to be held on 30.12.2020 between 01.00 pm. and 02.00 p.m. After the time inviting the bids to participate in the auction was over, all the bids received by the office were placed before the R.O. on 29.12.2020, and found that the online bid received from the Appellants was incomplete and the physical bid was received only at 05.20 p.m. on 28.12.2020, the bid submitted by the Appellants could not have been accepted and consequently, on 29.12.2020 an intimation was sent to the Appellant declining their bid for participating in the auction. The date of inspection of the property was fixed on 24.12.2020 and the Appellants as well as other bidders had sufficient opportunity to visit the site and prepare themselves for the bid within the stipulated time. The Ld. R.O. has recorded in the Roznama that the bid submitted by the Appellants cannot be accepted for three reasons : (1) that the Appellants have uploaded insufficient documents, (2) that the hard copies of the documents were submitted after 04.30 p.m. on 28.12.2020 and the time stipulated had expired, and (3) that the Appellants did not submit the signed authorization of all the intending bidders among them. On 30.12.2020 the application submitted by the Appellants was rejected by the Ld. R.O. The Appellants challenged the order of the R.O. before the D.R.T. by filing Appeal No. 2/2021 on 08.01.2021 and it was rightly dismissed by the Ld. P.O. on 18.02.2021, submits Ms Vaishaili Bhilare. On 10.03.2021 the Sale Certificate was issued to the successful bidder, the 2nd Respondent herein and on 13.03.2021 and the physical possession of the subject property was also handed over to him. Thereafter, on 02.02.2021 ₹5 Crores, the EMD amount deposited by the Appellants was returned to them. Ms Vaishaili Bhilare, therefore, submits that there is absolutely no justification in undoing the process of auction and repeating it all over again at the request of the Appellants. That, according to her, would cause untold hardship not only to the Bank but to all others who are involved in the process.

The learned Sr. Counsel Mr Nitin Thakkar appearing for the Appellants has very vehemently assailed the impugned order by stating that the Bank was to recover a sum of more than ₹456 Crores and the property was sold for a pittance which could not have satisfied the decree debt to any substantial extent. Mr Nitin Thakkar submits that the Appellants had offered Rs.10 Crores more than the amount for which the property was auctioned to the 2nd Respondent, and it was in the best interest of the Bank to have seized that opportunity to conduct the inter-se bidding between the Appellants and the 2nd Respondent. The borrower 7th Respondent would also support the Appellants in their effort to set aside the sale, for the reason that it is in the interest of the borrower as well as the Bank to gather maximum money in the auction sale. It is also suggested that the second Respondent is colluding with the first Respondent.

The relevant conditions Nos.4 and 5 in the aforesaid notice dated 24.11.2020 which are relevant for the purpose of this determination of this appeal, are extracted below:

“(4) The public at large is hereby invited to bid in the said E-Auction.  The  online  offers  along  with  EMD amount of Rs.5,00,00,000/-(Rupees Five Crores only), is payable by way of RTGS/NEFT in the Account No. 138929600003, Canara Bank, Assets Recovery Management Branch–II, New Marine Lines, Mumbai, IFSC Code No. CNRB0001389 of the Certificate Holder Bank at Mumbai. Attested photocopy of TAN/PAN card and address proof shall be uploaded with the online offer. The offer for more than one property shall be made separately. The last date for submission of online offer along with EMD and the other information/details is 28.12.2020 by 4.30 p.m. The physical inspection of the properties may be taken between 2.00 p.m. and 4.00 p.m. on date 24.12.2020 at the property site.

(5) The copy of PAN card, Address proof and identity proof, E-mail Id, Mobile No. and declaration if they are bidding on their own behalf or on behalf of their principals. In the latter case, they shall be required to deposit their authority and in default their bids shall be rejected. In case of the company copy of resolution passed by the board members of the company or any other document confirming representation/attorney of the company and the receipt/counter file of such deposit should reach to the said service provider or CH bank by e-mail or otherwise by the said date and hard copy shall be submitted before the Recovery Officer–II, DRT–II, Mumbai on or before 28.12.2020 up to 4.30 p.m.”

