RAJIV KUMAR JINDAL AND OTHERSversusBCI STAFF COLONY RESIDENTIAL WELFARE ASSOCIATION AND OTHERS

                          [2023] 4 S.C.R. 79                               79


             RAJIV KUMAR JINDAL AND OTHERS                                 A
                                   v.
BCI STAFF COLONY RESIDENTIAL WELFARE ASSOCIATION
                   AND OTHERS
               (Civil Appeal No(s). 10127–28 of 2011)                      B
                           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 – Operating
                                                                           C
agency to prepare complete inventory – On facts, Operating Agency-
IDBI initiated process to sell the subject assets of the sick industrial
company-BCI in terms of the order passed by the BIFR – Submission
of solitary bid by the appellant – Operating authority accepted the
same – However, the appellant did not adhere to the terms and
conditions of Asset Sale Committee (ASC) – In view thereof, BIFR           D
did not agree to the proposal to accept the bid – However, the
Appellate Authority-AAIFR set aside the order of BIFR and issued
directions to confirm the sale in favour of the appellant – However,
Division Bench holding that the appellants have not made payment
in terms of the guidelines of the ASC, they failed to furnish the
                                                                           E
bank guarantee and to deposit the purchase consideration, restored
the order of the BIFR – On appeal, held : Operating Agency was
under an obligation to obtain the valuation report of the subject
property 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 nor          F
furnished the bank guarantee within 15 days of the acceptance of
the bid in terms of the guidelines – Moreover, the Division Bench of
the High Court holding that there was no competitive bidding which
is a sine qua non for public auction and the guidelines of the ASC
have not been complied with, set aside the order of the AAIFR with
                                                                           G
the direction to initiate the process afresh – No error in the view of
the High Court – Appellant was under an obligation to comply with
the requirement and despite opportunity the appellant failed to
comply with the twin conditions – Thus, the High Court rightly set
aside the order of AAIFR.
                                                                           H
                                  79
80            SUPREME COURT REPORTS                      [2023] 4 S.C.R.


A         Auction: Object and purpose of – Process of auction/bidding
     – Explained.
           Dismissing the appeals, the Court
           HELD: 1.1 The Operating Agency was under an obligation
     to obtain the valuation report of the subject property and after
B    due assessment has to arrive at the reserve price for the sale of
     the property in terms of Section 21(c) of the Sick Industrial
     Companies (Special Provisions) Act, 1985 and thereafter has to
     proceed with a procedure known to law while adopting a method
     for sale of the assets by public auction or by inviting tenders or in
C    any other manner specified and for the manner of publicity therefor
     in 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 if
     there was any valuation report assessed by the Operating Agency
     from the approved valuer of the subject property and, at the same
D    time, the reserve price of the subject property was never
     disclosed/indicated in the first place when the public notice came
     to be notified inviting offers from the interested parties. Thus,
     the very procedure adopted by the Operating Agency appears to
     be defective at its very inception. [Para 23][90-C-D]

E          1.3 The object of the auction is to secure optimum realizable
     value of the property by giving opportunity to the potential buyers
     facing competitive bids either in open or closed format. The terms
     ‘auction’ or ‘bid’ are inter–related as both give the idea of selling
     the product to the public. Bidding involves the process where a
     person offers a price which is known as a bid. The process of
F    bidding takes place in a situation where large number of people
     show their willingness to buy a particular product or a service
     and bidding in a sealed envelope is often used by various
     companies, industries and small businesses for assessing the
     needs of the public at large. On the other hand, auction is the
G    process that involves buying and selling goods and services by
     offering them for bids, taking bids and selling the item to the
     highest bidder and that is possible if there is a competitive bidding
     between the bidders. The purpose of auction (open or close
     format) is to get the most remunerative price and giving