Mr Nitin Thakkar relies on a decision of the Hon’ble High Court Karnataka M/s. Scania Commercial Vehicles India Pvt. Ltd. Vs. Government of Karnataka & Ors. 2016 SCC OnLine Kar 6744. The facts in the said decision indicate that on the last date of submission of bids the petitioner therein started the process of submitting the technical and financial bids at 4.30 p.m. on uploading the system prompted for encryption of the documents by using the digital signature and the petitioner therein encrypted the documents by using the digital signature. At that stage, the system prompted the petitioner ‘sign and encryption’. As such the same was complied after which the petitioner was directed to the main page to key-in certain dates manually under the heading ‘item wise bid financial offer’. The further processes were also carried on as prompted from the system and when the ‘sign and encryption’ was attempted using the digital signature, a message ‘unexpected error’ was displayed. Though the draft had been uploaded the process was not completed due to the indication of such an error. Hence the petitioner therein contacted the customer care of Respondent No.4 for help but the assistance provided was of any help despite the petitioner clarifying the position and indicating the error and seeking for a solution to complete the process. The petitioner accordingly contacted Respondent No.4 therein on the next day by stating with regard to the problem encountered and also submitted the hard copies by dropping them in the box kept for the said purpose as it is also a requirement under the RFP. A further request was also made on 27.08.2016 and again up to 31.08.2016. However, since Respondents Nos.3 and 4 did not accede to the request of the petitioner, the petitioner approached the High Court of Karnataka for relief. The Hon’ble High Court of Karnataka held that if the benefit is granted, it would be in the public interest. The notice of tender floated, in that case, was for procurement of 150 AC Premium Buses and 350 non-AC Buses involving a cost of ₹250 Crores. The petitioner therein was a well-known manufacturer of buses and if they are allowed to remain in the field it will only increase the competition though ultimate it will all depend on the technical as well as financial evolution and that too the subject the entire details being available in the ‘draft’ that is already uploaded. On the other hand, if an opportunity is not granted only because of the delay of fewer than two minutes and that too in the circumstances stated above, it will only leave respondents 5 and 6 in the field without much competition. The Hon’ble High Court observed that to allow a tender of such magnitude to the benefit of one or two tenderers due to default rather on merit certainly is not in the public interest. Mr Nitin Thakkar relied on this decision to argue that in the instant case also there was a ‘technical glitch’ which prevented the appellants from uploading their KYC documents to the portal and thereafter, they were also not able to produce the hard copies of the documents before 4.30 p.m. The delay was only 50 minutes and, therefore, in the public interest, the documents ought to have been accepted, argues the Ld. senior counsel.

Mr Nitin Thakkar also relies upon the decision of the Hon’ble Supreme Court in Poddar Steel Corporation Vs. Ganesh Engineering Works & Ors. (1991) 3 SCC 273 to argue that deviation from non-essential or ancillary/subsidiary requirement in tender condition during an auction is permissible and minor technical irregularities can be waived. In the above-cited decision, the fact reveals that the requirement of depositing earnest money with the tender either in cash or by demand draft drawn on State Bank of India was violated by the bidder producing a Banker’s Cheque marked and certified by Union Bank of India along with the tender. It was held by the Hon’ble Supreme that the government was justified in waiving the technical compliance with the tender condition. The Hon’ble Apex Court had classified the requirements in a tender notice into two categories one of which was an essential condition while the others were merely ancillary or subsidiary. Essential conditions need to be enforced rigidly but the ancillary or subsidiary conditions could have deviated in appropriate cases. The Hon’ble Supreme Court held thus:

“6. It is true that in submitting its tender accompanied by a cheque of the Union Bank of India and not of the State Bank the clause no. 6 of the tender notice was not obeyed literally, but the question is as to whether the said non-compliance deprived the Diesel Locomotive Works of the authority to accept the bid. As a matter of general proposition it cannot be held that an authority inviting tenders is bound to give effect to every term mentioned in the notice in meticulous detail, and is not entitled to waive even a technical irregularity of little or no significance. The requirements in a tender notice can be classified into two categories-those which lay down the essential conditions of eligibility and the others which are merely ancillary or subsidiary with the main object to be achieved by the condition. In the first case the authority issuing the tender may be required to enforce them rigidly. In the other cases it must be open to the authority to deviate from and not to insist upon the strict literal compliance of the condition in appropriate cases. This aspect was examined by this Court in GJ Fernandez v. State of Karnataka 7 Ors., [1990] 2 SCC 488 a case dealing with tenders. Although not in an entirely identical situation as the present one, the observations in the judgment support our view. The High Court has, in the impugned decision, relied upon Ramana Dayaram Shetty v. International Airport Authority of India & Ors., [1979] 3 SCC 489 but has failed to appreciate that the reported case belonged to the first category where the strict compliance of the condition could be insisted upon. The authority in that case, by not insisting upon the requirement in the tender notice which was an essential condition of eligibility, bestowed a favour on one of the bidders, which amounted to illegal discrimination. The judgment indicates that the Court closely examined the nature of the condition which had been relaxed and its impact before answering the question whether it could have validly condoned the shortcoming in the tender in question. This part of the judgment demonstrates the difference between the two categories of the conditions discussed above.”

Mr Nithin Thakker also relies upon the decision of the Hon’ble Apex Court in Shradhha Aromatics Pvt. Ltd. Vs. Official Liquidator for Global Arya Industries Ltd. & Ors. (2011) 6 SCC 207 wherein it was held that ordinarily, the Court is loathe to accept the offer made by a bidder or a third party after acceptance of the highest bid/offer given pursuant to an advertisement issued or an auction held by a public authority. However, in the peculiar facts of that case, the Hon’ble Apex Court held that it would be appropriate to make a departure from that rule. The fact indicates that the total area of land advertised by a committee was 12,500 sq. mtr. and the same is situated in an important district of the state which was substantially developed during the last four years. The Hon’ble Apex Court observed that if the order of the Division Bench of the High Court was sustained, the creditors of the company are bound to suffer because the amount available for e-payment of the dues of the creditors would be a paltry sum of ₹1.27 Crs. As against this, if the offer made by the intervener/promotor is accepted, the Official Liquidator will get an additional amount of more than ₹4.25 Crs. The availability of such a huge amount will certainly be in the interest of the creditors and, therefore, the offer of ₹7.60 Crs. including an additional amount of ₹2 Lacs made by the intervener-cum-promoter was accepted.

Mr Nitin Thakkar submits that his client, the Appellant, was ready to offer ₹10 Crs. more than the amount offered by the highest bidder and, therefore, it was in the interest of the creditor, borrower and also the public interest that the offer made by the Appellant be accepted.