H
        RAJIV KUMAR JINDAL v. BCI STAFF COLONY                          81
          RESIDENTIAL WELFARE ASSOCIATION

opportunity to the intending bidders to participate and fetch higher    A
realizable value of the property. If that path is cut down or closed,
the possibility of fraud or to secure inadequate price or
underbidding would loom large. In the given circumstances, it is
the duty of the Court to exercise its discretion wisely and with
circumspection and keeping in view the facts and circumstances
                                                                        B
in each case. [Paras 24, 25][90-E-H]
      1.4 The appellants (auction bidder) have neither paid the
sale consideration in terms of clause (h) of the guidelines nor
furnished the bank guarantee within 15 days of the acceptance of
the bid in terms of clause (i) of the guidelines. [Para 29][92-F-G]
                                                                        C
      1.5 When the matter was placed before the BIFR, the Bench
took note of the fact that the appellants were the sole bidder for
Block IV and have not complied with the ASC guidelines. Taking
both the factors into consideration, the bid of the appellants was
not confirmed but on appeal being preferred by the appellants,
the AAIFR did not take into consideration that the guidelines of        D
the ASC have not been followed and the appellant was the sole
bidder, as there was no competitive bidding which is always to be
taken care of to secure the optimized value of the property. [Para
30][92-G-H; 93-A]
      1.6 The appellants have shown their willingness to deposit        E
the bid amount in two instalments but the fact is that even before
the order came to be passed by the BIFR, neither the bank
guarantee was furnished nor a single instalment was deposited
by the appellants and the AAIFR erred in setting aside the Order
of BIFR. [Para 31][93-B-C]                                              F
      1.7 The Division Bench of the High Court had revisited
the entire proceedings and taking into consideration the fact that
there was no competitive bidding which is a sine qua non for public
auction and guidelines of the ASC have not been complied with,
accordingly set aside the order of the AAIFR with a further             G
direction to initiate the process afresh in accordance with law.
There is no error in the view expressed by the High Court which
may call for interference. [Para 32][93-C-D]


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82            SUPREME COURT REPORTS                      [2023] 4 S.C.R.


A           1.8 The submission that the appellants in Civil Appeal No.
     10127 of 2011 have not participated in the bidding process and
     made an offer at the later stage, have no locus standi to challenge
     the order of the AAIFR confirming the bid of the appellants. In
     the facts and circumstances of the case, it may not be of any
     assistance for the reason that the appellants in Civil Appeal No.
B
     10127 of 2011 indeed were not the bidders and have not tendered
     any sealed bid, but at the same time, they have made an offer at a
     later stage and directly interested in the subject property in
     question as they are residing there for sufficiently long time, and
     not the strangers to the proceedings, being the person aggrieved
C    their right to question invoking the jurisdiction of High Court
     under Article 226 of the Constitution cannot be ruled out. The
     order of the AAIFR confirming the bid pursuant to its order
     impugned dated 1st April, 2005 is not legally sustainable, there
     is no justification at this stage to non-suit the claim of the
     appellants prayed for in Civil Appeal No. 10127 of 2011. [Paras
D
     33, 34][93-E-H]
            1.9 The submissions that the conditions of the ASC were
     scrupulously adhered to and the entire bid amount was deposited
     after the order came to be passed by the AAIFR confirming the
     bid on 3rd June, 2005 and 7th June, 2005 and Tripartite MOU
E    was executed is of no substance for the reason that the very
     procedure in the first instance initiated by the Operating Agency
     was defective at its very inception and before initiation of the
     auction proceedings, neither the value of the property was
     assessed through the approved valuer nor the reserve price was
F    notified in the auction notice and the solitary bid of the appellant
     was accepted and confirmed by the AAIFR without taking note
     of the fact that the appellant has failed to comply with the
     guidelines laid down by the ASC indicating that successful
     purchaser has to furnish a bank guarantee valid for a period of
     one year within 15 days of intimation regarding acceptance of the
G    bid and the balance of the purchase consideration has to be paid
     in two instalments in terms of clause (h) and (i) of the procedure
     and guidelines laid down by the ASC and that being a part of the
     auction notice, the appellant was under obligation to comply with
     and despite opportunity the appellant failed to comply with both
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       RAJIV KUMAR JINDAL v. BCI STAFF COLONY                         83
         RESIDENTIAL WELFARE ASSOCIATION

the twin conditions and, thus the Division Bench of the High Court    A
rightly set aside the order of AAIFR. [Para 35][94-A-E]
      1.10 The submission of the appellants in CA No. 10127 of
2011 that the offer made by the appellants was higher than the
sealed bid is concerned, has no substance for the reason that the
appellants did not participate in the bidding process and it is not   B
the case of the appellants that the auction notice published was
not in their knowledge. Later offer in the facts and circumstances
of the case tendered by the appellants was of no legal significance
and rightly not acknowledged by the authority. [Para 36][94-F-G]
      1.11 The money deposited by the appellants in Civil Appeal      C
No. 10128 of 2011 would be refunded in terms of the order of the
High Court impugned. At the same time, the official liquidator
may take all reasonable steps to fetch the optimum value of the
property in order to achieve the object of public auction. [Para
37][94-H; 95-A]
                                                                      D
      Valji Khimji and Company v. Official Liquidator of
      Hindustan Nitro Product (Gujarat) Limited and Others
      (2008) 9 SCC 299 : [2008] 12 SCR 1; National
      Highways Authority of India v. Gwalior–Jhansi
      Expressway Limited Through Director (2018) 8 SCC
      243 : [2018] 9 SCR 1024; Navalkha and Sons v. Sri               E
      Ramanya Das and Others (1969) 3 SCC 537 : [1970] 3
      SCR 1; Divya Manufacturing Company (P) Ltd. Tirupati
      Woollen Mills Shramik Sangharsha Samity and Another
      v. Union Bank of India and Others Official Liquidator
      and Others (2000) 6 SCC 69 : [2000] 1 Suppl. SCR                F
      474; Lakshmanasami Gounder v. C.I.T., Selvamani and
      Others (1992) 1 SCC 91 : [1991] 2 Suppl. SCR 181 –
      referred to.
                      Case Law Reference
[2008] 12 SCR 1                   referred to          Para 14        G
[2018] 9 SCR 1024                 referred to          Para 16
[1970] 3 SCR 1                    referred to          Para 18


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84            SUPREME COURT REPORTS                           [2023] 4 S.C.R.


A    [2000] 1 Suppl. SCR 474               referred to             Para 18
     [1991] 2 Suppl. SCR 181               referred to             Para 26
           CIVIL APPELLATE JURISDICTION: Civil Appeal No. 10128
     of 2011.
B          From the Judgment and Order dated 05.02.2010 of the High Court
     of Punjab & Haryana at Chandigarh in CWP No. 8234 of 2005.
           With
           Civil Appeal No.10127 of 2011.

C           Ravi Prakash Mehrotra, Jaideep Gupta, P. V. Surendranath, Sr.
     Advs., Apoorv Srivastava, Jogy Scaria, Sibo Sankar Mishra, Umakant
     Misra, Niranjan Sahu, Ms. Apoorva Sharma, Anindita Mitra, Debabrata
     Das, Biju P Raman, Sawan Kumar Shukla, Sarvan Kumar, Vipin Kumar
     Mishra, Ms. Lekha Sudhakaran, M/s. J S Wad and Co, Gagan Gupta,
     Rajive R Raj, Rajesh Kumar Chaurasia, Sujeet Kumar, Sushil Tekriwal,
D    Dr. 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.
E          1. The instant appealsare directed against the judgment and order
     dated 5th February, 2010 passed by the Division Bench of the High Court
     of Punjab and Haryana at Chandigarh, setting aside the auction held
     pursuant to auction notice dated 24th May, 2004 by Industrial Development
     Bank of India (hereinafter referred to as “IDBI” – Operating Agency).
F           2. The facts in brief culled out from the record are that M/s Bharat
     Commerce &Industries Limited (hereinafter referred to as “BCI”) was
     declared a sick company and for disposal of assets of BCI pursuant to
     directions 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 IDBI
G
     - the Operating Agency, initiated the process of inviting offers in sealed
     cover for sale of assets of the captioned unit.
            3. Pursuant to public notice dated 24th May, 2004, offers were
     invited for various blocks, calling upon the interested parties to deposit
     earnest money of Rs.6 lakhs for Block IV and submit their tenders in
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     RAJIV KUMAR JINDAL v. BCI STAFF COLONY                                    85
RESIDENTIAL WELFARE ASSOCIATION [AJAY RASTOGI, J.]