Mr G. R. Kinkhbawala, the learned counsel appearing for the auction purchaser, submits that the Appellants have no right whatsoever to question the sale. Their bid was not even accepted and at the very threshold, their request to participate in the auction was rejected for technical reasons. The argument that the Appellants were serious about participating in the auction by remitting the E.M.D. is no reason for them to participate in the auction if they have not complied with the other mandatory requirements. It is submitted that the auction purchaser in this case had also participated in the auction from Nasik and did not find any technical glitch in the portal pertaining to the auction. The Sale Certificate was issued to him on 10. 03.2021 after the sale was confirmed on 04.02.2021. On 13.03.2021 the possession of the property has been handed over to him. He has also thereafter transferred the property to a third party who is presently in possession of the property. It is submitted that setting aside the sale would create much hardship not only to the auction bidder but also to the third party who is presently in possession of the property consequent to sale by the auction purchaser. It is pointed out that clause 4 of the Proclamation of Sale is mandatory and needs to be complied with in letter and spirit. The attested copies of the PAN/ TAN Card of the participants in the auction were to be submitted. It is submitted that nowhere has the Appellants produced any substantial evidence to indicate that there was a technical glitch in the auction portal which they now tend to highlight. No complaint whatsoever has been submitted by them regarding any ‘technical glitch’. The printouts of the failed attempts in uploading the documents are not produced. Hence, the story of the technical glitch precluding the Appellants from uploading the documents in the auction portal is a make believe story now set forth by the appellants for the purpose of the case. In the Proclamation, it is very clearly stated that all the requirements regarding the date and time are to be strictly complied with and, therefore, mandatory. There is also an indication that the authority shall reject any bid which does not comply with the mandatory requirement of time and date. The hard copies were submitted on 28.12.2020 only at 5.20 p.m. as explicit from the endorsement made by the office, which runs counter to the requirement under clause 4 of the Proclamation insisting that the copies need to be tendered by 4.30 p.m. on 28.12.2020. Admittedly there is a delay. The learned counsel Mr Kinkhabwala points out that disregarding clause 4 of the Proclamation would also render Rule 59 of the second schedule to the Income Tax Act Act, redundant.

Mr. Kinkhabwala distinguishes the decisions relied upon by the Appellants on facts and states that those are not applicable to the facts of this case. He argues that in the decision Scania Commercial Vehicles India Pvt. Ltd. (supra), it is also held that on the principle of law as delineated in the decision discussed in that case the law is well settled that there is a limited scope available to the Courts to interfere except in the circumstances which have been noted in that case. Further, in relation to the tender process, it is also made clear that essential terms are to be strictly adhered to which includes the valid uploading of the bid within the time prescribed and in the case of e-procurement the documents submitted in the electronic mode alone can be considered. In KRK Infraprojects India Pvt. Ltd. Vs. State of Telangana 2015 SCC OnLine Hyd 34, it was held by the High Court of Andhra Pradesh that the very basis of calling for tender on an e-procurement basis would be defeated if the documents are accepted in physical form. Such a requirement is an essential condition and a violation that cannot be accepted. In another decision Central Coalfields Ltd. Vs. SLL-SML (Joint Venture Consortium) (2016) 8 SCC 622, it was held change being made in compliance with the essential terms of the tender after the process has commenced would be prejudicial to the others and if permitted, the other bidders who had not bid could well have contended that if they had known format was not mandatory, they too could have participated. It was observed that the goal post cannot be rearranged or be asked to be rearranged during the bidding process to affect the right of some or deny a privilege to some. In the decision M/s. Scania Commercial Vehicles (supra) there was evidence regarding an ‘unexpected error’ when the bidder attempted to upload the required documents for participating in the auction. He had contacted the customer care of the auction portal for help but the assistance provided was not of any help despite his clarifying the position and indicating the error and seeking for a solution to complete the process. Mr Kinkhabwala submits that the situation in the instant case is not similar. The Appellants had never attempted to contact the auction portal for any help regarding the alleged ‘technical glitch’. Hence, the allegation is totally unacceptable. It is further argued by Mr Kinkhabwala that the Hon’ble Apex Court had in the decision of Poddar Steel Corporation (supra) only suggested some deviation from non-essential or ancillary/subsidiary requirements and held that minor technical irregularities can be waived. In that case, the facts would suggest that the requirement of depositing EMD with the tender either in case or by Demand Draft drawn on State Bank of India was a non-essential requirement and that a Banker’s Cheque marked and certified by Union Bank of India instead of State Bank of India sent along with the tender was acceptable. It is also made clear by the Apex Court in that decision that the essential conditions of eligibility are required to be enforced with rigidity. Distinguishing the decision in Shradhha Aromatic Pvt. Ltd. (supra) Mr Kinkhabwala submits that the facts in the above decision would suggest that the learned Company Judge had relied upon the decision of the Hon’ble Supreme Court in Divya Mfg. Co. Pvt. Ltd. Vs. Union Bank of India (2000) 6 SCC 69 to hold that the sale was confirmed in favour of the second Respondent therein, neither the possession of the movable properties was handed over nor the sale deed executed. Unless and until these formalities are over, it cannot be said that the transaction is complete and before that, if a higher offer is made, the Court would certainly consider and at that point in time, it is to be seen as to whether the earlier transaction is by virtue of fraud. The real criteria were whether the property of the company in liquidation should fetch the maximum price and whether the properties can be adjudged on the basis of the offers which are received. The Court, in that case, was entitled to consider the case regarding the adequacy of the price but the situation in the instant case is not similar. The reserve price was fixed before the auction and it was never challenged by the borrower. The Appellants could never have challenged the inadequacy of the reserve price which is now taken up as a ground for setting aside the sale by the Appellants.