sealed cover within a period of 30 days from the date of advertisement         A
and for further information, the interested parties may contact the office
of Mr. P.M. Nair, DGM, IDBI, Mumbai, the office of the Assets Sale
Committee constituted by the BIFR and the agency reserved the right to
accept or reject any offer without assigning any reason therefor. It is
pertinent to note that the Operating Agency was under obligation to
                                                                               B
evaluate the realizable value of the property from the approved valuer
and thereafter to notify the reserve price in the auction notice in terms
of Section 21(c) of the Act, 1985, and that indeed was not indicated in
the auction notice and the solitary bid submitted by the appellants in Civil
Appeal No. 10128 of 2011 of Rs.2,84,00,000/- on 22 nd June, 2004 was
accepted by the authority.                                                     C
       4. On being examined by the ASC although nothing came forward
as to why in the absence of a competitive bidding, the solitary bid of the
present appellants was processed, be that as it may, the bid of the
appellants in reference to Unit Block IV for the captioned assets was
accepted as it reveals from the communication dated 12th August, 2004          D
with a rider that the same shall be confirmed as per the terms and
conditions of ASC advised to all the bidders on 8th August, 2004 for
which the bidder may be required to execute a tripartite Memorandum
of Understanding (MOU) with IDBI.
       5. The record indicates that the appellants were asked to furnish       E
a bank guarantee for a bid value of Rs.2,84,00,000/- by 27th August,
2004 for a period of one year and required to deposit payment in
instalments. The appellants from the day one were reluctant in furnishing
the bank guarantee of Rs.2,84,00,000/, however, shown their alleged
willingness to pay the value of the assets in terms of the bid within a
                                                                               F
period of six months. But the fact is that the appellants neither offered
bank guarantee of Rs.2,84,00,000/- nor deposited a penny after
acceptance of the bid on approval of the ASC by communication dated
12th August, 2004.
       6. The BIFR, pursuant to its order dated 24th November, 2004
                                                                               G
observed 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 not
agree to the proposal to accept the bid and left the sale of the assets of
the unit for Block IV be taken over and be sold by the Official Liquidator
of the concerned High Court.
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86             SUPREME COURT REPORTS                            [2023] 4 S.C.R.


A           7. The decision of BIFR dated 24th November, 2004 was challenged
     by the present appellantsbefore the Appellate Authority for Industrial &
     Financial Reconstruction (AAIFR). The AAIFR under its order dated
     1st April, 2005, while setting aside the order of the BIFR dated 24th
     November, 2004 directed the BIFR to confirm the sale of Unit Block IV
     in favour of the appellant and modalities for payment shall be in
B
     accordance with terms and conditions as approved by the ASC and
     thereafter the appellants deposited the bid value in instalments.
            8. That became the subject matter of challenge by filing of a writ
     petition before the High Court of Punjab and Haryana at Chandigarh at
     the instance of BCI Staff Colony, Residential Welfare Association and
C    its members under Article 226 of the Constitution.
            9. The Division Bench of the High Court after revisiting the records
     of the bidding process and the procedure adopted by the Operating
     Agency arrived to a conclusion that the appellants have not made payment
     in terms of the guidelines of the ASC and failed to furnish the bank
D    guarantee and to deposit the purchase consideration at the relevant point
     of time. The Division Bench also took note of the fact that solitary bid
     was received by the ASC for the subject property and it was less than
     the circle rate fixed by the Collector of the property in question and
     while setting aside the order of the AAIFR dated 1stApril, 2005, restored
E    the order of the BIFR dated 24th November, 2004 with a further direction
     that the money which was deposited by the appellant, be returned with
     interest @ 8% (simple) from the date of its deposit till the amount is
     refunded with liberty to sell the property, if need be, as per the provisions
     of law under its judgment dated 5th February, 2010.

F          10. That became the subject matter of challenge in the instant
     appeals on behalf of the appellants and this Court while issuing notice
     under order dated 8th July, 2010 directed the parties to maintain the status-
     quo.
           11. The original petitioners before the High Court had also
G    challenged the self-same judgment of the Division Bench of the High
     Court in Civil Appeal No.10127 of 2011.
           12. Mr. Jaideep Gupta, learned senior counsel appearing for the
     appellants, submits that while the advertisement came to be published
     by the IDBI (Operating Agency), the guidelines of ASC were not
     appended thereto and it was not made known to the parties that they are
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         RAJIV KUMAR JINDAL v. BCI STAFF COLONY                              87
    RESIDENTIAL WELFARE ASSOCIATION [AJAY RASTOGI, J.]

required to furnish a bank guarantee as a security to the bid amount and     A
calling upon the appellants at the stage of acceptance of the bid to act
upon the guidelines and to furnish a bank guarantee was not justified and
this was considered by the AAIFR under its order dated 1 stApril, 2005
and which has not been appreciated by the High Court in the right earnest.
      13. Learned counsel further submits that the appellants had paid       B
the entire sale consideration on 3rd June, 2005 and 7th June, 2005 and
pursuant thereto the tripartite Memorandum of Understanding had been
executed between the concerned parties on 18th July, 2005 and this was
not considered by the High Court while setting aside the bid under the
impugned judgment.
                                                                             C
      14. Learned counsel further submits that the High Court has
committed a manifest error and has failed to take into consideration that
once the auction sale is confirmed, the objections to the said auction can
only be entertained if there are material irregularities and fraud.
Furthermore, the process of auction sale would forever remain incomplete
because somebody may always come up after the confirmation of the            D
sale with an offer for higher value and that conduct has always been
deprecated by this Court in Valji Khimjiand Company v. Official
Liquidator of Hindustan Nitro Product (Gujarat) Limited and
Others 1.
       15. Learned counsel further submits that the appellants had           E
scrupulously adhered to the conditions of the ASC and were ready to
make payment of the entire sale consideration and till September, 2004,
the appellants were never made aware that the bank guarantee equivalent
to the bid amount would have to be furnished and immediately on their
appeal being allowed by the AAIFR, the appellants herein made over           F
the bid amount of Rs.2,84,00,000/- on 3rd June, 2005 and 7th June, 2005
and hence there was no violation of any terms and conditions of the sale
of assets.
       16. To buttress further, learned counsel submits that once the
auction sale stands approved, at least the employees who were residing       G
in the property in question and who had never participated in the bidding
process, have no locus to question the order passed by the AAIFR
confirming the auction bid under its order dated 1st April, 2005 and the
offer made by the respondent/original petitioner (BCI Staff Colony) was
1
    (2008) 9 SCC 299                                                         H
88             SUPREME COURT REPORTS                            [2023] 4 S.C.R.


A    of no substance and if such practice is being permitted, then such of the
     applicants who have not participated in the bidding process would make
     an offer at a later stage, no auction bid at any given point of time could
     be finalized and it will never fetch the value of the asset and the
     transaction can never attain finality. In support of his submissions, the
     counsel has placed reliance on the judgment of this Court in National
B
     Highways Authority of India v. Gwalior-Jhansi Expressway
     LimitedThrough Director2.
            17. Learned senior counsel, Shri Ravi Prakash Mehrotra, appearing
     for the appellants in Civil Appeal No.10127 of 2011 submits that the
     auction bid of the appellants in Civil Appeal No.10128 of 2011 has been
C
     rightly set aside by the Division Bench of the High Court but they are
     aggrieved only where the Division Bench has directed that the subject
     property be sold, if need be, as per the provisions of law.
            18. Learned counsel submits that since the appellants have made
     an offer of Rs.3 crores which was higher than the bid furnished by the
D
     appellants in Civil Appeal No.10128 of 2011 and they being residing for
     sufficiently long time over the property in question put to auction, at least
     they seek an indulgence of this Court that their offer may be accepted
     and the authorities may be directed to execute the sale certificate in
     their favour. Learned counsel has placed reliance on the judgments of
E    this Court in Navalkha and Sons v. Sri Ramanya Das and Others3
     and Divya Manufacturing Company (P) Ltd. Tirupati Woollen Mills
     Shramik Sangharsha Samity and Another v. Union Bank of India
     and Others Official Liquidator and Others4.
             19. Per contra, learned counsel for the intervenors, while supporting
F    the finding of the High Court, submits that the employees of the company
     in liquidation have not participated in the proceedings but their dues are
     still outstanding and which could not have been made over in absence of
     the funds available with the Official Liquidator and they being the
     sufferers for a long time, at least while upholding the judgment of the
     Division Bench of the High Court, the BIFR or the Official Liquidator
G
     may be called upon to initiate a fresh bidding process to fetch the
     maximized value of the property which may at least bring some solace

     2
       (2018) 8 SCC 243
     3
       (1969) 3 SCC 537
     4
H      (2000) 6 SCC 69
     RAJIV KUMAR JINDAL v. BCI STAFF COLONY                                   89
RESIDENTIAL WELFARE ASSOCIATION [AJAY RASTOGI, J.]