Mr Kinkhabwala refers to a decision of the Hon’ble Supreme Court in Vedica Procon Pvt. Ltd. Vs. Balleshwar Greens Pvt. Ltd. & Ors. AIR 2015 SC 3103 to argue that a subsequent higher offer is no valid ground for refusing confirmation of a sale or offer already made. In the aforesaid decision, it was observed that the highest bid of the Appellant therein was accepted and all stakeholders of the company in liquidation were heard before such an acceptance. No objections, including by the Respondent therein were made that there was fraud or irregularity in the sale, nor was there any objection from anyone that the price offered by the Appellant therein was inadequate. The fact that the property became more valuable due to subsequent development is not a relevant consideration in determining the legality of the order accepting the bid. Mr Kinkhbawala points out that the Hon’ble Apex Court had occasion to discuss the decision in Shradhha Aromatics Pvt. Ltd. (supra) and held that the decision was rendered on the peculiar facts of that case as is borne out from that judgment itself and it is further observed by the Hon’ble Apex Court that Shradhha Aromatics (supra) does not lay down any principle across the board.

Mr Kinkhabwala has also relied upon yet another decision of the Hon’ble Apex Court Valji Khimji & Co. Vs. Official Liquidator of Hindustan Nitro Product (Gujarat) Ltd. & Ors. (2008) 9 SCC 299 wherein it was held that entertaining objection after the sale is confirmed should not be allowed except on limited grounds like a fraud. Relying on yet another decision of the Hon’ble Supreme Court Kayjay Industries Pvt. Ltd. Vs. Asnew Drums Pvt. Ltd. & Ors. (1974) 3 SCR 678 it was observed by the Hon’ble Apex Court that inadequacy of price cannot demolish every Court sale. In Kayjay Industries (supra) it was observed that if Court sales are too frequently adjourned with a view to obtaining a still higher price, it may prove a self-defeating exercise, for industrialists will lose faith in the actual sale taking place and may not travel up to the place of auction, being uncertain that the sale would at all go through. The Apex Court had also discussed the ratio in Divya Mfg. Co. Pvt. Ltd. (supra) and held that the said decision cannot be treated as laying down any absolute rule that a confirmed sale can be set aside in all circumstances and goes on to hold that the auction is complete on the fall of the hammer and certain rights accrue in favour of the auction purchaser. However, where the action is subject to subsequent confirmation by some authority (under a statute or terms of the auction) the auction is not complete and no right accrues until the sale is confirmed by the said authority. Once, however, the sale is confirmed by that authority, these rights cannot be extinguished except in exceptional cases such as fraud. Mr Kinkhabwala submits that in the instant case also there is absolutely no allegation of any fraud and, therefore, without proving such an allegation, the confirmed sale cannot be set aside.