to the employees whose dues are outstanding for a long time and they          A
have a superior claim over the financial creditors of the company in
liquidation.
       20. The final arguments were concluded on 19th April, 2023 andwe
called upon the appellants, if they are interested, may give their revised
offer of the subject property. Both the appellants have submitted their       B
revised offer. Appellants in Civil Appeal No. 10128 of 2011 have tendered
their offer of Rs.23,09,00,000/-. At the same time, the appellants in Civil
Appeal No. 10127 of 2011 have given their offer of Rs.14 crores since
in the absence of valuation of the subject property from the approved
valuer, it may not have been possible to assess the fair value of the
                                                                              C
property.
       21. We have heard learned counsel for the parties and with their
assistance perused the material on record.
       22. The process was initiated by the Operating Agency (IDBI) to
sell the subject assets of the sick industrial company (BCI) in terms of      D
the order passed by the BIFR in exercise of its power under Section
20(4) of the Act, 1985. Pursuant thereto, the Operating Agency was
under an obligation to obtain the valuation report of the subject property
and after due assessment has to arrive at the reserve price for the sale
of the property in terms of Section 21(c) of the Act, 1985 and thereafter
has to proceed with a procedure known to law while adopting a method          E
for sale of the assets by public auction or by inviting tenders or in any
other manner specified and for the manner of publicity therefor in terms
of Section 18(2)(k) of the Act, 1985. Sections 18(2)(k) and 21(c) are
relevant for the purpose and are reproduced hereinbelow:
      “18. Preparation and sanction of Schemes. -                             F

      (1)                  xxx     xxx     xxx
      (2) The scheme referred to in sub-section (1) may provide for
      any one or more of the following, namely:-
            (a) to (j)     xxx     xxx     xxx                                G
            (k) method of sale of the assets of the industrial undertaking
            of the sick industrial company such as by public auction or by
            inviting tenders or in any other manner as may be specified
            and for the manner of publicity therefor;”
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90             SUPREME COURT REPORTS                             [2023] 4 S.C.R.


A           “21. Operating agency to prepare complete inventory, etc. -
            Where for the proper discharge of the functions of the Board under
            this Act the circumstances so require, the Board may, through
            any operating agency, cause to be prepared-
               (a) to (b)                xxx      xxx      xxx
B              (c) a valuation report in respect of the shares and assets in
               order to arrive at the reserve price for the sale of a part or
               whole of the industrial undertaking of the company or for fixation
               of the lease rent or share exchange ratio;”
             23. Indisputedly, in the instant case, it has not been placed on
C    record if there was any valuation report assessed by the Operating Agency
     from the approved valuer of the subject property and, at the same time,
     the reserve price of the subject property was never disclosed/indicated
     in 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, the
D    very procedure adopted by the Operating Agency appears to be defective
     at its very inception.
            24. The object of the auction is to secure optimum realizable value
     of the property by giving opportunity to the potential buyers facing
     competitive bids either in open or closed format. The terms ‘auction’ or
E    ‘bid’ are inter-related as both give the idea of selling the product to the
     public. Bidding involves the process where a person offers a price which
     is known as a bid. The process of bidding takes place in a situation
     where large number of people show their willingness to buy a particular
     product or a service and bidding in a sealed envelope is often used by
     various companies, industries and small businesses for assessing the
F    needs of the public at large. On the other hand, auction is the process
     that involves buying and selling goods and services by offering them for
     bids, taking bids and selling the item to the highest bidder and that is
     possible if there is a competitive bidding between the bidders.
            25. The purpose of auction (open or close format) is to get the
G    most remunerative price and giving opportunity to the intending bidders to
     participate and fetch higher realizable value of the property. If that path is
     cut down or closed, the possibility of fraud or to secure inadequate price
     or underbidding would loom large. In the given circumstances, it is the
     duty of the Court to exercise its discretion wisely and with circumspection
     and keeping in view the facts and circumstances in each case.
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         RAJIV KUMAR JINDAL v. BCI STAFF COLONY                                  91
    RESIDENTIAL WELFARE ASSOCIATION [AJAY RASTOGI, J.]