In the decision Narayan Yadav (D) thr. LRs Vs. State of Bihar & Ors. AIR 2020 SC 1167 the Hon’ble Apex Court was considering the scope and powers of the Certificate Officer u/s 28 of the Bihar & Orissa Public Demands Recovery Acts, 1914 to set aside the sale under certain circumstances. The section provided setting aside the sale on depositing the entire amount due together with interest and penalty within a period of 30 days. The Certificate Officer in that particular case allowed the sale to be set aside despite the money not being deposited within the stipulated time. The matter went up to the Hon’ble Supreme Court and it was held that when there is a prescribed time of 30 days from the date of the sale to set aside the sale on deposit of certain amounts, in absence of any power on the Certifying Officer to extend the time, he has no jurisdiction at all to extend the time of deposit beyond the period of 30 days from the date of sale and it was observed that u/s 28 of the said Act and considering the consequence of not depositing the money within the time of 30 days, the period of 30 days as mentioned in Section 28 is to be considered as mandatory. It is further observed that the aforesaid Section 28 is in the nature of a concession shown to the defaulter, so he has to strictly comply with the requirements thereto. If deposits are allowed to be made even after 30 days, the same will run contrary to Section 28 itself and frustrate the object of the provision. Drawing an analogy in the instant case, Mr Kinkhabwala submits that clause 4 of the Proclamation is mandatory and the date and time stipulated therein are intended to be complied with strictly. The Recovery Officer had absolutely no right to grant an extension of the time under any circumstances.

Mr Kinkhabwala had also relied upon the decision of the Hon’ble Supreme Court in H.S. Goutham & Ors. Vs. Rama Murthy & Ors. (2021) 5 SCC 241 to argue that unless the allegation that a decree was obtained by fraud and misrepresentation is substantiated, it cannot be set aside and the order confirming the sale consequent to the decree shall become absolute. Mr Kinkhabwala reiterates that in the instant case there is no allegation of any fraud much less any evidence substantiating it.

In K. Kumar Gupta Vs. Sri Markendaya and Sri. Omkareswara Swamy Temple & Ors. AIR 2022 SC 1220 the Hon’ble Supreme Court has held that once the auction purchaser was found to be the highest bidder in the public auction in which several persons had participated and 22 thereafter when the sale was confirmed in his favour and even the sale deed was executed, unless and until it was found that there was any material irregularity and/or any illegality in holding the public auction and/or auction/sale was vitiated by any fraud or collusion, it is not open to set aside the auction sale in favour of the highest bidder on the basis of some representation made by third parties, who did not even participate in the auction proceedings and did not make any offer. It was further observed that if auction/sale pursuant to the public auction is set aside on the basis of frivolous and irresponsible representation that the third party would have offered a higher amount, the sanctity of the public auction would be frustrated and the rights of a genuine bidder would be adversely affected.

Mr Kinkhabwala submits that before a sale can be set aside merely a material irregularity or fraud will not do. The Applicant must go further and establish to the satisfaction of the Court that the material irregularity or fraud has resulted in substantial injury to the Appellant. Conversely, even if the Appellant has suffered substantial injury by reason of the sale, this would not be sufficient to set aside the sale unless substantial injury has been occasioned by a material irregularity or fraud in publishing or conducting the sale. The learned counsel relies on the decision of the Hon’ble Supreme Court in Saheb Khan vs Mohammad Yousufuddin and Ors. AIR 2006 SC 1871, Wherein relying upon Order 21 Rule 90 of the CPC it was held that no sale shall be set aside on the ground of irregularity in publishing or conducting it unless, upon the facts proved, the Court is satisfied that the Applicant has sustained substantial injury by reason of such irregularity or fraud. It was observed that bald allegations would not do.

In M/s Jagan Kishan & Co vs. Ludhiana Improvement Trust & Ors 2022 LiveLaw(SC)733, the latest decision rendered by a three-judge Bench of the Hon’ble Supreme Court it is observed that the twin conditions of material irregularity or fraud and substantial injury has to be satisfied before auction sale can be set aside under Order 21 Rule 90 (3) of the Code of Civil Procedure. No sale could be set aside unless  the Court  is satisfied that the applicant has  sustained substantial injury by reason of irregularity or fraud in completing or conducting the sale, the three judges Bench of the Hon'ble Apex Court observed.