     26. The object of auction has been considered by this Court in              A
Lakshmanasami Gounder v. C.I.T., Selvamani and Others5 as under:-
         “…….The object of the sale is to secure the maximum price and
         to avoid arbitrariness in the procedure adopted before sale and to
         prevent underhand dealings in effecting sale and purchase of the
         debtor’s property. Public auction is one of the modes of sale           B
         intending to get highest competitive price for the property. Public
         auction also ensures fairness in actions of the public authorities or
         the sale officers who should act fairly and objectively. Their action
         should be legitimate. Their dealing should be free from suspicion.
         Nothing should be suggestive of bias, favouritism, nepotism or
         beset with suspicious features of underbidding detrimental to the       C
         legitimate interest of the debtor…”
      27. Before we proceed to consider the submissions made, it will
be apposite to summarize the admitted facts for better appreciation of
the submissions made.
                                                                                 D
         (i).    M/s Bharat Commerce &Industries Limited (BCI) was
                 established in 1964. However, it later became sick and by
                 an order dated 22nd January, 2004 passed by the BIFR in
                 case HP/2000, IDBI was directed to become the Operating
                 Agency to take up sale of assets of BCI under Section
                 20(4) of SICA in terms of ASC guidelines.                       E
         (ii).   Advertisement came to be published by IDBI (Operating
                 Agency) for sale of land of Block IV Staff Colony of
                 Rajpura unit of BCI admeasuring 26,750 sq. meters (approx.
                 5 acres) on 24thMay, 2004.
         (iii). The appellant (Rajiv Kumar Jindal and others) was the            F
                solitary bidder who submitted their bid for purchase of Block
                IV for Rs.2,84,00,000/- on 22nd June, 2004 and paid earnest
                money of Rs.6 lakhs.
         (iv). The Operating Agency accepted the bid by letter dated 12th
               August, 2004, subject to the condition that the successful        G
               bidder has to comply with the terms and conditions of the
               ASC, as advised to all the bidders on 8th August, 2004. The
               extract of the acceptance of the bid by the Appellants is
               reproduced hereunder:
5
    (1992) 1 SCC 91                                                              H
92               SUPREME COURT REPORTS                          [2023] 4 S.C.R.


A                     “The above sale is on the terms and conditions of Asset
                      Sale Committee (ASC) advised to all the bidders by the
                      ASC on August 08, 2004 for which you may be required
                      to execute a tripartite Memorandum of Understanding
                      (MOU) with IDBI, Selling Agency & BCIL, the draft
                      of which would be sent to you shortly.”
B
           28. It will be apposite at this stage to refer to the relevant terms
     and conditions of the ASC which the bidder was supposed to comply
     and the same are referred hereunder:
           “Procedure and Guidelines to be followed by Asset Sale
C          Committee (ASC) appointed by BIFR for sale of assets of
           sick companies –
           (a) to (g) xxx xxx xxx
           (h)     Where a bid has been finally accepted the purchaser shall
                   be required to pay the balance of the purchase consideration
D                  in two installments of 50% and 48% of the total selling price,
                   payable respectively, before the end of 45 days and 90 days
                   from the date on which intimation regarding the final
                   acceptance of t.he bid is dispatched to him by registered
                   Post (A.D.)/Special Post at his notified address.
E          (i)     The successful purchaser shall within 15 days of the receipt
                   of intimation regarding the acceptance of his bid, furnish a
                   bank guarantee, valid for one year, as many as considered
                   satisfactory by the OA/MA, to secure full and timely
                   payment of consideration for the assets purchased.”
F          (j) to (r) xxx xxx xxx.”
            29. Indisputedly, the appellants (auction bidder) have neither paid
     the sale consideration in terms of clause (h) of the guidelines nor furnished
     the bank guarantee within 15 days of the acceptance of the bid in terms
     of clause (i) of the guidelines.
G          30. When the matter was placed before the BIFR, the Bench
     took note of the fact that the appellants, viz., M/s Rajiv Kumar Jindal
     and others, were the sole bidder for Block IV of Rajpura Unit and have
     not complied with the ASC guidelines. Taking both the factors into
     consideration; (i) the appellant being the sole bidder; and (ii) guidelines
H    of ASC have not been complied with, the bid of the appellants was not
     RAJIV KUMAR JINDAL v. BCI STAFF COLONY                                   93
RESIDENTIAL WELFARE ASSOCIATION [AJAY RASTOGI, J.]

confirmed but on appeal being preferred by the appellants, the AAIFR          A
has not taken into consideration that the guidelines of the ASC have not
been followed and the appellant was the sole bidder, as there was no
competitive bidding which is always to be taken care of to secure the
optimized value of the property.
      31. The appellants have shown their willingness to deposit the bid      B
amount in two instalments on 20th September, 2004 and 10th November,
2004 but the fact is that even before the order came to be passed by the
BIFR,neither the bank guarantee was furnished nor a single instalment
was deposited by the appellants and here, in our view, the AAIFR has
went wrong in setting aside the Order of BIFR.
                                                                              C
       32. The Division Bench of the High Court had revisited the entire
proceedings and taking into consideration the fact that there was no
competitive bidding which is a sine qua non for public auction and
guidelines of the ASC have not been complied with, accordingly set
aside the order of the AAIFR with a further direction to initiate the
process afresh in accordance with law and we do not find any error in         D
the view expressed by the High Court which may call for our interference.
       33. The submission of Mr. Gupta, learned senior counsel, that the
appellants in Civil Appeal No.10127 of 2011 have not participated in the
bidding process and made an offer at the later stage, have no locus
standi to challenge the order of the AAIFR confirming the bid of the          E
appellants. In the facts and circumstances of the case, it may not be of
any assistance for the reason that the appellants in Civil Appeal No.10127
of 2011 (BCI Staff Colony, Residential Welfare Association and Others)
indeed were not the bidders and have not tendered any sealed bid, but at
the same time, they have made an offer at a later stage and directly          F
interested in the subject property in question as they are residing there
for sufficiently long time, and not the strangers to the proceedings, being
the person aggrieved their right to question invoking the jurisdiction of
High Court under Article 226 of the Constitution cannot be ruled out.
       34. That apart, the question of locus was never raised by the          G
appellants before the High Court and once the subject issue has been
looked into by the High Court on merits and we too are persuaded that
order of the AAIFR confirming the bid pursuant to its order impugned
dated 1st April, 2005 is not legally sustainable, we do not find any
justification at this stage to non-suit the claim of the appellants prayed
for in Civil Appeal No.10127 of 2011.                                         H
94            SUPREME COURT REPORTS                           [2023] 4 S.C.R.


A            35. Further submissions made by the learned counsel that the
     conditions of the ASC were scrupulously adhered to and the entire bid
     amount was deposited after the order came to be passed by the AAIFR
     confirming the bid on 3rd June, 2005 and 7th June, 2005 and Tripartite
     MOU was executed is of no substance for the reason that the very
     procedure in the first instance initiated by the Operating Agency was
B
     defective at its very inception and before initiation of theauction
     proceedings, neither the value of the property was assessed through the
     approved valuer nor the reserve price was notified in the auction notice
     dated 24 th May, 2004 and the solitary bid of the appellant for
     Rs.2,84,00,000/- was accepted and confirmed by the AAIFR without
C    taking note of the fact that the appellant has failed to comply with the
     guidelines laid down by the ASC indicating that successful purchaser
     has to furnish a bank guarantee valid for a period of one year within 15
     days of intimation regarding acceptance of the bid and the balance of
     the purchase consideration has to be paid in two instalments of 50% and
     48% of the total selling price payable respectively before the end of 45
D
     days and 90 days from the date of intimation of final acceptance of the
     bid is dispatched at his notified address which is the requirement in terms
     of clause (h) and (i) of the procedure and guidelines laid down by the
     ASC and that being a part of the auction notice, the appellant was under
     obligation to comply with and despite opportunity the appellant has failed
E    to comply with both the twin conditions and, thus in the facts and
     circumstance, the Division Bench of the High Court has rightly set aside
     the order of AAIFR dated 1st April, 2005.
            36. So far as the submission made by learned counsel for the
     appellants in Civil Appeal No. 10127 of 2011 that the offer made by the
F    appellants was higher than the sealed bid is concerned, it has no substance
     for the reason that the appellants have not participated in the bidding
     process and it is not the case of the appellants that the auction notice
     published on 24th May, 2004 was not in their knowledge. In our considered
     view, later offer in the facts and circumstances of the case tendered by
     the appellants was of no legal significance and rightly not acknowledged
G
     by the authority.
           37. Before we conclude, we would like to observe that the money
     deposited by the appellants in Civil Appeal No. 10128 of 2011 shall be
     refunded in terms of the order of the High Court impugned dated 5th
     February, 2010. At the same time, the official liquidator may take all
H
     RAJIV KUMAR JINDAL v. BCI STAFF COLONY                                    95
RESIDENTIAL WELFARE ASSOCIATION [AJAY RASTOGI, J.]

reasonable steps to fetch the optimum value of the property in order to        A
achieve the object of public auction.
      38. Consequently, both the appeals are without substance and
accordingly dismissed. No costs.
       39. Pending applications, if any, shall stand disposed of.              B

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



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