The Ld. Counsel appearing for the borrower has relied on a decision of the Hon’ble Andhra Pradesh High Court reported, P. Mohan Reddy & Ors. Vs. Debts Recovery Appellate Tribunal, Mumbai & Anr. AIR 2004 AP 94 in support of the contention that when the auction purchaser fails to deposit the amount in time, the proceedings are violative of Rule 57 (2) of the Second Schedule to the Income Tax Act, 1961, as the Rule does not contemplate that there can be any sale in favour of the purchaser without depositing 25% of the purchase money.

After having heard the learned counsel appearing for the parties at great length, perusal of documents and applying the ratio propounded in the above-cited decisions to the facts and circumstances of this case, I am of the opinion that the sale that took place in the instant case is not liable to be set aside.

There are many grounds raised by the Appellants challenging the sale. It is contended that they were illegally avoided from participating in the sale despite having deposited the EMD by depositing the amount the Appellants have expressed their bonafide intention to purchase the property. Under the circumstances, the Appellants should have been permitted to participate in the auction. But applying the ratio in the decisions cited above, it was essential on the part of the Appellants to have uploaded all the documents as required in the notification. The Appellants were not successful in establishing that there was a ‘technical glitch’ in the website which precluded them from uploading the documents on time. They have not made any complaint to get the technical glitch rectified. No evidence has been produced by means of print-outs or screenshots to indicate that there was a glitch which had prevented them from proceeding with the submission of the papers in time. Thereafter, the Appellants also failed to submit the papers physically in the office of the D.R.T. by 04.30 p.m. on 28.12.2020. The Appellants are from Nasik. The successful bidder is also from Nasik and if he was successful in uploading the documents on time, I cannot agree with the Appellants that the website had any technical problems. They travel to Mumbai to submit the papers by only 05.20 p.m. on the last date. If the successful bidder could submit his papers in time, there is no reason for the Appellants also to be able to submit the papers on time. The condition regarding the date and time to comply with the notice is mandatory and failure or breach on the part of the participants would entail in rejection of the papers and it was rightly rejected by the Recovery Officer. I do not think that the Recovery Officer could have exercised his discretion to accept the bid submitted out of time. Otherwise, there was no necessity for fixing a date and time for acceptance of the papers. Apart from the rhetoric that there was a ‘technical glitch’ while uploading the bid in the auction portal by the Appellants, there is not a scintilla of evidence to support that version. Confirming to the time and date schedule in submitting the papers is undoubtedly an essential requirement and could not have been overlooked or condoned by the R.O. to facilitate the Appellants to the detriment of other bidders.

The Appellants have objected to the inadequacy of the sale price. The Appellants could definitely not have objected to it as they were a third party and it was for the Bank, the secured creditor or the borrower to object to the inadequacy of the price. Merely because the Appellants are offering a better price after the sale was concluded, is no reason to set aside the sale. I find that setting aside the sale at the behest of the third party without there being specific proof of fraud or material irregularity would result in the sanctity of the public auction being lost. It is not the first time the property was put up for sale. The secured creditor had attempted an auction sale umpteen times before it was ultimately fructified. This attempt cannot be thwarted by raising untenable contentions. In case the Appellants were serious about participating in the sale, they should have stuck to the requirements of the auction notice in letter and spirit. Having failed to do so would not enable them to challenge the sale at a later point in time and offer a higher amount. There is nothing on record to establish that there was any material irregularity or fraud in conducting the sale, or that it has resulted in substantial injury to the Appellant.

The contention that the amount was not deposited by the successful bidder on time is also not acceptable. The amounts were deposited in accordance with law and rules and there is absolutely no irregularity about the deposit which requires interference.

I am, therefore, of the opinion that the sale was conducted in accordance with the provisions of the law and, therefore, there is no ground to set the sale aside. The Appeal has to fail. As the result, the Appeal is dismissed.

All Miscellaneous Applications, if any, are dismissed as infructuous.